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IP, IP Asset, Patent, Walker Digital

History Repeating Itself? Jay Walker’s Patent Licensing Efforts Reminiscent Of Another Legendary Inventor

Last week, I issued the following challenge:

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).

via Does The New Patent Licensing Regime Look Like The Old Patent Licensing Regime? (emphasis added)

Gametime IP reader Jerry Hosier stepped up to this challenge offered up the storied inventor Jerome Lemelson, and the licensing campaign involving his “machine vision” patents, including U.S. Patent Nos.  4,338,626, 4,511,918, 4,979,029, 4,984,073, 5,023,714, 5,067,012, 5,119,190, 5,119,205, 5,128,753, 5,249,045, 5,283,641 and 5,351,078.   This campaign included patents like U.S. Patent Nos. 4,969,038, 5,119,205, 5,128,753, and 5,144,421 related to “automatic identification” (a subset of the machine vision patents) and U.S. Patent Nos. 5,039,836 and 4,390,586 relevant to the semiconductor industry.  (You can view all of these patents here.)

This licensing campaign kicked off in November 1989 with letters being distributed to well over 200 companies, including the top electronics, semiconductor and automotive companies of the time.  Within two years, many foreign companies were asking for licensing terms that would cover the entire Lemelson portfolio, and before the end of ’92 licensing revenue from the campaign was approaching half a billion dollars from over 40 licensees.

The first lawsuits were initiated in late 1992 and early 1993 against eight companies, with subsequent rounds following in 1998, ’99, 2000 and 2001 against the likes of Intel, Lucent, Alcon, CompUSA (obviously a much bigger retail player at the time), and Broadcom.  A key moment came in June of 1998 when the storied “Big 3” automakers simultaneously settled their pending litigation.  This proved to be a tipping point as it later became fashionable for American companies to do business with Lemelson.

A significant number of Lemelson’s patents stemmed from a 150 page patent application he filed on Christmas Eve in 1954, after conceiving of a way to design machines that could “see,” process information and handle numerous automated manufacturing tasks.  Various continuations and continuations-in-part relying on this original specification issued between the 1960’s through the 21st Century.  Lemelson is often accused of manipulating patent office rules in order to extend prosecution of his patents, thereby “lengthening” his patent term.

However, other reports suggest that Lemelson’s original 1954 application was subjected to an unprecedented 20-way restriction requirement.  In other words, the patent examiner’s ordered Lemelson to pick from one of 20 distinct inventions, and forced him to apply for each invention separately! Practitioner’s know that restriction requirements are fairly common, with examiner’s asking inventors to elect between 2 or occasionally 3 different species of invention.  But 20?  Naturally, in the 1950’s, Lemelson was anything but wealthy, so he did the only thing he could afford to do, which was to prosecute these applications one at a time.

Others criticize Lemelson for not personally commercializing any of his inventions, but this is a dubious distinction. The very purpose for granting exclusionary rights to inventors is to allow those inventors to control the use of their inventions.  The patent rewards the mental, not physical, labor of inventor with exclusionary rights to control implementation of the invention.  How the inventor chooses to implement those rights is irrelevant to the value of the invention in the first place.

So is Jay Walker the next Jerome Lemelson?  Like Jay Walker, Lemelson had also been compared to Thomas Edison, although Edison’s 1000+ patents significantly overshadows Lemelson’s 600+ and Walker’s 200+ (and counting).  But unlike Lemelson, Walker has gained prominence as a businessman and entrepreneur prior to his more recent efforts at monetizing his IP.  Lemelson essentially worked as a full-time inventor in the 1950’s and never looked back, despite having to wait until the 1970’s to see any significant return for his licensing efforts.  And even then, it was not until the 1990’s, when he teamed up with Jerry Hosier that his licensing success really took off.

Lemelson’s litigation team was also much leaner than Walker’s is today.  Walker Digital is represented by a combination of Russ, August & Kabat, Agility IP and SNR Denton.  Lemelson had Jerry Hosier along with a handful of attorney’s and staff.  Of course, after seeing the success Lemelson enjoyed, patent lawyers started to take more interest in contingent fee cases.  Ray Niro worked with Jerry Hosier in the 90’s to license patented technology for Acacia, a company virtually unknown at the time, but today synonymous with monetizing patents.  These days it seems like there’s a new contingent fee firm popping up every day, such as the Uniloc trial team that just left Mintz Levin to start their own IP boutique.

Although it might seem that way, this was not intended to be a post about Lemelson himself. As I continue to research, I’m finding his story to be quite compelling, and I’ll likely have more to say about him in future posts.  Getting back to the topic, which was comparing Lemelson’s licensing campaign to Walker’s, there may ultimately be more differences than similarities.  As far as which campaign is more “aggressive,” I think Walker’s involves more patents over a more diverse array of technologies, but Lemelson’s move was way ahead of its time.

Lemelson and Hosier also proved the simple fact that, with enough skill, strategy and perseverance, the little guys can beat the big guys, which opened the door to the competitive patent marketplace we see today.

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Discussion

9 thoughts on “History Repeating Itself? Jay Walker’s Patent Licensing Efforts Reminiscent Of Another Legendary Inventor

  1. Patrick, continuing our Twitter discussion: The purpose of patents, at least according to the courts, is not per se to reward mental effort (pace your comment above), but to promote the progress of science and useful arts.

    So far as I’ve ever read, what you call Lemelson’s mental labors accomplished zip, zero, nada, on either count: AFAIK, he never commercialized any of his inventions himself, and he didn’t enable anyone else to do so by “taking the handoff” from him.

    You will probably argue that Lemelson sowed seeds, but it looks to me that he did so on rocky ground where nothing ever came of them. He appears to have been a pure rent-seeker, using quirks in the law (viz., the doctrine of constructive reduction to practice) and the power of the courts to let him reap where he had not sown. If my information is incomplete, I’d love to be educated.

    Posted by D. C. Toedt | April 21, 2011, 9:07 am
  2. D.C.,

    Thanks for the comment.
    I do think your information is incomplete, and I think its disingenuous to say that Lemelson accomplished nothing. For example, it is not literally true that companies Lemelson accused of infringement had never seen or had knowledge of his patents before he learned of infringement. In the early stages of his licensing career, he spent a portion of his time inventing and licensing toys. On occasion, he was shown the door only the see the product on store shelves a year later.

    Please understand, however, if I don’t address all of your points. Much of this is off-topic, and I am continuing to research a number of historical aspects about inventor’s and licensing, including the likes of Lemelson and Edison. I will release the results of this research as I see fit.

    I don’t consider constructive reduction to be a “quirk in the law” and I don’t really care what some appointed judges think about the purpose of patents. You can do the right thing for the wrong reasons and the wrong thing for the right reasons. Granting intellectual property rights to inventors and authors is a moral issue, regardless of what Thomas Jefferson or anyone else thinks.

    But I don’t think you came here to debate philosophy.

    The bottom line is that patents are issued for inventors, not privileges handed out to dues-paying corporations. Every patent you’ve ever obtained for a client was conceived of by a human being, and your client purchased the exclusive right from that human being, probably ex ante through an employment contract. But whatever the transaction, it was the inventor’s right to do with the fruits of his mental labor what he or she pleased. Many prefer the safety and security of a steady paycheck and health insurance.

    Lemelson, and many others, preferred to work alone. Their inventions may (or may not) be less valuable that those of employed inventors. But the merit of the invention itself has nothing whatsoever to do with whether the transaction took place ex ante or ex post.

    Posted by Patrick | April 21, 2011, 10:19 am
  3. Patrick, I don’t want to be setting up a strawman, but the POV I’m picking up here is that anyone who conceives and records in the USPTO an idea for a novel apparatus (method, product, etc.) deserves — for that reason alone — to dictate who else can use it.

    That’s a pretty-exalted view of the human thought process, it seems to me — thought alone is just opinion, and you know what they say about opinions.

    If Lemelson disclosed some of his patented ideas to people who saw their potential but then muscled him aside, that’d be one thing. But I’ve never read or heard about that happening. If you’ve got evidence to that effect, you ought to publicize it, if for no other reason than to be fair to Lemelson.

    But my impression is that Lemelson’s M.O. was, figuratively, to walk up to people who had come up with ideas for doing useful stuff on their own; he tapped them on the shoulder and demanded a piece of the action, because he had figured out how to get men with guns (and badges) to do his bidding. If I’m wrong about that, I’d like nothing better than to be corrected.

    Posted by D. C. Toedt | April 21, 2011, 2:16 pm
  4. D.C.,

    1) “the POV I’m picking up here is that anyone who conceives and records in the USPTO an idea for a novel apparatus (method, product, etc.) deserves — for that reason alone — to dictate who else can use it. ”

    I think you need to re-read Art. 1, Sec. 8 Clause 8 of the constitution (in its entirety, not just the selective portion you quoted above) if this concept confuses you.

    I don’t think it’s an overly “exalted” view of human thought. Ideas may not be worth much without actions, but without ideas, there is nothing to act upon. The invention is clearly worth less than 100% of the execution, but how much less? I’m not saying its worth 50%, or even 5%, or even 0.5%. But it is worth more than 0%.

    2) “If Lemelson disclosed some of his patented ideas to people who saw their potential but then muscled him aside, that’d be one thing. But I’ve never read or heard about that happening.”

    Actually, you have. Just now. What I told you was based on accounts I have read from doing my research on Lemelson. Like I said, I will publish it on my own terms, not yours. In the meantime, you can choose to believe it or not.

    Posted by Patrick | April 21, 2011, 2:55 pm

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