wiprmosaid
1 December 2012Patents

The best form of defence: MOSAID

How did you end up in your current role?

My father has a PhD in electrical engineering and is a patent attorney, so I followed his lead and obtained my bachelor's and master's degrees in electrical engineering and took a job out of Duke University with Texas Instruments (TI) in Dallas.

I did failure analysis engineering there for several years. One of my first side clients within TI, other than the product business, was the law department, because I had all the skills to take apart TI chips to figure out the causes of failure, whether it was a packaging, design, circuit or manufacturing problem.

They then brought me competitor dynamic random-access memory (DRAM) devices which they suspected of infringement. I took them apart and helped the patent attorneys prove the infringement case. Aft er doing that for several years, I was recruited to join the law department rather than the engineering side of TI.

I went to law school while continuing to work at TI, and then I started travelling with the patent licensing team and eventually took over all of the off ence for TI’s patent licensing business. After 20 years at TI in various roles, I moved on to MOSAID to become General Counsel. Five months later, I was named CEO, and I’ve been here for six years.

What does the company’s patent portfolio look like?

We have about 5,500 patents and applications worldwide fi led in approximately 50 countries. Th e bulk of the portfolio is related to semiconductor and telecommunications technologies, but we’ve recently acquired a portfolio in the automotive space. It’s a hybrid electric powertrain portfolio, and it’s very exciting to branch out beyond our traditional fields of focus.

We’ve decided as a company that we’ll no longer be limited to fields of semiconductor and telecommunications—we’ll go into select new markets subject to certain factors we analyse as to whether it’s an attractive market to participate in, and whether there are high quality patents available for us. One of the fi rst markets we identified was the hybrid electric vehicle market.

Do you use your patents to create products or services?

Not the ones we buy, but we do create our own. Close to a third of our patents were created by MOSAID engineers, so there’s a signifi cant contribution from our own R&D. We spend millions of dollars each year on R&D, and our current focus is flash memory technology, primarily around the fl ash interface. We call it HyperLink NAND: ‘HLNAND’ is our trademark, and the primary application is optimising fl ash for use in data search.

“YOU HAVE TO ASSUME THAT UNFORTUNATELY IN A MINORITY OF CASES YOU’LL HAVE TO LITIGATE BECAUSE THE OTHER SIDE JUST WILL NOT TAKE YOU SERIOUSLY WITHOUT FILING A SUIT.”

We’ll develop that technology and then license it to other people. Our engineers have fi led 600 patents and applications in the last six years and it’s created a strong portfolio on its own, but we’ve also had silicon chips produced, based on our designs and built to our specifications, and now we’re out there seeking a joint development partner or a licensee of the technology itself.

Would it be fair to describe MOSAID as a non-practising entity?

Depending on your definition, that description might be accurate for many of our programmes— for example, we’re not practising anything currently within the cellphone space apart from some minor R&D that we’ve started, but I would say that we are a practising entity with respect to our inventions within the flash portfolio, because we’re actively developing the technology and building products.

How does the company decide which patents to back or acquire?

The department responsible for that, the business development group, is very much like the M&A branch of a big conglomerate—we do a lot of due diligence on every acquisition of patents, the same way that a company would do on a business or real estate asset purchase. It involves a lot of people internally and externally—consultants and law firms. On the technical and legal side we look at the market and build up a solid business case, but we are very discerning, and thus we do end up drilling a lot of dry wells.

Many patents pass the initial test of looking pretty solid, but as you peel back the layers you either decide this is something you want to pursue or, because of some technical or legal or market reason, you decide to pass. We pass on the vast majority of opportunities that land on our desk. I think it’s probably more than 95 or 96 percent that we pass on.

You recently acquired approximately 2,000 Nokia patents by purchasing a company called Core Wireless Licensing S.a.r.l.—what is the ownership arrangement for those patents?

Core Wireless Licensing is a 100 percent owned subsidiary of MOSAID; Nokia and Microsoft have a passive economic interest in the entity, but they have no control, no contributions to strategy or approval process of settlements, litigation or anything else—they’re passive economic recipients of benefi ts if we license the patents successfully.

I’m not able to discuss much about the origins of this arrangement, as the discussions were confi dential, but what I can say is we were approached to participate in a final review of a number of companies they’d selected as potential licensing partners. We were compared against several entities and were chosen.

Nokia, for example, has had a policy of divesting patents for many years prior to this deal. I believe they have a target total number of patents they’d like to hold, and their engineers are extremely innovative and creative and continue to generate new ideas every year, so to make room for the new fi lings in the portfolio they divest a certain number each year.

Core Wireless Licensing sued Apple recently over some of these patents. Was that always the intention?

It’s an unfortunate part of the business. We really do not like to litigate—we’d much rather negotiate a reasonable business settlement, but every time you start a licensing programme you have to assume that unfortunately in a minority of cases you’ll have to litigate because the other side just will not take you seriously without filing a suit.

We chose to sue Apple based on a number of factors—it’s the only company we’ve sued on this portfolio. We’re in discussions with a number of Apple’s competitors right now, and those discussions are progressing in a reasonable way, but Apple is a very litigious company.

Is the ideal outcome a licensing deal?

Absolutely.

Some people view non-practising entities (NPEs) as somehow morally suspect. Do you have a view on that?

I have a very strong view on that. Patents are property rights, and just as real estate is a property right of a tangible asset, intangible assets should have the same protection under the law. It doesn’t matter who’s holding the deed to a piece of land, they should be able to stop trespassers on that land. Th e real estate deed is a property right that gives the holder the right to exclude trespassers, and that’s essentially what a patent is.

“I THINK IT’S MAINLY THE LARGE INFRINGERS THAT HAVE SPENT A LOT OF MONEY ON LOBBYING AND MANIPULATING THE MEDIA TO SAY THAT [NPE’S ARE] A MAJOR PROBLEM ACROSS THE BOARD, WHEN REALLY THEIR COMPLAINT SHOULD BE FOCUSED NOT ON WHO IS ASSERTING A PARTICULAR PATENT AGAINST THEM, BUT MORE ON WHETHER IT IS A GOOD PATENT.”

I think it’s mainly the large infringers that have spent a lot of money on lobbying and manipulating the media to say that this is a major problem across the board, when really their complaint should be focused not on who is asserting a particular patent against them, but more on whether it is a good patent. Th ere are plenty of entities—both NPEs and operating companies—that assert poor quality patents and request unreasonable royalties for them. But when these large infringers focus the public dialogue to include NPEs that are asserting strong patents and requesting reasonable royalties, what is going on is that these large companies are simply looking for an argument that they should not have to pay for their infringements.

It’s amazing that it becomes even close to a moral issue for some people—the only time companies will have to pay damages is if they are found to be guilty of infringing someone else’s property, so they’re asking for public sympathies to go with the wrongdoer, and not with the rights holder.

MOSAID owns standards-essential patents. Is the strategy different for these, and what involvement do you have in standard setting?

We’ve been involved in relatively few standards bodies—some related to DRAM and some related to flash technology, where we’ve been members at various times throughout the last 25 years or so.

With respect to the standardsbased patents we acquire from other parties, for example in 2G, 3G and 4G cellular standards bodies, we’re fully aware of the encumbrances that came with the original ownerships of the patents and their commitments to license on a fair, reasonable and non-discriminatory (FRAND) basis, and we’re happy to license these patents on an FRAND basis.

Is it clear what FRAND means?

There’s always room for debate about FRAND. If you look at the royalty rates we’d be asking for standards-essential patents, they compare very favourably to what other patent holders are asking for standards-essential patents.

What is your view of the socalled smartphone wars? What is driving the outpouring of litigation?

When you look at the complexity of a device like a smartphone these days, the barriers to entry in that market are extremely low, and that should be just the opposite—you should think of someone having to start from scratch to get to the complexity of your average smartphone. It should be nearly impossible for a latecomer to come along and succeed. Instead, it’s very easy, and this is because everyone is borrowing technology from many different sources, and this is easy to do from a commercial standpoint.

Legally, it shouldn’t be that easy, and I think that’s what the existing players are saying: “You just showed up on the market and didn’t spend all those years on R&D, and you’re adding nothing to the marketplace apart from cool marketing that has caused you to win over consumers, and that’s not fair—I deserve fair returns on my IP investments.” I think that’s the main driver in this—newcomers are being viewed as unfairly participating and trampling the IP rights of the people who came before.

It is kind of amusing—some of early players like Nokia and Motorola that contributed many of the fundamental inventions have to suddenly watch Apple claim to be the major innovator in this space, when it didn’t invest a dollar in research on making a call over a cellular network until just a few years ago.

Do you think these battles will be resolved?

Yes. I think eventually all of the parties will reach a reasonable commercial settlement on these cases. Each side is just waiting for the point at which it has an advantage, or there’s some other motivating factor to settle. Eventually there will be massive cross-licensing among the players.

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Adrian Tapping at atapping@newtonmedia.co.uk