The Thirty-Nine Steps

Is Bulk Cross-Licensing Moving Towards a Non-Compete?

“The charm of fishing is that it is the pursuit of what is elusive but attainable, a perpetual series of occasions for hope.”  John Buchan

The war on patent assertion entities continues. Sometimes it’s just rhetoric, sometimes it’s real.

Two days ago the Oregon state legislature introduced a measure to curb the most egregious types of patent trolling: dunning letters threatening legal actions if small businesses don’t pay a licensing fee. It’s the same type of provision—essentially a consumer and business protection law—as has been proposed in Vermont and Nebraska. We’ll keep an eye on what happens. Rampant “demand-letter trolling” deserves to be slammed.

On another front, IP Law360 today reports that Motorola Mobility LLC and Intellectual Ventures are going to a jury in a patent infringement case where plaintiff Intellectual Ventures (a.k.a., Nathan Myhrvold’s company) has already secured licensing agreements from Nokia, Samsung, and Verizon—which fact it has used to bolster its argument against Motorola.

Call it the “Well, those guys paid it, Your Honor. Why shouldn’t these guys?” argument.

On this same day, IP Law360 reported that Google and Cisco had reached a long-term cross-licensing agreement for a host of their patents—noting as they made the agreement that they have eliminated the risk of either one’s selling patents to NPEs that could later be asserted against the other. Predictably, the companies took the opportunity to loft a rhetorical dart at the much-impugned trolls of the world.

An agreement that eliminates companies’ ability to sell to an NPE is an intriguing development. On its face, the deal makes sense: it allows each to proceed with confidence that the other will not sell patents to NPEs—essentially, a handshake agreement to prevent coming to blows. But might it run another risk? Might such an agreement be considered a lockdown on patents, putting a halt to the rapid arms race to beat one’s close competitors on innovation?

Let’s play this out. Let’s say smart IP lawyers for each of the top technology companies sign these types of agreements and uphold a prolonged détente on patent infringement cases with their peers and direct competitors: “Okay, folks. I won’t sell patents to someone who can sue you, if you agree to not sell patent to someone who could sue me.”

Let’s say we end up with multilateral agreements between all the companies that are funding the current campaign to curb the activities of NPEs.

And let’s say the end result effectively prevents unfriendly fire from any of a company’s competitive borders. “I have my patents; you have your patents; we know we’re all playing in the same turf, so let’s make love not war.”

Could it amount to the first in a series of steps by thirty-odd technology companies that effectively creates a cartel of top innovators freezing out competition? If the top technology companies agree to not fight each other, and have agreements on which patents they’ll practice and which ones they’ll tie down and not sell to those who might enforce, won’t they have even more resources to lock out smaller competitors?

There’s a trend here. When the America Invents Act changed “first-to-invent” to “first-to-file,” it favored larger companies with a larger investment in R&D, a larger war chest of inventions in their pipeline, a cadre of sophisticated IP counsel in-house and/or on retainer who could prosecute and protect the patents, and the financial wherewithal to battle any pretenders to their patent crown. “First-to-file” was a potentially debilitating move for smaller and entrepreneurial companies, and it was promoted and defended by large technology companies.

The presence in our marketplace of companies that can assert patents on behalf of smaller inventors is not a bad thing in principle—or in practice. As I and others have said before, let’s not throw the innovative baby out with the bathwater. Seeking to inhibit the role of NPEs may deserve a measured step back by lawmakers. Perhaps we implement some rational and limited legislation. We certainly need an informed and active Federal court system that discriminates between bad actors and essential economic agents. But if larger technology companies want détente—not war—how much of the innovative market will they be able to control?



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