PAEs Forming Association That Would Be First of Its Kind

"IPRC is an association of inventors, experts and enterprises advancing intellectual property rights and patent quality through research and education,” said a beta website for the group that was taken down after our inquiry. The group’s logo can still be viewed on the site for the company that designed it (http://bit.ly/16RokIr). Several test pages on the site included articles asserting the importance of patent rights, including an August USA Today op-ed from former Sen. Jon Kyl, R-Ariz. (http://usat.ly/1aWqx65), and an Intellectual Property Today column by David Treece, a University of California-Berkeley professor (http://bit.ly/1aWqBCP). The lobbyist familiar with the nascent organization declined to say which PAEs had been contacted and which, if any, had agreed to join. He didn’t provide a timeline for the official launch of the organization, but others said they anticipate an announcement this fall.

"There is a lot of lobbying going on around the issue of patents in other areas,” said the lobbyist. “Patent licensing companies are sensitive to the fact that they need to do a better job helping people understand their role in the innovation cycle. There’s a need to provide more information to help education about the role that they play,” he said. “Entering the discussions with good, constructive, well-articulated and fact-based information is something that a growing number of patent licensing companies, [as well as] a lot of large companies with huge licensing portfolios, are sensitive to the need to articulate.”

PAEs including Intellectual Ventures (IV), CopyTele, ArrivalStar and IPNav said they would welcome participation in a Washington association. “IPNav and our operating partners would welcome participating in any organization that helps to clarify the real issues that are important to the patent dialogue in Washington,” said CEO Erich Spangenberg of IPNav, which doesn’t have a Washington presence. Spangenberg said IPNav wasn’t contacted about the IPRC. Tony Dowell, an attorney for ArrivalStar, said he couldn’t think of any existing groups that fully represented the interests of inventors and patent licensors, and ArrivalStar would “absolutely” consider joining such an organization. He said he had not been contacted by IPRC. More than 20 other patent assertion or monetization entities had no comment.

Stakeholders in the industry are “starting to talk about” an association, said Russ Merbeth, chief policy counsel at IV, a patent licensing company with a research branch, and a frequent target for critics of what they call patent trolls. He had no comment on whether IV was associated with IPRC. Merbeth, a recent hire who has engaged those critics at several Washington events this summer, said it would hypothetically be nice to have others in the industry working to correct misperceptions. “It isn’t always that much fun to be the only voice or face in an industry that’s really taking a lot of hits, from at least the public interest community,” he said. “The debate is just going to get hotter and the level of nuttiness and lack of real data is going to prevail, if we don’t start countering this.” IV thought “someone has to do it, so let’s just do it ourselves,” he said.

An association makes sense “because the anti-patent lobby is becoming so active,” said CopyTele CEO Rob Berman, who was contacted by IPRC. He pointed to ongoing efforts to paint patent assertion negatively, including national TV commercials characterizing what they saw as abusive patent litigation behavior. Patent licensors and other “large players” want to get together “because there is so much misinformation out there, patent owners and companies that trade in IP are forced to tell the other side of the story,” he said of intellectual property. “I'm not a Washington guy, but I guess the only way to really get yourself heard is to form some type of trade group and put a lot of money behind it.” Berman said he would welcome the chance to testify before a congressional hearing, and he had never been approached about one. “Congress really needs to act not in a knee-jerk way,” he said. “They really need to bring everybody to the table, and hear from everybody, including companies like ours."

InterDigital also actively engages with Capitol Hill, said CEO William Merritt. InterDigital is primarily known for its standards development work in wireless technology and as one of the top holders of wireless patents. Its patent licensing business has led some critics to refer to it as a troll. Merritt said he and other InterDigital executives routinely travel to Washington to meet with Hill staffers. Those meetings, particularly during the debate over the America Invents Act (AIA), helped to “correct a lot of misconceptions” about InterDigital and other patent firms that devote significant resources to research -- reason enough for the firm to maintain a “pretty active process,” Merritt said. “We absolutely need to continue to do that, because unfortunately I think incorrect notions get floated in D.C. by various groups involved in this process."

Merritt said he recently told Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., that Congress should take a page from its consultations for the AIA and again seek out all industry voices as it looks at additional patent revamp legislation. “Research-based” patent firms have become more active on the Hill, but companies that are “clearly in the cross hairs of legislation, if they're clearly viewed as a pure patent assertion company without any research arm, have tended to shy away from lobbying efforts,” Merritt said. “They seem to think it would be counterproductive. I actually don’t buy into that because I think they have a pretty important story to tell."

Several congressional aides said input from PAEs would be helpful on the Hill. How readily the groups can relay the facts of their position will be a measure of their success, an aide said. Members don’t know enough to make a decision for either side, the aide said. Another said the PAE perspective is important, because “people hear a lot about them and not from them.” The aide said it was good the groups had a chance to respond. None of the offices we surveyed, on both sides of the aisle and in both chambers, said they had yet heard of the IP Rights Council. The Patent and Trademark Office didn’t comment specifically about IPRC, and a spokesman said the agency “is of course receptive to feedback and input from all of our stakeholders."

Critics of the PAEs described even Merbeth’s initial engagement efforts as somewhat superficial. IV’s outreach is a “charm offensive,” with a similar effort coming from IPNav, said Matt Levy, patent counsel at the Computer and Communications Industry Association, which has members including Facebook, Google, Microsoft, Samsung and T-Mobile. “They're concerned about the patent reforms that have been introduced on the Hill,” he said. “I doubt they'd be driven out of business, but it certainly could cost them a lot of money. And any time that happens, we should expect them to come out and try and sell themselves in the best way possible.” Merbeth said otherwise. “Other people describe it as a charm offensive because they want to create an impression that we need to be charming, when I think we just need to be factual,” he said. “Which is what I have been saying is really missing from the debate -- the facts and data. Because there are so few companies like IV and even fewer still that have any presence in Washington it seems to fall on us to try to fill in the blanks and correct misimpressions."

The PAE perspective is “absolutely” important to the patent revamp debate, said Application Developers Alliance President Jon Potter, who has been critical of PAEs. “If the patent assertion business model is a legitimate business model, then we should figure out where the line is between legitimate and abusive. And if they will help us figure out that line, then we are happy to have them at the debate. We think everyone should hear both sides.”

PAEs’ lack of a Washington presence, at least on the same scale as pro-revamp industry groups, has affected the “nature and tenor of the patent debate, particularly as it’s heated up over the past year,” said Adam Mossoff, senior scholar at the George Mason University School of Law’s Center for the Protection of Intellectual Property. “The debate has come to be dominated by rhetoric and studies that have claimed [these companies] have been harming the patent system and innovation generally. It’s become part of the conventional wisdom.” Patent firms that “aggregate for the purposes of licensing” have historically not been involved in outreach on the Hill, said Mossoff. The situation is similar to the computer industry’s “benign neglect” of Washington in the 1980s and early 1990s, “when you would have been very hard pressed to find any presence in D.C. by companies like Apple and Microsoft,” Mossoff said. That changed when Microsoft began facing antitrust scrutiny, he said. Other patent companies could join IV and InterDigital in Washington if they come to believe their lack of visibility is “having an impact on perceptions on the Hill, regulatory agencies and ultimately the courts,” Mossoff said.

PAEs have a history of hiring professional lobbying firms to take their message to the Hill. IV has contracted out lobbying efforts to several firms since 2005, most recently The Nickles Group and Richetti Inc., according to House and Senate lobbying databases. InterDigital has had lobbyists in Washington since at least 2003 -- first through DLA Piper and then through Lloyd Hand & Associates, according to the databases. InterDigital’s contract lobbyists are able to meet with people on the Hill far more frequently than the company’s executives, helping to push the message that “innovation’s really important in and of itself,” Merritt said. Patent firms Tessera and Mosaid Technologies -- the latter to become “Conversant Intellectual Property Management Inc.” in January -- both contract their lobbying to American Continental Group, while patent firm Rambus used the lobbying firm Cassidy & Associates until the beginning of this year, according to the lobbying databases. Mosaid, Tessera and Rambus didn’t comment.

Some industry groups already partially represent the views of PAEs, though they don’t claim to only represent those companies’ interests, observers said. The Innovation Alliance includes multiple patent licensing companies among its members, including InterDigital and Tessera. The group’s members also include many product-producing companies, but its message in favor of valuing innovation aligns well with the interests of InterDigital and similar companies, Merritt said. The Coalition for 21st Century Patent Reform has also been mentioned as holding similar policy positions to those of patent companies, with Potter saying he believes many patent firms are “hiding behind” that group rather than participate individually in the patent reform debate. The Coalition for 21st Century Patent Reform is “somewhat representative of patent firms’ views,” but it and other groups have shifted position on some issues since AIA was enacted, Mossoff said.