IPWatchdog Innography Webinar: Supreme Court Impact on Patent Portfolio Management

©2015 INNOGRAPHY, INC. : : CONFIDENTIAL 1 ©2015 INNOGRAPHY, INC. : : CONFIDENTIAL JULY 30, 2015

Supreme Court Impact on Patent Portfolio Management

https://www.innography.com/

©2015 INNOGRAPHY, INC. : : CONFIDENTIAL 2

Host and Participants

•  President at IPWatchdog

•  Host of today’s webinar

Gene Quinn

•  CEO at MedicinusIP

•  Former veteran of Acacia

•  Current Partner at Crowell & Moring

•  Former Deputy Director of US PTO

Bob Rauker Terry Rea



Introduction

We will discuss: •  What the recent Supreme Court cases have meant for

patents, patent porHolios, and valuaIons •  The recent case of CLS Bank v. Alice CorporaIon and the

ramificaIons to the industry •  Other §101 issues and important quesIons


©2015 INNOGRAPHY, INC. : : CONFIDENTIAL 4 ©2015 INNOGRAPHY, INC. : : CONFIDENTIAL JULY 30, 2015

Q&A



What has Alice done to the licensing industry?

Bob Rauker: “Alice has had a huge impact on the licensing industry… With the high rate of patent cases now being basically killed, it’s had a devastaIng effect… It’s becoming very, very difficult to understand and evaluate patents for licensing, because you just don’t know the value.” Terry Rea: “I was surprised at the extreme impact that CLS Bank vs. Alice had on the soZware and business method sector. The fact that they almost needed a technological component to be part of their claim and you couldn’t just merely recite computer anymore. I didn’t expect that in the higher tech world to have the impact that it did.”



How do you approach valuing patents or a portfolio you may be trying to acquire?

Bob: Positive effects: “It’s had the posiIve effect of cleaning up what we would say ‘garbage patents’ and maybe what I would call the true troll business of junk patents being asserted, the cost of liIgaIon.” Negative effects: “You literally have to put a much lower value like anything else unIl there’s more certainty, which is unfortunate, because there are a number of people who have some nice patents, but the industry has to respond and say, ‘Listen, there’s just huge uncertainty.’”



Terry: “So what I do with my clients, when I’m claim draZing, I try and be as creaIve as possible. I look start to finish when you find and idenIfy that component in nature that will be modified. I try and draZ claims that will cover it each segment of the way unIl it’s sold and used by a paIent or a pracIIoner. …the examiners are going through the very same learning curve that we are. We’re all in it together and we should think about teaming with the examiner to arrive at patentable subject ma]er.”

What are you telling clients?



Terry: “I’m sort of opImisIc that the future will give us the drugs and the diagnosIcs that we need so we can all live purportedly to be over a hundred. I think that if I owned a company right now, frankly I would conInue filing patent applicaIons. Maybe I wouldn’t file on as many or as robustly as I did in the past, but I think that you’ve got to protect your R&D efforts and your spend as much as possible.” “If you already have something commercial and your patent is listed in the package insert or on the product, I would be inclined to pay that maintenance fee, because I do think that it does provide some type of barrier from prevenIng third parIes to copy what you’re doing. But it’s all a balance.”

What should a start up company in the bio-tech sector do? Should they still be filing patent applications? What should an established company do when it comes time to decide whether or not to pay

maintenance fee?



Bob: “These recent rulings have had a significant impact on the industry. And so the key there is people need to be cognizant of what these rulings are. I would sIll conInue filing the claims. I would try to push as much as possible toward diagnosIc kits or other apparatus claims if we can do it. That’s the general advice on that that we’re following.”

What do you think about the future in diagnostic methods? Where are you placing your focus?



Bob: “We’re basically keeping everything alive. Yes, it is more expensive and I think the typical thing is to do that, but we’re really trying to go down the various paths and focus on that and that requires creaIng specificaIons that are more detailed perhaps and maybe take a li]le bit longer, or filing mulIple different specificaIons. One may be directed more towards methods, one more directed toward apparatus. It’s the idea that you have to keep stuff alive because you’re going to have to respond to these changes. It’s tough, the cost, we understand that, but it could be a very significant cost if you don’t keep it alive.

How do you determine what to focus on, what to keep alive, and what is worth having?



Terry: “I think that you do have to draZ patent applicaIon smarter than ever before in some areas of technology they might be longer, in other areas, maybe not. You have to be smarter; you have to be more creaIve in your claim draZing. Reissue is a bit expensive, it takes a while, but for those crown jewels, where you think your future is riding, I’d recommend it in those circumstances. It’s true the record tends to get a li]le bit more convoluted, but if you already have, in the back of your mind, liIgaIon issues and you’re already working with liIgaIon counsel while you’re going through a reissue or reexam, I do think the product that comes out could be ve]ed and could come out a stronger patent than before, because every issue was already addressed by the PTO.”

Is re-issue a solution?



Gene: “I’m sIll in favor of patents, and fundamentally I think things are going to change sooner rather than later, because if you look at the last 30 years, as far as I can tell, and I’ve looked through it, we haven’t given the same advice to soZware applicants for any more than a two to two and a half year period of Ime. It’s just constantly evolving and changing.”

Bob: “Even if there is this quesIon of validity when we’re looking at invesIng, there’s always a slightly be]er comfort level that there is a patent. It may eventually be declared invalid, but I think just from a pure funding standpoint, the valuaIon of the company, it’s be]er to have patents than not… That’s why you have to keep stuff alive and try to put as much in there that goes to the core of what you’re trying to achieve… There’s a lot more priority now and we have to be cognizant of that. But I would sIll file them. I think you just have to be recognizing that it’s going to be narrower, there are going to be changes in the law, but I sIll think it’s be]er to have them at the very least from a valuaIon and funding source.”

What would your advice be to a start-up company whose core technology is web-based software? Should they be seeking patent protection today or not? If not, what approach should they take to

try and protect what they have?



Is it time to build again?

Terry: “That would be my basic recommendaIon. I’m hoping that the Supreme Court is going to get more sophisIcated and more finely tuned with their decisions as their comfort level with these patent cases and their understanding of how they affect business and the economy evolve. And it sIll amazes me, 9 to 0; that’s a whole lot of very intelligent people, who don’t oZenImes act in sync on a wide variety of other issues, and yet in the patent world, they’re pre]y much lockstep.”

Bob: “I’ve always been of the feeling that you design and develop and then have the patents follow… I think, in fact, the development drives be]er patents because you work through all the issues and then you file on those issues. That’s what we’re working with and trying to get people to see. Develop your product. Sell your product. The patent applicaIons will follow. Just be smart about it.”



Terry: “I do think that there will conInue to be strong licensing from outside the United States because, believe it or not, they sIll have confidence, perhaps more than many of us who are in the middle of it, that they’re more objecIve perhaps than us and they think that we will find our way out of this apparent inconsistency a li]le bit sooner than we think. Teva vs. Sandoz has not changed, I don’t think, the liIgaIon plaHorm as much as we thought.”

What is the effect on licensing US Patents internationally in light of all these cases? And

what about enforcement as well?



Bob: “I’m somewhat pessimisIc that there’ll ever be harmonizaIon. I just think that there are too many naIonal interests in industries within the various countries. I don’t think you’ll ever see a global patent or anything of that nature where stuff is consistent. To Terry’s point, they sIll have great hope and promise in our patent system. As she said, I think they do have a li]le bit stronger belief in our system, but they’re also obviously buying it to bring in their own industries.” Terry: “I think a lot of countries are talking about [harmonizaIon] now just because business requires efficiencies and they don’t like that mulItude of different laws in different countries, and also patent offices are collaboraIng more so now than ever before in areas such as work-‐sharing. I think that the more we can inch there, the more efficient it can be for business, and therefore it’ll give us, hopefully, a “best pracIces” and it would only be the best aspects that were harmonized across the globe.”

What do you think about §101 issues or the equivalent issue overseas? Are we going to harmonize these issues with the way that Europe looks at them and the way that we look at them? Should we in the US just be

writing applications and looking for applications that would satisfy the European standard?



Terry: “Absolutely. It’s easier to do it than ever before. The examiners are encouraged to parIcipate in interviews. The examiners are encouraged to iniIate interviews. The examiners are flexible no ma]er what your Ime zone is to work with you. So, yes. Historically, that’s what I’ve found to work best and I think the staIsIcs also show the quality of the claims and the applicaIon is higher when that applicaIon has an interview.”

In light of all that’s going on, do you recommend trying to do more interviews with examiners?



Bob: “I don’t think so. Let’s face it. Companies are in the business to make products and commercialize stuff. People will conInue to invent. People will conInue to innovate. The problem is more on the smaller level. Is it going to impact smaller companies? Probably. Are they going to be able to protect their intellectual property? That may be more difficult. I don’t think R&D is going to go away, but a lot of these decisions will have an impact on these smaller companies.”

Do you think that all of these recent decisions are going to wind up having a long-term

adverse effect on R&D in the US?



Terry: “I’m big about filing in the EPO and, as I indicated before, I think quite a few commentators, and myself included, think that the actual subject ma]er eligibility 101, it’s broader in Europe right now than it is here in the US… Right now the EPO has been surprisingly posiIve for me and my clients.” Bob: “I agree with her. I would just add in I am very comfortable with Canada, at least on the medical device side. Japan has been always fine with me… You just have to look on an individual basis.”

Are there places around the world that you can get better protection right now than you can get

in the US?



With the growing use of the patent prosecution highway, do you suppose it may

be a strategic advantage, that in these jurisdictions where you might be able to get better, more meaningful, strong protection,

you try and start there and then enter the PPH and the US based on what you get there,

maybe under the belief that the courts might think that it’s a stronger patent because it’s

been looked at in multiple different countries?



Terry: Yes, absolutely. I know quite a few people who use that as a strategy. They make a strategic decision where to file their first applicaIon or where to request examinaIon or where the first examinaIon will likely occur. I actually haven’t seen it completely play out quite yet, but they do seem to get a broader scope to their claims once they come back to the US.

Bob: The other thing I’d say is, especially in the bio-‐tech and med device, with your products being commercialized typically sooner in Europe, it’s that much be]er to do it. You get that advantage of geing your patent issued.

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IPWatchdog Innography Webinar: Supreme Court Impact on Patent Portfolio Management

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