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INTELLECTUAL PROPERTY/PATENT LAW

KEEPING IDEAS AND TECHNOLOGIES SECURE

Patents and other forms of intellectual property (IP) are among the most valuable assets owned by both large and small organizations. IP owners are facing great challenges and opportunities—now and in the future. Two local IP/patent lawyers and one IP/patent valuation expert shared their industry insights with Crain’s Content Studio.

How is your organization involved in the intellectual property space?

Carey J. Prill: McAndrews, Held & Malloy is on the front lines of IP and technology law—from comprehensive patent, trademark, copyright and design portfolios to IP litigation successes. We’re relied on by industry-leading companies, as well as businesses and innovators of all sizes and in virtually every technical field. Clients tell us they appreciate our collaborative, teambased approach, as well as the handson, senior attorney attention we provide without requiring budgetbreaking large law firm legal fees. In addition, our IP-only focus delivers a competitive advantage to clients in solving their IP challenges.

Scott Weingust: Stout provides services to companies, law firms, investment firms, universities and other nonprofits regarding IP disputes, valuation, royalty compliance, advisory and transactions. Our experts perform damages calculations and provide expert testimony in dispute matters.

We also value IP for various purposes including transactions, tax planning and compliance, corporate

agreements involving a broad scope of technologies in varied industries.

How have companies’ IP priorities changed over the last year or so?

Prill: We’ve seen an increase in companies not only wanting to enforce the IP that they already have, but also creating new technologies and filing patent applications to protect those new technologies.

Over the last year, many companies have also prioritized putting an IP program in place for the entire company so that all employees have a better understanding of IP. Many of our new clients are discovering the need to implement IP programs in a more careful and organized manner.

Harris: Companies are being strategic about the IP they acquire and related enforcement strategies.

While legal outcomes are always important, more companies are concerned about the economic and commercial returns associated with their intellectual property strategies and enforcement activities.

MARCUS HARRIS

CAREY J. PRILL

SCOTT WEINGUST

Partner Taft Law mharris@taftlaw.com 312-840-4320

Partner McAndrews, Held & Malloy cprill@mcandrews-ip.com 312-775-8037

Managing Director Stout sweingust@stout.com 312-752-3388

costly and lengthy to be practical, especially for small businesses and independent inventors. While there’s some truth to that, having a patent very much gives you a seat at the table. Your IP strategy and patents in particular create value and give investors assurance that your idea is novel and provides a competitive edge. Patents can be critical to raising capital.

Moreover, being able to license patents for innovative and complex technologies you’ve created can be critical to successfully exploiting them and meeting business objectives. Patents continue to have value.

Weingust: On average, patents are worth less today than they were 10 years ago. Probably the biggest

contributor to the decrease is the American Invents Act, which created a more robust system by which granted patents could be challenged by third parties. Extensive use of this system has led to the determination that thousands of previously granted patent claims are no longer valid. From a technical valuation perspective, since the AIA passed, granted patents are more likely to

Weingust: Since the Biden Administration came into office, we’ve seen a higher priority put on

“COMPANIES ARE BEING STRATEGIC ABOUT THE IP THEY ACQUIRE AND RELATED ENFORCEMENT STRATEGIES.” — MARCUS HARRIS, TAFT LAW strategic decision-making, capital raising, financial reporting and bankruptcy. We provide transaction services to clients seeking to sell, buy or license IP and we help companies analyze IP portfolios for effective IP management. Finally, our professionals perform royalty audits ensuring compliance with existing license agreements.

Marcus Harris: Taft’s IP team consists of more than 80 attorneys focused on providing legal and business strategies to support our clients’ goals. This includes identifying, protecting and enforcing our clients’ IP rights, giving them the freedom to operate in the marketplace. We have extensive experience litigating suits involving a wide range of technologies. We also negotiate development agreements and technology transfer and license

the execution of various types of IP transactions in anticipation of potential tax increases. In many instances, certain IP transactions create more value for companies when executed in a lower tax environment compared to those executed under a higher-tax regime.

Are patents, on average, worth more or less today than 10 years ago?

Harris: With the continuing integration of technology in every aspect of our lives, patents continue to have value. While there are defensive and offensive patent strategies to deter others from infringing, you must be willing to enforce your patent. Some would argue that the current U.S. patent system makes the process of defending intellectual property too

Lawyers with one mission: to advance yours.

In today’s competitive landscape, your intellectual property is a significant asset.

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INTELLECTUAL PROPERTY/PATENT LAW

KEEPING IDEAS AND TECHNOLOGIES SECURE be invalidated, creating additional risk and uncertainty, and, as a result, lower values.

Prill: The value of a patent is very specific to the particular technology covered by the patent claims and the market in which it exists. Today, the most valuable patents typically arise in spaces where unmet needs of customers are uncovered. We help clients discover this space by using tech-based tools and analysis to map product innovation across an industry sector, analyzing whether their competitors are in the space and identifying opportunities to file patents. We also assist them in building a wall of IP to deter other companies from entering critical technology areas. This is a great opportunity for companies to obtain valuable patents, and increases the value of those they already hold.

What’s driving the increased interest in IP? Weingust: In today’s knowledge economy, IP assets are typically the most valuable assets that companies own. Studies have shown that the value of intangible assets, including IP, currently represents approximately 90% of the market value of the S&P 500, up from 32% in 1985. Further, IP assets are typically the source of competitive

advantage for industry-leading companies and help produce premium profits that translate to increased shareholder value. For example, patented inventions and well-known trademarks often allow companies to charge higher prices for their products compared to competitors that can’t provide the same unique, patented features or whose brands are not as well-known and respected.

Prill: Protecting IP is more important now than ever. Since the COVID-19 pandemic first began, this interest has been magnified with a new generation of unprecedented investments in breakthrough technical solutions, like diagnostic tests, drugs and vaccines. We’ve been busier than ever, as clients repeatedly turn to us to aggressively develop protection for their technologies to secure value and market advantage, while also maintaining their hard-won competitive advantages. In short, interest in IP is high because it delivers concrete value as a property right and transforms ideas into valuable assets that drive progress, company growth and competitiveness.

Harris: The virtual explosion of technology in our daily lives drives interest in IP. Entrepreneurs

continue to see the value in IP and the value it can create.

What’s the number one IP question or concern you’re hearing from clients?

Harris: Clients want to know how to reasonably protect their IP portfolios from infringement while at the same time maximize the value of their IP portfolios. We do this by initiating protection programs and litigation strategies, as well as licensing schemes.

Weingust: I regularly speak with entrepreneurs who’ve developed a unique invention that they believe will differentiate their business and drive their company’s future success.

Prill: Our clients are wondering how they can prepare and protect their IP rights and still stay on budget. To help them with this, we’re always “looking around corners” to identify and assess opportunities and threats. Our senior attorneys and team then work closely with

Prill: Despite the pandemic, we’ve seen record damages and increased case filings. However, it’s made litigation difficult to pursue in some respects—for example, having to conduct remote court hearings, depositions and trials, and with courts granting numerous COVIDrelated case extensions. Yet, patent case filings in federal district courts increased in 2020 for the first time since 2015, and a record $4.7 billion in damages was awarded in 52 patent cases in 2020. Patent litigation and damages appear to be holding strong in 2021 as well. How damages and litigation trends play out as the pandemic continues is yet to be seen; but if the past is any indicator, we expect these trends to continue.

“DESPITE THE PANDEMIC, WE’VE SEEN RECORD DAMAGES AND INCREASED CASE FILINGS.” — CAREY J. PRILL, MCANDREWS, HELD & MALLOY To successfully commercialize the new technology, however, they need to raise capital. Many of these businesses have generated little or no revenue and as a result have trouble attracting investment—whether in the form of equity or debt. In particular, start-up companies frequently prefer

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to use the patents that relate to their primary invention as collateral for debt financing. Unfortunately, traditional commercial lenders are typically uncomfortable accepting IP as the primary—or sole—form of collateral for loans they issue, as they don’t fully understand how to think about the value of the asset class. This lack of access to capital appears to be preventing a lot of great technology from reaching the market.

10/28/2021 2:16:23 AM

clients to create patent development and enforcement programs that strategically protect their IP.

Is the increase in litigation finance good or bad for the patent litigation space?

How has the COVID-19 pandemic affected patent damages, valuation and litigation?

Harris: While financing can help patent holders pay for legal fees and expenses, it gives plaintiffs the ability to pursue cases that otherwise would not have been brought and the staying power to continue to litigate them. From that perspective, one could argue that litigation financing has had a negative impact and resulted in an increase in the number of patent cases filed. However, inventors enforcing their rights have an uphill battle and to some extent, litigation funding has leveled the playing field.

Weingust: From a valuation perspective, it’s often been more challenging to implement income approaches that are commonly relied upon to value IP. Forecasting future economic benefits has become more challenging as both the short- and long-term disruptions to many businesses are harder to predict.

Some businesses that have suffered due to the pandemic may never fully recover, while, for those that do recover, the timing of such a recovery is uncertain.

Harris: COVID-19 has affected how experts determine royalty damages, especially in industries that have been significantly impacted by the pandemic. In patent infringement cases, a plaintiff is entitled to damages adequate to compensate for infringement, but in no event less than a reasonable royalty. To determine the royalty upon which parties would have agreed had they negotiated an agreement prior to infringement courts often consider a hypothetical license negotiation between a licensor and licensee. In considering the effect of the pandemic, the structure of that license becomes important. For example, a running royalty structure would most likely capture the pandemic’s impact on sales, where an upfront payment may not fully capture the pandemic’s economic impact.

Prill: Litigation financing can provide clients opportunities to pursue matters they otherwise would not. Alternatives to traditional billing can also better allocate incentives and returns. Contingency fee agreements and third-party litigation funding provide a portion of any financial recovery from the lawsuit to the risk takers. These funding arrangements can be great solutions for clients looking to minimize business exposure risk.

Weingust: Without access to litigation funding, small companies, individual inventors and nonprofits may be precluded from bringing a patent suit against an infringer solely due to the outsized expense. The increased availability of litigation funding helps address this problem and levels the playing field between organizations with deep pockets and those that lack the same resources.

What should companies look for when selecting an IP partner?

Harris: Companies should look for a strategic partner that prioritizes their business goals. Having an IP partner that over-lawyers a deal or engages in aggressive litigation tactics with little understanding of the business objectives the client is trying to achieve only increases costs and risks. A practical well-reasoned business-focused approach is something that clients appreciate.

Weingust: A service provider that provides a full spectrum of IP services—for example, expert testimony and damages calculations, valuation, transaction advisory and royalty audits—typically makes a good partner. That way all of the IP owner’s needs can be met by a single firm that’s able to develop a deep understanding of the IP owner’s underlying business and go-forward strategy. Also, an IP services firm with a larger group of IP-focused practitioners tends to have a more extensive set of experiences to draw from in helping clients solve their IP-related challenges.

Prill: A company should look for an IP law firm that can commit to assigning senior attorneys with experience in both litigation and procurement. The attorneys should be available to actually work on the matter—as opposed to predominantly assigning inexperienced associates as large firms often do—and they should commit to learning and understanding the company’s business. It’s important to find patent counsel with a technical background and experience that matches the client’s product. IP counsel should provide innovative solutions tailored to clients’ strategies, priorities and needs. An IP-only law firm is often a good choice.

What’s the biggest challenge facing the space?

Prill: Currently it’s the war for talent.

In the same way that it’s difficult for companies to find great scientists and engineers during this innovation boom, companies are telling us that it’s difficult to find IP counsel who understand their technology as well

components in business transactions.

The collection, manipulation, storage and distribution of data have become major issues in negotiations involving not only technology transactions, but also general business transactions. Statutes and regulations governing the use, collection and distribution of data often create burdensome restrictions and potential liabilities that need to be assessed and accounted for in negotiations.

Weingust: Historically, the United States has been considered to have the strongest IP system in the world. This has led to companies from around the world often pursuing U.S. IP rights first, particularly patent rights, or at least pursuing U.S. IP protections as a matter of course at some point as part of its IP strategy. Similarly, the U.S. court system has often been the most common jurisdiction for various IP litigation matters, particularly related to patent infringement. These practices are gradually changing as a result of the devaluing of U.S. patents caused by government legislation, certain case law coming out of the courts and the high cost of litigation.

The trend is worrisome for those who rely on IP and want to successfully do business in the United States; legislators and courts will likely need to implement changes within our IP system to change these trends.

What’s the most exciting IP trend or development that you’re seeing?

Weingust: Recently there’s been an increased focus on what’s commonly referred to as name, image and likeness rights. The recent rise of social media platforms has allowed for the more effective monetization of NIL rights as celebrities can more easily engage with their fans.

The ease of use of NIL rights on social media platforms also has led to more unauthorized use of celebrities’ NIL rights, which appears has led to an increase in litigation. Further, the National Collegiate Athletic Association recently passed new rules that allow college student athletes to monetize their NIL rights without fear of losing eligibility to compete. Finally, certain recent high-profile disputes related to Michael Jackson’s and Whitney Houston’s NIL rights have

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ABOUT THE PANELISTS

MARCUS HARRIS is a partner in the Chicago office of Taft Law, a full-service law firm with 11 offices across the United States. A global technology attorney, he established and leads one of the country’s preeminent law practices devoted to drafting and negotiating enterprise software-related licenses, implementation and SaaS (software as a service) agreements, as well as litigating failed software implementations in courts and before arbitration panels across the country. He also has experience dealing with cybersecurity issues.

CAREY J. PRILL is a partner at McAndrews, Held & Malloy, a full-service intellectual property and technology law firm. As a registered patent attorney, she counsels her clients on expanding their IP portfolios and delivers business-critical strategic guidance by providing freedom to operate and patent infringement analyses, and conducting IP due diligence in mergers and acquisitions. She also helps clients enforce and protect their IP rights through a variety of strategies, including litigation.

SCOTT WEINGUST is a managing director and IP valuation practice leader at Stout, a global investment bank and advisory firm specializing in corporate finance, valuation, financial disputes and investigations. He has more than 25 years of experience consulting with corporations, law firms, universities, other nonprofits and investment firms, primarily in the areas of IP valuation, damages, monetization and management. He currently is an adjunct professor at DePaul University’s College of Law where he teaches a course on IP valuation.

to protect their IP internationally.

Additionally, IP often accounts for a significant portion of a company’s assets and is a substantial element in our national economy. Due to recent world events, people are devoting more attention to science, health and innovative technologies, and there’s an increased recognition of the critical nature that IP plays for all types of companies. We’re also seeing

companies becoming more strategic about their IP programs, whether they’re asking us to assist them with utility or design patents, copyrights or trademarks. They understand the value and they’re devoting more resources to ensure that they have their IP house in order.

Harris: The continued impact of the COVID-19 pandemic on intellectual

property owners provides new opportunities and demands creative strategies. Due in part to the pandemic, business stakeholders are more concerned than ever with the commercial returns of IP enforcement instead of the legal outcomes. IP lawyers who understand this are well-positioned to serve their clients.

INTELLECTUAL PROPERTY SERVICES

“RECENTLY THERE’S BEEN AN INCREASED FOCUS ON WHAT’S COMMONLY REFERRED TO AS NAME, IMAGE AND LIKENESS RIGHTS.” — SCOTT WEINGUST, STOUT

as their own scientists and engineers.

A great IP law firm should have patent attorneys who are top-notch scientists and engineers, registered to practice before the Patent and Trademark Office, and who have prior work experience in technology and IP-focused industries.

Harris: Rights in data and information continue to be huge

highlighted how NIL rights are to be properly valued for trust and estate tax purposes.

Prill: IP as a whole in this economy is viewed as the great differentiator, the great profit maker, the great winner. Due to the technologies at our disposal, companies are now almost instantly global and must think beyond their borders

DECADES OF EXPERTISE AT THE INTERSECTION OF IP + FINANCE. Stout has a fully integrated team of valuation professionals, damages experts, compliance professionals, investment bankers, and technical experts with the ability to execute a full spectrum of IP services.

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