The Maturing Nature of e-Intellectual Property Legal Services

Licensing Internet IP has many elements, and each is related to allowing Internet firms that own IP to make money from it. Such licensing legal services began with documenting the ownership of the Internet IP, which facilitated licensing transactions by making it easier for potential licensees to conduct their due diligence.

Licensing

Once the ownership of the Internet IP was established, the next most requested service was preparing licensing agreements. Since Internet IP was novel, so were the licensing agreements. Because the Internet was new, the issue of exclusivity regularly created a need for legal services. In particular, Internet startup companies tended to develop something new, and hence potential customers who wanted to incorporate the novel item into their products usually asked for exclusivity.

As the Internet IP licensing matures, the novel issues have been resolved. Standard Internet IP licensing clauses and agreements have been adopted, such as the “look and feel” clause.

Prior to regular Internet IP licensing, Internet licensing agreements attempted to detail the subject of licenses involving computers in computer terms, because a computer is normally required to deliver the Internet licensed material. Thus, website license agreements were described in terms of what computer language was used, how many lines of code were necessary to transfer the licensed Internet IP, and so on.

The “look and feel” clause includes a term which states that the licensee will get Internet IP with the same look and feel as that which the licensor demonstrated at a particular time and place. Such a clause dramatically reduces the work necessary to prepare an Internet IP licensing agreement because a detailed, written description of both what the website will look like and how the website will function and perform is no longer necessary.

In addition, the regular use of paid-up licenses (when the licensee paid a one-time lump sum payment in lieu of future royalties) for Internet IP has resulted in standard clauses that address the event of the licensee's insolvency or filing for bankruptcy.

Enforcement

Today, enforcement legal services, including infringement litigation, appear to be on track to become the most demanded legal services associated with Internet IP. Requests for such services are fueled by the increasing number of Internet IP licenses and the nature of the Internet patents.

Furthermore, questions as to whether the United States Patent and Trademark Office has improvidently granted patents on Internet processes that appear, at first glance, to be obvious, has emboldened entities to test the validity of issued patents. Initially, courts applied the business processes test to determine whether Internet implementation resulted in patentability. See, State Street Bank v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998) (http://bit.ly/T7AYcW). Subsequently, in Bilski v. Kappos, 130 S. Ct. 3218 (2010) (http://1.usa.gov/UR8zgy), the U.S. Supreme Court agreed that there was no patentability exclusion for such processes. Most importantly, the court disagreed with the legal standard employed by the Federal Circuit in State Street, but upheld the absence of a patentability exclusion.

Additionally, there has been conspicuous growth in both the cost and number associated with Internet IP infringement. This is particularly true of method patents related to methods of doing business on the Internet, which has resulted in an increased need for Internet IP enforcement legal services.

A 2001 survey by the American IP Law Association reported that the median cost per party through the end of discovery in Internet patent cases was $1.5 million. (See, American Intellectual Property Law Association, Report of the Economic Survey 2001.) A 2009 survey by the same association reported that the median cost per party through the end of discovery in Internet patent cases was $3 million. (See, American Intellectual Property Law Association, Report of the Economic Survey 2009, http://bit.ly/TUbctj.)

A comparison of the results of those two surveys also shows a 59% growth in the number of patent infringement litigations with stakes exceeding $25 million. While the survey did not break out Internet patent infringement cases, due to the growth of the Internet industry, it may well be assumed that this growth is related to the increasing value of Internet IP. Recently, it was found that Internet patents were about eight times more likely than non-Internet patents to be infringed. See, Allison, et. al., “Patent Litigation and the Internet,” 2012 Stan. Tech. L. Rev. 3 (http://stanford.io/SZAqFy).

Finally, economic factors may have resulted in an increased need for enforcement legal services for Internet IP. In particular, as Internet businesses failed, investors have tried to monetize their IP collateral by initiating legal actions against their successful competitors for allegedly infringing their IP. Alternatively, investors in failed Internet businesses regularly sell their IP collateral to others who initiate litigation against those who may have infringed the acquired intellectual property.

As the Internet matures, so does the nature of intellectual property legal services required by Internet users. Initially, IP legal services were primarily in demand to facilitate Internet startups. As Internet commerce matured, the demand for legal services related to licensing Internet IP overshadowed requests for legal services for startups. Most recently, requests for enforcement of Internet IP rights appears to be overtaking calls for legal services related to licensing Internet IP.

Fifteen years ago, services which resulted in either a patent issuance or a trademark or copyright registration was the leading form of Internet IP legal work. Such IP prosecution facilitated funding of Internet startups by allowing investors to receive IP collateral in exchange for cash.

Five years ago, Internet IP prosecution legal work was eclipsed by legal services which resulted in either a license for, or the use of, Internet-related patents, trademarks and copyrights. Such Internet IP licensing made possible the monetization of Internet IP by allowing Internet firms that owned IP to charge others to use them in commerce.

Licensing Internet IP has many elements, and each is related to allowing Internet firms that own IP to make money from it. Such licensing legal services began with documenting the ownership of the Internet IP, which facilitated licensing transactions by making it easier for potential licensees to conduct their due diligence.

Licensing

Once the ownership of the Internet IP was established, the next most requested service was preparing licensing agreements. Since Internet IP was novel, so were the licensing agreements. Because the Internet was new, the issue of exclusivity regularly created a need for legal services. In particular, Internet startup companies tended to develop something new, and hence potential customers who wanted to incorporate the novel item into their products usually asked for exclusivity.

As the Internet IP licensing matures, the novel issues have been resolved. Standard Internet IP licensing clauses and agreements have been adopted, such as the “look and feel” clause.

Prior to regular Internet IP licensing, Internet licensing agreements attempted to detail the subject of licenses involving computers in computer terms, because a computer is normally required to deliver the Internet licensed material. Thus, website license agreements were described in terms of what computer language was used, how many lines of code were necessary to transfer the licensed Internet IP, and so on.

The “look and feel” clause includes a term which states that the licensee will get Internet IP with the same look and feel as that which the licensor demonstrated at a particular time and place. Such a clause dramatically reduces the work necessary to prepare an Internet IP licensing agreement because a detailed, written description of both what the website will look like and how the website will function and perform is no longer necessary.

In addition, the regular use of paid-up licenses (when the licensee paid a one-time lump sum payment in lieu of future royalties) for Internet IP has resulted in standard clauses that address the event of the licensee's insolvency or filing for bankruptcy.

Enforcement

Today, enforcement legal services, including infringement litigation, appear to be on track to become the most demanded legal services associated with Internet IP. Requests for such services are fueled by the increasing number of Internet IP licenses and the nature of the Internet patents.

Furthermore, questions as to whether the United States Patent and Trademark Office has improvidently granted patents on Internet processes that appear, at first glance, to be obvious, has emboldened entities to test the validity of issued patents. Initially, courts applied the business processes test to determine whether Internet implementation resulted in patentability. See , State Street Bank v. Signature Financial Group , 149 F.3d 1368 (Fed. Cir. 1998) (http://bit.ly/T7AYcW). Subsequently, in Bilski v. Kappos , 130 S. Ct. 3218 (2010) ( http://1.usa.gov/UR8zgy ), the U.S. Supreme Court agreed that there was no patentability exclusion for such processes. Most importantly, the court disagreed with the legal standard employed by the Federal Circuit in State Street, but upheld the absence of a patentability exclusion.

Additionally, there has been conspicuous growth in both the cost and number associated with Internet IP infringement. This is particularly true of method patents related to methods of doing business on the Internet, which has resulted in an increased need for Internet IP enforcement legal services.

A 2001 survey by the American IP Law Association reported that the median cost per party through the end of discovery in Internet patent cases was $1.5 million. (See, American Intellectual Property Law Association, Report of the Economic Survey 2001.) A 2009 survey by the same association reported that the median cost per party through the end of discovery in Internet patent cases was $3 million. (See, American Intellectual Property Law Association, Report of the Economic Survey 2009, http://bit.ly/TUbctj.)

A comparison of the results of those two surveys also shows a 59% growth in the number of patent infringement litigations with stakes exceeding $25 million. While the survey did not break out Internet patent infringement cases, due to the growth of the Internet industry, it may well be assumed that this growth is related to the increasing value of Internet IP. Recently, it was found that Internet patents were about eight times more likely than non-Internet patents to be infringed. See, Allison, et. al., “Patent Litigation and the Internet,” 2012 Stan. Tech. L. Rev. 3 (http://stanford.io/SZAqFy).

Finally, economic factors may have resulted in an increased need for enforcement legal services for Internet IP. In particular, as Internet businesses failed, investors have tried to monetize their IP collateral by initiating legal actions against their successful competitors for allegedly infringing their IP. Alternatively, investors in failed Internet businesses regularly sell their IP collateral to others who initiate litigation against those who may have infringed the acquired intellectual property.