Page 8 - Intellectual Property

S8 | MONDAY, APRIL 4, 2016 | Intellectual Property
| NYLJ.COM

By David Kappos, Richard Ludwin

And Marc Ehrlich

From Eficient Licensing

To Eficient Infringement

Decisions, legislation have weakened patent rights.

Those who have followed the U.S. pat- courts. The Federal Circuit’s early decisions practicing entities (NPEs), have resulted the 1990s.1 During this period, information
ent system for an extended period are reversed a period of weak patent rights, for in signiicant weakening of patent rights technology (IT) irms adopted a practice
familiar with proverbs like “what goes example, by afirming preliminary injunc- over the last 10 years. In aggregate, we of engaging in full patent portfolio cross-

up must come down” and “deja vu all over tions against infringers, inding more pat- have experienced approximately 20 years licensing, using balancing payments to
again,” as the late great Yogi Bera once said. ents valid and more patents infringed in of strengthening patent rights followed by compensate the party with the stronger
Indeed, U.S. patent holders have seen the close-call situations, and increasing damag- 10 years of weakening them. In describing portfolio. We noted that, as a means to
strength of their patent rights luctuate sig- es awards. Patent rights remained relatively the evolution of U.S. patent rights, commen- value each patent in each party’s portfolio,
niicantly over the last several decades. In strong under the stewardship of the Fed- tators often use the analogy of a pendulum such cross-licenses lacked precision—but
1982, the Court of Appeals for the Federal eral Circuit until the Supreme Court began by which patent rights have swung from irms valued the freedom-of-action provided
Circuit was created to harmonize patent reducing the strength of rights in 2005. In weak to strong and back again.
by these portfolio licenses over the poten-
rulings coming up from the various district
a series of decisions, the court cut back This tale of two patent regimes provides tial value lost by declining to examine the

on the applicability of injunctions, made it a unique opportunity to examine how irms value of each individual patent covered by
easier to ind inventions obvious, and added act under stronger and weaker patent rules, the license. We described this behavior as
DAVID KAPPOS is a partner at Cravath, Swaine & to the types of inventions deemed ineligible and to consider the economics and policy “Rational Ignorance” since the actors made
Moore and is the former director of the U.S. Patent for patenting, among other changes. These implications of both approaches. In our pri- the rational decision to remain ignorant of
and Trademark Oice. RICHARD LUDWIN and MARC decisions, coupled with legislation aimed or article, we examined behaviors during individual patent valuations in favor of the
EHRLICH are associate general counsels at IBM.
at addressing abuses attributed to non-
the period of strong patent protection in
freedom provided by the cross-license. It is