Professor Mossoff's Historical Paper About Patent Thicket, Patent Troll and Patent Pool: Relevant Today

Can we learn from history? Or are we doomed to make the same mistakes over and over? Professor Adam Mossoff of George Mason University School of Law wrote an excellent paper about the Sewing Machine War of the 1850's which illustrates that the challenges we are facing in this day and age with patent thickets, patent trolls and patent pools are not new. Professor Mossoff draws the conclusion that "[t]he denouement of the sewing machine patent thicket in the Sewing Machine Combination of 1856, the first privately formed patent pool, further challenges the widely held belief that patent thickets are best solved through new statutes, regulations or court decisions that limit property rights in patents."

The paper illustrates in great style the titanic battle between Elias Howe (who did not do anything other with the patent then using it for injunctions to compel licenses from manufacturers) and Isaac Merritt Singer (who was an incremental inventor). In this battle Singer was looking for prior art to invalidate Howe's patent:

"Singer first attempted to uncover prior art in the patent offices in England, France, and, of course, the United States, and he even went so far as to argue that the sewing machine had long been invented in China, but this was all to no avail."

Download and read professor Mossoff's great SSRN-paper 'A Stitch in Time: The Rise and Fall of the Sewing Machine Patent Thicket', here (52 pages PDF).

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Pyrrhic Victory For Anti Patent Pool Professors Against Philips

Remember Zhang Ping, the IPR professor of Peking University who in December 2005 attacked a patent of Philips that was part of the 4C DVD pool because it was alleged to be not essential, read here. Emma Barraclough followed the story for Managing IP:

In January 2006, Zhang got support of four other law professors who joined her case.
In August 2006 the Patent Reexamination Board began hearing the dispute, see Barraclough's article about this here.

However, the parties have agreed to settle the matter.
Philips will remove the Chinese patent from the patent lists attached to the DVD patent licence agreement and "never again claim the rights of the Chinese patent".
The academics have withdrawn their request for SIPO to invalidate the patent.

Notwithstanding this settlement, the total royalty of $ 3.50 per unit charged to DVD manufacturers would not change, according Barraclough who cited a spokesman for Philips.

This position was anticipated by Zhang. Barraclough quoted Zhang in her August article:
"Even if a questionable patent is declared invalid, typically, royalties are unchanged. It seems as if that unless the last so-called essential patent is declared invalid or expires, the licensing policy will stand unchanged. Therefore, by imposing prohibitive costs on the opponent and by offering little fruit to the challenger, patent pools are protected from challenge and public supervision."

In this respect Philips' withdrawal is a Pyrrhic victory. However, manufacturers can start using the technology, although non-essential, manifested in the withdrawn patent without authorisation. This could stimulate innovation. Besides, the professors have acquired a new case study for their students.

Read Barraclough's January 2007 article here (free access as part of MIP Week).

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IP Professor Attacks Philips' Right To Collect Royalties For DVDs

Zhang Ping, a professor from the Intellectual Property Rights Institute of Peking University, has filed an argument against Philips, a member of the 3C DVD Patent Group.

The 3C DVD Patent Group consists of Philips, Sony, Pioneer (that's 3), but LG Electronics joined them, so in fact it is now 4C DVD Patent Group, read here.

According to China Tech News Professor Zhang has been working on a case against Philips' DVD patent since september last year, accumulating evidence. If Zhang's validity report on the Philips' DVD patent and "the rationality of their patent fee in China passes the review of the State Intellectual Property Office, Philips and other 4C members will no longer have the right to charge a DVD patent fee from Chinese enterprises."

It's expensive not to own technology standards. Edward Jung of Intellectual Ventures quoted China’s Minister of Science and Technology Xu Guanhua saying:

"Since 99 percent of Chinese companies fail to file for patents, royalties are a high burden, including a 20 percent royalty stack on mobile phones, 30 percent on computers, and 40 percent on programmed numerical control machine tools paid to overseas patent holders. A Chinese exporter of a $32 DVD player exporter makes one dollar in profit and pays $20 to patent holders outside China." Read more of Edward Jung's testimony to the US-China Economic and Security Review Commission about China's Intellectual Property Right enforcement here.

"A final judgment will be made next Thursday. Philips may have to return the patent fees it has already collected from Chinese enterprises if it loses the judgment."

Read the China Tech News article here.

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