 OK, I think we're going to go ahead and get started. I'm Julie Samuels from EFF. I'd like to thank everyone for joining us today for our virtual bootcamp for app developers. I'm going to start off by making a little introduction and then introduce you to our four panelists, and I will let them take it from there. So first, I wanted to start by saying that most of you listening today are app developers who either been sued by Lotsus, received a letter demanding you take a license from Lotsus, or are simply and rightfully concerned that you might hear from Lotsus or another patent troll in the future. As you're all aware, Lotsus has been targeting app developers, claiming that they infringed its patents by using in-app upgrade and payment functionalities. In most cases, you also probably already know, app developers receive that technology directly from Apple or Google. We know that many of you listening today cannot afford a lawyer. So we'd like to help give you some general information to help make informed decisions on how to deal with Lotsus or other patent trolls. And this is important, though. I really want to underscore this point. Everyone on this panel might be a lawyer, but no one is your lawyer. So that means that nothing anyone says is protected by any kind of attorney client privilege or any other confidentiality protections. Since we are not your lawyers, we also cannot answer questions about what you should specifically do if you've already heard from Lotsus, or even if you haven't. We can only give you general information to either make that decision yourself or with a lawyer. If you are interested in EFF's help in finding a lawyer, please email info at EFF.org. That's info at EFF.org. I should also say we don't have specifics about any agreements that Lotsus has entered into with any other app developers that's most likely confidential between those app developers and Lotsus. Finally, we are not going to publicize any of your names or professional affiliations. If you want to ask a question and we encourage you to do so and are worried about remaining anonymous, please send your question via email to bootcamp at EFF.org. No one else is going to see those emails except for me. If you're not as concerned about remaining anonymous and are also curious about questions from others, go ahead and use the bootcamp hashtag on Twitter and direct your tweets to at EFF. So the hashtag, again, is bootcamp and direct the tweets to at EFF. And we're going to try to answer as many questions as we can. A lot of you have already sent in some great questions. Unfortunately, we only have 90 minutes, so we'll get through what we are able to. Now I'm going to go ahead and I'm going to introduce the panelists in the order that they will be speaking and then I will let them take it from there. First, we have Kalin Chen. She's a professor at Santa Clara Law School. She's nationally known for her research and publications surrounding domestic and international patent, law, and policy issues. Her work has been cited by the FTC and in Congress. She has testified before the Department of Justice, the Federal Trade Commission, and the Patent Office on patent issues. She's done some great articles and written empirical studies on history and effective patent trolls on the industry. Next, we have Tony Patek, who got his law degree from UC Berkeley and clerked for Judge Edward Reed in U.S. District Court in Reno, Nevada. He worked previously with Cooley and the Bernstein Law Group, and he is currently the co-chair of the American Bar Association's Subcommittee on Non-Practicing Entities, which is a new subcommittee of the Patent Litigation Committee. He is now a partner at the newly founded law firm of Helix IP LLP in Redwood City, a small firm dedicated to IP litigation and counseling. After Tony, you're going to hear from Andre Papavici, who's been working in the patent field since 1995 and started his own practice in 1998. Andre's areas of expertise include computer software, hardware, scientific instruments, energy, and medical devices, and he specializes in representing clients before the Patent Office. Finally, you're going to hear from Ben Singer, a partner at Dithubang Mori and Steiner. Ben has worked at Quinn Emanuel and Fish and Neve, as well as the District Attorney's Office in Massachusetts. He's litigated patent cases in California, Texas, Delaware, and the International Trade Commission. He was a member of the team named IP Litigation Department of the Year by the American Lawyer Magazine in 2010. I would personally like to thank the panelists for joining us today. I am so honored to have them here, and I know they're going to be able to provide you all with lots of good and interesting information. So without further ado, Colleen. Thanks so much, Julie, and it's my privilege to be here and in my, I'm really pleased. I want to mention because we are talking about trolls and there are other polite names for them, including non-practicing entities, that I'm a non-practicing entity of sorts as well as a patent law professor. So more than probably any of the other commenters here, you should take my comments as ones that are meant to just give you some perspective on the patent system and where I see the troll issue kind of from my perspective, having done some empirical work on the different aspects of we have some issues with the video, but I'll just go ahead and speak. But anyway, so based on some of my different studies. So I want to try to do four things today in my presentation, and I just have basically four points to make. And the first point I want to make is the Constitution, and I'll explain what I mean by the Constitution. The second point I want to make is that the patent system is unitary. And what I mean by that is that we have a lot of different technologies, and here we're in this conversation, and when we talk about trolls in general, talking a lot about tech and component technologies, but the problem with the patent system is that it's meant to serve the entirety of technology, all the different areas, large and small inventors, the main different areas, biotech, high-tech, et cetera. And so when we think about the patent system and why it is this way, and what are some of the issues with it, it's also important to consider that there are other kind of sides to the story. Another point I want to make, point three, is to question, are calling them trolls, and again, that's something that I think is now coming to the common parlance, but there may be a reason to think about trolls in another way. And so I'd like to talk about that as well. So the first point I want to make is about the Constitution and really what the purpose of the patent system is. So this is, again, kind of thinking about what I do with my Pat Ma students on the first day of class, they come in and we look at the Constitution. And so we go back to what the real purpose of the patent system is. We see, we look up if you want to do this, you've got your trusty Constitution by your bedside, I'm sure you do. It's an article one, section eight, and it says that the purpose is basically to promote the progress of the useful arts by securing for limited times to inventors exclusive rights. So to promote the progress of useful arts is basically the whole kind of idea behind the patent system. And Abraham Lincoln put it in his own distinctive way. When he talked about the patent system adding the fuel of interest to the fire of genius. So we kind of parse through the language of the Constitution. We can get an idea for, even though you're not patent lawyers, you probably aren't gonna be people who are studying it too closely, you get a basic idea for what is the bargain that the patent system basically makes between society and inventors. And what do we want out of this as a society? We want to promote the progress, we want inventions to come forward, we want them to be disclosed. And in exchange for that, we give inventors this limited right, which is this exclusive right for a period of time. So that's the basic kind of patent bargain where we talk about the patent system. We get progress, inventors get this incentive of exclusive right. But if we go through the language of that, then we can kind of feel and understand what are the requirements of a patent and what is the nature of the right that is actually provided. So we're talking about promoting not any old invention, but inventions that actually bring things forward that are representing progress, that represent discoveries. And there we have the requirement that inventions actually have to be novel and non-obvious. So they have to represent some kind of improvement over the past. And it can't be just a small improvement, but it should be something that is non-obvious. In addition, the progress that is made has to be to a useful art. So there are certain kind of basic threshold for what can be considered useful or not that are pretty low, but at least we have a sense that we're not giving this privilege to just anyone. We're looking for inventions that are truly promoting the progress and are in a certain types of areas. The other point about this all though is to say that what we're giving to inventors isn't, as you might think in a, if you buy a property, a piece of property, well, I get to be on that property, I get to inhabit it, this is my house, my domain. That's not what we're giving in a patent context. What we're giving others is, we're giving the patentee the right to exclude the exclusive right. And so rather than a positive right or right to be there, it's really a negative right. It's the right to exclude somebody else from being there. And so that's a bit of a distinction and a difference between thinking about patents as property and they don't function really in the same way in this particular context. So given that, I think it just gives a, if we wanna think about, for example, you guys are probably, many of you writing applications for current and future iPhone versions, if we think about what about an iPhone is actually patentable, because we've heard the, I think in probably several contexts that there's many, many patents over iPhones and up to a quarter of a million. The thing you wanna think about, well, if we think about what we just heard, what about an iPhone is patentable? So for example, if Apple comes out in their next iteration with some new features, those are gonna be actually patentable. So kind of think about it, if we step back. They're talking about potentially having a larger screen. And if we're now looking on the particular slide, let's talk about the swipe on mechanism. Okay, is that something that's patentable? It's very useful. It represents progress in terms of when it came out. But if it's a feature that's on the iPhone 5, but it's been out there before, it's not gonna be novel. Basically, it's already been out there. So that wouldn't be patentable. What about a larger screen? Again, it promotes visibility and it's a feature that a lot of people would like. Maybe a larger screen has never existed in this particular configuration, but that's a really small incremental improvement. That is considered to be something that wasn't out there before. So it's not that it's been there before, this particular set of features on one place, but that the screen is really a small improvement and therefore is an obvious one. So that wouldn't be patentable either. What about the fact that the model is, they're now coming in a silver model? That is an aspect of the phone that is not considered to be part of the useful arts. It would be considered more of an aesthetic choice. So that might be something that, even though it's pretty cool, is not gonna be patentable. Finally, if we think about the shape of the device itself, the chassis, let's say they come out with a new kind of design that makes it easier for you to hold it. I actually do drop mine quite a bit and I would love it if they came out with this new feature to allow me to hold onto it and not kind of be clumsy with it. That might be something that would be patentable maybe as a design patent. And for those of you who saw the articles about Steve Jobs stepping down and then the legacy of his patents, many of his patents were actually design patents. So they weren't over necessarily some of the basic functionality in terms of performance but about the shape and the color and certain aspects that can be protected in a design patent form. So that's kind of a basic, very, very high level broad brush representation of what the patent system is and who it's supposed to be working for. Again, we have a bargain here and we're trying to make sure that we get as a society what's something back for what we're actually giving which is this monopoly right to exclude others. I wanna make another point now though to change gears about the patent system. So we've kind of understood from the very basic introduction what the patent system is. When we think about how it actually applies, the next point I wanna make is that many technologies and innovators are out there but we only have one patent system. So we go back to this example of the smartphone having 250,000 patents. That's one version of the world and that's how the tech world kind of sees patents. There was a famous description of IBM early on when they started to acquire patents. Early on, one of the patent lawyers went into the CEO's office and they said, well, what's this whole patent thing about? And he had a computer with him and it had all these pieces of red and green tape on them. He said, these pieces of tape represent all the types of technology that we're using that are other's technology in our product. And that is kind of the reality of modern technology that a lot of different inventions are embedded into a single device. So here we have an estimate out there of about 250,000, a quarter of a million patents on just one particular device. Contrast that to another wonderful invention, the invention of aspirin which is now quite old but when it came out, if you talk about drugs, we're talking about a lot fewer patents that actually cover the actual product. So maybe on the order of 10 patents, something over the molecule itself, over potentially the formulation, maybe there's a patent over the process of making them. But there's a much more finite number of patents that are out there that cover this particular technology and these may be considered equal in terms of their importance. If we step back and think about what are the implications of having 250,000 patents on a product versus 10, they are pretty significant. If I wanna find, let's say I wanna make the next aspirin, what's already out there, I can kind of know that I can look for related technologies and be able to find those 10 patents, I can locate them fairly easily. Not only that, but the language that's used by those 10 patents is fairly consistent within itself because we're really talking about a more limited community of folks that are working on these issues and a more unified vocabulary. If there's an acetyl group or something, for example, in a type of drug, then that's gonna be an acetyl group. Compare that to a smartphone, which can be referred to in many, many different ways and among these 250,000 patents, it is referred to in many different ways. So you're talking about an electronic device, mobile phone implement, a wonder device, an electronic babysitter, there are a lot of different ways you can try to characterize a smartphone. And so being able to find what patents are out there and be able to get around them is pretty much an impossible task. So if you wanna try to avoid infringement, it's pretty much impossible, you just don't know what's out there. And I think that has ramifications for the patent system as we see it. And you'll start hearing if now you're kind of following the patent system more closely, you'll see that just yesterday the Senate voted to pass patent reform and it will be going to the president for signature fairly soon. And you're gonna hear different perspectives about whether this is a good thing or a bad thing. And I put this slide up because I think this is true in many contexts, but in particularly in patent law, you hear people talking about, well, we're working just fine the way it is or we need change. And they're really talking from their own experience about how it's working for them. And so when we talk about why doesn't patent reform do anything to really help the troll problem? It's largely because the troll problem is seen as one that really only affects tech and component industries. It does not affect bio and other kind of more traditional types of technology. And so if you're gonna, as I talked about before, we only have one patent system. So if you make a change to fix the troll problem, you might end up creating problems in other areas. And this is what's really stymied and prevented progress from going forward. So I just wanna make that point as well. When you hear more about the patent system, just be careful when you see whose perspective is being represented because there is a pretty diverse and heterogeneous system that's there. I wanna move to my third point, which might be a little controversial for this setting, but we're talking here about troll bootcamp. And I think there's one thing to think about in terms of what you actually call trolls. And I've certainly used that word by self before and talked about what it really means and thought about it. And I think the reason that I find that it's maybe not the most helpful term is because when we think about troll, we think of somebody who's kind of small, unsophisticated, maybe unethical in their behavior and you're really focusing on the ethics. And I think what that obscures is that really for trolls, another term somebody's used in the academic context is that they're really low-cost litigators. They're really more entrepreneurs. So they're really not, you know, they're because they kind of are anti-innovation or anti-product companies, but they're there for the financial benefits that they can reap, they think, at a low cost. And they're not small-ish. I mean, loads just look small, but as we've talked about before, their patents come from intellectual ventures, which has, among its investors, a lot of the very tech companies that are the ones that are being now in trouble because of these patents. And they have universities and a lot of retirement funds actually invest in intellectual ventures as well. So they're anything but unsophisticated. They have large resources. They're not small-ish in those senses. And what they really do is, I think, if we wanna think about them from an economic, rather than an ethical perspective, is try to exploit the kind of weaknesses in the patent system and also come up with cheaper ways to bring litigation. So we have this call now with 60 or, you know, hundreds of application developers and there's others who are potentially going to be implicated in the Lodzis patent suit. That is involving a small handful of patents, but they efficiently bring litigation by naming many parties. They use the same venues. They use the same kinds of counsel trying to capture efficient economies of scale. And they do a lot to reduce their own costs and exposure. So by putting these patents in a non-practicing entity, they're not vulnerable to countersuit anymore. And in that sense, they've really become kind of innovators in terms of litigation strategy and coming up with low cost ways to assert patents. If we think about patents that are out there, if we go back to the smartphone, who are they're held by? They're held by a lot of big companies as well as, you know, individual inventors and they're widely dispersed among a lot of sources. But finding which patents are infringed by what products is not an easy task. That's something that they've been able to do. And also, thinking about IBM or Nortel, one of these companies suing, well, obviously Nortel's not gonna be doing that anymore. They have exposure. So non-practicing entities, I think, have been able to do that. The last one I wanna make with respect to not calling them trolls is again, if we think about them as entrepreneurs, that entrepreneurs are by nature are gonna be looking for quick opportunities to make money, low hanging fruit. And so if you can raise their costs or raise their costs more than others are doing so, then maybe they'll move on to other easier targets. And with that, I will conclude. Thanks, Colleen. And I think we'll go ahead and switch now to Tony, who's gonna talk a little bit about some general patent litigation, or not strategies, not gonna discuss strategies. He's just gonna talk about patent litigation. Tony. Okay, well, thanks for everybody for calling in. I am now going to talk about litigation, which is probably the aspect of this whole process that most of you are trying hardest to avoid. And I just wanted to distinguish, there's a difference between patent litigation, which is stuff that's going on in the US District Court, and re-examination proceedings, which are proceedings that happened before the Patent and Trademark Office. Andre is going to be talking about re-examinations. So everything that I'm going to be discussing with you is basically just stuff that's going on within the United States District Courts. And I just wanted to put out there that litigation can actually come up in a couple different ways. One is, of course, the one that most of you are worried about is ending up as a defendant in a lawsuit where somebody is claiming that you infringe their patent. It is also possible for you to be a plaintiff in what is known as a declaratory judgment type of claim, which is a situation where you are essentially going to the court and you're asking them to essentially issue an order clearing you from any risk that you are infringing the plaintiff, I'm sorry, the patentee's patent. So with that, I also just wanted to note, of course, the biggest reason that everybody wants to avoid litigation is that it's very expensive. A number that a lot of you may have seen put out there is that the average cost of a patent lawsuit is somewhere in the vicinity of $4 million. Well, that number is accurate in a sense. I would just point out that that has actually a number for patent lawsuits where there's a lot of money at stake. In fact, that's for cases where there's $25 million or more at stake. The cost of the actual patent litigation correlates somewhat with the amount of damages that are being asked for. And as the amount of damages at stake goes down, so does the cost of litigation, which is not to say that it truly becomes cheap. The numbers for cases where less than a million dollars in damages are being asked for are still in the $600,000 range, which is a rather exorbitant amount of money compared to the amount of money that's at stake. So as you can imagine, people tend to settle out of those small cases much more quickly. And of course, that's one of the main problems that's going on in litigation with non-practicing entities. They're often coming in and asking for relatively low amounts of damages. And you're then stuck with a situation where it's going to cost you significantly more to litigate it than is even at risk in the lawsuit. And so from an economically rational point of view, there's really no reason to pursue litigation because you're still coming out ahead financially if you just buy a license. And that's a big part of the reason why a lot of people get licenses from non-practicing entities as quickly as they can. And I'm not saying that's something that you should do, but I'm just saying it is an economically rational path that a lot of people do follow. So I guess then if you wanna ask, why would you actually bother to go through with any litigation as opposed to simply settling? I'm just gonna throw out there. I'm not again recommending this because I think it's a bit of a long shot. But there are a very small number of cases where people litigate and then at the end, you can ask for your attorney's fees, arguing that it's an exceptional case and that the claims that were brought against you were essentially specious. And there are some decisions out there where people are awarded their attorney's fees. There was actually a recent federal circuit decision. I apologize, I don't remember the name of it off the top of my head. But it was a case where a non-practicing entity brought some claims against a small company. There was a fairly trivial amount of money at stake. I think it was under $100,000, although I should probably double check that. The party that was defending spent, I believe, around half a million dollars defending the case. And at the end of it all, the district court, this was in the western district of Washington, basically sat down and looked at the claims, said that they were ridiculous, said that the lawsuit never should have been brought and that it was basically just done in an attempt to essentially extort money from the defendant and they awarded all of the attorney's fees to the defendant in that case and the federal circuit affirmed that. I haven't seen a lot of cases like that, but I think it's interesting to note that there is that case out there. So that is another strategy that somebody followed. They gambled and in that particular case, they won. So, but other than that, if you're going into litigation, I guess then the question becomes, if you're going to go in, are you going to go in as a plaintiff and file a preemptive declaratory judgment action or are you going to wait to get sued? And there the big question is, why are you going to make a point of incurring all the costs of litigation rather than simply sitting back and hoping that the patentee passes you by or perhaps that somebody else wins and knocks out the patents before they get around to suing you. And there are a number of reasons why you might go on the offense and actually file a declaratory judgment. And mostly what it boils down to is trying to get into court where you have a better overall chance of success. So, as many of you may know, a lot of the non-practicing entity cases are bought in the Eastern District of Texas. And that is considered a relatively pro-plaintiff jurisdiction. On the other hand, if you are the person being accused of patent infringement, you're generally going to go and try and get into a forum somewhere else in hopes that you will have a better jury pool and a better chance of invalidating the patents. Hopefully you will have a jury that is also or an end of court that is more skeptical about the patentee's claims for damages. So even if you do lose, they may just get a lower amount of money from you. And then also, depending on the forum that you're in, you could end up in a forum where it's actually simply cheaper to litigate on a procedural basis, either because the court has some rules that make the litigation go faster or just for whatever reason, it's less likely that the case will drag out. And along these lines, one thing that might happen is there are differences among the forums in terms of whether or not you might be able to get a stay if the defendant goes or somebody else goes and asks the patent office to take the patent into re-exam. And so just some statistics to give you a little bit of a feel for how this boils down. So just looking at the Northern District of California versus the Eastern District of Texas, okay? As you can imagine, I mean, the Northern District of California is essentially Silicon Valley. There are a lot of tech companies here. There are a lot of people here who are very familiar with software and high technology. And that gives you a very different jury pool from the one you have in the Eastern District of Texas. And where there's essentially no software industry in the Eastern District of Texas. And as a result, you see starkly different results in the two forums. The Northern District of California, the median damages for a case that goes to trial where the patentee wins is about $7.6 million. And that compares to the Eastern District of Texas where the median damages is $19.7 million. Then if you have the situation where the patent has been taken into re-exam, and I'm sorry for preempting you here, Andre, but if you're in the Northern District of Texas and the patent office issues re-exam order where they're saying that they think they might have made a mistake and they want to take another look at the patent, you have an opportunity to have the district court stay the case, which is essentially that's an order where they stop the litigation and they basically put it on the shelf until the re-exam is done. And in the Northern District of California, those types of motions have won about 65% of the time. In comparison, in the Eastern District of Texas, only about one in four of those is granted. So you can see you have a much better chance of getting the litigation stopped in California than you do in Texas. Then in terms of the overall win rate, NPEs only win about 35% of their cases in the Northern District of Texas, whereas they win about 54% in the Eastern, so I need to say Northern District of Texas, Northern District of California, versus about 54% in the Eastern District of Texas. And that's for everything, that's all dispositions, both trials and motions for summary judgment, which are essentially motions where the court is saying before the matter goes to trial that the evidence is essentially lopsided enough that it can decide one side should win without going to trial. And then it's interesting, when you actually go to trial, the non-practicing entity win rate goes up substantially. It's about 71% in the Northern District of California, which is roughly equivalent to the 66% in the Eastern District of Texas. And so when you take that in conjunction with the overall win rate, where the non-practicing entities have a much, much lower win rate in the Northern District of California, what the conclusion that I take away from that is that there are a lot of weak claims that get brought. And then in the Northern District of California, those get weeded out at the summary judgment stage so that they don't end up going to trial. And then the ones that actually do go to trial are the ones that are left that are actually more meritorious, where the non-practicing entity has a much better chance of winning. So that gives you an idea of why people would bother to go and file for a declaratory judgment. And just to give a little bit of background, so as some of you may know, there are actually a number of people who have been accused of infringement or given quote unquote licensing offers from Ladsis who have gone ahead and tried to file declaratory judgment actions in places outside of the Eastern District of Texas. And I would just note those, I mean, I don't know that there have been, that many of those have gone through the pleadings phase, which is essentially just the beginning of the whole litigation where the court's just trying to figure out if it has jurisdiction and if the plaintiff drafted their complaint properly. And so the court actually has power to go ahead and hear the case. There was one defendant that actually filed in Chicago, which is I believe Northern District of Illinois. And they did so because they had gone and found that the CEO of Ladsis had listed himself somewhere as living in the greater Chicago area. And so they went ahead and filed in the Northern District of Illinois thinking that they would have personal jurisdiction there. And then it later came to light that he was actually in Wisconsin, I believe. And so now Ladsis has gone through and basically is trying to get rid of that declaratory judgment action arguing that there's no personal jurisdiction in the Northern District of Illinois. And that original plaintiff has refiled or has filed a second declaratory judgment action in Wisconsin. And there are a number of other plaintiffs who have also done so there. And then I would also note there are a couple of people, I believe one or two who have filed in the Southern District of California. And I can actually, let's see. So yeah, so it was four C results, I believe was the, and a few other defendant or companies rather were the ones who had done that Northern District of Illinois declaratory judgment. Then there's ESET, which is also filed in the Eastern District of Wisconsin. And then another one by right now Technology and then yet another by Wolfram Alpha. And I don't have, I'm sorry, I'm looking at my notes here. I don't have the Southern District of California case. I think I might actually have put in ESET incorrectly. I think ESET might have been Southern District of California. But in any event, that just kind of gives you a background for LODCIS in terms of what's going on, in terms of people trying to get declaratory judgments heard. Tony, can I quickly read a question I've gotten? Sure. Can you quickly talk about what would happen if defendants can join together and maybe be in a litigation together? Sure. Well, and so there, it's a little bit unclear to me whether they're asking if they can join together as plaintiffs and file a lawsuit altogether, which I guess they can. I think that's what Forsey and other peoples have done. Basically, anybody who has been accused of a legal wrong where the claims have similar facts and so the basic interest of all the various parties are aligned, they can join together and make what's called a joint defense group. It more often happens in an actual defense setting where they have all actually been sued and then they're all defendants and they're trying to coordinate their efforts. And that is a good way to cut down on litigation costs because you can distribute the costs among multiple parties. In a situation where there are one or two really big companies and then the other companies are smaller, there's also frankly a bit of a free rider opportunity in that you can just rely on the fact that the big companies are going to be pushing forward and spending money and that's of course what a lot of people are relying upon in the case where Apple is trying to intervene is they're hoping that Apple will come in and then Apple will be able to carry the water at least on certain issues to handle most of the costs of the defense and then everybody else can hopefully sit back a little bit. And I think I'm about out of time. But really quickly speaking of Apple's motion to intervene, you are almost out of time but if you could just quickly talk about what a motion to intervene is and means and kind of explain what Apple's tried to do, I think that would be helpful. Sure, so generally speaking in litigation you're gonna have a plaintiff who comes in and sees a bunch of defendants. If you have a situation like this, an Apple was not named as a defendant but they have arguably a big stake in the litigation. So they want to be able to participate in the litigation. So essentially in their motion to intervene they're arguing that they are a party with significant interests in the disposition of the case and to have some legal standing to intervene and participate. And so that's essentially what Apple is trying to do. And then if the motion is granted Apple will be able to assert various defenses on behalf of the defendants. And I would just point out as many of you may be familiar Apple will not be able to assert invalidity defenses or at least that's the impression that we all have. It's assumed that when they took a license they waived that right. So they are simply going to be asserting their license as an exhaustion defense essentially arguing that all of the developers are covered under their license. Great, thanks. And then one last quick question about litigation that I think is pretty straightforward. There are a lot of international app developers who've received letters from Lotus and have frankly even been sued. So really quickly what happens if someone lives outside of the United States and either receives it is sued frankly in court here? Well, so of course the first question always in a lawsuit is whether or not the court has jurisdiction over the parties. So essentially whether or not they actually have the power to try the case and to enforce a judgment. The real question is probably not where the defendant resides so much perhaps as whether or not they actually have a corporate presence in the United States. If you have a corporate presence within the US the patentee is probably going to be able to serve you because you will have had to register in order to be served somewhere within the United States. So they'll just serve you there. And then the law on personal jurisdiction so whether or not the Eastern District of Texas can actually hear a case over an American company that is presumably doing some business within Texas is pretty lax. There's been a movement to cut back on whether or not the Eastern District can hear some of those cases and the Federal Circuit's been pushing on them to get some of those cases moved to other forms within the United States. But the simple fact of the matter is if you are registered as a corporation anywhere in the US there's probably going to be some US court that can hear your case whether or not it is the Eastern District of Texas. But there are some procedural hoops that they have to jump through. So if you aren't registered somewhere within the United States so let's say you aren't a Delaware corporation but you're only incorporated in for example the United Kingdom. There are additional procedural hoops that they're going to have to go through in order to pull you into a case in the United States. Those procedural hoops can be gotten through I believe but you have to wait until you actually get a properly served complaint up until that point the court doesn't have any power over you. Thanks, thanks Tony. And now we're going to move on to Andre he's going to talk about re-exams. I know people are really curious about re-exams because as most of you know Google's filed a re-exam and it too loads as patents that are at the heart of most of this debate. So with that, Andre. Thank you Julie. So I will not talk specifically about the Google re-exams but I will talk about re-exams in general. So I'll start with some terminology what are ex-party and inter-party re-exams? Google filed a kind called inter-parties. And then I'll talk about three topics. First, some numbers to provide you a better understanding of re-exams. Second, I'll go over some details on procedure and substance on the procedure and substance of re-examinations. And a little bit on the relationship to litigation. I think Tony has covered a good part of that. And finally, I'll very briefly go over some of the patent reform legislation that just passed the Senate yesterday. So as Tony mentioned, re-examinations are proceedings in the PTO in the United States Patent and Trademark Office as opposed to court. In an ex-party re-examination, the requester files a request with a patent office and then the process continues solely between the patent owner and the patent office. So the requester's out of it after the initial request. The requester can in fact keep going if he can file another ex-party re-exam request. And as long as that one can stand on its own, those re-exams will be merged by the PTO in certain circumstances. So there are ways to get around that, but typically the requester's out. The ex-party request can also be filed anonymously. An inter-party re-examination request allows the requester to stay involved in the process after the filing. So at every stage of the process, after the patent owner makes a submission to the PTO, the requester has a chance to chime in as well. So let me give you some numbers. This year the PTO is on track to receive about 1200 ex-party re-exam requests and about 500 inter-parties re-exam requests. Those both of these numbers are up 50% from last year. So re-examinations are growing fast. Those numbers are not that large. Let me put those in context. PTO will probably receive a little bit short of 500,000 patent applications this year and they'll issue about 200,000 patents. And there are about 3,000 patent lawsuits filed every year and maybe a hundred of those go to jury trial. So re-examinations, a total of about 1,500, it's actually, there are fewer re-examinations than lawsuits. The PTO almost always agrees to start re-examining. Over 90% of the cases, the bar is fairly low. For inter-parties it's 95% of the cases, they agree to start a re-examination. And the outcome of most re-examination, I'll give you the more detailed statistics in just a little bit, is that most patents come out either completely dead or changed, changed in some ways, sometimes in major ways, sometimes in more minor ways. So to get this picture, a stack, and at the top of the stack you have a layer of, and those are the patents that emerged without any changes out of the patent office. That's a pretty thin layer. For inter-parties re-exams, only 13% of the patents emerge completely unchanged out of the re-examination process. The next layer down, those are patents that are changed in some ways. And for inter-parties re-exams, that's about 45%, a little shy of 45% of the patents that are re-examined, come out changed. And the next layer down, those are the patents that don't come out at all, that are completely canceled. For inter-parties re-exams, that's about 45% as well. The middle layer, it's hard to evaluate exactly what happens there. Those patents that do come out but are changed, the PTO doesn't break out those statistics to tell us, was it a big change or a small change? But there's some indirect reason to believe that patent owners are generally not happy with the results. And that is that all the inter-parties re-exams that are appealed, they're appealed three to one by the patent owner. So for every appeal by the requester, there are three appeals by the patent owner. I'll give you some more numbers in this. I figure since we have engineers on the call, you won't mind. So, Tony talked about the cost of litigation. And you can use cost as a proxy for the complexity of the proceeding. And inter-parties re-examination is a factor of eight or so less than the cost of litigation for cases with under a million dollars at stake. So you're talking about a cost in the high tens of thousands of dollars. And then the cost of an ex-party re-exam where you just filed a request and you stay out of it is another factor of eight or so less than that. So these are litigation, inter-parties re-exam and ex-party re-exams are almost an order of magnitude from each other in cost and complexity. There are actually fairly different proceedings. So what happens to a re-exam when it's filed? It goes to a special place in the patent office. It's called the central re-examination unit. Some lawyers call it the central rejection unit. This has about 75 primary examiners. These are experienced examiners. Two thirds of them are in the electrical field which covers software. And the cases have one examiner assigned to them but it's really a team of three examiners that sign off on each office action. And the examiners don't have as much time pressure for their work. They don't have to crank out as many, what they call counts in their jobs. If you compare this to regular examination, in the normal prosecution process you have about 6,000 examiners who get about 20 hours to examine a case. And some of them are junior examiners who get their work reviewed by their supervisors but might have a couple of years of experience. In the re-examination unit it's all experienced examiners and teams of three with more time. After a request is filed, if the PTO finds that there is a substantial new question of patability and that's a fairly low threshold. They almost always do. They issue an order in about two months after the filing and to grant or deny the request to start the re-examination. And fairly shortly thereafter a first office action on the merits follows. So for an inter-party's re-exam statistically that usually comes three months after the filing of the request. For an ex-party it's about six months afterwards. I saw a study where some attorneys looked at the rejection rate on this first office action on the merits for software electronics inter-party re-exams. And they looked at the rejection rate by each examiner in that field. So they looked at how many claims are rejected out of total number of claims that were at stake in the re-examination. And more than half of the examiners there have a historical rejection rate of 100%. They have never seen a claim they didn't reject at least the first time around. And many of them have fairly high rejection rates as well. So at least for an inter-party's re-exam it's not easy to get your claims through at least the first office action stage. The applicant gets a chance to respond. They have to respond within two months. They can amend the claims or they can argue. There's a little wrinkle here and that is if the patents are about to expire you really don't want to amend your claims because once the patent is expired you can only benefit from your unamended claims. You can go back six years to get damages but you cannot change your claims going forward. So with a patent about to expire you're really gonna be thinking very hard about even trying to propose any kind of amendment. Maybe I should clarify that six years thing. Should I do that now? Okay, so say if a patent expires next summer in 2012. Theoretically the plaintiff, the patent owner can sue up to six years later for damages that occurred up to next summer. So the clock on the damages stops but the enforceability of the patents keeps going for six years. So a patent owner can look back six years to get damages. Is that right Tony? Is that a good way to put it? Yes, the one caveat that I'm gonna throw in there is there are also marking requirements or there are notice requirements in terms of when the clock starts. So for instance, for a method patent the damages clock won't start until they actually notify you that you are infringing. So if they wait four years on that clock, before they notify you, they're not gonna be able in theory to go back the entire six years. Right, right. And if I may just quickly point out that if an app developer has received a letter from Loadsys that Loadsys believes that app developer is infringing that is the kind of notice that Tony's talking about here. Okay. So, well going back, so after the patent owner responds they have two months to do it. If it's an inter-parties re-exam then the requester has a month to also respond. And the patent office at that point issues after reviewing the material they issue a second office action which is usually final which means that the patent owner doesn't really get as much freedom to amend their claims if they wanted to amend their claims or to submit evidence. At that point the patent owner can appeal to the board of appeals within the patent office and then on to the federal circuit. The PTO reports that the average time from start to finish of a re-examination that's from filing to an issuance of a re-examination certificate is just a little over two years for an ex-party and just a little over three years for an inter-parties. I would caution though that there's major selection bias in those numbers because only the re-exams that have gone, that have been fast enough to get out of the system are counted here. So the real numbers for a contested re-exam that might be appeal is probably a lot higher than three years. So a contested re-exam that ends up being appealed may end up taking longer than three years. On the other hand re-exams have gotten faster over the last couple of years. There are a lot more examiners doing this. Tony has talked about stays, right? Can you will a judge stay a case? And the statistics he gave I think are very useful, right? 25% of stay requests in the Eastern District of Texas are granted. I would just add that a stay request is more likely to be granted if it's filed early and if the patentee can get an injunction. At least that's my understanding of the factors for granting a stay. So what are some differences from litigation? A major one is the way claims are construed. So the meaning the claim terms are given in the patent office versus litigation. In litigation if there's a disputed term pick your favorite term out of a claim and there's disagreement about what that means. The judge interpreting that claim term is much more likely to look at the specification and interpret that claim in a narrow way than the patent office. The patent office uses a different standard for claim construction that they call the broadest reasonable interpretation. And if there are multiple plausible terms as long as the spec has an excluded one of them very specifically the PTO will say that all of these meanings of the term are plausible meanings and any kind of prior art that comes within any one of these meanings is gonna be good against that claim term. The wrinkle here is that in this funny situation if once the patent has expired actually the PTO shifts back to the court style interpretation and to original claim. So if you've made any changes or relied or the re-examination proceeded on this broadest reasonable interpretation standard and the PTO standard it all switches back once the patent expires. There's no presumption of validity in the PTO. PTO examiners are no engineers they're technical. That's different from say a judge or a jury. There is one downside to having an error parties re-examine that is if you go to the PTO and you lose you might not be able to raise the same arguments or arguments you could have raised in the PTO if you later go to court. And that's one of the downsides of inner parties re-exams. I will end with very brief a few words about patent reform. Most of the changes I'm about to talk about are going to kick in about a year from enactment so they will not be relevant right away. But re-exams will be decided in the future by panels of three administrative law judges rather than examiners. And I expect that might make it even harder for the patent owners to survive a re-examination with their claims unchanged. There's a new type of review called post-grant review that will be available for nine months after the issuance of the patents and inner parties re-exams will get harder to start and they'll have more limits on them. But I won't go into the details of that. I do have one quick question that I'd like to quickly raise and that's what happens if the court, if there's a litigation pending and a re-exam and the court does not stay the litigation. So both proceedings are moving along on parallel tracks and then the patent comes out of the re-exam different potentially narrower. What effect does that have if the litigation is almost done or maybe even the litigation is done? Well, so the first question you'd have to ask is whether or not the disposition and the re-exam was final. And that means not only that the re-examiner has gone in and issued a finding, but that all of the appeals on that are done. And I would point out that can take a really long time. You can be looking at like six to eight years for all of that to happen. But if it were final, then that would essentially, I mean the court I think would be forced to go back to square one. I mean, it's not gonna be able to issue any kind of order of finding of infringement on a bunch of claims that are no longer actually in force because the re-exam, if it's final will have completely abrogated the original claims. On the other hand, the claims, the original claims are not actually void until the re-exam is final. So if there's something that happens and that re-exam proceeding is still going on either because no final disposition, I'm sorry, no disposition has been given by the patent office or because it's still an appeal, whatever, then the court could in theory just go ahead and give a disposition on the merits for the original claims that were filed. And that's just one of those things. I think it's in the discretion of the district court judge. So depending on where you are, you might or might not be able to convince the judge to hold off on doing that. Sometimes in that circumstance, the parties will work together to resolve the mess. They both have incentives to not litigate some unknown question that may or may not matter. I think the really key point that we touched on a little bit but may not have been perfectly clear is if the claim comes out changed, then the patent owner gives up the rights to any damages on the claim that they changed until that time. So that's the idea with why you wouldn't change a patent that's close to expiring because if you change it, the clock can't start until the change happened. Anything before the change happened, they surrender. And so that's also why you wouldn't litigate a claim that there was no damages to. I've had that situation once and it just worked out that it made sense for the patent owner to stipulate, to get through the appeals process and it made sense for the defendants to tolerate an amended complaint. And the really tricky thing comes up with the Markman order but I won't even talk about that. And that is actually a perfect segue because that was Ben Singer, our final panelist. He's gonna talk a little bit about licensing but I really wanna be clear that we can't answer any questions about your particular situation or give you any advice about what kind of terms you should or shouldn't enter into. Again, I've said this before, I'll say it again. If you want help finding a lawyer, let us know we can try and help you. Info at eff.org but I think that Ben's gonna be able to offer some good lessons on how licensing in patent context works. And I just would point out too that relevant to what we were just talking about, Ben, if you could eventually get to talk about what would happen if you enter to license and then a patent came out of re-exam later. I don't know if you were planning to mention that but I think that's relevant to this past conversation. So without further ado, Ben. So as Julie has us all on wired chairs and if I stray into giving you advice, I get zapped. So that will keep us all protected. So I do all litigation and what that really means is I do licensing. 98 or 99% of federal court cases and in a settlement, settlement means a license. So more and more that's where everything's going and as Tony mentioned, particularly in the non-practicing entity context where the words we use is the nuisance value while paces the demand, you're just headed for a license unless you have just decided you wanna be the irrational actor and you want to fight on principle and spend your money to wage that war, which sometimes happens and makes lawyers particularly happy because we enjoy fighting. So I have three quick points. I'm gonna try and give very practical information. What is a license? When might you want a lawyer and some very high level ideas about how a license negotiation happens? So a license is a right to use another's protected property. I think a lot of people think it's something that isn't part of their daily life, but it actually is. A movie ticket is a license. A lift ticket at a ski mountain is a license. Take the movie theater, for example. They have a right to who gets to view their content. You pay a little bit of money, they give you a right. And actually the right is more specific than you may think. You're entitled to stay for one movie. You're entitled to one chair. You're supposed to see the movie you bought the ticket to, although I don't always do that. So that's a license. Same thing with intellectual property. It works a little bit differently, but that's the gist. Julie sent me some questions beforehand about what can be in a license. And for our purposes here today, I think you should think of it as essentially anything. It's a contract. There are rules to what can be a valid contract, but as long as two people have a meeting of the minds about what deal they wanna strike and the deal meets some very simple low threshold rules, we can have any deal we want. I literally mean I can let you ride my giraffe for a week if you give me a right to use your patent for that week. And so it's very broad. With that understanding though, what are some of the key terms that appear in almost every license? Well, one term people are probably starting to get used to is royalty. A royalty is I guess a fancy word for how you're gonna pay for the right. There are two very common types. One is a running royalty. That means you pay me 15 cents for every widget you sell. Another very common type is a fully paid up royalty. You pay me a million dollars and you're free to use my technology for forever. I think one distinction I wanna draw is even though we sometimes call it a royalty, when you're talking about making a payment for something you've already done past activity, it's really a release. You give me some money and you're buying the right that I won't sue you for things that you already did. Also with the royalty, I'll come back to that actually, but so let's talk about licensing in the context when you've been sued. If you've already been sued, then a very important part of a license is the dismissal. There are two types of dismissal. One is without prejudice. One is with prejudice. Without prejudice really is not much of a dismissal at all. It means they can sue you again. With prejudice means that those claims are now barred. So of course from a developer standpoint with prejudice is preferable. I haven't entered a license where there was a dismissal without prejudice in maybe ever unless I wasn't paying anything and it was just to go away. So another very important aspect of a license is what we call its term. Is it for a year? Is it for five years? Is it until the patents end? You wanna pay attention to that. Another important aspect of a license is the field of use and its scope. And so, well let me take those in separate. Field of use in this case is gonna be fairly well focused, right? But I think what I have in mind there is if let's say you've developed an app for the iPhone, does your license cover only the iPhone or should you expand to the droid platform would it still be covered? That's the field of use. And its scope, it covers things like how many patents? Is it for one patent? Is it for both patents? Is it for a broader portfolio that might be available for licensing and connection with this case? Would it cover things like continuations in part or divisionals that issue from the applications that became these patents? Would it cover claims that come out of a read exam? So you wanna focus on those things. I know that's a lot of information but that's sort of a two inch deep summary of what a license can be. So do you need a lawyer? Is a lawyer a good idea for you? Well I'm a lawyer so I'm biased of course but I think that in any time, in any circumstance where you're gonna enter a contract or you're gonna have a litigation, of course a lawyer is useful to you in the same way that if I'm going to fix a problem under the hood of my car, a mechanic is useful to me. Are there exceptions? Sure, there are a lot of times when a person can't afford a lawyer so it's not a choice for them but even let's say you could. You know my understanding of sort of the universe of app developers is there may be some people who are actually the front man for you too and that just happened to develop one app in a cookie night and that app made them $20. With $20 at stake, is it ever useful to have a lawyer? Probably not, certainly not cost effective. So you need to sort of think about who you are. If you have had many apps or you plan to have many apps or you have had one app that made a gajillion dollars then I would suggest that considering hiring a lawyer before entering a license agreement is a good idea for you. Having a lawyer consider a license agreement is not a cost that's on the same scale as litigating. Just to give you an off the cuff estimate, I mean I have clients that have decided they would like to take a license, they've even received a license that the other side would like them to enter into and to get that license reviewed and short up and negotiated and executed can be anywhere from three to five hours of time. So if you're talking about making payments under a license that have five figures you may wanna spend four figures with a lawyer to make sure that what you get for your money is what you need to protect your business. So negotiation. Well it's like any negotiation and particularly small business owners are used to negotiating. Although in some ways, just like with the contract for an app on the iPhone where Apple dictates most of the terms to you because there's such a disparity in leverage, sometimes in a situation like this you're gonna face the same thing. But setting that aside, let's assume that things are up for negotiation, things are debatable. Then what is a negotiation? Well, in every license negotiation the licensor wants to sell the smallest possible bundle of rights for the biggest possible pile of money. And you want the biggest bundle of rights for the smallest pile of money. That's sort of a gross over simplification but it will work for today. So what I think of it as in a little, I think it's fair to classify it as essentially a war of information. They want information from you, you want information from them. The difference is they're gonna have a very good feel for when they're obligated to give you information or when they're not and you won't know those kind of things. So I wanna try to level that out a little bit. So first, what kind of information is important to a patent owner in getting the best license and achieving their goals? They wanna know how much can you afford to pay? They wanna know your financials, how much have you made? They wanna know your plans. What amazing app are you gonna drop next? And so what do you wanna know from them? Well, what's the cheapest license they ever gave? And things like that. So I want to, there was one question about kind of going over things on the phone versus in writing and how that would be, how that would affect the outcomes. And I think that's really up to each individual party, but I will give you some ground rules. For one, you're under no obligation to answer any questions. And that's really an important thing. If I have, if you're the world's most skilled negotiator, then oftentimes the game is, well, let's reveal the minimum amount of information that we want, but shield everything else. If you're not a skilled negotiator, the better rule is don't say anything. You don't have to. And that's weird, right? I mean, my wife comes home and says, what did you do today? I say, I'm not talking about that. But here, this isn't about being polite. It's not about making friends. It's a different social norm. You're under no obligation to answer questions. You may not ultimately be able to get to a license without eventually doing some of that, but you wanna take your time and be sure before you say anything. The next ground rule is don't commit. You're free to hear them out and always say, I'll consider it. I'll think about it. I wanna talk to my attorney. I wanna sleep on it. Whatever it is, you should be very clear. And frankly, lawyers are relatively good at pressuring without really seeming like they're pressuring. So you may even say, I'm not committing now or I don't wanna discuss that now more than once. And you may be asked again. You need to feel comfortable to stand your ground. And once you have some information from them, you can consider back to my second point of whether or not a lawyer is for you. So that's really all I had in my outline. I sort of anticipated maybe my window going last would get short, but I will add one thing to the concept of a re-exam. And there was one question about, well, what if the patents expire? And you can draft a license that covers any event. I recently did a license where we said, well, we'll pay you making the numbers up, but we'll pay you $50,000, but we'll pay you 20,000 today. And if your patent comes out of re-exam with even one unchanged claim, we'll pay you 30,000 that day. And if it doesn't, you forgive that 30,000. So you can structure it however you want. The one thing I will say is there are patent misuse rules. And so to the extent that you end up with a running royalty arrangement, you should only be paying until the patent expiration date. So just one thing you might want to comment a little bit more on with respect to taking your time to respond. I know there are a lot of developers who look at the 21 day time limit that's in the Lodsis letters. And so maybe you just want to comment on, I mean, that's not enforceable, but also just general experiences in terms of how long actual discussions usually go on for. Well, let's take a step back too, if I may. I think Tony makes a really important point. There's no legal obligation to respond to a letter. There are strategic reasons why you might want to, but the letter from Lodsis isn't a lawsuit and you don't legally have to respond. So with that, Ben? Well, when I, I mean, can speak to it from, so first of all, there's Tony's point that the 21 days is a number that they gave you. I can only speak to what it means from personal experience because I do work on both sides of the fence. And so when I write a demand letter, do I always include a timeframe? Sure, otherwise I have no expectation I'll ever hear back. But do I always enforce my timeframe? Is that written in stone? I think one thing I can say about that is that if I have or if you are cooperating, you're participating, we're hand in hand, heading down the path towards a license, I have no incentive to go forward and sue you. It cost me money. And one, you know, when I was a first year associate, one of the very senior partners said to me that litigation is like dancing with a bear. Once you start, you don't say when you stop. And so everybody involved, they want a license. And so if you're interested in a license, you can probably get there. I think it is important to, that's maybe one of the strategic reasons for at least responding to the letter. Oh geez, I got your letter. I'm interested in talking, whatever it is, right? Because if you're at least engaged in cooperating in a process, then that process buys you time. But I will give the caveat that there are a lot of things about this case that don't fit a traditional norm, right? And so I won't try to guess or promise what it is that LoadSys or LotSys will do. It's really, it's kind of a unique situation. I think one of the things that is important to sort of get a feel for is if you have an app, and maybe that they don't know, but if you have the most popular app and it's sort of public knowledge that it's a very successful app, then you're probably on a shorter leash for how long you have until you respond to the letter, right? If you're sort of someone that they don't have a high value expectation from, you may have a longer leash. I mean, I asked a few people in response to a question that came in about, well, what if you just do nothing? And we haven't really completely touched on that. And so let's say you did absolutely nothing. I just wanna make sure people understand this. If you do nothing, and let's say you haven't been sued yet, you do nothing, you're probably gonna get sued unless something shakes out first. If you already have been sued, you're already in that boat. What happens if you do nothing? Well, there's gonna be a default judgment entered against you when you don't appear at a certain time. And a default judgment will entitle the plaintiff to get reasonable penalties or damages from you. And one of the people asking the question said, well, what if I don't have any US assets? Well, if you don't have any US assets, it's very difficult to enforce a default judgment against you and collect anything. But don't forget, you could also have an injunction enforced against you. And that is the kind of thing where an injunction can be enforced on your app through Apple. That's a good point. So, there is actually, there is a rule called Federal Rule of Evidence 408 that controls, controls, it's really not, it's really a relevant standard, right? It's not, I guess, as a legal sort of splitting of hairs. But there are rules in the evidence code that prevent negotiations from becoming part of a litigation if you've already been sued. So, what the idea is creating, if you will, a trustee, right? We want people to be able to get to a deal and we wanna create an environment where they can save the things they need to get to a deal without worrying about those things coming back to bite them in a litigation. So, for example, you may be, a patent owner may be demanding $100 million. And we may have a negotiation where I say I'll settle for two. If we don't, as long as we take the right steps to protect ourselves, labeling things, Federal Rule of Evidence 408, and if we had a mediation agreeing that it's under 408, then you wouldn't be allowed a trial to say, well, he can't ask for $100 million, he was willing to settle for two. If there's more, I probably could have been more complete with that, but whoever. So, if I may, I actually just wanted to go back and make a correction to some of the statistics that I cited, I just realized I misread them off of my notes. And just going back to the question of what the win rates are for patent cases in the Northern District of California and the Eastern District of Texas. So, I think I quoted before the overall win rate in the Northern District is 35%. If the 71% number that I had quoted was for all cases that go to trial, I think I'd characterize it as NPE cases go to trial, that was not right. It's all cases that go to trial. If you limit the subset to cases brought by NPEs only, their win rate is only 25%, which is lower than the general win rate, which kind of supports the idea that NPEs are going to do worse in the Northern District of California than they would than a general patent plane of foot. And then I would just note that the win rate for NPEs in Eastern District of Texas is 55%, which is actually nearly identical for the 54% win rate for all parties. So, sorry. I think we're gonna go ahead and take some questions. Well, I've already gotten a bunch of questions, but I'm gonna ask them to the panel. The first question is, we talked earlier about how there's prior art and there are other patents that might inform an app developer what is or is not infringing. And so if an app developer wanted to make a new app, could he or she find those patents themselves? Where would they go to do that? I think you get back to the issue, this is Professor Colleen Chen of the difficulty in tech of really being able to isolate and do this type of work. So we call these freedom to operate searches and they are done in certain industries, but I think the idea here is, if you thought about what am I doing that's new, as it's been done before, it's a pretty difficult thing to do. If you were able to hypothetically come up with the language and be able to search kind of everything, you would be looking at the old patents, but you'd also be looking at everything that's out there. So stuff on the internet or, and I'm not kind of recommending that you necessarily do so, but anything is really fair game before your kind of date of thinking of the invention of kind of your new app. So all of that stuff that's come before is relevant. And what you'd be looking for is not only stuff that's exactly like what you've been doing, but also that would be close to it, that would be the same idea, again, putting two things together and then those two things being in your application, those would be considered relevant as well. And just to follow up on that, we didn't really talk a ton about substantive patent law in terms of validity, like anticipation and obviousness, which are hurdles that patentees have to overcome in order to have the valid patent. We really didn't discuss that in any detail. But when you're going out and you're doing a prior art search, I mean, just to follow up with a little bit more detail on what Colleen was saying. I mean, you're basically going out, you're looking for two types of things. I mean, one is generally speaking, like stuff that was out in the public domain before the patent was filed for that is exactly what was claimed within the patent. And that's the kind of stuff we would usually talk about as being anticipatory or raising a prior sale bar or something like that. And then there's their obviousness questions, which is just, even if what the patent claims is a little bit different from what was out there before, is that little difference so trivial that we're not going to give them patent protection anyway. And the whole comparison of whether or not something that you find is going to be anticipatory or obvious is really involved. And frankly, I think it's probably hard to do for a layperson because there are a whole bunch of subsidiary steps. I mean, you have to go into the patent. You have to do what's called construing the claims, which is trying to figure out what the legal interpretation of the claims is. And then you have to go and compare that to all the prior art. And that's a lot of work. Now, having said that, there are, I think, some interesting new resources out there that people can rely upon if they're looking to do things in a more cost-effective way. One, I'm going to blank out the name now. I think it's called Article One. Article One, partner. Yeah, which I have not used personally. I've heard very good things about them. That it's essentially a company that does sort of a bounty search method. They basically offer whoever comes up with prior art that will knock out this patent, will give you X amount of dollars. And apparently, the patent searches that come out of them are pretty good. The Article One partners has put a call out for prior art on the Loads' patents, as a matter of fact. Yeah. But just one clarification, I think this is good advice. Donnie, but the one thing to think about is if you're actually just talking about, I want to make my application. I just want to see what's out there so that I can minimize my risk. Then you're really just looking at patents and you're not looking to invalid it, which is a distinct issue is from trying to invalidate a patent that's being asserted against you. So if you're looking for, I want to make this and I want to minimize the harm or the risk that I'm going to be sued, then you'd be looking at patents. And Google patents is a better interface than the PTO website because they're searching algorithms, obviously, will work a little better. But then, again, the issue is how do you actually figure out what terms you'd search for, it can be described in many ways. For example, right now, when we're talking about the Nordel patents that have been bought recently to try to cover the next generation of wireless communications, they're talking about pager patents. Okay, so these are pager patents were written years ago over old technology, but they're written in such a way that they're so broad that now they cover new stuff. So that kind of just explains or gives an example of how difficult it is to know what you might be infringing. I thought the question was a little bit confusing to in whether it was how do I bust patents or how do I get freedom to operate? But the one thing, and I know this sounds backwards, I just want to make sure I layer on top is if you go looking in a freedom to operate situation and you find a patent, remember earlier we were talking about the concept of notice, well, you've just provided your own notice and you may have stepped into something called willfulness. So it is, I'm not saying it's always better to just go blind, but you should appreciate that there are risks when you have a product you're developing to taking on that kind of work yourself. Or for that matter, hiring a lawyer to go do it, since if the lawyer finds that you're in pretty much the same situation. I'm glad you just said that because I've seen some questions about hiring a lawyer more broadly. Number one, if a party could actually defend itself in court without a lawyer, and number two, what kinds of services would it make sense for an app developer to ask for in a lawyer? If maybe an app developer hasn't been sued yet. Well, can you defend yourself? I mean, there's two aspects of that. One, is it a good idea and two, is it legally okay? Yeah, it's legally okay. And in fact, it depends what judge you have because there are judges that will give a pro say defendant a lot of leeway understanding that you don't know the rules. There are other judges who will just be very angry that you've slowed down and confused their courtroom where they're already overburdened and will throw the hammer at you. Is it a good idea? I don't really think so, but it's only a choice if you have the money anyway. If you don't have the money, then sometimes that's what you need to do. The firm that I work at is a full service firm and we work with a lot of startups. And so we have a bunch of former PTO judges that we have licensing specialists and we have litigators. And so with respect to the services we provide to people like app developers, we have a client now who's one. Oh, apparently corporation can't go pro say. Good point. So, but in terms of the services we provide, we'll do what you're talking about if you want information about a freedom to operate, we do those kind of searches and report back. If you get a demand letter from someone, we do a similar search and may or may not do an opinion letter that would then fix a potential willfulness problem. And a lot of what we do is we'll get you your own patent so that after something comes out, someone can't just copy it. And in smaller situations, the value of a patent is also cross licensing. All right, we've just got time for two more quick questions. Unfortunately, I've gotten a lot of great questions. I wish we had all day, but we don't. So the first one, Ben, this is on licensing and I actually think you talked about this some but I just kind of want to make sure we're clear. This is actually two questions, but they're related. Do licenses apply internationally or just nationally? And someone asks, if I sign a license for a certain royalty rate, can lots of them change that rate? I'll start with the second one because I understand it better. If you commit to a deal at a certain royalty rate, unless the deal has escalation clauses, that will be the royalty rate. It's becoming more and more common with the NPE situation forcing creative solutions for there to be escalation clauses. But if it doesn't say something like, well, in two years it goes up or if I go from three apps to five apps, it goes up. If it doesn't say something like that, they can't just revisit it and change what is the royalty rate. It's a contract. The national, international, I'm not sure I fully understood the question. So I'm going to interpret the question as one of if you get a license and it offers you worldwide rights to operate under the patents. It depends a little bit on what it is they're licensing. I mean, a US patent is only enforceable within the United States. You don't need a license to a US patent to do things anywhere else. On the other hand, there may be other patents in those other places that do control your right to practice the claimed invention there. And if they actually have patents in those countries, you can bundle those into the license and you can get a license to those as well. And then in theory, I suppose you would probably be paying royalties on sales in that jurisdiction as well. But of course, the threshold question there is whether or not they actually have patents that are in those other places. So for example, could Lodz's come and give you one license that covered both the US patent and any UK patents? Yes, they could. Do they have UK patents? I don't know if they do. I haven't seen them yet. You know, the one thing we didn't talk about yet that's probably pretty critical to this is the concept of exhaustion, right? With the Apple intervening and what that means. So if somebody wanted to talk about it. Well, let me really quickly, before you go there, I do want to talk about that quickly, but I just want to, what Tony was just talking about is relevant to another question I just saw. And I'll quickly say that it's important that US patents are only enforceable in the US. So if you do not sell your app in the US, either in the app store or the Android marketplace or wherever, Lodz can't accuse you of infringing its US patent. That's just in response to another question that came over. So, Ben, if you'll go ahead and quickly talk about exhaustion, which to be clear is the theory, or Colleen's going to talk about exhaustion. Someone is going to tell you a little bit about exhaustion, which is the theory under which Apple is alleging that the app developers should not be liable for any infringement of Lodz's patents. So the idea of exhaustion is basically a rule against double dipping. Once I have my patent, I can use it to get royalties against somebody, but then I can't go ahead and then ask that person later, again, for more royalties. And the way it comes up in a patent context might be I sell a patented product, I have that patent, and then later on down the line, somebody resells that product, and I try to then stop that sale from happening. I say, I have patent rights, I can't do that because I've already sold the product that bodies the patent rights, and I've basically exhausted my rights. In this particular context, I think the theory from what I understand about it is that Apple, as I mentioned before, has actually a blanket license to a number of patents that were held by this company called Intellectual Ventures. And so it had secured rights to the patents that in fact are being now litigated by Lodzis or Lodzis. And so the issue is, does now, and I'm not clear exactly what, if Lodzis bought, or is licensing the patents from Intellectual Ventures, but does Apple's license then cover the other uses of the patent by its own developers? And so there are a couple of kind of steps in that logic which I think need the clarification, but the basic idea is that you can't use this patent. If you've already sold it, right, they've already sold the rights to Apple by making Apple take a license, then that license should cover then the actions of the people Apple's working with. Great. The last question I'm going to quickly raise and then say thank yous and goodbyes, is we've seen a real uptick in a lot of these types of suits and in patent-troll suits generally. And I just am kind of curious to get everyone's opinion on if you see any long-term solutions to this problem or if there's anything to make you feel hopeful that maybe this problem of innovators being targeted by patent-trolls might go away anytime soon or what people can do if you have any ideas about that too. So if anyone wants to take that. I have two quick comments on that. One is, so patent-trolls, as Colleen mentioned, it's kind of a nasty term. I mean, in a lot of ways patent-trolls provide value. They create a market and they monetize and create a liquid environment for inventions. There are a lot of people who are innovating who then don't have the ability to take their product to market or who don't have the ability to stand up to someone infringing their patent and so they can sell their patent or license their patent or have any kind of arrangement with someone who's willing to enforce it and it actually benefits everyone. Has the pendulum gone too far? Yes, absolutely. Very quickly on the second issue of whether or not there are things that give me hope. Well, quite recently the Eastern District of Texas has started to pass, particularly Judge Davis, has started to issue a number of orders that are defendant-friendly. They have said, they call it the Hobson's choice, right? It's what the judge called it, meaning you may know that you don't infringe a patent or the patent is bogus, but it's gonna cost you a million dollars to prove it and the plaintiff is asking for 10,000 and they're asking for 10,000 from 1,000 defendants and so what the courts have done in those circumstances has started to restructure the procedural rules to allow the escape hatch to be reached sooner. So you don't have to spend a million dollars to test the validity. They'll restructure it, give you something called a Markman order in a first month or a summary judgment motion very quickly and so it's not that I expect anyone to fully understand those orders or that those orders in and of themselves solve the problem, but the point is the court in the district that seems to be most egregious in this regard is starting to take notice that there's a problem and reel it back in. So I find that encouraging. I think I'm actually feeling more optimistic because I think that the work of Julie and others to bring public attention to this issue has really raised the profile of the patent roll problem and I think recently we've had mainstream press from the Wall Street Journal to the Economist to others calling for really scrutiny on the patent system that we haven't seen really ever at least in my time in patent law and I think historically it's really been a new thing. So I'm interested in how that public scrutiny is going to play out and I think there's a lot of pressure on change. The thing I think that's hard about changing the patent system is that you've got the judiciary who's also pretty well aware of the issues but they can only do so much then you've got Congress and in the current patent reform bills they haven't been able to kind of affect the change that some people have wanted but this is again because we don't have, we have this unitary system so that if you make changes to fix the troll issue then you might create problems in other areas and I still think there are some areas, some kinds of changes out there that would be facially neutral but actually technology specific in application and one is the prior user rights defense and this is one that I'm pretty interested in thinking about more and saying that if you application developers did your, came up with your technology and it might be difficult for individual, it might not solve the problem for everybody but if the companies were doing things and they independently invented them, they didn't have any knowledge of the patent and they did it before the patent actually was filed then they should have immunity. So there are ways that we can think about and realize that invention isn't anymore this kind of idea of a single person coming with an idea by themselves but simultaneously a lot of people thinking about and coming up with great ideas that we don't really wanna punish that anymore and we wanna try to create enough room that people can have their space. So I think that's a kind of challenge for the lawyers and for the politicians and maybe I'm naive to think that that is something that can happen but I do think that there's more momentum and understanding that this is something that's really not helpful not only to, I guess, small developers but also the big companies realize it as well and so I think a lot of forces are interested in change and will continue to press for it. Just to follow up on what was said, I too think the courts are very, they're slow. I mean, moving the law is it's like taking a huge tanker and trying to get it to do a sharp right turn. It just doesn't happen. It happens very slowly but there are indications that the courts are aware of the problem and there have been decisions over recent years that have addressed some of the issues and it used to be that you got an injunction almost as a matter of right in patent cases and the courts looked at the fact that all of these cases were really just about money and they changed the standards for getting a preliminary injunction to make it a little bit easier on defendants to keep on fighting. Likewise, the tests for obviousness used to be very rigid and make it very hard to win on obviousness and then the Supreme Court came in and changed that so that it was a little bit easier for defendants to invalidate patents and there are other decisions along these lines. I mean, there was the 25% rule on royalty rates that recently the Federal Circuit came in and got rid of that and said that it was basically just completely unfounded and there's been the push to make it easier to get foreign changes, to transfer cases out of the Eastern District of Texas. One thing that I'm a little curious to see what will happen as a result of, there were some NPE-oriented provisions in the recent Patent Reform Act, most of which were taken out. One that was actually left in, mostly I think because it just wasn't on anybody's radar, is a non-joinder provision. So it's now going to be the case unless it was taken out of the act unbeknownst to me that unless the patentee is actually suing two parties on the exact same product that they're not going to be able to join them in a single case unless they have the consent of the defendants. And so what that's going to do as a practical matter is every time there's a venue choice argument, instead of it being a case where you have 40 defendants from all over the country and the patentee says, hey, everybody's all over the place, the Eastern District is as good a place as any, may as well have it here. It's now always going to be a one-on-one comparison, in theory at least, between the patentee and the defendant. And so that could result in a lot more foreign transfers. But I don't know, I mean, maybe my read of that portion of the act will not actually be played out. So I'll just add that I deal, I'm Andre, by the way, I deal a lot with the Patent Office and to the extent there's a solution to this problem, I'm not sure the Patent Office is the right place to look for that solution. I mean, I have a lot of sympathy for the Patent Office within the constraints they work with. They actually do a good job, that's my opinion. You know, you look at litigation budgets versus prosecution budgets. You know, the time that examiners have versus the time that litigators have, the ratio between the patents that are economically important versus, and end up being litigated, versus the number of patents filed overall. Mark Lemley from Stanford wrote this article, I think it was called Rational Ignorance or something. And he said basically it would be way more expensive to try to bulletproof every single patent that issues, than to try to fix the problem once you know which ones are important. And perhaps the PTO can speed up reexaminations. You know, that's hard to do. There are a lot of problems with trying to find the solution in the PTO. I think the solution to the extent that one comes will have to come from the courts. Put some, have the NPEs have some downside risk. You know, the rest of the world has loser pays. The United States is the only one pretty much that allows lawsuits so easily. Maybe put some limits on discovery. Reduce the cost of the hold up for defendants. I don't know, litigators perhaps will figure out how to do it, but that's where I would look for a solution. Well, let me say I wish you guys were all in charge and could implement those changes. Thanks everyone so much. Thank you participants. Thank you so much panelists. I think this was a really helpful conversation. I'm sorry we couldn't answer all of your questions. Many of them, you know, were a little too specific for this type of panel. And again, if you have specific questions about your app or about a particular license provision, it might make sense for you to talk to a lawyer. And if you're curious about that, you should email info at eff.org. If you are a lawyer who's perhaps willing to help out in some of these cases, you can also go ahead and email info at eff.org or me at julie at eff.org. And you know, hopefully we'll be able to find some lawyers who might be able to help you out for maybe even a lower rate or something like that. So again, thank you everyone. And I hope that everyone enjoyed this as much as I did.