Apple’s latest settlement provides more evidence of the depressed patent licensing market

Apple’s latest settlement provides more evidence of the depressed patent licensing market Late on Friday 8th July 2016 the non-practising entity Network 1 announced that it had reached a settlement with Apple over the alleged infringement of one patent in its Mirror Worlds portfolio. The terms of the deal will see the tech giant hand over $25 million in return for a licence to the patent in question – US6,006,227 - and certain rights to other patents in Network 1’s portfolio.

It has been a productive few days for one of the smallest (in terms of number of patents), but also one of the most quietly effective, public IP companies in the market. Hot on the heels of the Apple announcement, Network-1 also disclosed that it had reached a settlement with Alcatel-Lucent which could lead to a $4.3 million award.

The size of the settlement is in line with the one that Apple agreed with Marathon Patent Group earlier this year which saw the NPE and its partner Rensselaer Polytechnic Institute, receive just under $25 million as the tech giant settled the dispute over a patent relating to its virtual assistant Siri. It’s also in the same ballpark as Vringo’s December settlement with the Chinese tech giant ZTE which, after a long, multijurisdictional infringement fight, agreed to pay the NPE $21 million.

Considering that Apple is far better known for fighting tooth and nail through the courts, particularly against NPEs, than for agreeing to multi-million dollar settlements the Network 1 announcement was certainly noteworthy. That said, whether it signals a change of heart in Cupertino that will lead to more settlements in future is probably stretching things. For every Network 1 or Marathon settlement there’s aVirnetX or Smartflash, both of which are embroiled in long-drawn out court fights with Apple.

Those two NPEs have both been awarded jury verdicts worth hundreds of millions of dollars although those disputes are at various stages of appeal and there’s every chance they will be overturned by the Court of Appeals for the Federal Circuit or, in the case of Smartflash, be fatally challenged in a series ofinter partes reviews. As the CEO of any NPE will now tell you, “you can’t cash a verdict, it’s money in the bank that counts”.

So what does the latest Apple settlement tell us about the state of the licensing market?

We have known for several years that the prospect of hundred million dollar payouts are long gone or at least that verdicts of that size are not enough to significantly move investors. But are the payouts that the likes of Network 1, Marathon and Vringo have received, a fair return on their IP? Probably not if you’re one of their senior executives, although they may still look too steep if you’re a denizen of Silicon Valley.

At the recent IPBC Global in Barcelona former Apple IP exec and Unwired Planet CEO Boris Teksler gave an insight into how he felt the damages market had been subject to some wild swings in the US. The erosion in US patent rights, Teksler claimed, “started with a system that gave way too much leverage to patent holders”.

When he was at Apple, he added, he could, “line the halls with people who came and told me that they had invented the iPhone”. The campaign to decrease damages, he went on, had been swept up in a broader fight to weaken the patent system and now the focus should be on returning the US to a much more even keel, like in Europe.

Teksler was talking about damages as a whole not just in relation to NPEs, but his words would resonate in particular with those who are only in the business of patent licensing.

Of course, any meaningful correction to the damages regime might take years to happen so perhaps the greatest lesson from Apple’s most recent settlement is that straight patent licensing still looks like a perilous pursuit.

The future of licensing undoubtedly lies with those businesses that can broaden the way that they monetise IP through things like technology licensing or by moving into other areas of IP such as brands. A settlement of over $20 million is not to be sniffed at, but when it’s against a giant manufacturer like Apple, it merely underlines that in the longer term most licensing businesses are going to need to take a very different approach

IAM Market is an online portal designed to allow IP owners to profile their licensing and sales operations and technology transfer programmes, as well as provide details of specific rights that they are interested in transacting.