News Article | March 27, 2014
Most tech entrepreneurs would jump for joy if the U.S. abolished software patents, but since this isn’t happening anytime soon, I have two less radical requests. First, Senators, do not water down the Innovation Act. Pass or bolster the bill that your colleagues in the House so wisely created. And most importantly, preserve the Innovation Act provisions on detailed pleading, demand letters, fee shifting and limiting discovery. Second, let’s start a conversation about how to prevent ridiculous software patents from passing the U.S. Patent and Trademark Office approval process in the first place. Most politicians, including Rep. Robert Goodlatte, who introduced the Innovation Act in October 2013, have turned their attention toward patent law to address the abuses committed by nonpracticing entities or “patent trolls,” which for years have damaged innovation by filing ridiculous patents, threatening “violators,” and pressuring them into settlements. However, we also see “practicing entities” (PEs) like Apple, Samsung, Microsoft, Google, Nokia and Motorola dogfighting in the so-called “smartphone wars.” More alarmingly, many PEs now use patent law to bludgeon upstart competitors who threaten their dominance in a particular market. Patent-troll cases seem to be making more headlines, but both forms of predatory patent litigation are damaging to U.S. innovation and entrepreneurship. “Trial Lawyers Inc.: Patent Trolls,” a report from the Manhattan Institute’s Center for Legal Policy, found that patent litigation initiated by trolls grew from 466 cases in 2006 to 2,914 cases in 2012; 55 percent of the defendants in 2012 cases were companies with revenue under $10 million. Depending on the amount of money at risk, patent litigation ranges from a median cost of $650,000 to $5 million. The most frustrating part is that 90 percent of patent-troll cases are actually won by the defendant, according to the report. On the other hand, the Government Accountability Office found that PEs initiated far more than half of all patent litigation in 2011. The Electronic Frontier Foundation reports that in 2011 both Apple and Google spent more on patent litigation and buying patents than they did on actual research. It’s easy to hate on trolls, but many respected companies are also taking advantage of U.S. patent law. Depending on who’s suing your company and why, trolls and PEs can both be pretty bad. The Innovation Act passed in the House with 325 to 91 votes on Dec. 5, 2013, and now this bill is in the hands of the Senate. Patrick Leahy, chairman of the Senate Judiciary Committee, and two co-sponsors have also introduced the Patent Transparency and Improvements Act, which some legal commentators are calling a similar but less aggressive version of the Innovation Act. Regardless of which bill eventually passes, I think the tech world ought to worry only if the Senate tries to water down any one of four provisions that will make the most significant difference for innovators: Detailed pleading Right now, a patent troll or bully competitor can file a demand letter claiming that a tech startup violates their patents — and they can use that startup’s brochures or marketing copy to justify the claim. The plaintiff doesn’t have to have any idea of how the startup’s software functionally operates. With detailed pleading, plaintiffs would have to identify the accused apparatus or process, model numbers for accused devices and theories of literal or equivalent infringement. In most cases, trolls and bullies can’t provide that information. Demand letters Similarly, the Innovation Act stipulates that demand letters must include basic information about the patent in question, what is being infringed and how it is being infringed. In a nod to small retailers, restaurants and other end-user companies that have become easier targets for trolls, the Innovation Act would make purposely evasive demand letters to end users a fraudulent or deceptive practice, and an exceptional circumstance when considering whether the litigation is abusive. Fee shifting It’s a simple concept: If a pompous PE or troll loses the case, the Innovation Act says they must pay the opponent’s attorney fees unless the litigation position was “reasonably justified.” This should reduce the number of extortive cases by a lot. Limiting discovery Discovery — the process in which opponents can request and obtain information, documents and testimony relevant to the lawsuit — is far more expensive for the defendant than the plaintiff. Currently, a tech company has to begin discovery before any claim construction decision is made. The Innovation Act would limit discovery to the meaning of claim terms until a claim construction decision is issued so companies actually know what documentation they need to prepare. I commend the House for passing a bill that actually will discourage trolls and PEs from taking advantage of companies, but we need to consider further reforms. The USPTO has approved thousands of absurd patents. PEs and trolls alike have demanded that other companies pay them a licensing fee or royalties for something as obvious as an online shopping cart or targeted banner ads. These patents remain on file, and I expect trolls and bullies will search for new ways to monetize them. While the America Invents Act, signed into law in September 2011, gave companies new tools for challenging the validity of patents, it has also revealed two further problems. First, Law360 found that one year after the new review processes were implemented, almost 70 percent of petitions were in the electronics or computer fields, with less than eight percent in the biological or pharmaceutical fields. For software, petition success rates stood at 80 percent. Unlike drug patents, which require the filer to show a formula, software patents capture business concepts, not actual code and hardware. I can’t foresee the U.S. banning software patents like New Zealand did in August 2013, but many of us in the tech world who are dedicated to innovation see the need for a fundamental change in what we patent. It’s possible to write drastically different software programs that accomplish the same end result. If developers want to patent the code itself, fine, but the practice of monopolizing broad business concepts under the guise of a software patent should be stopped. Second, once a patent is issued, challenging it is far too expensive and complicated, even with the AIA options in place. The fee for a post-grant or covered business method review fee is $18,000 for up to 15 claims (and more for additional claims). When you add lawyer’s fees to that minimum, challenging a patent becomes prohibitively expensive for startups and many small companies. My hope is that the Senate strengthens and passes the Innovation Act, and that we take one more step toward ending the abuses of PEs and trolls. When trolls and PEs suddenly have to pay the defendant’s legal fees for frivolous patent litigation brought about by their own blackmail tactics, many of the trolls will return to their caves, and the PEs will go back to spending their money on smarter things — like R&D. Afterward, I hope politicians will take on the challenging of redefining what we can and cannot patent in the software world. The long-term growth and progress of the global tech revolution depends on it. Jeff Canter is president and CEO of Uptivity. Reach him @Uptivity.
News Article | February 25, 2015
AIA Group Ltd., the third-largest Asia-based insurer by market value, posted a bigger-than-expected 22 percent increase in full-year profit, led by business growth in China and Hong Kong. Net income climbed to $3.45 billion, or 28.73 cents a share, in the 12 months through November, from $2.82 billion, or 23.5 cents a share, a year earlier, the Hong Kong-based insurer said in a statement to the stock exchange Thursday. The value of new business, a measure of future profitability of new policies, jumped 24 percent to $1.85 billion. AIA beat estimates for the third time in the past five full years. Chief Executive Officer Mark Tucker has boosted the number of agents, improved their productivity and shifted toward more profitable products since taking over as CEO months before AIA went public in October 2010. The insurer’s new business value has nearly tripled since 2010 and share price more than doubled over that of its initial public offering, outperforming peers. “The general quality of the business continues to grow, continues to put the right foundation into place,” Tucker said in a Thursday interview with Bloomberg Television, adding he’s “tremendously excited about the future.” AIA’s profit beat the $3.19 billion average estimate of 14 analysts, according to data compiled by Bloomberg. The increase in the value of new business exceeded the 22 percent median projection of five analysts surveyed. Tucker has singled out the figure as a key measure of management performance. The markets that AIA operates in will have four times the total population, twice the urban residents and eight times the spending power of Group of Seven nations by 2020, Tucker said in a separate call with reporters on Thursday. There will be an “immense need” for AIA’s life-insurance products, given the low government social spending and private insurance ownership in the company’s markets, he said. Shares of the insurer was little changed in Hong Kong trading today, closing at HK$45.75 after touching a high of HK$46.45 in the morning session. “The results were good,” Andrew Sullivan, head of sales trading at Haitong International Securities Group in Hong Kong, said in an e-mail. As the stock approaches its Jan. 28 record of HK$46.35, “it will need a catalyst to break out.” Shares of AIA have surged about 132 percent since its IPO through Wednesday, outperforming the 29 percent advance of the Bloomberg Asia-Pacific Insurance Index, which tracks 24 such companies. Bullish bets on the stock climbed to the highest in four years before Thursday’s announcement. Operating profit after tax, which excludes $508 million of net stock investment gains, rose 16 percent last year to $2.9 billion. Annualized new premium, which tracks new policy sales, grew 11 percent to $3.7 billion after depreciating local currencies hit markets including Thailand, Singapore and Malaysia. The insurer sells policies in local currencies in 17 regional markets and reports financial results in the dollar. Operating profit in China, where AIA runs the only fully foreign-owned life insurer, increased 38 percent, according to the statement. The value of new business in China for the insurer, which traces its roots to Shanghai more than 90 years ago, jumped 55 percent to $258 million. The country is now AIA’s fourth-largest market by both measures. Industry sales in China had declined since 2011 amid tightening regulation over bancassurance and as yields on insurance policies became less attractive compared with bank deposits or wealth management products, Credit Suisse Group AG analysts Arjan van Veen and Frances Feng wrote in a Feb. 12 report. It has been recovering since early 2013, they added. “The China opportunity is a phenomenal one,” Tucker said in the interview, adding that the size of AIA’s China business has quadrupled in the last four years. AIA’s new business in Hong Kong surged 32 percent to $619 million, while operating profit in the city rose 17 percent to $905 million, the largest among its markets. The value of new business jumped 34 percent in Malaysia, and expanded at least 11 percent in Thailand and Singapore. AIA’s embedded value increased 10 percent to $37.2 billion last year. The measure is used to assess the economic worth of life insurers. It had $7.8 billion of free surplus at the end of November, an indicator of its ability to do deals such as acquisitions and add new bancassurance channels in addition to support new policy sales. The insurer announced in December 2013 an exclusive 15-year bancassurance agreement with Citibank in 11 Asia-Pacific markets. It began to sell policies under the deal in Hong Kong and Singapore in the second quarter. AIA was among insurers shortlisted for a 15-year exclusive bank distribution deal, valued at $1.5 billion, with Singapore’s DBS Group Holdings Ltd., Reuters reported earlier this month, citing unidentified people. AIA raised its final dividend by 19 percent to 34 Hong Kong cents a share, bringing full-year payout 18 percent higher at 50 Hong Kong cents, according to the statement.
News Article | September 1, 2015
Applications for the second phase of the AIA Accelerator are now open until 9 October 2015 at and is looking for Eight start-ups to join its AIA Accelerator 2.0, which will commence on 16 November 2015 and conclude with a Public Investor Demo Day in March 2016. The AIA Accelerator 2.0 is open to startups from Africa and will select the best two from the submissions. In a statement, Steve Monaghan, Head of AIA Edge said, “We are looking for innovative solutions and providers who focus on new ways to improve and maintain health, reward people for embracing a healthier lifestyle and help people make informed choices.” According to him, Health is an area where customer needs and commercial incentives align perfectly and added that AIA Accelerator 2.0 will include start-ups that can use the power of data or emerging technology to improve the impact and relevance of customer engagement for companies in the field of healthcare. AIA Accelerator 2.0, is AIA’s second 12-week programme to support innovative businesses in the healthcare arena to deliver break-through innovations and technologies. The second phase comes after the first-of-its-kind AIA Accelerator programme garnered wide-spread attention within the investor community following its introduction in late 2014. The programme is a collaborative effort between AIA and Nest, Hong-Kong’s full service start-up incubator. Of the eight start-ups that participated in the inaugural programme, seven successfully secured funding through a Demo Day in June 2015, and continued to raise capital in the weeks that followed. The innovative ideas of the start-ups focused on such diverse areas as biotech, wearables, genomics and applied wellness regimens. In the 12 weeks, the startups progressed from ideas to prototypes, and from prototypes to products that are commercially viable, raised funds and signed partnerships. Simon Squibb, CEO of Nest, said, “With the healthcare and wellness space evolving so rapidly, we are delighted to announce the second phase of the AIA Accelerator so we can continue to support companies at the forefront of healthcare technology.” The AIA Accelerator programme aims to create opportunities for innovators to shape the future of insurance and healthcare industries. It brings together domain expert providers as co-sponsors, including Amazon, Hong Kong Science and Technology Parks Corporation, InvestHK, KPMG, and Microsoft to create a holistic ecosystem for the start-ups. Nest recently opened its pan-African office in Nairobi and promised to invest heavily in pan-African startups. It also recently announced that two African startups had been accepted into an Asian accelerator program. The firm has also signed partnerships with Garage to reach more startups across Africa.
News Article | September 18, 2015
After partnering with Garage in Cape Town and Nairobi, early-stage venture capital firm Nest.vc has begun operations in Paris to help early stage French businesses in their pursuit of success and growth. The deal will also see Nest open the space for pan-African startups that want to get into the European market through Paris. Nest France will be headed-up by managing partner, Ethan Pierse, an entrepreneur and skilled marketer with over 20 years of experience in digital marketing strategy with brands including Coca-Cola, HP, BP, Delta Airlines. Ethan was recently dedicated to helping FrenchTech startups develop their offering internationally, with a specific focus on expansion to the US market. Nest is also pioneering corporate accelerators in Asia and now Africa, currently operating three 12-week mentor-driven programmes in Hong Kong with insurance giant, AIA, DBS Bank and with Nissan’s luxury car marque Infiniti. Paris has more than 50 accelerators and incubators and hundreds of co-working spaces as the city is a focal point for European venture funding. Nest’s extensive global network and access to Asian capital will add another element to the entrepreneurial community there. Aaron Fu Nest Africa Managing Partner added “Nest has a strong track record of accelerating startups that scale globally and certainly throughout Asia. Launching in Paris – we are creating a pathway for startups from Africa to scale not just to Asia but also Europe. This will support Africa’s most capable entrepreneurs with the ambition to internationalize their businesses”
News Article | February 23, 2015
Editor’s note: Sid Venkatesan is an intellectual property partner in the Silicon Valley office of Orrick, Herrington & Sutcliffe LLP. Sid helps maintain the Norcal IP blog, which covers patent litigation in the San Francisco and Silicon Valley. Last summer, the United States Supreme Court issued a decision in Alice Corporation v. CLS Bank International in which it directed lower courts to scrutinize computer-implemented abstract methods very closely. Alice’s impact was unclear at the time the decision was issued, but lower courts have since relied on the Supreme Court’s opinion to invalidate a number of software patents in the eight months since the decision. This legal trend has altered the cost benefit analysis for companies that are seeking software patent protection, enforcing their existing patents, or defending themselves in litigation. Alice did not take place in a vacuum. In 2012, Congress listened to some criticisms of certain types of “business methods” by limiting patents on tax strategies and implementing a Covered Business Method review process that makes it easier for a challenger to invalidate a patent claiming certain “financial products or services” as part of the America Invents Act. Moreover, the Supreme Court has shown a renewed interest in recent years in answering the question: What is patentable? under the United States Patent Act, including in the 2009 decision in Bilski v. Kappos, the 2012 decision in Mayo Collaborative Services v. Prometheus, and the 2013 Association for Molecular Pathology v. Myriad Genetics. Mayo, which rejected patents dealing with a technique of measuring a metabolized drug in a human body as an “abstract concept,” was particularly influential in the Alice decision. In Alice, a unanimous Supreme Court invalidated a software patent that related to a computer-implemented method that would help ensure that two financial institutions involved in multiple trades could settle up their accounts on a daily basis. Because Alice involved a computer-implemented method to a financial process, it implicated two hot-button patent policy issues: the ongoing debate over the extent to which business-method patents should be viable under U.S. patent law and how much protection software patents should receive under U.S. patent law. The Alice Court did not answer either question squarely. Instead, the Supreme Court reiterated that patents on “abstract ideas” are invalid under Section 101 the Patent Act and applied a two-part legal test advanced in Mayo to the computer-implemented process at issue. This two-part test – which looks to whether a patent claim is directed to an abstract idea and, if so, whether it includes inventive features (e.g. novel technology) – meant that courts would be analyzing future software and business-method patents on a patent-by-patent basis. Thus, at the time, commentators were unsure about what the impact of Alice would be. Federal trial courts and the Federal Circuit (the court that handles patent appeals) decisions since Alice have invalidated many patents using the two-part Section 101 test applied in Alice. For example, the Federal Circuit invalidated a patent dealing with the storage of device-specific profiles, a patent on a system that provided online purchase guarantees, and a patent involving an online system of delivering content with embedded ads in quick succession. That being said, it has not been a clean sweep against software patents, as the Federal Circuit has also upheld a patent claiming a method of creating a composite webpage using third-party product information within a host website. Numerous trial courts have also invalidated software patents, including a number here in the Silicon Valley area. Many of these decisions have been made “on the pleadings,” i.e. in the very early stages of a case, meaning that Section 101 is being used early on by patent defendants to try to avoid the costs of a long and drawn out patent case. In fact, in the first four months following the Alice decision, one commentator concluded that courts invalidated patents in 15 out of 20 decisions involving Section 101 challenges. In addition, the United States Patent & Trademark Office appears to have a greater appetite for hearing Section 101 challenges using the Covered Business Method review proceeding created as part of the AIA. The USPTO has also issued guidelines for its patent examiners to use in evaluating patent applications before they become patents that embody some parts of the recent run of restrictive court cases. While examination decisions are less public than court rulings, it is a safe bet that companies will face greater resistance in obtaining broad software patents (particularly those in the e-commerce space) from the USPTO than before. Alice and the cases that have followed it have already had an impact on many software patent cases. This case law is sure to have a ripple effect that will cause patent plaintiffs to think twice about asserting a software patent before suing, and will get many companies with existing software patent portfolios to take a closer look at their existing patents to see if they have become less enforceable (and hence, less valuable) than before. Companies looking to file new patents will have to think critically about whether their inventions will pass the “abstract idea” test and should prepare themselves for more aggressive push-back from the USPTO on software patents. Thus, no matter where you sit, it is time to take stock of what you have and where your IP roadmap is headed. With the Supreme Court continuing to hear new patent cases, and with a Republican Congress considering a revival of patent troll legislation, we can expect further adjustments to the patent system in the years ahead.