[Patent Suit Funding Fantasies & 4 AMTX ANSI Standard ADSL Patents]
Jim,
You recently wrote:
<<There has been some debate on the thread as to how Amati could afford
to go to court to fight for it's Patents. fibonacci found the answer
in the 10Q. [snip] Stanford will provide resource to prosecute DMT
patent infringments?>>
Here's the actual text from several Amati SEC filings, together with my
analysis. In short, Stanford does not appear to be required to fund ANY
patent litigation brought by Amati under ANY circumstances. In particular,
Stanford does not appear to be required to fund any patent litigation with
respect to the four US patents owned by Amati which Amati claims "consist
of technology necessary to conform to the ANSI standard for ADSL." Nor
does Stanford have any incentive to do so, at least if you believe what AMTX
apparently stated in its prospectus.
1. From the Amati 1/1/92 license agreement with Stanford and University
Ventures II, as attached to Amati's 4/12/96 10Q filing with the SEC at:
sec.gov
<<2. DEFINITIONS
2.1"Licensed Patent(s)" means, either jointly or separately, any Letters
Patent issued:
(a) Upon STANFORD's U.S. Patent Application, Serial No. 07/621,460
(Stanford Docket S90-099), filed November 30, 1990; or
(b) Upon a patent application(s) filed by STANFORD and pertaining to any
of the other Invention(s); including the information contained in any
such application(s), with respect to the Invention(s), any foreign
patents corresponding thereto, and/or any divisions, continuations,
continuation-in-part, or reissue thereof.
[snip]
13. INFRINGEMENT BY OTHERS; PROTECTION OF PATENTS.
13.1 AMATI shall promptly inform STANFORD of any suspected infringement
of any Licensed Patent(s) by a third party. In the event that AMATI, as
STANFORD's Exclusive licensee(s), further notifies STANFORD that AMATI
intends to commence a patent infringement action against a third party,
AMATI shall be entitled, at its own expense and for its sole benefit, to
name STANFORD as a part plaintiff in the event that the rules then require
the owner of the Licensed Patent(s) to be named for purposes of such
infringement action. AMATI shall conduct the lawsuit and shall be
responsible for strategy and settlement. STANFORD shall provide reasonable
cooperation to AMATI and may participate in the action at STANFORD's expense.
Any recoveries gained in any such action commenced by AMATI shall belong to
AMATI except that portion of recoveries due STANFORD arising from sublicensed
royalties.
13.2 In the event that AMATI fails to commence vigorous action to enjoin
noticed infringement or seek sublicense(s) from infringing party(ies) within
one hundred and eighty (180) days of such notice, then STANFORD shall be
entitled, at its expense and for its sole benefit, to commence the action in
its name. AMATI shall provide reasonable cooperation to STANFORD and may
participate in the action at AMATI's expense. STANFORD shall be entitled
to conduct the lawsuit and its strategy and settlement, and to keep any
recoveries gained in any such action commenced by STANFORD.>>
2. First, note that the Amati/Stanford agreement defines "Licensed Patents"
in a way that does NOT include any patent applications filed by Amati rather
than by Stanford.
Second, note that the only obligation imposed on Stanford by section 13.1,
with respect to patents that issue based on patent applications filed by
Stanford, is to "provide reasonable cooperation" to Amati. Section 13.1
gives Stanford the right (but NOT the obligation) to participate, at
Stanford's expense, in any patent infringement suit filed by Amati.
Third, section 13.2 gives Stanford the right (but NOT the obligation) to file
a patent infringement suit as a plaintiff in Stanford's own name if Amati
gets cold feet and fails to file such a suit. Also note that in the latter
event, 100% of any monetary recovery would be kept by Stanford.
3. Although I have not checked it for accuracy, a portion of the Amati
prospectus was reproduced on this thread at:
techstocks.com
<<Group I -- Consists of 3 patent applications and 1 patent (shared with
Northern Telecom), consisting of technology necessary to conform to the
ANSI standard for ADSL. The Company has informally agreed with the ANSI
standards body to license these patents to third parties on fair and
equitable terms.
Group II -- Consists of 2 patents issued to Stanford University in 1993
and 1994 a 1 patent application filed by Stanford University, all of which
have been exclusively licensed to the Company, and 1 patent application
filed by the Company in 1995. The technology described in these patents
is not necessary to conform to the ANSI standard for ADSL; however, such
technology makes ADSL transceivers more efficient.
Group III -- Consists of 1 patent owned by the Company and 5 patent
applications filed by the Company, all of which relate more generally to
the Company's DMT technology.>>
4. While the above-quoted portion of the Amati prospectus apparently did
not specifically identify the 3 patent applications and 1 issued patent
comprising "Group I" (i.e., the "technology necessary to conform to the
ANSI standard for ADSL"), it does identify the Group I patent and patent
applications as "shared with Northern Telecom."
5. You can figure out which patents the Amati prospectus refers to
as "Group I," however, by reviewing the 3/16/95 Motorola licensing
agreement, which is reproduced as "Appendix B" at:
sec.gov
Documents 1.1, 1.2, 1.3, and 1.4 in that "Exhibit B" are described as
"Group I Patents And Patent Applications (Jointly Filed By Amati And
Northern Telecom)." Although the Motorola agreement does not specifically
state that documents 1.1 through 1.4 are necessary to comply with the ANSI
ADSL standard, the fact that both documents describe 4 patents/applications
that Amati "shared" or "jointly filed" with Northern Telecom, while using
the identical "Group I" nomenclature, makes it pretty clear that the Amati
prospectus and the Motorola agreement define "Group I" the same way. Do
you happen to know the date of the AMTX prospectus?
6. Assuming that the Amati prospectus language was accurately quoted on
this thread, this means that, in Amati's view, the four patents "consisting
of technology necessary to conform to the ANSI standard" are as follows
(all four are now issued patents, the most recent of which issued on 5/6/97):
(1) patent.womplex.ibm.com
(2) patent.womplex.ibm.com
(3) patent.womplex.ibm.com
(4) patent.womplex.ibm.com
The inventor names, patent titles, and most importantly the patent
application serial numbers of these 4 Amati patents are *IDENTICAL*
to the patents/applications listed as documents 1.1, 1.2, 1.3, and
1.4 in Exhibit B to the AMTX/Motorola agreement.
7. Note that the Amati prospectus specifically states with respect
to the "Group II" Stanford patents:
<<The technology described in these [i.e., the Group II] patents is
not necessary to conform to the ANSI standard for ADSL; however, such
technology makes ADSL transceivers more efficient.>>
8. In summary, according to AMTX itself, the Stanford patents are not
required to be used by AMTX's competitors to make an ANSI standard
compliant ADSL modem (at least under the Issue 1 ANSI ADSL standard),
but even if they were, Stanford would be under no obligation to spend
a dime to enforce the Stanford patents now exclusively licensed to
Amati.
9. In my view, totally apart from the desireability of doing so, it
is still an open question whether or not AMTX could fund patent
litigation against any competitor who infringed any of the four AMTX
ADSL patents which AMTX apparently claims are necessary for ANSI ADSL
standard compliance.
Beware of conventional but unverified wisdom (and go ahead and shoot
at the messenger if you must, but aim low, I'm riding a Shetland),
Bozo T. Clown
P.S. #1: Although I disagree with the conclusion about Stanford funding
of AMTX patent suits, my thanks to you for the indirect reference to the
Amati SEC 10Q filing which contained the text of the Amati/Stanford
agreement, and to Mark Lewin for his recent post with the Edgar URL
for the AMTX/Motorola agreement. I think the above analysis is pretty
tight, but I welcome any comments that point out anything I may have
overlooked. It is possible, for example, that Stanford has some separate
obligation to Amati not reflected in the 1/1/92 license agreement, but
I would find that surprising. While I admit that the above analysis
leaves open the possibility that Stanford could step up to the plate
and file suit against any AMTX competitor that is making, using, or
selling an ADSL modem that incorporates the "Stanford-based" technology,
I think that possibility is pretty remote, especially since AMTX itself
takes the position that the "Stanford-based" technology is "not necessary
to conform to the ANSI standard for ADSL." Of course, this position is
in AMTX's self-interest, because it allows AMTX to claim that Stanford
has no right to receive "sub-royalties" from AMTX when AMTX starts getting
royalty income from competitors who want to make, use or sell an ANSI-
compliant ADSL modem without litigating AMTX's right to such royalties.
P.S. #2: My conclusion that Stanford is unlikely to fund patent suits
involving the ANSI ADSL standard may be disappointing, but it actually
should be quite useful to have identified the 4 specific patents that
AMTX *claims* must be licensed to make an ANSI-compliant ADSL modem. By
comparing the claims of those 4 patents with any Aware DMT or DWMT
modem products, for example, we may be able, based upon the collective
technical expertise on this thread, to draw our own conclusions about
whether any Aware modems infringe any of the "Group I" AMTX patents.
P.S. #3: I still think it would be interesting to look at the actual
text of the ANSI ADSL "Issue 1" standard to try to independently
determine the validity of AMTX's claim that the 4 "Group I" patents are
necessary for making, using or selling an ANSI standard-compliant ADSL
modem, but I have not seen the actual ANSI text yet.
P.S. #4: If the bullets had found the target, I'm sure you would have
spent the time to try figure all of this out and then shared it with
everyone else while inviting a critique of anything you missed. |
