Patent Law

Out to Sea

By Gary Odom and Jordan Kuhn

Wall Street floats on an ocean of dumb money. Patent purveyor Ocean Tomo has patent-oriented stock indices, supposedly taking the heavy lifting out of picking patent-heavy stocks. Speculators, who may be hedge fund or large bank proprietary traders, or market research fabricators, collar patent lawyers for quick steps up on a steep learning curve.

IP Law 360:

The sheer complexity and multidisciplinary nature of patent matters presents a unique set of issues and challenges for patent lawyers who choose to serve this role. For example, market participants' baseline understanding of patent matters is typically substantially below that of other commercial or regulatory areas, and many aspects of patent law are counterintuitive.

Deep pocket patent rubes commonly appreciate that patents may be invalidated, but most assume that's a rare event, like a real estate deed being invalidated. After all, patents are approved by the USPTO. Strict standards must apply. That over 30% of patents are killed in court consistently surprises. KSR might as well be FDR's grandson.

While litigation occurs over many months, acquisitions and capital market transactions transpire in a matter of weeks. Due diligence of an IP portfolio in that context is a hand-waving exercise. Ultimately, in these situations, the goal is binary decision (buy or not), not work product analysis that is home base to backbench patent litigators.

Traders are a jittery bunch. The RIM Blackberry case is an example of market IQ. After RIM lost at district court and the CAFC denied appeal, RIM did a doomed Hail Mary in requesting an en banc rehearing, something that almost never occurs. The Street is reputedly known for "factoring in" predicted outcomes. Although en banc RIM's request was a laugher, RIM stock dropped 8% during the two days after the CAFC told RIM to take a walk. (The NASDAQ, the exchange RIM is listed on, dropped 1.5% in that period.)

And there is an oil-and-water mix of mentalities at work. Lawyers, who generally treat predictive statistics like a rash, are ill-suited to the odds-jockeys that traders are. But patents smell like money, so dumb money keeps sniffing.

Full post as published by The Patent Prospector on June 04, 2008 (boomark / email).