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IP, IP Asset, Patent, Walker Digital

Does The New Patent Licensing Regime Look Like The Old Patent Licensing Regime?

So, not that long ago, partially in reaction to the fascinating results of Walker Digital’s novel attempt to auction freedom to operate under its patents (as opposed to the patents themselves), I declared the dawning of a new era in patent licensing:

Litigation is simply obsolete, and will most likely end up being reserved for those cases where the fact of the battle is more significant than the outcome.  For companies based on patent assertions, it’s all about the outcome.

Then, but a few days later, Walker Digital was at the forefront of the most aggressive patent assertion effort ever to be attempted.  (That’s not hyperbole. I challenge anyone to find an instance where a patent owner asserted more patents against more companies in a comparable period of time). So what’s going on?  Is this really part of a new licensing model? Or is it just the old licensing model on steroids?

Could I have simply gotten it wrong?  I’m sure that’s what the skeptics think.

Patrick believes that IP litigation like this may become extinct if patent auctions profligate – and I hope he’s right. On the other hand, and you can call me a cynic or closed-minded, but I don’t think so. Why pay for a slice of the pie when you can fight and win for the whole thing?

via Walker Digital Sues the Bejesus Out of Everyone

Admittedly, Aaron may have been having a little fun at my expense, but anyone who genuinely believes that this is business as usual simply hasn’t been paying attention. So what are the skeptics actually saying? Primarily, they’re not buying the “reluctant plaintiff” claims.  After all, who can blame them?  If you don’t “want” to sue someone, the solution is easy. You just don’t sue.  Easy, right?  From Mike Masnick:

The press release also plays up the claim that they prefer not to sue (uh… yeah…) and that they would have liked it better if these companies had just agreed to give them money in the first place. That’s pretty amusing coming from a company that has teamed up with Spangenberg who has flat out said he prefers to sue first. If you don’t want to sue, you don’t work with someone like Spangenberg.

via Jay Walker Sues Nearly Every Successful Internet Company, Claiming They’re All Built Off His Patents

Of course, Masnick completely missed the boat on the Walker Digital auction attempt, the years of failed attempts to get the attention of infringers in the industry, and (conveniently enough) the fact that Walker was repeatedly told to go away unless he was prepared to litigate.  So prepare he did, but teaming up with the “most experienced name in widespread patent litigation.”  (Quote from Joe Mullin).

Why team up with someone who has a reputation for IP litigation when your goal is to license the portfolio?  Because unlike every run-of-the-mill law firm in the world, Walker picked an advisor that understands litigation is a tool to be used in licensing, not a solution.  In fact, it’s not just a tool, it’s really the only tool.  Take a closer look at Spangenberg’s comment from the press release:

“We contacted these companies and urged them to come to the table. Some have been sitting down with us and we will continue to work with them outside the courtroom. But dozens of companies have responded with silence, indifference, delay or worse yet, by taking legal action against Walker Digital. Perhaps now we can start good faith negotiations. Walker Digital desires to license its intellectual property and not to prolong the legal process,” stated Erich Spangenberg, CEO of IPNav. “This is a plain and simple case of some companies taking advantage of the high costs and built-in delays of the U.S. legal system with their refusal to negotiate. We are committed to help protect Walker Digital’s intellectual property through the only means available.”

In a world where even an invitation to discuss a licensing arrangement can result in an anonymous/John Doe lawsuit, the avenues for patent licensing automatically get funneled straight into the courtroom.  What we’re left with is a slow and expensive legal system that ends up abusing the patent owner. Ironically, it’s the patent owners who are accused of “abusing the legal system for profit …”

How do we know this?  Because the overwhelming majority of cases settle before trial anyway, which means that companies, almost universally, end up paying the patent owner some amount of compensation … too bad most of what the companies spend goes to the lawyers on either side …

And on that note, I’ve had more than a few conversations expressing extreme skepticism about the genuineness of the bids for Walker and Round Rock’s portfolios.  We won’t really know for sure until there’s an announcement about finalizing the Round Rock sale (and even then, I suppose one could still argue that deal was already done and the bidding staged).  But as far as whether it is (or isn’t ) colossally stupid, bear in mind that companies often get stupid with their the shareholder’s money by spending millions on litigation, only to settle a case on the eve trial for the same amount they could have settled for on day one.  (Yes, this has happened. It has happened more than once. I suspect it happens far more often than you’d want to believe.)

One of the ultimate acts of irony, however, has to be the existence of a patent system that fostered the growth of inventions like electric lighting, controlled flight, and telecommunications which is forced to use a centuries-old, archaic ritual in order to move compensation from users of intellectual assets to its rightful owners.  Jay Walker wants his compensation too, but he also recognizes hat its time for a change, saying:

…we also hope this effort will contribute to the process of moving the asset class of patents and Intellectual Property out of the stone age of litigation and into an efficient market which, in the end, would benefit America and its economy.

Unfortunately, revolutionizing the system can probably only come from within the system itself.



8 thoughts on “Does The New Patent Licensing Regime Look Like The Old Patent Licensing Regime?

  1. To be clear (again), the “pie” quotation was meant to portray a typical plaintiff’s philosophy, not my own. That said, litigation should always be a last resort. Unfortunately, there are too few other resorts. The auction provides one such alternative. Again, I hope you’re right.

    Posted by Aaron Thalwitzer | April 15, 2011, 3:41 pm
  2. Aaron,

    What I was actually doing was acknowledging the fact that I walked right into your punchline without even realizing it…

    Posted by Patrick | April 15, 2011, 4:08 pm
  3. I usually agree with you Patrick, and I agree with most of this post except at the end: we both will be gone before lawyers who benefit from this system will innovate and change without something or someone making them change. It’s centuries old, right?! Instead, I think that change will–and is–in the process of being developed from outside the system. As business people at forward-thinking organizations wrest control of patent issues from their lawyers, we will see business solutions developed that will leave lawyers fighting over litigation scraps from less sophisticated patent owners (or defendants). So, I think that patent litigation will effectively wither (but maybe not become truly obsolete) as external forces require lawyers to offer solutions that don’t only fatten their pockets.

    Posted by JACKIE HUTTER | April 15, 2011, 4:39 pm
  4. Jackie,

    I’m trying to be optimistic. (Rare, I know.)

    Posted by Patrick | April 15, 2011, 4:45 pm


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