You Could Almost Hear the Whistling; Panel Talks Good, Bad and Ugly of NPEs

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By Tom Taylor

Oct. 30 — The theme was “The Good, The Bad and The Ugly,” and a panel discussion about the pros and cons of nonpracticing entities had the makings of a shootout Oct. 24 at the American Intellectual Property Law Associations's annual meeting.

The three panelists delivered remarks focusing on one of the three titular characters from Sergio Leone's famous spaghetti western, trying to explain how NPE litigation, in one way or another, fits under each umbrella.

The Good

“The Good” was articulated by Matthew Vella of Acacia Research Corp., Newport Beach, Calif., who argued that NPEs, like his own company, level the playing field for parties who—for one reason or another—can't bring potential licensing partners to the table.

In the majority of markets where NPEs are active, an oligopoly is in play, Vella said. NPEs provide three services to patent owners in these kinds of situations, he said, including:

• expertise, meaning access to potential licensing partners;

• risk-discounted liquidity to patent owners that need money now; and

• the ability to bundle and present technologies, what Vella called a “search and screen” function.

The Bad

Hilda Galvan of Jones Day, Dallas, discussed “The Bad,” which she equated mostly with numbers and statistics meant to illustrate the problems caused by NPE litigation.

The overall cost of patent litigation in this context was around $29 billion in 2011, she said, although that number was later disputed by a member of the audience during the question and answer period.

The average cost for each litigation for smaller litigants came to about $500,000, while larger litigants spent around $1.3 million, she said.

The Ugly

Suzanne Michel, former deputy director of the Federal Trade Commission's Office of Policy and Planning and now senior patent counsel at Google Inc., Washington, was the third panelist to speak and drew “The Ugly,” although she said she preferred to talk in social media terms and dubbed her talk, “It's Complicated.”

Her main point was that abusive NPE litigation is a symptom of larger problems with the patent system.

She identified a number of specific problems, including:

• Poor patent quality.Amorphous claims are a problem, and “Nautilus is great but not going to be a sea change, not going to solve these problems,” she said, referencing Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2014 BL 151635, 110 U.S.P.Q.2d 1688 (2014).

• Remedies not grounded in economics.“Hope of the lottery ticket patent drives a lot of the litigation we see,” Michel said.

• Expensive and inefficient ligation.It is too easy to drive a settlement based on costs, which not only include attorneys' fees, but engineer and executive distraction, she said.

The Audience

And while the panelists seemed eager enough to spar with each other, the bullets didn't really start flying until the audience began asking questions.

The crowd—or at least those who made it to a microphone—revealed itself to be very much of the pro-patent persuasion, framing their “questions” (most seemed rhetorical at best, with one questioner even noting that he'd ask his question and then leave as to let the panelists mull it over) as an issue of constitutionally-based property rights in need of protection from erosion at the hands of powerful corporations.

One audience member took particular issue with Michel's claim that innovation, and ultimately the patent system, is “about getting new products to consumers.”

Are patent protections about the promotion of science and the useful arts, the commenter suggested, or about consumerism?

To contact the reporter on this story: Tom P. Taylor in Washington at

To contact the editor responsible for this story: Tony Dutra at