Assignment #12: Intangible Assets in the S&P 500

In this post, I will be discussing an article that touches on one of Efrat’s points regarding intangible assets in the S&P 500.  Below is the link to the article that I will be touching on.

http://www.equities.com/editors-desk/investing-strategies/alternative-investments/finding-the-84-of-stock-market-value-that-most-investors-ignore

 As Efrat showed in her presentation, as well as the chart I’ve included below, the amount of intangible assets in the US market has dramatically increased over time.

From 1975 til the present day, intangible assets have increase from 17% to 84%.  That’s almost a 500% increase over a 40 year period.  In this context, I use the term “intangible assets” as a way to describe things that will bring a future economic value that do not exist in physical space.  A perfect example to this is the value of intellectual property, such as copyrights and patents.  However, this article touches on different aspects than intellectual property, but that of human capital.

Milton Friedman, one of the most renowned economists in history, claimed that “total wealth includes all sources of ‘income’. One such source is the productive capacity of human beings.”  Instead of focusing on the actual values of patents themselves, I want to focus on the aspect of human capital.  Patents don’t just become filed and granted out of thin air, it takes brilliant minds to think of and develop some of the ideas that eventually become patented.  Aside from the large costs of R&D, the compensation paid to personnel such as developers, lawyers, etc. far exceed the tangible costs of developing a product. 

The article goes further in depth on human capital but I prefer to end my discussion where I have.  The rise of the value intangible assets in the market shows the level of innovation we are arising to.  With more and more innovators and developers attempting to patent their ideas, I would not be surprised to see the 84% rise even further over the next few years.  What do you think?

Thanks!

Assignment #12: Eastern Texas Cities in Patent Litigation

So for this post, I will be analyzing an article related to a topic well discussed in Monday’s class: The role of Eastern Texas in patent litigation.  Below is a link to the article.

http://www.chron.com/business/technology/article/Apple-sued-84-times-in-Texas-patent-courts-in-6-ye-6145522.php#photo-7681181

Dylan Baddour, the author of the article, begins by stating that Apple has both won and lost patent cases over the years, but six of their cases took place in the Eastern Texas cities such as Marshall and Tyler.  Historically, the towns have been seen as uneducated would therefore not fully understand the terms discussed in the cases.  Juries as well as judges have been criticized for being overly sympathetic to patent trolls and opposed by large corporations such as Apple or Samsung.  However, the pro-plaintiff sentiment from an uneducated jury is not the only reasoning for patent litigation being brought to the Lone Star State.

Michael Smith, an IP lawyer for many years, claims that patent cases are just easier to hold in the small cities of Texas. In a previous case he worked on with Texas Instruments,  he filed a case in Dallas only to being delayed and delayed due to the high criminal rate of the metropolitan town.  Marshall on the other hand, is not home to a prison nor a US attorney’s office.  With few criminal cases taking precedence over patent suits, cases were able to be heard much quicker and therefore at a cheaper cost.  After a successful first case, TI then ran its whole portfolio through Marshall courts. 

With more and more patent suits being filed in Marshall, the town court became one of the first members of the patent pilot program.  And with it, more and more cases found their way to Marshall and the town court became more and more experienced in patent law and litigation.  With more and more cases being brought to Marshall courts, the city began to reap the economic benefits with it.  More cases meant more lawyers in the town, who then spent money in bars, restaurants, and hotels.  Soon, major law firms decided to build large offices in the city and create jobs and boost city tax revenue.  So even though Marshall may be thought of as a plaintiff-pity town, the economic benefits brought into the market are more than enough to make up for it.

Thanks!

Assignment #11: Drew Curtis on How to Beat a Patent Troll

Curtis and his company Fark.com have been one of the many victims of NPEs trolling patents.  The company fighting his firm held a ridiculous patent that held the rights to the ”creation and distribution of news released via email”.  It’s hard to believe that such an idea can be patentable, but erroneous patents slip through the system and give trolls fuel to target others. 

As he continues his talk, Curtis talks about the worst part about patent litigation.  For example, when a patent trolls sues a corporation such as Amazon or Apple, the burden of the work falls on the defendant.  Simply put, the defendant must find significant proof to show that their company did not infringe on the plaintiff’s patent.  To me, I take this to be the complete opposite of the legal system such that the train of thought is guilty until proven innocent.  It is for this reason that patent trolls can become successful in their witch hunts of litigation.

Not only can these cases be an annoying burden on a defendant, it can also be very costly.  The average case takes around 18 months and a near $2 million to finance even in the case of a defendant victory.  Due to this, many infringement cases result in settlements that are protected by a non-disclosure agreement.  This gives trolls the ability to say that they had won the case regardless of the terms of the settlement. 

After successfully fighting off the troll, Curtis claims to have learned three things about fighting trolls: 1) Fight the infringement, not the patent. 2) Make it known that you either have no money to settle with or that you are willing to spend the money you do have on fighting the case.  3) Lastly, make the troll know that you and your company are willing to be as annoying and difficult as possible in fighting the charges.  Though this is not a fool proof plan, it is a way to prevent trolls from trying to take advantage of you or your firm. 

Thanks!

Assignment #11: Johanna Blakely on Fashion

Hey Everyone!

So for this blog post (as well as the next) I will be talking about one of the TED Talks we watched in class.  In this post, I will be focusing on Johanna Blakely’s talk at USC: Lessons from Fashion’s Free Culture. 

The main point that Johanna points out in her lecture is the differences between the fashion industry and copyrighted industries such as film or music.  To begin, she touches on some key issues facing the fashion world.  First of which, is the role of patents in fashion.  Simply, there aren’t any and the US Patent and Trademark Office’s reasoning is that designs and clothes are too utilitarian of item to be patentable.  Therefore, there is basically no way for designers to protect their design from being copied. 

Knock-off clothing is a huge market for those who want to wear the best styles without emptying their pockets.  By contrasting some pictures of brand name designs next to their cheap knock-offs, Blakely is able to demonstrate the small differences between the expensive designs and their respective copy.  The reason that Gucci and Prada brands sells for so much more than their replicas are due to the use of higher quality fabrics and materials.  Each type of clothing has a market which is why the fashion industry is still able to operate.

The way Blakely compares the fashion industry to markets such as film and music is based on the aspect of copyrights.  Films, music, literature, are all eligible to be protected by intellectual property rights so it should follow that those industries are more successful right?  Blakely speaks to the opposite and demonstrates that industries not protected by property rights such as fashion and culinary soar past copyrightable industries in regards to sales.  So even though the fashion industry is not eligible to be a copyrightable industry, it still brings in billions of dollars in revenue and is constantly progressing in terms of creativity and innovation.  This talk was a great example as to how intellectual property is not always necessary to promote innovation.

Assignment #10: The Pedal Operated Mower

So for this post, I will talking about anther wacky invention: The Pedal Operated Mower.

The patent combines all the fun of mowing your lawn with riding a bike.  Simply, this patent outlines a device that rides just like a bike, but has a rear-mounted grass clipper system that operates as you ride.   It sounds like a great idea until you let your children ride the contraption and they end up injuring themselves or another person. 

Anyway, this invention is a direct derivative of the previously patented Exercycle Mower Apparatus.  That device, as I will refer to as the EMA hereafter, is basically the same idea except that the grass cutting blades are located beneath the rider instead of behind them.  However, in their patent application, the Pedal Operated Mower state its differences such that “None of these [previous] patents discloses all of the specific details of the present invention in such a way as to bear upon the patentability of any claims of the present invention.”  Basically, my understanding is that this invention, though slightly modified from the prior arts, capitalized on the lack of specifications of the previous patents and therefore allowed it to be patentable. 

This seems like a fun, although dangerous way, to mow a lawn but I still don’t understand why anyone would see a need for this invention.  Either way, the patent office accepted the innovators request and thus it has now made it on to my blog.

Thanks!

Assignment #10: Beerbrella

So for this patent, I imagine the inventor loved to be out at the beach, relaxing, and drinking a beer.  But while he was sun tanning, he didn’t want his beer to do the same.  So instead of having his ice cold bottle of beer sitting in direct sunlight causing its temperature to rise, he came up with the idea to invent a shade for this bottle of beer. 

As you can see by the diagram shown, the idea of the invention is pretty straightforward.  There is an umbrella type shade attached to a pole that has a C-shaped clamp to it.  The clamp goes around the bottle and causes the shade to be over the beer.  With that, your beer is now in the shade and staying out of the way of the sun’s warmth. 

For this patent, I want to take a closer look at how the inventor developed the idea.  In the patent document, the inventors reference 16 other patents to distinguish just how novel their idea is.   The one that comes closes to denying this patent for similarity to a prior art is to the beverage shader.  Looking further into that patent, there is only a slight difference that the inventors of the beerbrella made.  The beverage shader was only the use of an umbrella to shade a drink whereas the beerbrella uses a coozie or other beverage insulating materials to keep the beer cold as well.  The beerbrella not only keeps the warm away, but also keeps the coolness in the beer container.  It’s not the most obvious or most needed invention in the world, but it’s still a patent.  I’m more than positive there is someone using this as we speak. 

Check back for my next post about another wacky invention.  Thanks!

Assignment #9: The Role of a Troll

Similar to my last post, I will touch on a case involving Apple and another NPE suing them for patent infringement.  However, this case will serve as an example as to how NPE can operate as trolls and damage the patent industry.   The link to the article summarizing the case can be found below. 

http://www.cnet.com/news/apple-defeats-gpnes-94m-patent-infringement-claim/

In this 2011 case, GPNE filed charges against tech giant Apple for infringing on four cellular patents that Apple supposedly used to create many versions of their iPhone’s and ipad’s.  GPNE, at the time of the trial, held patents that surrounded cellular communication between devices.  These patents, however, were filed under the assumption that they would be used in the production of pagers.  GPNE’s whole case asserted that Apple took this technology and willfully implemented it within their products and GPNE was out to seek damages.  Unfortunately, in the fight against Apple in patent litigation, GPNE was not as fortunate as Smartflash in being awarded compensation.

In a federal district court located in San Jose, Apple successfully defended itself and was not ordered to pay any damages to GPNE.  Apple’s core argument was that the patents listed in the litigation were specifically in pagers and therefore did not claim any rights to be used in tablets or smartphones.  The jury sided with Apple, and just hours after Apple had won the case, they released a critical statement attacking GPNE.  Apple claimed that GPNE was simply a patent troll trying to extort millions out of them for 20 year old pager patents that ultimately resulted in a waste of time and money. 

GPNE had also issued letters to over 300 other companies, Apple claimed, from “truckers to farmers…threatening costly legal entanglements if these small businesses didn't pay them off.”  This is what many fear when talks of patent trolls arise.  NPEs such as GNPE simply mean to use their intellectual property rights as a basis for extorting a payoff from hundreds of companies.  Though they were unsuccessful in the fight against Apple, I’m sure that GPNE and its legal team will out to fight another fight in hopes of earning a hefty compensation ruling. 

Assignment #8: Smartflash LLC, The Benefits of NPEs

For this blog post, please refer to the article listed below.  It is an article in Fortune magazine explaining how Apple’s bullish behavior lost the company over half a billion dollars.  The reason I have chosen this case is that it shows how NPEs operate for the good of the patent industry and how the big companies (Apple in this instance) fight to do whatever they want simply because they are a juggernaut of the tech world. 

http://fortune.com/2015/02/27/how-apple-lost-533-million-to-an-8th-grade-dropout-patent-troll/

Smartflash LLC is a small technology developing and licensing company in Tyler, Texas, started by a man who grew up on a farm with only an 8^th grade education.  Patrick Racz, the founder of Smartflash, LLC, and his background were of large attention to the legal team of Apple in a recent patent infringement court case originally filed in 2013.  The case Smartflash brought up against Apple was infringement on three specific patents relating to data storage.  The patents in question were all valid and filed by Racz himself, a fact that he later pointed out as to not make Smartflash come across as a patent troll, but merely a non-practicing entity.  This did not matter to Apple’s legal team, as they sought out to fight the charges and pay a little as possible in damages. 

When the court proceedings took place, Smartflash had all the proper questions ready to address and focused on the specifics on the case.  Apple, on the other hand, called several witnesses to speak in their favor and to prove they did not willfully infringe on any prior arts.  When they called Racz, they simply intended to show that with his educational background, he was not qualified to hold such patents and targeted him as a troll fishing for licensing fees.  They attacked him with ridiculous questions and according to Brad Caldwell, Smartflash’s legal counsel, “They acted like we’re Apple and have no need to respect other people’s intellectual property.” 

But as we all know, all intellectual property is to be respected or else to face the consequences.  In this case, Apple’s consequences amounted up to over half a billion dollars in damages payable to Racz and his company.  This case showed NPEs in a positive light, fighting for their IP rights against large companies that simply aim to dominate the industry through means of their huge reputation and market share. 

In my next post, I will outline an example in which an NPE are detrimental to the patent industry.

Assignment #8: Trolls – What are they?

In this post, I will touch on what exactly a Non-Practicing Entity (NPE) is as well as the arguments from both sides on their significance.

Also called a patent troll, an NPE is simply an entity that holds patents with the intent on pursuing licensing fees, or other monetary compensation, from other corporations due to patent infringement.  Usually, these people or companies simply hold the rights to certain patents and therefore to not produce or sell products.  An example of an NPE that I will touch on in my next blog post is called Smartflash LLC.

The name troll carries with it a negative connotation, suggesting that the work these NPEs do is somewhat malicious or detrimental to the patent industry.  However, there are two sides to every story.  Starting off in a positive light, NPEs are essential when it comes to protecting intellectual property.  They give small innovators and entrepreneurs a chance to protect their patent rights in a fight against a large corporation.  A single person may not have the capital to fight a lengthy legal battle against a fortune 500 tech company, but an NPE can hold their own in such a legal battle.  By protecting the patents rights of its owners, NPEs succeed in achieving the main goal of the patent system.

Opponents of patent trolls cling to the argument that NPEs are simply out to fish for compensation and licensing fees.  Winning or losing the court battles, though very important, is not the main reason for the tech industry’s dislike of trolls.   Many claim that by NPEs enforcing their property rights are doing more harm than good.  By continually suing large, innovating companies, many are afraid to innovate further for fear of being taken to court by a later troll.  For this reason, the interaction of NPEs and large tech companies are threatening the pursuit of innovation.  Furthermore, this is the reason that legislature restricting NPEs are coming in the near future.

Check back to my blog for an example of this type of litigation involving Smartflash LLC and Apple.