Lessons for Licensors from IBM's Patent Litigations versus Chewy, Groupon
Lessons for Licensors from IBM's Patent Litigations versus Chewy, Groupon
Also: surprising positive view of USPTO's new Section 103 guidance; global SEP updates; and patent-related trivia re RFK's running-mate
Quick takes:
IBM’s willingness to litigate explains its ongoing licensing successes
Bunch O Balloons inventor Josh Malone praises USPTO’s new Section 103 guidance as “opportunity for inventors”
EU’s DG COMP joins fight against SEPs
Ericsson secures record $29 million award in SEP case in India
IBM’s willingness to litigate explains its ongoing licensing successes
Latest?
Last week, IBM and Chewy “agreed to end a patent infringement lawsuit from IBM over the online pet-food seller's advertising technology.”
(The Clause 8 interview with IBM's Chief Patent Counsel for Americas Mark Vallone was coincidentally posted just a few days later.)
Why?
Although the terms of the settlement have not been disclosed, it followed IBM scoring a modest victory of the Federal Circuit sending the case back for the district court to determine infringement of a claim of one of IBM’s patents.
Seems familiar?
IBM settled with Groupon back in 2018 after a jury agreed that Groupon infringed its e-commerce patents.
IBM’s Ongoing IP Licensing Activity
IBM’s 2022 and 2023 Annual Reports indicate that it has made $397 million and $366 million, respectively, in those years purely from licensing of IP (excluding sales or “custom development income”). Although those amounts are dwarfed by the $1+ billion in IP licensing revenue IBM used to make in the best years and the $60+ billion it now makes in total per year, those are still substantial sums in today’s environment.
How?
IBM’s willingness to litigate against Chewy and Groupon sends a clear message to current and potential licensees that they’re willing to enforce their patent rights in court. And that they settled in both cases right after securing victories during the litigation process helps bolster the image that IBM can’t be counted out even in the toughest looking cases.
Both of these cases are exactly the type that most litigation funders would run away from backing: (1) relatively modest sums at play (Groupon involved portfolio that was previously licensed by IBM for only $20-50 million & Chewy “said it rejected a $36 million licensing offer from IBM”); (2) prospect of significant patent eligibility issues since cases involved ecommerce and advertising technology; and (3) enforcement based on US patents/activity that forecloses global litigation enforcement strategy of obtaining injunctions in foreign jurisdictions that might get the infringer to reconsider their refusal to settle in the US.
IBM surely knew all of this and that there was a decent chance that they wouldn’t be successful. However, they must’ve thought it was more important to fight in court AND had the confidence that even a decisive loss in a single litigation wouldn’t be a decisive message about its overall portfolio (but just a reality of patent enforcement these days).
Bottom line: IBM’s patent litigation successes send a message that its licensing efforts should be taken seriously.
Praise for USPTO’s new Section 103 guidance from inventor community
The USPTO’s new Section 103 guidance has mostly been greeted with criticism and bewilderment. Most in the patent community interpreted the guidance to be a way to signal to examiners to be more aggressive about making 103 rejections. The USPTO pointing to the strategic plan on “robust & reliable patents” as an explanation for issuing the guidance also seemed to be a nod in that direction.
Contrary view: at the time, I surprisingly did hear some positive reception of the guidance from some in the inventor community because of its discussion of secondary considerations. So when I previously discussed the guidance and the official responded with the “robust & reliable” explanation, I did ask the official whether the guidance was also driven by helping patents be “robust & reliable” by surviving the PTAB based on the guidance
Besides generally stating that the guidance is applicable for examiners and the PTAB, the USPTO official refused to bite. And, because the mention of secondary considerations was such a small part of the guidance, I dropped the subject and didn’t pursue that angle during my conversation with the official.
However, I recently came across a compelling article by Bunch o Balloons inventor and early Clause 8 guest Josh Malone that made me reconsider.
Josh Malone’s view: in the article, Malone argues that the new guidance
guides APJs at the PTAB and examiners “to address inventor arguments on motivations to combine and secondary considerations instead of giving those points short shrift, which happens too often”
“will most benefit those inventors who have claimed product-type inventions that are ready for retail markets”
bolsters the effectiveness of evidence of secondary considerations, such as “commercial success, industry recognition, media praise, and licensing activities”
So, I circled back with other contacts who were involved with the discussions at the USPTO related to the Section 103 guidance. Those contacts confirmed that discussion regarding providing proper due to secondary considerations at the PTAB was an important part of those discussions.
Bottom line: although it remains to be seen if the guidance is treated in that way at the PTAB, it seems to be a fair expectation from the guidance that strong evidence of secondary considerations will help more patents survive at the PTAB (just like it helped Peloton save one of its patents before the guidance).
SEP Updates
EU: IP Fray writes about the troubling decision of another part of the EU bureaucracy (the Directorate-General for Competition (DG COMP)) to side with a company that has repeatedly refused to license SEPs.
India: “Ericsson wins $29 [million] in India’s highest-ever SEP damages award.” Although the amount is relatively low and it took 9 years for Ericsson to get to this point in India, this award follows other high-profile wins by SEP owners that were far from certain in a country that hasn’t had the most pro-patent reputation.
IP Trivia
Before RFK Jr. chose her as his running mate, Nicole Shanahan was immersed in the world of patents. She worked as an IP paralegal at several firms, helped Professor Colleen Chien with research related to non-practicing entities, and founded a software platform called ClearAccessIP that was eventually acquired by IPWe.
Are you Nicole Shanahan and want to share what you learned from your patent-related roles? Do you work for EU’s DG COMP on SEP issues? Do you know what it really takes to sustain a successful licensing program?
If so, please email me at eli@VoiceOfIP.com or find me on Signal at eli.92.