What are we to make of the Defensive Patent Licence?

Why has discussion on the patent troll phenomenon taken on a bit of a true-believer tone? A case in point is a recent posting on the Cyber-Prof listserv, which is captioned "Private-Ordering Approaches to Patent System Issues-and Defensive Patent License Launch - Conference". It is authored by Jennifer Urban, here, who is the Assistant Clinical Professor of Law and Co-Director, Samuelson Law, Technology & Public Policy Clinic at the University of California-Berkeley. Let me bring the readers material portions of the post accompanying this notice.

“The current patent system poses a growing threat to innovators. Broad patents of often suspect quality can cripple legitimate competitors and prevent new entrants’ access to the marketplace. Patent trolls buy these broad patents and use them to threaten everyone from large companies to start-ups to municipalities and non-profits.

The DPL Launch Conference will focus on innovative private-ordering solutions to address the patent threat issue. These solutions can go hand-in-hand with congressional or judicial reforms. … The conference will then feature and officially launch the Defensive Patent License (“DPL”). The DPL is a new legal mechanism designed to protect innovators by networking patents into powerful, mutually beneficial legal shields that are 100% committed to defending innovation and reducing patent litigation abuse....

Innovators who opt into the DPL network pledge to forgo any patent litigation against any other DPL user, except when asserting patents defensively. In return, they are eligible to receive royalty-free licenses from every other user’s portfolio. Anyone taking a license must promise to put all of her patents under the DPL. In the event that the patents are sold, DPL users must legally obligate the new owner to abide by prior DPLs. If one ceases offering one’s patents under the DPL, previous licensees keep their DPLs royalty-free, but the leaving user may have her licenses converted from royalty-free to fair, reasonable, and non-discriminatory terms (FRAND) at the discretion of the remaining licensors.

With a broad strong network of reliably defensive patents at their disposal, DPL users gain freedom to innovate. The DPL is also designed to help limit lawsuit risks from patent trolls, as trolls are unlikely to pursue acquisition and enforcement of patents that have been legally obligated to defensive use and licensed to DPL users on a royalty-free basis.”

Let’s assume that this summary represents a short-form manifesto of the current world-view that underlies the DPL initiative. On that basis, I have several questions and comments:

1. What is the empirical evidence for the assertion that “[t]he current patent system poses a growing threat to innovators”, which “cripple[s] legitimate competitors and prevent new entrants’ access to the marketplace.” Patents have always been exclusionary, which is inherent in the nature of a patent as a negative right. What is different this time? The claim seems to rest on the view that there has been a “decline” in innovation. Maybe yes, maybe no, depending upon how one defines innovation, develops a metric for measuring whether innovation is roughly increasing or decreasing, and then can successfully disentangle the ebb and flow of innovation within a normal statistical range from a statistically significant departure from this range. While there has been some empirical research in this regard, to conclude that the patent system is a “threat” to innovation seems at best premature and at worst a bit overwrought.

2. Public patent enemy number one is “broad patents of often suspect quality”, which are then exploited by the patent troll. Here, as well, I am not certain that the research is as clear as suggested. Indeed, I have encountered claims that patent trolls actually make use of patents of reasonable quality. This is assuming, of course, that it is even possible to measure patent quality objectively and point to a decline, at least in some areas, over time. The iconic words about the decline of the youth generation, as taken from the Broadway musical of a half a century ago, “Bye Bye Birdie”, here, merits attention. “Why can’t they be like we were, perfect in every way. What’s the matter with kids [read patents] today.” Perhaps we are imaging a patent past perfect that never was.

3. The connection between patents and innovation is highly nuanced and not entirely understood. As I recently suggested elsewhere, in “The Misplaced Patent Narrative”, here, there may be swathes of innovative activity for which the patent system is of limited relevance. But even if we are talking about inventions (after all, patents are about invention, which is a legal notion, and not about innovation, which is beyond the legal IP pale), something more profound may be taking place in the intellectual IP environment. Thus, if we are speaking of ebbs and flows, what may be occurring is a broader intellectual return to the anti-patent ethos that was present from the post-WWII era through the 1970s (though patents were then seen more as threats to competition to innovation). That patents fall in and out of intellectual favour may be cyclical and correspond to rises and declines in innovation (without any necessary causal connection between the two phenomena).

4. There is a sense that enforcing one’s patent borders on being an “illegitimate” use of the patent right (except for “defensive” purposes, whatever that precisely means). Indeed, the DPL seems to rest on the notion of patent altruism: that it's better to “pool” patents as a collective shield in the name of innovation than for a patentee to assert its patents against a competitor, or for an inventor to seek to monetize his invention by whatever legal means that are available. Whether such an altruistically communal view of the use of patents will in fact lead to “more” innovation” is hardly self-evident and may even be misplaced. I suggest that the DPL supporters take a close look at the kibbutz experience in Israel, here, for an illuminating example of the limits on any experiment resting on communal goodwill in the face of individual self-interest.

5. The ability of an arrangement for the defensive aggregation of patents, such as in the DPL framework, to reduce patent troll activity, also needs to be empirically established. The theory seems to be that such aggregation will serve to dry up the potential pool for patent troll-exploitable patents. Here, as well, maybe yes, maybe no. Ultimately, whether this will come to pass will depend upon whether the type of patent and patentee that seeks the services of a patent troll will be likely to enter into a DPL arrangement. Much more research is required on this point.

Don’t get me wrong. My critique is not directed at Professor Urban, who is affiliated with one of the great universities/law schools/centres of innovation in the world. My reservations rest on whether we really know enough about the connection between innovation, inventions, the patent system, altruism and collective behaviour to consider “innovative private-ordering solutions to address the patent threat issue … [that] can hand-in hand with congressional or judicial systems.” Perhaps a larger dose of humility, at least for the present, might be in order.

More on the Defensive Patent Licence and the February 2014 conference here

“A Kodak Moment” or “Rembrandts in the Attic”: The Valuation for the BlackBerry Patent Portfolio

On the heels of the announcement that BlackBerry would start looking “at strategic alternatives,” the web has lit up with commentary and speculation on the value of the BlackBerry patent portfolio—a whopping 5,000 plus patents and almost 4,000 patent applications! (here, here, here and here) And, the value is – well, $2 billion.  Or, maybe $3 billion.  But, well, under some circumstances could be $5 billion.  Wow.  A $2 to $5 billion range?  To be fair, these valuations are being made “on the fly.”  I do hope that this time the folks doing the valuing are taking into account, at least, how extensive the licensing of the critical patents in the portfolio has been (apparently a mistake with the Kodak portfolio valuation), the existence of noninfringing substitutes, the relevant markets, the construction of the claims and potential prior art not considered by the relevant patent offices. (How much is that analysis going to cost?) 

Could the portfolio be a "Rembrandt in the Attic" (or a lot of them)?  Again, how extensive has the licensing of the patents been?  At least one analysis has pointed out that there is quite a bit of term left on some of the BlackBerry patents.  And, in early 2013, Intellectual Asset Management reportedly gave the BlackBerry Patent Portfolio a relatively high rating based on quality and quantity of patents and BlackBerry supposedly has been spending "$1.5 billion to $2 billion" on R&D a year. Here is the Envision IP analysis (and update) of the BlackBerry Patent Portfolio.  ThinkFire will release its analysis of the present BlackBerry Patent Portfolio soon.    Anyone need a shield or something to trade?    

Besides the valuation issue, it will be interesting to see if the BlackBerry patents are eventually used by so called “patent trolls” to hold up other entities since BlackBerry (Research in Motion) was such a famous “victim” of NTP and has been an outspoken critic of "patent trolls."  (the sword).  Again, anyone need a shield?  We shall see how the game plays out. 

Keeping Tabs on “Patent Trolls”: "Trolling Effects"

The Electronic Frontier Foundation recently released its “Trolling Effects” website.  The purpose of the website is to collect information, specifically cease and desist letters [C&D letters] sent by “patent trolls,” and provide a “one-stop shop” for resources concerning “patent trolls” and their impact on the patent system.  Unlike the somewhat similar Chilling Effects Clearinghouse website, which collects C&D letters across the IP disciplines, but particularly copyright C&D letters, “Trolling Effects” is specifically aimed at “patent trolls.” 

The Chilling Effects Clearinghouse website, in addition to its database of C&D letters, provides advice concerning intellectual property law for folks who receive C&D letters and offers a “weather report” on the chilling effect of intellectual property law enforcement on the Internet.  Notably, the Chilling Effects Clearinghouse website has provided a source of C&D letters that allow interested parties to find potential abusive cease and desist letters to “shame” intellectual property owners who may attempt to stop lawful activity through overreaching claims.  The “Trolling Effects” website is designed to help figure out who exactly are the “patent trolls.”  The blog at the website states:

The new site will gather information that's usually kept secret and put it to two important uses:

1. Give those facing troll threats information about the specific threats (including who is really sending them), along with general information about patent law and the system that might help them navigate the legal process and better understand their options.
2. Collect sorely needed data for journalists, academics, and policy makers, helping them better understand the scope of the patent troll problem and allowing them to make a better case for real reform.

In a very short period of time, the website has already collected a number of C&D letters.   Any opinions on how effective the Chilling Effects Clearinghouse website has been?   Will “Trolling Effects” be as or more effective?