Florida Patent Lawyer Blog

Research in Motion, Inc (RIM), a leader in mobile communications (see one of their key patents, US5802312 here), has been in the news lately due to a weaker than expected earnings report which sparked concerns about RIM's true value. Goldman Sachs evaluated RIM's business components in order to come up with a book value - the value at which an asset is carried on a balance sheet. Consequently, based on this value, Goldman calculated a "fair market price" for RIM's stock. It does not surprise me that the debate about RIM's future stock price recommendations were heavily influenced by valuing RIM's patents - by far their most important and highest-valued assets. Jeffries, the global securities and investment banking group, came up with a liquidation value of $1B, if RIM sells off its patents, and $2.5B if RIM continues to use its patents. These two numbers, however, are well below RIM's estimated book value of $10B. It seems odd that the calculated liquidation value of RIM is so low, considering that the company is doing well, earnings-wise. But it goes to show that a company reliant on its patents is eventually judged and valued based on its patents.

The debate over RIM's value highlights the importance of patents in the mobile communications industry - this sector of the telecommunications industry has been growing at a very fast pace for almost two decades. For example, take a look at Apple's growth over the last 3 years, which was largely due to the success of the iPhone. The large blue chips in this industry, including Microsoft and Google, have been heavily involved in positioning themselves in the mobility market and protecting those position as best as possible. The highly competitive mobile communications market has spurred a buying spree of patents - motivated mainly out of a desire to protect themselves from patent infringement lawsuits. Recently, Microsoft and other companies partnered up to buy a highly sought-after portfolio from Nortel and Google bought Motorola Mobility for $12.5B. Did Google buy Motorola for its brand name or for its portfolio of 17,000 patents? It is generally accepted that Google did so mainly for Motorola's patents. As an aside, Google did not pay liquidation value for those valuable patents - Google paid a 60% premium on Motorola's previous day stock price. But getting back to Blackberry, is RIM worth it's liquidation value? RIM's roughly 2,000 patents are probably worth a lot more than $1B - $2.5B. But RIM's stock has plummeted since the Goldman Sachs and Jeffries reports. RIM may be losing market share, but does that mean the patents should be worth a liquidation value? This debate highlights the importance of valuing patents properly based on facts, research and using proper appraisal techniques.

Investment bankers may be intent on using liquidation values but a proper appraisal of patents should include a variety of factors, including liquidation value, the cost approach, the market approach and the income approach. When valuating patents, it is important to have an understanding of the patented product, the state of the market for such products and competing products. Then it's time to dig into the numbers. The cost approach calculates either the purchase price paid for the patents and/or the costs incurred in the research and development of the product, as well as the legal fees associated with obtaining the patents (which is no small expenditure). The easiest way to use the market approach is to find comparable sales of a similar patent. Finding comparable sales, however, is difficult due to the difference in products, the use of product, subtleties between patent designs and finding actual sales. The income approach uses a net present value (NPV) calculation. The NPV uses an aggregation of projected sales that are discounted over a period of time to calculate a value at the present time. Liquidation value basically takes the current value of a patent and cuts the value by 40%-70%. The four methods described above create a range of values which can be used for different purposes, such as attracting investors, getting loans, selling patents and projecting the potential stock price.

Liquidation value may not be the best way to value a patent or a company. In fact it can do more harm than good. Help your clients protect the value of their patents by getting a proper appraisal of their patent(s), which may be their most important asset.

Continue reading "Research In Motion (RIM) and the Art of Valuing Patents" »

As a patent practitioner, it's not often that anyone, including the Patent Office, says that you have or have not met the evidentiary standard. Tough it is a phrase often read in civil and criminal cases in courts of law, it has not made it into the vernacular at the USPTO. So it may surprise some practitioners to know that there is, actually, an evidentiary standard at the USPTO.

In today's Ex parte Torrens (Appeal No. 2010-007811) decision, the claims involved a computer program for use in editing video. At issue was an Examiner's 35 U.S.C. §103 obviousness rejection, which the Board actually reversed. But what is more interesting is that the Board cited the evidentiary standard that an Examiner's findings of fact must meet.

On that issue, the Board stated:

"the following enumerated findings of fact (FF) are supported at least by a preponderance of the evidence ... See Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1427 (Fed. Cir. 1988) (explaining the general evidentiary standard for proceedings before the Patent Office)."

Preponderance of the evidence, also known as balance of probabilities, is the standard required in most civil cases. This is also the standard of proof used in grand jury indictment proceedings.The standard is met if the proposition is more likely to be true than not true. Effectively, the standard is satisfied if there is greater than 50 percent chance that the proposition is true. This is also the standard of proof used when determining eligibility of unemployment benefits in civil employment cases.

What does this mean for practitioners? The evidentiary standard of a preponderance of the evidence means that in the course of making arguments before the Patent Office, you should aim to prove your point in a manner that is "more likely than not." You don't need a rock-solid argument and evidence during prosecution, but at a bare minimum, you do need an argument and evidence that makes it more likely than not that your argument is correct. So present as much as evidence as you can, and make sure there is more evidence and more arguments in your favor than not.

Continue reading "Pop Quiz: What is the evidentiary standard at the USPTO?" »

Today, the Board of Patent Appeals and Interferences (BPAI) reversed an Examiner's obviousness rejection under 35 U.S.C. § 103, but issued a new grounds of rejection under 35 U.S.C. § 101. This Quick Post highlights the need to continue "prosecuting" your patent application, even after you've gone to Appeal.

Recall that 37 C.F.R. § 41.50(b) states:

"Should the Board have knowledge of any grounds not involved in the appeal for rejecting any pending claim, it may include in its opinion a statement to that effect with its reasons for so holding, which statement constitutes a new ground of rejection of the claim. A new ground of rejection pursuant to this paragraph shall not be considered final for judicial review."

Thus, even if you've never received a particular rejection by a Patent Examiner during prosecution, the Board of Patent Appeals can, sua sponte, issue that rejection on appeal.

In today's Ex parte Nickell (Appeal No. 2010-008158) decision, the claims involved a computer password protection related invention. At issue was an Examiner's 35 U.S.C. §103 obviousness rejection, which the Board actually reversed. But, the Board went beyond that rejection, without any urging request by any party, and evaluated the claims at issue for compliance with 35 U.S.C. §101.

On that issue, the Board decided:

"Claim 1 does not recite any computer or other machine. For example, the claim does not recite that the steps of randomly selecting and providing the requirements must be performed by a computer, that the steps of receiving characters for the password must be performed by a computer, or that the step of determining whether the characters satisfy any requirements must be performed by a computer. As such, claim 1 is broad enough to read on two human beings communicating verbally, with the first person performing all of the recited steps. ... We, therefore, conclude that claim 1 is not tied to a particular machine or apparatus, and claim 1 does not transform a particular article to a different state or thing. That is, claim 1 fails the so-called 'machine-or transformation test.' The claim, instead, wholly embraces the judicially recognized exception of abstract ideas. Specifically, the claim is directed to a set of mental processes and communications that can be performed solely by a human being."

And thus, the BPAI issued a 35 U.S.C. §101 that was first seen by the Applicant on Appeal. See my earlier post about 35 U.S.C. §101 rejections.

What does this mean for practitioners? This decision means that before going to appeal, you should make sure your claims constitute patentable subject matter under 35 U.S.C. §101. It doesn't matter that a Patent Examiner has not issued this type of rejection or that no one ever brought it up during prosecution. The Board can bring up these issues on Appeal, which would then require you to re-open prosecution to clear the rejection - a major prosecution setback. Thus, it's best to take care of these 35 U.S.C. §101 issues earlier than later.

Continue reading "Quick Post: Board of Patent Appeals Can Issue a New Grounds for Rejection on Appeal" »