Presented: AIPLA Japan Committee April 14-17, 2008

1. PATENT TROLLS:Are Patent Trolls Still Viable In View of Recent Case Law & Proposed Patent Reform Legislation? Presented: AIPLA Japan Committee April 14-17, 2008

2. Table of Content • Introduction • What is a “Troll”? • The Origin of “Patent Troll” • Types of Patent Trolls 1. True Blue Trolls 2. Thinking Person’s Trolls 3. Incidental Trolls 4. Competitors • Mechanics of Patent Trolls • Industry Perspectives 1. IT Industry 2. Biotech/Pharmaceutical • Recent Supreme Court Case Law • Proposed Patent Reform Act of 2005/2006/2007/2008 • Future Viability • Effective Responses to Patent Trolls

3. What is a “Troll” Historically, a troll was a devious creature from Scandinavia folklore that is humanoid in shape but monstrous in appearance, and lived underground in caves or under bridges often pestering travelers and merchants for safe passage.

4. What is a “Troll” Trolls were also noted for thieving, abducting, and consuming humans.

5. What is a “Troll” A popular tale involves a troll guarding a bridge, who demanded payment before a traveler could cross.

6. The Origin of “Patent Trolls” In 2001, Tech Search LLC bought a patent and sued Intel for infringement. In response, Intel’s Assistant General Counsel, Peter Detkin, was outraged and publicly called TechSearch an “extortionist”. After being sued for defamation, Detkin coined the term “Patent Troll” to reduce the risk of such lawsuits. According to Detkin, a Patent Troll is a derogatory term used to describe a unique type of patent enforcer - an entity that makes money from a patent solely through litigation or licensing and not from manufacturing or developing the patented invention. Ironically, Detkin later became the Managing Director of Intellectual Ventures – an invention company noted for its acquisition of patents.

7. The Origin of “Patent Trolls” Pay Up

8. The Origin of “Patent Trolls” Patent Troll is also susceptible to multiple definitions, some of which are more inflammatory than others, including, for example: • Word Spy: • “A company that purchases a patent, often from a bankrupt firm, then sues another company by claiming one of its products infringes on the purchased patent.” • Yahoo!, Inc: • An entity “whose primary purpose is to prey on innovators who actually produce societally valuable products – abuses the patent system by obtaining patents for the purpose of coercing settlements from such innovators.” • Howrey LLP (Litigation Firm): • An individual or company “whose sole purpose is acquiring patents for the purpose of forcing legitimate companies to take licenses or otherwise pay money – usually through threat of litigation.”

9. The Origin of “Patent Troll” Common theme: • “Patent Troll” refers to a Non-Practicing Entity (NPE) who licenses or brings suit using its patent without any intention to practice that particular patent. • NPEs encompass a broad spectrum of patent holders, including: • Large manufacturers with unused patents in their patent portfolio • Holding companies • Most universities • Many individual inventors (frequently without expertise or money to develop or manufacture their inventions) • However, licensing without practicing an invention is a legitimate right that should be protected. So, why demonizes “Patent Troll”? • Patent Terrorist - Abuse patent systems • Make unreasonable demands for court awarded cash settlements only, • Refuse to negotiate a settlement in a customary businesslike manner, and/or use the threat of an injunction to extort for more momey.

10. Most Infamous Patent Trolls:eBay, Inc. v. MercExchange, LLC., Supreme Court 2006 • MercExchange, LLC, is an invention holding company founded by a former patent lawyer, Thomas G. Woolston, that has several business method patents, including U.S. Patent No. 5,845,265 for an electronic market designed to facilitate the sale of goods between individuals on the Internet with a fixed-price online purchasing feature. • eBay and other Internet-based auction sites, operate websites that allow customers to purchase items listed on the websites for a fixed, listed price.

11. Most Infamous Patent Trolls:eBay, Inc. v. MercExchange, LLC., Supreme Court 2006 • On October 2, 2001, MercExchange filed patent infringement lawsuit against eBay in the District Court of Eastern District of Virginia. • On May 27, 2003, a jury found the patents valid and infringed, awarding damages of $36 millions. However, judge denied motion of permanent injunction in view of “a growing concern over the issuance of business-method patents … and the presumption of validity for such business-method patents.” • On appeal, the Federal Circuit (CAFC) reversed district court’s denial of a permanent injunction, noting that the “general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances (such as public health)” • On May 15, 2006, the Supreme Court unanimously overruled the Federal Circuit’s 20 years of practice of granting near-automatic injunctions in patent infringement cases and held that the traditional “four-factor test” for determining whether to issue a permanent injunction applies equally in patent cases: • Irreparable harm; • Inadequate remedies at law; • Balance of hardships; and • Public interest.

12. Most Infamous Patent Trolls:NTP, Inc. v. RIM, Ltd., Federal Circuit (2005) • NTP is another invention holding company, co-founded by Thomas Campana, Jr. and his patent lawyer, Don Stout, that has a patent portfolio (over 30 US Patents) relating to the earlier wireless communication systems in early 1990s (pager systems) and wireless communication systems for integrating existing electronic mail systems (“wireline” systems) with radio frequency (“RF”) communication networks, to enable a mobile user to receive emails over a wireless network. • Research in Motion (RIM) is a leading Canadian wireless device company, maker of Blackberry devices which allow customers to receive emails over a wireless network. • On November 13, 2001, NTP filed patent infringement lawsuit against RIM at the District Court of Eastern District of Virginia. • On November 21, 2002, the jury found NTP patents valid and infringed, awarding damages of $54 million. The judge also granted motion for a permanent injunction. • On August 2, 2005, the Federal Circuit (CAFC) affirmed-in-part, reversed-in-part, vacated-in-part and remand for further proceeding. • On March 2006, 3 months before the Supreme Court ruled on eBay, NTP and RIM settled the Blackberry device’s infringement on NTP’s patents for $612 million.

13. Types of Patent Trolls A well-known Silicon Valley patent litigator, Doug Lumish, has suggested there are four types of patent trolls: • True Blue Trolls: These are non-manufacturing holding companies which acquire patents from inventors. • Thinking Person’s Trolls: These folks develop inventions for the purpose of licensing and enforcement, not to manufacture and sell products. • Incidental Trolls: These are failed manufacturing companies left with patent assets ready to be exploited, or patents left over from discontinued product lines. • Competitor Trolls: Often a company will acquire patents to target a competitor with lawsuit.

14. Types of Patent Trolls • True Blue Trolls: Non-manufacturing holding companies which acquire patents from inventors. For example: • Intellectual Ventures, founded by Peter Detkin of Intel fame, raised $350 million with the sole purpose of purchasing a patent portfolio and pursuing licensing efforts. It is rumored to have amassed at least 1,000 patents to date. • Acacia Technologies has acquired over 91 patent portfolios, via a number of subsidiaries, covering a broad range of technologies. Recently, Acacia: • Filed an infringement suit against a range of online pornography companies to enforce a streaming video patent, N.D. Ca., No. C 05-01114 JW; • Settled an infringement suit against AOL LLC over technology that displays background images in instant messages and emails. E.D. Texas (March 23, 2008); and • Settled an infringement suit against 5 different software companies over rule-based monitoring technology used in computer systems (March 26, 2007). • Zodiac Conglomerate, formed of several small companies producing no products, has sued 357 different companies using its patent portfolio.

15. Types of Patent Trolls • Thinking Person’s Trolls: Companies, laboratories or other research groups that develop inventions with the intention of licensing and enforcement, not manufacturing. For example: • Most research universities have prominent “technology transfer” offices to “transfer” patented technologies to an outside manufacturing group using licenses of university-developed patents. • In 2000, these universities collected $1.1 billion in royalties from the 13,000 U.S. patents that they hold. • Independent inventors: • Thomas Edison is credited for over 1000 inventions. • Jerome Lemelson is credited for over 600 patents, who successfully licensed and enforced many of them. He was criticized for his use of submarine patents in the early 1990s – a practice in which a patent application is filed and then delayed during prosecution until after the relevant industry had developed, at which point the patent is allowed to be issued for purposes of suing the infringing industry. • Ronald A. Katz is credited for over 30 patents related to interactive voice technologies, and call processing system for automated customer service, which has already earned Mr. Katz over $1 billion.

16. Types of Patent Trolls • Incidental Trolls: These are typically failed manufacturing companies who developed patents initially, but business failed, or have patents left over from discontinued product lines. For example: • NTP v. Blackberry (2005): Patents were held by NTP after the inventor’s original business failed to take off. • Eastman Kodak Company v. Sun Microsystem Inc., (2004): Kodak, not itself in the software industry, inherited Wang Laboratories’ patents on Java software, and ultimately sued Sun Microsystems on February 11, 2002, which settled for $92 million on October 9, 2004.

17. Types of Patent Trolls • Competitor Trolls: These are companies that will acquire patents to bring suit against competitors. For example: • Broadcom v. Qualcom No. 337-TA-543 (ITC 2007): Broadcom recently acquired a patent portfolio to target rival Qualcomm in an ITC §337 action, asserting that Qualcomm's mobile-phone chip imports infringed Broadcom’s Patent No. 6,374,311; Patent No. 6,714,983, and others.

18. Mechanics of Patent Trolls Patent Trolls operate much like any other company that is aggressively exploiting a patent portfolio: • Monitor the market for possible infringing technologies; • Review published patent applications for signs that another company is developing infringing technology; and • Target vulnerable company that has much to lose, or little money to defend itself, hoping that an early victory or settlement will establish a precedent to encourage other (or bigger) companies to acquiesce to licenses. Advantages: • Uncertainty in patent judicial system. • Uncertainty and unpredictability of the outcome of jury trials. • High cost of legal defense.

19. Reasons for “Patent Trolling” Success In the US: • Immune from patent countersuit: • No products to infringe defendant’s portfolio; • No employees (lost jobs); and • No customers => no pressure from customers. • Possibilities exist for reducing litigation costs: • Can obtain “free” contingency fee attorneys; • Can draw on hedge funds and institutional investors to finance litigation; • Pooling patents in a firm purchasing patents “in bulk” increases capital available to pursue promising enforcement actions. • Easy nationwide venue against large corporations, encouraging forum shopping and creating easy entry to pro-plaintiff jurisdictions, such as ED TX. • Treble damages- Injunction threat (pre-eBay decision) . • Abuse of continuation practices. • Liberal approach to patentability (35 USC 101) • High reversal rate at the Federal Circuit.

20. Industry Perspectives:Patent Trolls are more an issue in the IT industry than other industries, including Biotech/Pharmaceutical industry • IT industry: • Easier to enter into business - Low cost of R/D. • Single product often has 100’s of patented or patentable features.  Thus, even if infringement was for only one element of the product, Patent Trolls often use the threat of a permanent injunction to shut down an entire product. • Cross licensing is common because it is difficult and expensive to evaluate the infringement of all related patents. However, Patent Trolls do not manufacture products and, therefore, do not respond to cross licensing offers. • Biotech/Pharmaceutical Industry: • Difficult to enter into business - High cost of R/D • Single patent can be worth billions of USD with 10-15 years of R/D • Rely heavily on patents granted for a very few, highly important, discoveries. So, these companies do not license the patents but rather, use them more offensively.  Therefore, if their patents are infringed, they want an injunction. • License only for reasons, such as decide not to develop further in-house, market changes, priority changes, additional clinical studies, cost, resource constraints   • Careful with prior art searches because of enormous cost of R/D, and prior art searches may be easier to conduct

21. Recent Supreme Court Case LawNew Era for Patent Trolls: eBay (2006) eBay v. MercExchange (2006) – imposed a tighter standard on injunctions. Prior to eBay, injunctions were nearly automatic once infringement is found. Post eBay, the traditional four-factor injunction test must be followed: • Irreparable injury; • Monetary damages inadequate; • Balance of hardships; and • Public interest. Supreme Court even issued a rebuke to the so-called “Patent Trolls” companies that seek licensing revenues and do not use their patents, noting that in many instances … these companies use injunctions only as “a bargaining tool.” Where the patented invention is only a small component of a product, and the injunction threat is used for undue leverage, then “an injunction may not serve the public interest.”

22. Recent Supreme Court Case LawNew Era for Patent Trolls: eBay (2006) Post – eBay: Patent Holders who are competing with infringers will still get a permanent injunction; those who are not competing, such as Patent Trolls, will not get a permanent injunction. Why: • No irreparable harm: no direct competition and/or no product sales even if there are licensing activities. • Permanent/Preliminary Injunctions Granted (2006): • Black & Decker v. Robert Bosch Tool Corp. (ND Ill) • Rosco v. Mirror Lite Co (E.D.N.Y) • Smith & Nephew, Inc., v. Synthes (W.D. Tenn) • 3M v. Avery Dennison (D. Minn) • Tivo Inc., v. Echostar Communications Corp., (E.D. Tex) • Telequip Corp., v. The Change Exchange et al., (N.D.N.Y) • Wald v. Mudhopper Oilfield Servs, Inc., (W.D. Okla) • Permanent Injunctions Denied (2006): • Voda v. Cordis Corp., (W.D. Okla) • Paice LLC v. Toyota Motor Corp. (E.D. Tex) • Z4 Techs., Inc., v. Microsoft Corp. (E.D. Tex) • Finisar Corp., DirecTV Group, Inc. (E.D. Tex)

23. Recent Supreme Court Case LawNew Hurdle for Patentability: KSR v. Teleflex (2007) KSR v. Teleflex (2007) – lowered the standard for proving patent invalidity based on obviousness. Prior to KSR, patent can only be invalidated when there are some “teaching, suggestion and motivation” (known as TSM test) that would have lead a person of ordinary skill in the art to combine the relevant prior art teachings in the manner claimed. In KSR, the Supreme Court rejected rigid application of “teaching, suggestion and motivation” (TSM test) for §103 obviousness and expounded on several aspects of the obvious inquiry: • Flexibility: The obviousness inquiry is an “expansive and flexible approach”; • Ordinary Creativity: A person of ordinary skill is also a person of ordinary creativity, not an automaton, “who will not limit herself to art with the same problem, nor can she be confined to the problem the patentee was trying to solve; • Obvious to Try: Where there are “a finite number of identified, predictable solutions” or design need/market pressure; and • Predictability: The patent must be more than “the predictable use of prior art elements according to their established functions”.

24. Recent Supreme Court Case LawNew Hurdle for Patentability: KSR v. Teleflex (2007) Post – KSR: Easier for accused infringers to invalidate asserted patents: • Find a strong design or market demand as a reason to combine elements; • Establish a higher level of ordinary skill in the art, thereby creating a higher likelihood of a reason to combine elements; • Cast suspicion on patents combining solely old elements – predictable results; and • Argue against presumption of validity because patent prosecuted under rigid TSM test.

25. Recent Supreme Court Case LawLetting Accused Infringers Strike First in a Favorable Forum: MedImmune, Inc., v. Genetech (2007) MedImmune, Inc. v. Genentech (2007) – Lowered barrier for licensee to seek Declaratory Judgment. Declaratory Judgment Act, 28 USC § 2201(a) is often used to control litigation and timing. For example: • Company A threatens Company B with infringement. • Company B wants to resolve in local District Court and immediately. • Why? Tactical Advantage: Company A will be in unfamiliar court and may not be ready to bring suit. Prior to MedImmune, such Declaratory Judgments were difficult to obtain in patent cases without overt threat. • Gen-Probe Inc. v. Vysis, Inc., (Fed. Cir. 2004), the Federal Circuit held that the Declaratory Judgment Act, 28 USC § 2201(a) only allows parties to file declaratory judgments consistent with the limits of Article III of the Constitution, which requires an actual case or controversy to exist. For there to be case for our controversy, there needs to be a “reasonable apprehension of infringement suit” – an overt threat, and that threat is of imminent.

26. Recent Supreme Court Case LawLetting Accused Infringers Strike First in a Favorable Forum: MedImmune, Inc., v. Genetech (2007) In MedImmune, the Federal Circuit affirmed the District Court’s decision to dismiss the Declaratory Judgment action for lack of subject matter jurisdiction, noting that since MedImmune was a licensee in good standing, there was no reasonable apprehension of infringement suit. On appeal, the Supreme Court rejected Federal Circuit’s “reasonable apprehension of infringement suit” test, and held that a licensee need not break or terminate a licensing agreement before seeking a Declaratory Judgment that the underlying patent is invalid, unenforceable or infringed. Post – MedImmune: Easier for accused infringers to file Declaration Judgment actions in favorable forum to declare whether the patent is invalid, unenforceable or not infringed.

27. Recent Supreme Court Case LawLimiting Extraterritorial Enforcement: Microsoft v. AT&T (2007) Microsoft v. AT&T (2007) – On the same day as the KSR decision, the Supreme Court limited the extraterritorial impact of U.S. patents. • AT&T: Patent holder of U.S. Patent No. 32,580 which claims an apparatus for digitally encoding and processing speech. • Microsoft Corp: • Master versions of Windows OS incorporate certain speech codes which, when installed on a computer, enables the computer to process speech in the same manner as AT&T’s 32,580 patent. • Sells Windows to foreign manufacturers who install the software onto computers for sale in their markets. • Sends each manufacturer a master version of Windows (either as a disk or as an encrypted electronic transmission), which the manufacturer uses to generate copies, and install the copies on the foreign computers. 35 U.S.C. § 271(f): (1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

28. Recent Supreme Court Case LawLimiting Extraterritorial Enforcement: Microsoft v. AT&T (2007) §271(f) was enacted in response to the “loophole” created in Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), which allowed companies to escape liability by making parts in the United States to be assembled in foreign countries Question: Whether 35 U.S.C. §271(k) applies to software sent from the U.S to a foreign manufacturer on a master disk or via electronic transmission, when such software is then copied abroad and installed on computers made and sold abroad. • Supreme Court held that Microsoft is not liable under 35 U.S.C. §271(k) for software copied abroad and installed in foreign made and sold computers because: • Software in the abstract is not a “component” of a patentable invention. • Foreign copies of the master versions of Windows were not supplied from the United States. (MS only supplied the master versions of Windows, and did not export copies of such master versions) • Supreme Court also emphasized the presumption against extraterritoriality in that US law does not govern foreign affairs, particularly regarding patent law, and noted that the “loophole” for avoiding liability for infringement by copying software abroad is best resolved by legislation.

29. Recent Federal Circuit Case LawHigher Standard for Willful Infringement: In re Seagate (2007) In re Seagate (2007) – Raised bar to show willful infringement from negligence-type duty of care to “objective recklessness”. Prior to Seagate, the standard for willful infringement was that a potential infringer having actual notice of another’s patent rights has an affirmative duty to exercise due care to determine whether the pursued activities would amount toinfringement, Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1390-91 (Fed. Cir. 1983). • Such affirmative “duty of care” included seeking and obtaining competent legal advice from counsel before pursing any potentially infringing activity. In re Seagate, the Federal Circuit (en banc): • Eliminated “duty of care” standard for enhanced damages; and • Held that enhanced damages are only appropriate where the infringer acts with reckless disregard of the patentee’s rights, i.e., at least a showing of objective recklessness.”

30. Recent Federal Circuit Case LawHigher Standard for Willful Infringement: In re Seagate (2007) Objective Recklessness: • A patentee must now show by clear and convincing evidence that: • the alleged infringer “acted despite an objectively high likelihood that its actions constituted infringement of a valid patent”; AND • Upon such a showing, the patentee must also “demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” • Such objectively reckless standard does not take into account the state of mind of the accused. • “There is no affirmative obligation to obtain opinion of counsel” to avoid a willfulness charge.

31. Proposed Patent Reform Act Measures2007/2008 • First “Inventor” to File • §135 Derivation Proceedings • Prior Art Standards • Damages for Infringement In Case of Combination Inventions • Willful Infringement • Post-Grant Opposition • Inequitable Conduct as a Defense to Patent Infringement • Publication Requirements • Pre-issuance Submissions by 3rd Parties • Venue and Jurisdiction • Inventor’s Oath or Declaration • Tax Planning Methods • Miscellaneous Provisions - Interlocutory Appeals of claim construction appealable to Federal Circuit if appeals filed within 10 days of entry of order and at the discretion of the district court.

32. Proposed Patent Reform Act Measures2005/2006/2007/2008 • Venue Changes: Bye-Bye Marshall, Texas • Venue would be appropriate for patent enforcement only where: • The district where the defendant has its principal place of business or where it is incorporated; or • For foreign corporations with a U.S. subsidiary, the district where the defendant’s primary U.S. subsidiary has its principal place of business where it is incorporated; or • The district where the defendant has committed a substantial portion of the acts of infringement and has a regular and established physical facility that the defendant controls and that constitutes a substantial portion of the defendant’s operations; or • The district where the primary plaintiff resides, if the primary plaintiff in the action is an institution of higher education; or • The district where the plaintiff resides, if one of the following is true: • The plaintiff or a subsidiary of the plaintiff has an established physical facility in the district dedicated to research, development, or manufacturing that is operated by full-time employees of the plaintiff or such subsidiary; or • The sole plaintiff in the action is an individual investor who is a natural person and who qualifies, at the time the action is filed, as a micro entity under 35 U.S.C § 124.

33. Proposed Patent Reform Act Measures2005/2006/2007/2008 • Limitation on Damages • Damages would be based on a “reasonable royalty,” which must be based on: • An analysis that ensures that the reasonable royalty is applied only to that economic value properly attributable to the patent’s specific contribution over prior art. The court shall exclude from this analysis the economic value attributable to the prior art, as well as other features or improvement that contribute economic value to the infringing product or process. • The entire market value of a product may not be used as a measure of damages unless the claimant can show that the patent’s specific contribution over the prior art is the predominant basis for market demand for an infringing product or process. • Other factors, including terms of any nonexclusive marketplace licensing of the invention. • For a combination invention, the patentee may show the value of additional function resulting from the combination, as well as any enhanced value, if any, of some or all of the prior art elements resulting from the combination.

34. Proposed Patent Reform Act Measures2005/2006/2007/2008 • Willful Infringement & Enhanced Damages • Generally, willfulness can only be found in cases where the defendant was aware of the patent, and intentionally infringed: • Written notice with particularity, followed by reasonable time to investigate; • Intentional copying with knowledge of patent; and/or • Continues infringement after infringement found by court. • Willfulness must be found by court, not jury. • May not make finding where informed, good faith belief invalid or not infringed. • May not plead willful infringement until after finding of infringement. • Close to a codification of In re Seagate. • Claim Construction Interlocutory Appeals • Allow for resolution of claim scope before full trial on the merits; greater certainty of claim scope could lead to earlier settlement.

35. Future Viability of Patent Trolls Patent Trolls will encounter a tougher environment due to the changes at the court and possible legislative measures. In summary, the following may all affect trolling behavior: • More constrained venue - less accessible rocket dockets; • Higher incidence of invalidity rulings; • More USPTO re-examinations, especially for pre-KSR patents; • Smaller settlements and lower damage awards; • Fewer injunctions; • Fewer pre-suit settlements; and • Fewer contingency fee arrangements due to above effects.

36. Future Viability of Patent Trolls I GIVE UP!

37. Effective Responses to Patent Trolls 1. Recognize Patent Troll’s objectives • Trolls typically have a single purpose: $$$. • Can be risk seeking, willing and able to pursue litigation. • Often not vulnerable to countersuit; • If a holding company, little to no assets at risk; and • Company is not distracted by other concerns – can focus its energy on patent licensing and enforcement.

38. Effective Responses to Patent Trolls 2. Consider Patent Troll’s Business Model • Licensing program for $30,000 - $100,000 from hundreds of targets. - At or below nuisance cost; - Troll seeks to minimize time spent with any individual target; and - Troll and other defendants may not be sensitive to single target’s dismissal or failure by troll to pursue. • Licensing program for $200,000 - $750,000 from a smaller number of targets. - At or below litigation cost. • “Jackpot” - $10 million or more from a small number of defendants. - Troll prepared to litigate, may have targeted crucial aspect of target’s business; and - Troll may proceed even on a weak claim, absent clear showing troll will lose.

39. Effective Responses to Patent Trolls 3. Understand Patent Troll’s strengths and weaknesses: Litigation posture • Will seek most efficient suits. • Cluster several defendants into single suit; • Pro-plaintiff venue; • Seek high “reasonable” royalty to use in enforcement suits; and • May avoid multiple jurisdictions & motions practice. • Trolls are sensitive to effects on litigation, especially if it affects ability to enforce on other targets. • Strong prior art early in Patent Troll’s enforcement process; • Significantly different position of one defendant from others; and • Will seek well known licensees or to show other targets that Patent Troll has had substantial success at litigation or acquiring licenses.

40. Effective Responses to Patent Trolls 4. Concrete Strategies in response to Patent Trolls: • Seek re-examination of patents; • Design around; • Consider exchanging publicizing licensee status or acknowledging validity for reduced license fees; • Prevent willful infringement finding with non-infringement or invalidity opinion; • Seek ways around troll’s “most-favored-licensee” clause with other licensees; and • If client is unlike other defendants in litigation, the troll will have to stretch argument to reach client and the chance of invalidation may be increased and strengthen bargaining power.

41. Why “Patent Trolls” Have Not Been Seen in Japan or Other Major Patent Countries? Primarily cultural reasons: In US: • More litigious society • Competition is often seen as “I win-you lose” In Japan: • More cooperation and coexistence • Other factors that help keep “Patent Trolls” at bay in Japan: • Higher Judicial Stability - the trial to appeal differential rate of civil patent infringement cases in Japan is only 18% - "This low rate indicates the judicial consistency between district courts and appeals courts in Japan.” • More Reasonable Damages • More Effective Administrative Proceedings

42. QUESTIONS Contact Information: 1) Hung H. Bui, Esq Stein, McEwen & BUI LLP 1400 Eye Street, NW, Suite 300 Washington DC 20005 Email: hbui@smbiplaw.com 2) Mark Guetlich, Esq Microsoft Corp., International Patents Email: markgue@microsoft.com 3) Soonhee Jang, Esq Eli Lilly Corp., Email: Jang_Soonhee@lilly.com