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The Recorder, 07/30/01

The Recorder, 07/30/01. 1. INTEL CREATES A SHELL COMPANY IN THE CAYMAN ISLANDS TO BUY THE PATENT FROM BANKRUPTCY. The Story. The patent owner was a small inventor-owned company, IMS Meta Systems. It produced a microprocessor chip designed to compete with the fastest Intel chips.

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The Recorder, 07/30/01

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  1. The Recorder, 07/30/01 1

  2. INTEL CREATES A SHELL COMPANY IN THE CAYMAN ISLANDS TO BUY THE PATENT FROM BANKRUPTCY The Story • The patent owner was a small inventor-owned company, IMS Meta Systems. • It produced a microprocessor chip designed to compete with the fastest Intel chips. • Intel infringed, but refused a license. • IMS was driven into bankruptcy. • Intel formed a shell company in the Cayman islands to secretly buy the patent from bankruptcy. • The Bankruptcy Judge blasts Intel. • “I would submit that neither Maelen nor Intel gives • a damn what this estate gets” out of any patent litigation. 2

  3. THE WALL STREET JOURNAL SAYS “SHAME ON INTEL” The Article “The giant semiconductor maker secretly used a shell company in the Cayman Islands to argue on its behalf in the federal bankruptcy case of International Meta Systems Inc., a tiny El Segundo, Calif., computer-chip-design company. As part of the Chapter 11 proceedings, now under way in Austin, the Cayman company challenged IMS’s sale last year of a patent to a Northbrook, Ill., law firm called TechSearch LLC.” The Judge  “‘They are using this estate in an attempt to bring leverage upon TechSearch and the litigation in California,” the judge said, describing the maneuver as “totally inappropriate.’” Intel Uses the “E” Word -- Patent “Extortionist”  “Chuck Mulloy, an Intel spokesman, acknowledged the company’s use of the Cayman company. But he says Intel was using ‘tactics appropriate to the plaintiff in this matter.’ He called TechSearch a ‘patent extortionist.’” Charles Wolfman “Charles, Wolfram, a Cornell University law professor and an ethics expert, said Intel appeared to disclose its role when a ‘gun was to their heads,’ under the pressure of discovery rules. ‘I am distressed by this,’ Prof. Wolfram said, ‘what is a big company like Intel doing sneaking round like this?’” 3

  4. Ironic THE PATENT EXTORTIONIST MORPHS INTO A TROLL AND PETER DETKIN BECOMES A TROLL 4

  5. Opposing Counsel Opening Statement 5

  6. WERE THESE GUYS TROLLS? • Westinghouse (air brake) • Ford (car) • Gillette (razor) • Hewlett-Packard (oscillation generator) • Otis (elevator) • Harley (motorcycle shock absorber) • Colt (revolving gun) • Goodrich (tires) • Goodyear (synthetic rubber) • Carrier (air treatment) • Noyce (Intel) • Carlson (Xerox) • Eastman (laser printer camera) • Land (Polaroid) • Shockley (semiconductor) • Kellogg (grain harvester) • DuPont (gun powder) • Nobel (explosives) • the Wright brothers (aircraft) • Owens (glass) • Steinway (pianos) • Bessemer (steel) • Jacuzzi (hot tub) • Smith & Wesson (firearm) • Burroughs (calculator) • Carothers (nylon) • Curtiss (aircraft) • Houdry (catalytic cracker) • Marconi (wireless communication) • Goodard (rocket) • Diesel (internal combustion engine) • Fermi (neutronic reactor) • Disney (animation) • Sperry (Gyroscope) • Williams (helicopter) • Abraham Lincoln who was granted U.S. Patent No. 6,469. TROLLS? 6

  7. MARKETPLACE FOR IDEAS • Markman • Cost: $3-10 Million Risk: 1/10 Chance • Victimology • Trolls • Reform • No Right to Exclude • No Willfulness • Opposition & IPR Proceedings • Compulsory Licenses • Restricted Venue • Create New Jobs • Create New Businesses • Users of Technology IDEAS 7

  8. WHOIS CREATINGTHE NEW JOBS? • Many big companies are out-sourcing jobs to China and India. Small companies often create new jobs here. As the inventor of the MRI scanning machine, Dr. Raymond Damadian, observed, it’s the small companies that often provide the spark for new jobs: “Few Americans realize that the great majority of new jobs created for the public are provided by small companies with fewer than 500 employees. From 1981 to 1988, companies with fewer than 500 employees contributed 11.7 million new jobs to the economy. In this period, America’s small companies generated two thirds of all new employment.” JOBS 8

  9. PATENT LITIGATION RISK • Economist Gauri Prakash-Canjels did a comprehensive study of all patent cases that went to final judgment in all federal district courts in the United States between 1990 and 2000. She found that, in 2000, 78% of all the patent cases that went to final judgment (this excludes settlements) resulted in no recovery for the patentee (up from 64% in 1990). And of the 22% that did result in a recovery, roughly half (54%) produced a recovery greater than $1 million. That’s one out of ten. If it really costs $2 to $6 million to get a 10% chance of recovering more than $1 million, patent enforcement is a bad bet, not a good one. RISK 9

  10. Question: WHAT IS AN OBJECTIVELY BASELESS CASE?  • Answer: ANY CASE DECIDED ADVERSELY TO THE PATENTEE? • AS PROFESSOR ARTHUR MILLER FOUND: • A FRIVOLOUS CASE IS “ANY CASE BROUGHT AGAINST YOUR CLIENT AND LITIGATION ABUSE IS ANYTHING THE OPPOSING LAWYER IS DOING” • (Arthur Miller, Simplified Pleading, Meaningful Days in Court, and Trials on the Merits: Reflections on the Deformation of Federal Procedure, 88 NYU Law Rev. 286, 361 (2013). OR 10

  11. WHAT IS A NUISANCE VALUE SETTLEMENT? WHY SHOULD A CLIENT BE FORCED TO BE GREEDY? Number of Infringers Settlement Recovery 10 $3.0 million $30 million 1,000 $0.5 million $500 million 2,000 $1.0 million $2 billion All below AIPLA average cost of defense of patent infringement case through trial: $3,000,000 to $8,000,000 Number of Infringers Settlement/ Total Infringer Recovery 1,000 $3.0 million $3 billion 2,000 $3.0 million $6 billion 11

  12. With Multiple Infringers Take Some Chips Off the Table x x x x x x Multiple Infringers Settlements - Trial Litigation 12

  13. $1 Million $10 Million Take $1 Million; No chance of losing Flip the coin for possible $50 Million ? Empty Pockets? Sitting on a lot of money? What to do? 13

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