Lodsys, LLC is a “non-practicing entity.” It makes no products. Its business model is structured to earn revenue by enforcing patents against operating companies which Lodsys contends infringe upon its patents. It is enforcing a group of four patents against Apple iOS app developers. Lodsys says the claims “are directed to systems and methods for providers of products and/or services to interact with users of those products and services to gather information from those users and transmit that information to the provider.”
Lodsys has sued a number of large companies, including Adidas and Best Buy, for patent infringement. It appears that Lodsys has been sending information packages to individual developers. This package includes a patent infringement charge giving developers 21 days to respond to Lodsys’ demand that the recipient take a revenue-bearing license.
New developments in this situation continue to unfold. On May 23, 2011, Bruce Sewell, Senior Vice President & General Counsel of Apple, sent a letter to the CEO of Lodsys, LLC. Sewell wrote, “Apple requests that Lodsys immediately withdraw all notice letters sent to Apple App Makers and cease its false assertions that the App Makers’ use of licensed Apple products and services in any way constitute infringement of any Lodsys patent.”
Consultation with counsel can help a developer that has received an infringement charge to make informed business decisions regarding its position and to avoid undue harm to its business.
Does a marriage ending in divorce spell the end of an early stage company? The company or an interest in one may be community property subject to divorce settlement negotiations. One spouse may say the company is worthless while the other sees a large value. A dispute can impact the company’s business. Evaluation by a technically qualified attorney can be very useful.
Conventional business appraisal standards are formulated to work for established companies. These standards include the sale price of comparable companies, cash flow, and the cost to replace the business. However, there may be no companies comparable to the early stage company. Even if there are, sale prices are almost always confidential. Cash flow may be irregular and uninformative regarding value. Finally, the replacement cost could become unimportant as the technology advances.
Often, intellectual property is the predominant component of the value of an early stage company. Patents and trademark registrations alone may not represent the value of the company. An “intellectual property inventory” may uncover unrecognized assets. Each asset may be analyzed for its relation to actual or possible revenue generation, attractiveness for a potential acquirer of the company, and other indications.
The calculated value may not turn out to predict eventual actual cash value. However, meaningful numbers can be generated. This method can give the spouses confidence that a property division based on these calculated values makes sense. Divorce proceedings are often contentious and emotionally charged. This method can reduce delay and difficulty in negotiation of the property division.
In Microsoft Corp. v. I4I Limited Partnership, Case No. 10–290, the Supreme Court rejected Microsoft’s attempt to make patents more difficult and expensive to enforce. The Court did this by reinforcing the principal that clear and convincing evidence is necessary to invalidate a patent.
A patent must be valid to be enforceable. Section 282 of Title 35 of the United States Code states, “A patent shall be presumed valid.” Therefore, if the Patent Office has decided that the invention is patentable, this decision should not be overruled unless the evidence against patentability is “clear and convincing.” The decision of the Patent Office is entitled to deference because it has examined the patent application and, in its expertise, has judged that the patent application was worthy of issuance as a patent.
However, problems arise when the accused infringer presents evidence that the Patent Office did not consider. Should the clear and convincing standard disappear? Is the decision of the Patent Office now suspect? Should a lower level of evidence now be required to show that the patent is invalid?
The Supreme Court said “No” to these questions. New evidence presented to the Patent Office must be considered. It will be given more significance than evidence already considered. However, the “clear and convincing” standard remains in place.
This is important for a number of reasons. A patent defense attorney can virtually always find prior publications related to patentability that were not considered by the Patent Office. The defense will insist that the new evidence is material and that it renders the original decision of the Patent Office meaningless. Because the “clear and convincing” evidentiary standard must be met, the cost for the accused infringer to prove its case is higher. Also, the patentee faces a lower bar to demonstrate that the accused infringer’s arguments of invalidity are inadequate. This translates into a cost saving for the patentee.
These considerations are very significant when an infringement suit begins. A great deal of legal maneuvering occurs early on, perhaps years before a case is in a posture for trial. This Supreme Court decision will be helpful to a patentee who is formulating a legal and financial strategy for a suit.
Clients will come to me and say, “I want to form a corporation,” or “I want to get a patent.” If the client wants a service, we provide it. That may be the client’s objective.
More often, the client’s true objective is to make money. A patent, for example, is not an end in itself. It is a tool for building business. The client may simply be assuming that the patent will help the business to make money. It is better to examine cost versus benefit in each case. Cases will vary. For example, in some scenarios, a software patent will be a very important and cost-justified tool for building business. In other situations, applying for a software patent will be a very expensive undertaking with little likelihood of a significant return on investment.
Analyzing whether making expenditure for legal services will provide the result that you desire will help you in making the best use of precious cash resources.