The declining values revealed by an

examination of the 25 biggest awards and

settlements in the US during 2006 perhaps

suggest a deflation in the patent euphoria

(dare we say, bubble) of the early

millennium. Back then, a flood of patent

grants, the opening of the rocket dockets

and the spread of dotcom fever appeared to

turn every patent into a land grant claim.

The bloom is off the bush now as the

USPTO has increased its number of examiners

and reexamined, not only a number of its

previous grants, but its granting process, and

both the legislature and the courts have

stepped in with tough questions, if not – yet –

with answers. Indeed, perhaps the most

dampening impact on patent values, whose

full effect is still to be seen, was the Supreme

Court’s decision in MercExchange v Ebay, in

which the Court decided against the ready

application of permanent injunctions. Still,

even without the high court’s hand waving, the

marketplace (ie, the lower courts) were already

signalling a dampening down in patent values.

The decline in both the average and

cumulative patent value was aided, in part,

by a willingness to re-examine, if not

rationalise, the economics of patent value –

not just the costs/benefits of litigation, but

the true contribution to economic value

creation. This newfound religion came at the

behest of the courts, of course, but,

encouragingly, it appeared to take with both

plaintiffs and defendants alike. Some of the

more highly visible, and contentious, cases

that demonstrated this surprising willingness

to reconsider and resolve their value

differences included:

And the winner is...
The biggest winner in 2006, aside from
NTP and Masmio, was perhaps InterDigital
Communications, a maker of 2G and 3G
wireless technology used in mobile phone
handsets. In 2006, the company won
settlements of US$253 million and US$134
million against Nokia and Samsung
respectively. But litigation is not the only
path for InterDigital. The company also
entered into a major licensing deal with LG
Electronics, of Korea, for US$285 million.
In fact, the company has a long history of
licensing and litigation, showing a classic,
and successful, two-handed strategy of olive
branch and war club.
Another big winner, if not monetarily, at
least symbolically, was Tivo. After several

attempts, the company finally prevailed in
asserting its groundbreaking digital video
recording technology, with a US$74 million
verdict against satellite communications giant
Echostar; which itself won a collective $100
million from the network media companies.
From an industry standpoint, broadcast
media, which includes TV/video and music,
was one of the more active and high-profile
segments with four cases involving nearly
US$400 million in settlements and some of
the biggest names within its industry.
Medical devices also had four cases totalling
more than US$500 million, however, twothirds
of this amount involved the
Masimo/Nellcor litigation.
But the industry king was telecom in
2006, with four cases worth over
US$1.1billion, at an average of US$264
million. While the result is a zero sum for the
industry, it does perhaps signal a rise from
the ashes, both in terms of the importance of
its technology and the health of its industry.
Aside from the collective chill that swept over
“crack berries”, consumers were little harmed
by the huge amounts of money that changed
hands. And the companies themselves, RIM
in particular, have taken the hits in their stride
and done quite well financially.
In comparison with 2005, telecom, along
with broadcast media, showed the greatest
gains across the board: total amount; average
amount; and number of cases. Perhaps not
surprisingly, all eight cases involved some
form of wireless technology – voice, video,
music, email. On the flip side, medical
devices and semiconductors registered the
biggest declines in 2006, with total
settlement amounts falling by more than
US$1.5 billion and $1 billion, respectively.
And finally, there was little talk of the
trolls in 2006, not that they have gone away.
The patent licence companies are here to
stay. They are proliferating, getting bigger
and more sophisticated, and by their
collective action forcing the larger companies
to recognise what they previously would not
dare allow themselves to admit: patents
have value irrespective of ownership; not
that the value is always positive!
The decline in patent values is a good
thing for owners, users and the marketplace.
It perhaps signals a rationalisation of value
perspectives, a willingness to compromise
and a clearinghouse for commerce.