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“The Patent Crisis” John A. Squires Chief Intellectual Property Counsel Goldman, Sachs & Co. Council on Foreign Relations March 20, 2007 New York.

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Presentation on theme: "“The Patent Crisis” John A. Squires Chief Intellectual Property Counsel Goldman, Sachs & Co. Council on Foreign Relations March 20, 2007 New York."— Presentation transcript:

1 “The Patent Crisis” John A. Squires Chief Intellectual Property Counsel Goldman, Sachs & Co. Council on Foreign Relations March 20, 2007 New York

2 2 For Our Own Account…. WSJ – Patent Poses Problems for Amex Exchange Trade Funds, Sept. 20, 2000: “ Some Wall Street firms, notably Goldman Sachs, have largely avoided patents…Citigroup has 60, many granted in the past two years.” New York Times – A Wall Street Rush to Patent Profit-Making Methods, August 11, 2006 viewed by many as a patent leader on Wall Street hundreds of patent applications in the pipeline “Goldman, viewed by many as a patent leader on Wall Street, has hundreds of patent applications in the pipeline and has received patent rights on a couple of dozen products and systems, according to its chief patent officer, John Squires. He joined Goldman in the new position in 2000 after being a patent lawyer with Allied Signal. “I think there will be increased filings as the convergence of banking and technology is irreversible,’’ he said. “As people spend more and more building systems and deploying technology, they’re going to want to make sure they have the rights available to them.”

3 3 Institutional Portal US Patent No. 6,970,870 –Systems and methods for facilitating access to documents via associated tags Dweck, Elci, Moulton ABSTRACT OF THE DISCLOSURE Systems and methods are provided to facilitate access to documents via associated tags. According to one embodiment, a first document tag is initially assigned to a document. For example, an author may review a document and indicate which document tag should be assigned to the document. An associated tag for the document is then automatically determined based on the first document tag. For example, a pre-determined tag association rule may be used to determine the associated tag based on the first document tag. The author may then review the associated tag to determine whether or not the associated tag should be also assigned to the document.

4 4 Seeds of a Crisis Systemic – “New” Subject Matter discipline –Software in the 90’s, business methods now –Flood of new applications Training/Resources Confidence – Self (Business Methods) –“Technology in the Claims” – “Second Look” – Public – Quality … and Pendency Legal/Judicial –Litigation Abuse/Trolls –Supreme Court “reengagement”

5 5 Crisis Litigation Abuse: RIM and eBay – Automatic Injunction Rule Patent Act says injunctions “may” issue However, judicially interpreted as “must” (1908 Continental Paper Bag – Supreme Court) –No “four factor” equitable test Success on the merits Balance of Hardships Irreparable Harm (monetary damages insufficient) Public Interest –Only in public health emergency –“Favorite” Plaintiffs Jurisdiction

6 6 RIM Proceeding A near settlement (Summer, reported $425M) but silver –From a public library in Norway – the silver bullet a Northern Telecom reference which disclosing NTP’s “invention” –So called “Prior-Art” –Discloses each and every element as claimed in the patent, before the patentee –RIM triggers a U.S. Patent Office “Director-Ordered Reexam All four NTP patents are initially declared invalid (proceeding ongoing) RIM eventually settles for $600M +

7 7 eBay – Deja-vu All Over Again? The Financial Services Sector – What’s it to us? –Real operational risk to the U.S. financial system, markets and exchanges Troll threats to the commercial banking industry –DataTreasury files 56 lawsuits identical lawsuits (E.D. Texas –surprise!) against 56 separate defendants for patent infringement of “Check 21” clearing operations –An amicus to the Supreme Court Our key insight: Department of Treasury 2003, Statement of Interest in eSpeed v. BrokerTec – an operational risk close call FIA, FSR and TBMA join

8 8 Treasury’s eSpeed Intervention … Treasury – eSpeed v. BrokerTec –Preliminary injunction motion on eSpeed trading system patent (secondary market for Treasuries) District Court denies preliminary injunctive relief to eSpeed based on Treasuries Statement of interest that, irrespective of the merits, public interestdisrupt and dislocate –Injunction would not serve the public interest since it would disrupt and dislocate the secondary market for wholesalers Look at the Troll/E.D. Texas –no preliminary injunctions motions filed to avoid the four-factor balancing test –race to get to the automatic injunction (No patent ever found invalid)

9 9 The Rule is Laid to Result Thomas writes the opinion of the Court – –Strikes down automatic rule, noting the statute says may “a major departure from the long tradition of equity practice should not be lightly implied” looked to the copyright act, also employing the “may” language, yet no ‘automatic rule’ Roberts/Scalia/Ginsburg concurrence: –Courts have traditionally granted injunctive relief in the vast majority of cases – right to exclude (Pharma) Kennedy (concurrence, joined by Stevens, Souter, Breyer) –Value-chain/apportionment concerns – patent holders should not have undue leverage where patented component is “a very small component” of the infringing product (Tech/Financial Services)

10 10 Quality Definition- Silly inventions ? –Cat toys, child swings, bathroom patents... A golf club head contains a barrel with a rearward facing muzzle. The barrel is adapted to contain a propellant charge held in place by a combined breech block and firing pin mechanism. When the ball-striking face of the club head hits a golf ball, the propellant charge is detonated to push the club head forward with increased energy. United States Patent[19][11]4,170,357 Geer[45]Oct. 9, 1979 [54]GOLF CLUB [76]Inventor:George C. Greer, 2115 N. Crater La., Newberg, Oreg [21]Appl. No.:869,710 [22]Filed:Apr. 17, 1978 Ahern, “The Puffle Booster Driver” (cartoon); Times Union (Albany), Apr. 20, 1956 at 31. Primary Examiner–Richard J. Apley Attorney, Agent or Firm–Klarquist, Sparkman, Campbell, Leigh, Hall & Whinston OTHER PUBLICATIONS

11 11 Quality – A role for Industry? Financial Services –Is it a subject matter issue? –1999 American Inventors Protection Act “First Inventor Defense” Suitable Prior Art Databases do not exist (Innovation and Its Discontents – pp (2004)) –Who, how – and when – do you inject prior art into the system? In Examination: Peer Review – IBM/Noveck pilot Post-Grant –Reexamination/Judicial Review –Willful Infringement Liability and an Affirmative Duty of Care Reform Issue – an Opposition Procedure

12 12 A Clearinghouse for Granted Patents SIFMA - Intellectual Property Clearinghouse (2005) –To further open collaboration concepts on matters of common interest and concern to our members –Permit members to combat unfounded allegations of infringement at lower cost and explore licensing opportunities –Share information and communicate with each other in cases of potentially predatory enforcement activities of various IP claims (e.g., patent, copyright, trademark, and trade secret claims). –Allow members to log certain identifying information into a database. Firms that choose to contact the clearinghouse are agreeing to be contacted by other member-firms.

13 13 Quality – The Role for Industry Clearinghouse – a feeder for peer review? Larger issue is Industry as quality police –An Opposition Procedure Engage Industry – but when? –9-12 months following grant A second “window”? –Makes senses for “complex value chain” industries –May be untenable for pharmaceutical industry concerns >>> We may have the art – how do you administer a process so as to timely and suitably engage those who may have it?


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