By: Joff Wild, Editor, IAM Magazine

Conversant Intellectual Property Management (MOSAID as was) has today published a 10 point best practice set of guidelines for patent licensing as what it says is a direct response to “growing calls from business and the United States Congress to rein in patent trolls”. No doubt aware that it has been labelled a troll on any number of occasions itself, Conversant has laid out a set of “ethical patent licensing practices” to be followed by both licensors and licensees, and has called for responses to them. Among the 10 points, a press release that Conversant has issued identifies the following:

• Never seek a license from or threaten litigation against a start-up company, a local retailer, or an end-user customer, unless it is a direct competitor.

• Only license quality patents for which material resources have been invested in due diligence that confirms their validity and technical merit.

• Initiate litigation only as a last resort in order to obtain fair compensation for the use of its patented technology — and never for the purpose of obtaining a nuisance or litigation cost-based settlement.

• Always disclose a patent’s true ownership and never hide behind shell or sham companies.

Conversant has also secured backing for its initiative from Marshall Phelps, ex-Tessera IP president Barney Cassidy and Professor Adam Mossof of the George Mason University School of Law. “These principles, or ones like them, should be embraced by all legitimate patent licensors. Conversant has made an important contribution to the ongoing dialogue about abusive litigation tactics,” Cassidy states.

What I like most about this excellent initiative is that it makes very clear that not all patent licensing businesses are the same. This is something that not enough people seem to understand right now. Back in September, the FTC defined PAEs as “firms with a business model based primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technologies”. The clear implication being that these are entities that go out and acquire any old patents and then look for victims to sue.

While there are undoubtedly some outfits that do that, there are many others – such as Conversant – that have much more sophisticated operations. Rather than seeking to assert whatever they can get their hands on, they have teams of highly qualified technicians and licensing experts that undertake a great deal of due diligence before any patent is purchased; as a result of which the vast majority of rights that are put in front of them are rejected. Within this group, there will also be very differing attitudes to litigation – some will take this route quickly, others will see it as a last resort.

In outlook, investment, knowledge and target licensee, though, serious patent licensing businesses are very different to the bottom feeders who prey off lack of IP knowledge and the fear of expensive litigation to extract relatively small licensing fees from a wide variety of victims for patents whose quality has never been given a second thought. Serious patent licensing businesses invest time and money in acquiring good quality assets, and they are careful to identify their licensing prospects. Some may rush to court, others may hold off – but they do not seek to assert stuff they have not given very close scrutiny to against entities way down the food chain. As a result, I can think of very few major licensing NPEs – ones that are so often lumped in with the trolls, either by design or through ignorance – that will be uncomfortable with much of what Conversant says.

What is important to emphasise about the Conversant points, however, is that they are a basis for discussion; they are not a definitive statement. While in broad terms, there will be any number of NPEs that could sign up to what the firm has laid out, differing business models mean that there will be some divergence on specifics. For example, there may be legitimate reasons for initiating litigation at an early stage in a negotiation; while some may be happy to sign up to everything except, perhaps, the level of transparency Conversant calls for. What should be avoided is a situation that leads to firms being labelled trolls just because they do not follow all the points to the full extent; that’s why this should be just the start of the conversation. And it’s not a discussion that should only take place among NPEs. The points set out are equally applicable to operating companies with licensing operations – which, again, is something that demonstrates that not all PAEs and NPEs are the same.

And something else to note about the 10 points is that they also make clear that there are two sides in all licensing negotiations/disputes. Just as there are some bottom feeding trolls, there are also infringers who are not interested in paying patent owners anything, but instead expect to get it all for free. Conversant rightly makes clear that potential licensees have obligations too; acting in good faith being the primary one.

It would also be good to hear from some of the anti-NPE fundamentalists to get their views on Conversant’s initiative. Do they really believe that it is necessary to introduce new legislation to rework US patent law and practice to make it much less plaintiff-friendly in order to curtail the activities of entities that can sign up to the vast majority of the principles underpinning the guidelines? And are they genuinely sure that those who can endorse them should be lumped together with the bottom feeders, who never could?

Source: http://www.iam-magazine.com/