With a live application on file at the Patent and Trademark Office (“PTO”), you have an opportunity to look back in time.  Namely, you can claim property rights looking at present and trending markets, and draft claims that directly and cleanly read on such markets.

There is no way to quantify the value-add to a campaign with a live application.  It can mean the difference between putting seven figures in your pocket, earned over a 3 to 5 year timespan, or finding yourself looking for other opportunities.

In addition the infringement leverage, a pending application provides leverage over prior-art attacks. As litigants submit prior art over the course of a campaign (which is inevitable), you have the opportunity to draft new claims that overcome the prior art, and yet still read on current and trending markets.

Moreover, having a live, pending application is a tool you can wield to thwart any counter measure thrown by a defendant—including the present-day tested Inter Partes Review.

If you acquire a portfolio with a pending application, keep it alive and thoroughly analyze ways to draft claims that read on current and trending markets, and that weave through the prior art. 

Why?

Because the incentives and resources employed to invalidate a patent during litigation are highly skewed and dwarf the incentives and resources employed to examine and issue the patent at the patent office.

(1) Litigation

Patent validity is truly tested in litigation.  When a defendant is charged with patent infringement, which could occur rarely or up to several times a year, it will prospectively spend millions of dollars to defend its case at trial, all under a dark cloud of potential infringement liability, which could pose an additional risk of several million dollars.

Because of the inherent risk to those charged with patent infringement, a defendant is strongly incentivized to invalidate an asserted patent.  If a killer prior art reference exists, the defendant is incentivized to uncover the earth to find it, no matter how obscure or buried. 

And because of this strong incentive, defendants typically invest hundreds of thousands of dollars to invalidate an asserted patent, including undergoing extensive prior art searching around the world, and retaining highly-qualified (and expensive) experts to support its case for invalidity. 

(2) Patent examination

This picture is starkly contrasted with patent examination and issuance at the patent office. 

The patent office sees hundreds of thousands of patent applications a year and has been consistently facing a growing backlog of cases. 

When an applicant files a patent application, it is assigned to a single examiner.  This examiner is tasked with understanding the patent application’s invention and claim scope, search for prior art, issue rejections when the claim scope is too broad, and allow patent issuance when the claim scope is appropriate.

But with the sheer volume of cases and the current backlog, patent examiners experience considerable pressure to move its cases forward.  Namely, examiners are judged not by the quality of examination or the relevance of prior art it uncovers, but by the movement of it cases, either by issuing rejections or allowances. 

Because of this pressure, rather than providing a thorough examination, the examiner is incentivized issue rejections off of the first-found marginal references, rather than spending more time to find better prior art.  As such, it isn’t uncommon for examiners to issue rejections and allowances based on relatively weak art, without consideration of the most relevant references.

Because of the above contrast between incentives and resource allocation during litigation and patent examination, patent issuance is a weak indication of validity–no wonder we see such a high invalidity rate of patents asserted in litigation.

The new AIA law attempts to address these issues by enabling third parties to submit prior art during examination and enabling a post-grant review process, within 12 months of issuance.  But time will tell if the new AIA procedure will sufficiently tip the scales to enable patent issuance to become a better indicator of validity.

As patent holders begin to feel the sting of Inter Partes Review, this will quickly change—thorough prior art searching prior to campaign launch will become standard procedure.

Why?

Prior to Inter Partes Review, patent holders were incentivized to file a lawsuit, regardless of the prior art landscape, because the cost of defense virtually guaranteed a six-figure nuisance value settlement.  Even if prior art were to surface, it would cost the defendant more than a low six-figure settlement to invalidate the patent, without much cost to the patent holder.

Moreover, if a patent holder found prior art prior to launching its campaign, the prior art may raise a substantial question of patentability, which would prevent the patent holder from filing lawsuits, thereby creating a self-imposed barrier to monetization.

But the AIA’s Inter Partes Review will significantly alter these economics for patent holders.  Namely, if killer prior art exists and a defendant initiates an Inter Partes Review on the patent, this will pose significant costs on patent holders.  Particularly, the patent holder will need to pay hourly or flat-rate attorney’s fees to defend its validity case in a parallel trial—a cost sink that didn’t exist prior to the AIA.

Because prior art could now pose a significant cost sink on the patent holder, expect to see patent holders conduct thorough prior art searching prior to launching a campaign—yet another example of how Inter Partes Review will change the monetization landscape.

In this post, I’ll be discussing (6) compelling story telling.

Compelling Story Telling

While there are a myriad of legal, technical, and strategic nuances surrounding a monetization campaign, never forget that in the end it’s all about people—specifically, persuading another person to act in a way that furthers your goals.

In the settlement context, you are persuading an in-house counsel or a business-unit member of a potential licensee to make an executive decision to pay you for a license, because if they don’t a judge or jury will eventually compel them to pay you an increased amount, at a later time.

In the litigation context, you are trying to persuade a judge and jury that the potential licensee is infringing valid and enforceable patents, and that they need to pay you for it.

In either context, you are persuading another person to see things the way you want them to.  As such, you need to deliver your message in the most influential manner possible.

Do so by simplifying your message and connecting the dots with a story—particularly, a story that involves a human element.

While you are dealing with technology, people are swayed by the stories involving people and their struggles over obstacles. While your arguments may be technical, always tie it to a story involving a person’s journey.

There is no limit to persuasive story-telling—it’s an art.  There are multiple ways to weave a compelling story, all based on the same fact.

Below are questions that can help prompt you to create one.

Regarding the inventor:

How did the inventor come up with the invention?  What was the problem the inventor saw? Did the inventor form a business around the invention?  Was it successful?  Did it fail?  Does the inventor have a history of innovation (e.g., other patents, publications)?  Was it a one-time epiphany?

Regarding the invention:

Is it groundbreaking?  Did the market adopt its principles?  Is it a leap over the prior art?

Regarding the infringer:

Did they know about the invention?  Did they have any prior dealings with the inventor?  Did they widely incorporate the invention into their main product line?  Are they benefiting from it?  Is it giving them a competitive advantage?

Regarding the patent owner:

Is the patent owner the inventor or working with the inventor?  Is the patent owner commercializing the invention?  Is the patent owner losing its market share due to other infringers?  Is the patent owner contributing the community?

Tie everything to a story behind a person.  Make it compelling—add a human element beyond the technology.  The more compelling you create your story, the greater your potential to realize returns on your campaign.

In this post, I’ll be discussing (5) filing strategies.

Filing Strategies

As a patent holder, your venue selection (i.e., the district court in which you file your complaint) is your battleground.  It will be the forum in which you litigate issues of claim scope, infringement, validity, and enforceability.

A monetization strategy may be a total success or failure, depending on the forum–select your venue carefully.

Factor in the following considerations when selecting your venue: (1) transfer risk; (2) risk of stayed litigation; and (3) plaintiff/defendant deference re: claim constructions.

(1) Transfer Risk

If you file in any district court, you’ll always risk the defendant successfully transferring the case to another district.

If you’re transferred to another district, you’ll fight your battle in the defendant’s home territory and it’ll increase your costs.

Even worse, if you file lawsuits against various defendants and a number of them transfer their respective cases to forums across the country, you’ll fight your war on multiple fronts—avoid this at all costs.

For the forum you contemplate in which to file, how have judges in that district ruled on motion to transfers?  What factors caused them to keep or transfer cases?

All motions to transfer are decided on a balancing test—are there enough factors in your favor to win a motion to transfer in that district?

(2) Risk of Stayed Litigation

When patent holders initiate lawsuits in district court, a common strategy amongst defendants is to challenge the validity of the patents in an alternate forum—typically in the patent office with a reexamination proceeding or, more recently, in a parallel trial with an Inter Partes Review.

In doing so, defendants concurrently file a motion to stay the litigation, pending the outcome of validity rulings from the reexamination or Inter Partes Review—the argument: if the alternative forum invalidates the patents, there will be no need for the district court to expend resources trying the case.

Stays are detrimental to your monetization campaign—it will stall time-to-money for several years and nullify your litigation leverage.  .

For the forum you contemplate in which to file, how have judges in the district ruled on motion to stays?  If judges in the district routinely grant stays, avoid the district.

(3) Plaintiff / Defendant Deference re: Claim Constructions

Determining claim scope is a legal matter decided by a judge (during the Markman hearing and subsequent Markman order).  Some judges are deferential to patent holders, while others are not.  File in district courts in which the judges are deferential to plaintiffs.

For the district in which you plan to file, review the Markman orders issued by its judges.  For each judge, ask yourself the following:

a. For the claim terms in dispute, do the judges have a tendency to side with the plaintiff’s construction or the defendant’s?

b. To what extent do the judges add in limitations from the specification or file history?

c. To what extent do the judges limit claim scope due to written-description or enablement requirements?

If judges have a tendency to side with defendants’ proposed constructions, add in limitations from the specification or file history, or limit claim scope due to written-description or enablement requirements, they are likely deferential to the defendants—avoid these districts.

In this post, I’ll be discussing (4)(iii)(b) assessments regarding validity, strength.

Notwithstanding the forum considerations noted in the previous post, access your validity position using the reasonable-persons test—this will orient you in the face of uncertainty regarding forum variability and the respective standards of review.

Assess your validity strength at least two points: (1) prior to filing suit and (2) after prior art surfaces (e.g., after the defendants serve you with invalidity contentions).

Prior to Filing Suit

There are divided camps regarding whether or not to conduct prior art searches prior to filing suit—I’ll discuss the pros and cons of each in another post.

Assuming you do not have any problematic prior-art references on hand, ask yourself the following:

1. What’s the timeline and evolution of the technology-at-issue, and where does your priority date fall within that timeline?

Consult with an industry expert who has firsthand knowledge of the industry and can pinpoint where your priority date falls within the industry’s development.  Obviously, you’ll want your priority date to predate the point at which the industry adopted the infringing technology, preferably by at least 5 years. 

2. Is there an argument your claims cover products and systems that predate your priority date?

If so, the patent office issued overly broad claims.  You’ll need to find support for more limiting constructions that avoid reading on prior art systems and services.

3. For a potential licensee, when did it start selling the infringing product or service?

If the potential licensee sold versions of the infringing product or services before your priority date, you’ll need to find distinctions between the previous versions and versions sold after your priority date.  If you can’t find a meaningful distinction that directly relates to your patent claims, your validity position is weak.

After Prior Art Surfaces

After you receive prior art, you’ll need to thoroughly analyze whether the prior art actually invalidates your claims, i.e., whether the prior art teaches each and every element of your claims. 

There is no shortcut to this process—to find the holes, it’ll take hard work, attention to detail, and creativity.    

Remember–prior art will be an issue in every campaign.  You’ll need to overcome the prior art attacks in each and every one of your campaigns.

When you receive prior art, ask yourself the following:

1. Have you been served with invalidity charts?

Never rely on a defendant’s charts—it’s too easy obscure bad facts in a chart.  Analyze each reference and come to your own conclusions. 

2. Did the defendants submit an expert declaration to support its invalidity arguments?

If so, you’ll need to line up your expert, to contest what the other expert’s interpretation of the references and the motivation to combine them.  Never let a defendant expert declaration go unchallenged.

3. Are the references really prior art?

In some instances, defendants submit references that are not, legally, prior art.  I’ll discuss how to determine this in another post. 

4. Did any of the prior art references contemplate and solve your patent’s identified problem and proposed solution?

If so, the defendants are equipped with a story that others in the field already considered the same problem and addressed it—this will significantly undermine your validity position.

5. If the problem was previously identified, does your patent solve the problem in a way that others did not consider?

If so, then you have an argument that your inventor(s) found a unique solution to the problem, and that this is the solution adopted by the market—this will significantly bolster your story for validity.

6. For each defendant attempt to show that a reference(s) discloses your claims, how coherent is the defendant’s story?

Did the defendant need to stretch any definition, word, or teaching in a prior art reference, to make it fit your claims?  Conversely, did the defendant stretch any definition or teaching of your claim terms, to support its own arguments?

Find these holes and expose them—you can crack the defendant’s invalidity position here. 

7. Did the defendants need to combine references (103 references) to disclose every element of your claims?

If the defendant needed to combine references, then it did not find a single reference (102 reference) that discloses every element of your claim—this is a very good sign. 

There are number of holes from which to attack 103 references—I’ll discuss this in another post.

8. Did the defendant find a single reference that discloses each and every element of your claims?

These are 102 references–these are the dangerous ones.  You’ll need to find arguments overcome these references or your campaign will crumble.

Look at 102 references from a bird’s eye view and in depth.  From a bird’s eye view, can you distinguish the purpose of the 102 reference’s teachings from your patented invention?  If so, formulate a theme regarding overall purpose of your patented invention, to distinguish the 102 reference’s teachings.

Looking in depth, repeat the process described in (6) above.  Are there any constructions you can import into your claims to distinguish it from the prior art reference? 

You’ll need to find the particular constructions that overcome the prior art, yet maintain the integrity of your infringement read.  I’ll be discussing this process in more detail in another post. 

In this post, I’ll be discussing (4)(iii)(a) validity assessments, including forum considerations.

Validity Assessment – Forum Considerations

Validity rulings are yet another pitfall in a monetization campaign—for each of these pitfalls, you’ll need to cross safely.

If your patent claims are ruled invalid, then game over.  If you survive validity, your claims are bullet proof, barring a contradictory ruling from another forum or another reference surfacing.

Validity-ruling outcomes are a coin toss—groups of other people will ultimately decide whether the invention defined by the claims are novel and non-obvious over previously-published material (prior art).

To assess your validity position, factor in the following: (1) the forum(s) in which validity will be heard; and (2) the factors affecting its outcome.

In this post, I’ll discuss (1) forum considerations.

(1) Forum

Understanding the forum in which validity will be heard will help orient you. 

There are at least three forums to determine validity—the district court, patent office, and appellate court. 

When you file a lawsuit, the district-court forum is immediately implicated.  If the defendant initiates a reexamination in one form or another, then the patent office will be involved in the decision-making process. 

The third forum, the appeals court, will be implicated when either side appeals a district-court or patent-office ruling of validity—the appellate court trumps either of the prior forums.

Any one or all of these forums could be implicated.  There are pros and cons to each–you’ll need to assess your validity strength in each. 

District court

In this forum, your advantage is that the patent’s validity is derailed by nothing less than clear and convincing evidence.  Hence, the defendants have a steeper uphill battle.

Within the district court, either a judge or jury could make the determination. 

If a judge makes a decision to cut-off your rights to a jury determination and instead rule from the bench, some of your claims are likely in jeopardy (this is called a summary judgment ruling—I’ll discuss more about this in another post).

If you pass summary judgment and go to a jury, you’re in good shape—anything can happen in front a jury, which makes it unpredictable.  This unpredictability adds to your leverage.

Patent Office

The forum can switch to the patent office on the defendants move—typically when it files a reexamination of some sort, whether a post-grant review, ex parte reexamination, inter partes reexamination, or an Inter Partes Review (I’ll be discussing each of these in more detail in another post). 

At the patent office, the patent’s validity is upheld by merely a preponderance of the evidence (more likely than not)—this is the most significant advantage to a defendant. 

But while the burden is less than the district court’s, your advantage here is that you’ll have an opportunity to amend the claims, in light of the prior art presented by the defendants. 

This opportunity to amend your claims adds a level of variability in your favor, to potentially preserve your read over the prior art.  There are other implications here (e.g., resetting the damages clock), but the important point is that you’ll have an opportunity to overcome the references.

If the defendant initiates patent-office proceedings, it may attempt to halt the litigation by filing a motion to stay with the district court.  If the defendants successfully stay the litigation, your time to money will be delayed by 2-to-4 years—you’ll want to avoid this at all costs. 

But don’t be overly concerned on this point, because you can mitigate your chances of a stay by filing in a venue that historically does not stay district-court litigations—I’ll discuss this later. 

Appeals Court

Regardless of the above forums and their respective outcomes, either side will have an opportunity to appeal a district-court or patent-office decision to the Federal Circuit.  At the Federal Circuit, the appellate court will have an opportunity to confirm or overturn a lower decision.

With the current-day makeup of the bench, the Federal Circuit is much more defendant friendly regarding validity rulings than most juries, plaintiff-friendly judges, and patent-holder friendly examiners.  Expect validity to be more at risk at the Federal Circuit than at other forums. 

Though defendants may have advantage with a defendant-friendly appellate bench, your advantage here is that the time and money required to have a case heard before the appellate court is an lengthy and expensive one—typically a 3-to-5 year process.  This protracted length of time to reach an appeals court provides numerous opportunities to settle.

Tying it together, you’ll need to appreciate the various forums that may be implicated when making a validity assessment.  You’ll want your validity case to hold, regardless of the forum.

In the next post, I’ll be discussing how to do so.

In this post, I’ll be discussing (4)(ii) assessments re claim construction positions.

Claim Construction Positions?

Just as your campaign hinges on the strength of your read, it also hinges on the strength of your claim-construction positions.

A claim-construction hearing is when the assigned judge construes (i.e., decides) on the exact meaning of each claim term in-question, including whether or not to import limitations. This hearing more clearly outlines whether or not your claims read on the accused product or service.

Your claim-construction position represents your chances of winning constructions that support your read—not just once, but on each front.

From a monetization standpoint, the claim construction hearing is when you see the flop (poker analogy)—after this point, you will have a much clearer outlook on the strength of your campaign.

How do you access your claim-construction position?

You’ll need to accurately identify all battleground claim terms—each of these claim terms will need a particular definition for the claim, as a whole, to read on the accused product or service.  In law school, they call this “issue spotting.”

1. At this point, ask yourself how many fronts do you have?

If you need to win on more than three fronts, your probabilities of winning drop dramatically.  If this is the case for your campaign, find other assertable claims, either in the same patent, another patent in the same family, or a patent in a asserted, non-related patent.

You can use this claim to support a strength-in-numbers approach.

Next, for each battleground claim-term, draw a side-by-side comparison of each your arguments, as well as that of the defendant’s.

Then, for each argument, map support to at least one of the specification and file history (I’ll discuss this more in another post)—this is your legal foundation to your arguments.

2. At this point, do you have direct support from the specification or file history?

If you direct support on each front, your position is strong.

If not, you have a weak link—your campaign will crack at this point, at a minimum.

To determine if you have direct support, ask yourself the following:

2i) Is the read supported by a specific example from the preferred embodiment?

If so, you have direct support.

2ii) If not a specific example, is it a natural evolution or other example of implementing the invention?

Use the reasonable-persons test—who appears to be splitting hairs?  Whose argument is more simple and to-the-point?

If it’s a natural evolution or other example, you’re on solid footing.

2iii) If there isn’t direct support and it doesn’t appear to be a natural evolution, is your proposed read something the inventor clearly did not contemplate?

If so, you’re arguing for a stretch and you won’t look credible in front of a jury.

In this post, I’ll be discussing (4)(i) assessments regarding the strength of the read.

Strength of the read?

This is the foundation of your campaign.  If you’re read is weak, the campaign will inevitably crumble.

The extent of a read’s strength is a question of degree—a question ultimately resolved by a jury, should it get there.

The question’s framework stems from a reasonable-person’s test—the entirety of the law is based on this principle.

If your position comes across as more reasonable and fair, you’ll likely win.  If the defendant’s position comes across as more reasonable and/or fair, the defendant will likely win.

From a monetization standpoint, if your read is weak, target for lower settlements.  If your read is strong, then you may have the opportunity to hold out for higher-value licenses.

To the nuts-and-bolts, what’s the best way to assess your read’s strength?  Below are questions to assist you:

1. How simple is the read?

If the read is explainable to a junior high or high school student, then the juror will more likely understand the story.

The strength or weakness will be more easily exposed when the read is simple.

2. How credible is your infringement position?

Is the read in line with the purpose of the invention?  If not, you may be going for a stretch read.  If so, your read is weak.

3. Do PTO statement corroborate your read?

Studies have shown United States Patent & Trademark (“USPTO”) statements, particularly by the examiner or reviewing board, to be highly persuasive.

If USPTO statements contradict your read, your read is extremely weak.

If USPTO statements are neutral—no ground gain or lost.

If USPTO statements corroborate your read, this is very persuasive evidence of infringement.  Your read is strong.

In this post, I’ll be discussing (3)(ii) estimating revenue potential, taking into the importance of the read.

Revenue Potential–Importance of the Read

To estimate the revenue potential of your campaign, determine the extent to which the patented feature(s) drive demand, sales, and/or revenue of the infringing product or service.  If the patented feature drives demand/revenue, then you can capture a royalty on a higher proportion of the product/service’s revenue (“higher apportionment”).

The extent to which the patented feature drives demand is a question of degree—a question usually the topic of heated debate by damages experts.  Nonetheless, you can make an initial assessment by answering the following:

1. Is the patented feature a central component of the product or service, such that without it, the product or service would no longer be marketable?

An example would be touchscreen technology regarding smartphones.  If a smartphone manufacturer provided smartphones without touchscreen capability, no one would consider it a smartphone or purchase it as such.

If the patented feature is a central component that enables marketability and competitiveness of the product or service, you can obtain a royalty on significant proportion of overall revenue (e.g., 60% to 70%).

2. Do industry experts consider the patented feature a critical one?

If independent experts publically comment that the patented feature is a novel innovation, then this strong third-party corroboration that will support a higher apportionment.

As an example, if industry experts note that smartphone batteries notoriously run out after just a few hours of use, and an improved power-management technology extends battery life to a full day, then this provides strong evidence that the patented power-management technology is a critical feature that drives demand.

Always search for industry-expert commentary regarding the patented feature.

3. If the patented feature does not cover a feature that clearly drives demand, does it cover a required feature?

An example of such a feature is the home button of a smartphone.  The home button doesn’t necessarily drive demand directly, but it would be extremely inconvenient to operate a smartphone without a home button.

Here, the apportionment will depend on the extent to which the patented invention is used.  In this instance, you can argue the patented home button is used nearly every time a user operates the smartphone.

The more you can argue the patented feature is used during normal operation of the infringing product or service, the higher your apportionment.

4. Does the patented invention cover an optional feature or a feature of a feature?

If so, then your apportionment will likely be extremely low (e.g., 5% to 10% of overall revenue)–plan for a low damages base.