Inexpensive, fast, and reliable, Inter Partes Review (IPR) has been a powerful mechanism used to gain leverage against licensing demands. Even the threat of invalidation (the so-called “Dark IPR” strategy) can pressure valuation assumptions, leading to depressed proposed royalty rates. The IPR process completely reshaped the patent landscape and provided an accessible pathway to prevent invalid and weak patents from causing material market harm. However, the mechanism was also exploited with sequential (and often coordinated) IPR petitions against the same patents, wearing down patent holders and providing outsized leverage to challengers in settlement or licensing discussions.
Defensive organizations and co-ops formed around the ability to use IPR challenges to deter or nullify patent assertions and licensing demands. Yet this strategy now faces a new barrier from Director John Squires and the current policy direction of the USPTO. As of the publication of this article, the IPR grant rate, subject to the discretion of Director Squires and relying on the “settled expectations” doctrine, has slowly crept up to 23.9% (up from 4% last year, and in stark contrast to the 67% average during the Vidal USPTO).
This represents a seismic shift in leverage, with negotiating power moving from would-be infringers and/or licensees to patent holders/licensors. Patent holders stand to greatly benefit from the validation of validity provided by a successful IPR defense, with renewed leverage in licensing negotiations and in their broader enforcement efforts.
With IPR institution rates on the decline, one immediate effect will be the pivot to Ex Parte Reexamination (EPR). Though it offers the challenger less control and optionality, their denied IPR petition can be recycled into an EPR request that is likely to be granted (historically, around 90%).
But two issues immediately become apparent; first, should the petition be granted, challengers risk significant opportunity cost by exhausting IPR (which offers the most control and a cheap, relatively expedient outcome) with an ill-prepared attempt, or to the same effect, another party initiates an unsuccessful attempt, triggering estoppel for future challengers. Second, EPR arguably requires even more preparation from the outset, given limited challenger control of the proceeding and the fact that the challenged party could successfully amend their claims, overcome cited prior art references, and ultimately strengthen their patent.
It is clear, whether preparing for IPR, the result of which could preclude future IPR attempts, or opting for EPR with limited challenger participation, that one trend is now emerging: more challengers are relying on advanced patent analytics to make the most of their likely one shot at IPR, or to prepare strong EPR petitions with the best prior art references available and detailed substantial new questions of patentability (SNQs). Prosecution history analysis, in particular, has been of immense value in preparing research for IPR and EPR, enabling practitioners to turn prosecution and post-grant history into actionable insights and strong SNQs in their petitions. By making file wrappers and PTAB decisions fully searchable, LexisNexis PatentAdvisor® allows users to quickly identify how claims were construed, amended, and argued, providing deeper visibility into prosecution history. Enabling even faster data retrieval into custom platforms, we offer API access to PatentAdvisor data.
While leveraging data-driven validity challenge strategies to generate leverage in licensing and settlement negotiations will be effective in reducing licensing exposure, it will not supplant the need for patent valuation data. And for standard technologies, even more data is required due to the extra step of verifying that a patent is standard-essential. Standard-essential patent (SEP) implementers, now that they are losing access to serial IPR challenges as a form of SEP assertion deterrence, will still need to properly prepare for licensing discussions. Aside from other mechanisms, it is certain that the lengthy federal court process will push parties to settle earlier and thereby force implementers to find new resources for leverage.
Likely this will further accelerate adoption of data-driven approaches to licensing negotiation, with problems arising due to the limited transparency of public ownership data, obscured cross-licensing schemes and a general lack of public royalty rates, and difficulty understanding which patents have been pooled by a licensing administrator. Additionally, SEP implementers for complex technologies such as Wi-Fi, Video or Audio Codecs, Cellular IoT or Wireless Charging (e.g., Qi), face challenges in mapping asserted patents to the respective standards.
In general, SEPs involve highly complex technologies. 5G, as example, is a vast web of technologies described by over 1,200 technical specifications within a still evolving ecosystem, each release (e.g., 3GPP Release 18 builds on Releases 15–17) bringing forth new patent filings. This makes it challenging to even find a starting place for a licensing discussion, let alone determine fair royalty rates.
Understanding the portfolio holder’s ownership share of the relevant technology standard will be key, as portfolio share serves as a fundamental benchmark for determining FRAND rates in SEP markets now worth hundreds of billions. And as we observed in our latest report on the state of the 5G landscape, even minute discrepancies in portfolio measurement can change royalty outcomes by hundreds of millions; it is more important than ever to have high-fidelity data from the outset of a licensing negotiation to produce the best result.
LexisNexis Intellectual Property provides industry-leading clarity into SEP analysis, with comprehensive technical contributions and datasets, all built on market-validated patent declaration data, ensuring that royalties correctly reflect the technological contributions of the asserting entity.
Ready to have a conversation about your infringement or licensing exposure? Preparing a validity challenge and need access to prosecution or PTAB data? Get in touch with us.
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