Patents don’t bite – a licence to do the right thing


Financier Worldwide Magazine

November 2014 Issue

November 2014 Issue

Bad actors who pollute any business environment eventually cause public sentiment to turn negative and, in turn, instigate government intervention. Self-regulation isn’t a miracle cure either. Not all intentions are genuine and good, and one person’s view of acceptable behaviour will certainly vary to the next persons.

What we can agree on is a framework of what is acceptable conduct and what is not. The recent worldwide spectacle of the World Cup shows how a global game managed by a shortlist of 17 rules that any person can understand is refreshing and exciting. When a player bites someone, it is widely recognised that that player – a star or otherwise – is on their way out of the game. At the core there is very little, if any, question about whether or not there should be a World Cup championship.

And in the world of licensing inventions, when a patent owner bites a third-party customer, the negative public reaction should not be a surprise. Indeed, those guilty of such taboo behaviours justifiably draw vituperative criticism to themselves. We, as an industry collective, have to identify what types of behaviour and conduct are acceptable from both patent owners and prospective licensees. Let’s face it, a metaphorical bite can originate from either side.

It is time for the industry and legitimate patent holders to take steps to promote and protect our system because it is being held hostage by a small number of abusive patent asserters. Perhaps no more than two dozen non-practicing entities (NPEs) are in the sole business of shaking down technology companies, retailers and other businesses through highly suspect patent claims, unscrupulous practices and an outright canvassing of offers to licence dubious patents.

These outfits are buying patents with the sole intent of inundating third-party and end-users with threats to sue unless they receive a licence fee for using a patent whose applicability is questionable at best. Many assert patents without merit, using litigation costs as leverage in negotiations when seeking low, nuisance value settlements. A recent PwC study, entitled ‘2013 Patent Litigation Study: Big cases make headlines, while patent cases proliferate’, found such actions now account for two-thirds of all patent lawsuits. Perhaps worst of all, those that are unjustly sued are often unaware of their legal rights and too small to fight back, therefore forced to succumb to the nuisance lawsuit.

Not only is this unethical, it has also been showed by some to put a drain on our overburdened judicial resources and a huge cost to companies that simply pay rather than wasting time going to court; research by Boston University professors, published in a paper called ‘The Direct Costs from NPE Disputes’, estimated NPE disputes cost US companies $29bn in 2011. Furthermore, it unfairly shrouds all NPEs in a cloud of mistrust. No wonder the patent licensing industry is falling victim to a negative image; indeed, the problem is undermining confidence in the entire patent system, which is a shame.

This waste tells us there is an opportunity for business people. Sustainable farming tells us, for example, that managing water, labour, land and customers all can be in balance. Such best practices may for some be more expensive to implement up front and may reduce volume output or margins, but over time the value created makes the enterprise more durable. The same can be proved true for the role that patent licensing plays in the innovation ecosystem.

Patent licensors who sign on could have the intellectual property equivalent of the Good Housekeeping Seal of Approval, a sign that would give assurance to licensees, and whose absence would be a warning sign for potential victims of abusive patent asserters.

In our experience, we have the struggles that companies make between hiring a new employee or filing for a patent application, endured the multi-year process of examination at the USPTO, and seen firsthand the value that hard earned patents represent for innovative companies. It is unfortunate that we have lost sight of the value the US patent system has generated to our modern economy for more than 200 years. Moreover, it is disappointing that a few bad actors and their unscrupulous methods cloud the efficiencies that do exist in the transfer and licensing of IP assets and the value contributed to new technologies and new markets.


Phil Hartstein is president and CEO of Finjan Holdings, Inc. He can be contacted on +1 (650) 282 3228 or by email:

© Financier Worldwide


Phil Hartstein

Finjan Holdings, Inc.

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