Nielsen Using Patent Monopolies To Act Like A Monopolist

from the seems-a-bit-questionable dept

For many years, we've highlighted how patents are monopolies and they provide monopolistic power. Indeed, the founders of the US recognized this. James Madison was quite skeptical:

"But grants of this sort can be justified in very peculiar cases only, if at all; the danger being very great that the good resulting from the operation of the monopoly, will be overbalanced by the evil effect of the precedent; and it being not impossible that the monopoly itself, in its original operation, may produce more evil than good."

Jefferson was similarly dubious of the need for patents:

... generally speaking, other nations have thought that these monopolies produce more embarrassment than advantage to society; and it may be observed that the nations which refuse monopolies of invention, are as fruitful as England in new and useful devices.

Eventually, Jefferson was convinced to support such a system -- and even reluctantly ran it for a while -- but he did so with great concern about how these "monopolies" could hinder actual innovation.

Fast forward a couple centuries, and let's look at the case of Nielsen. You know, the company that "measures" freaking everything. Once synonymous with television ratings and "Nielsen homes," it has expanded into other entertainment measuring markets over time -- and has certainly had something resembling a monopoly during much of that period -- and it has often used patents to retain that monopoly. And this goes back a very, very long time.

In the 1940s, Nielsen worried about a competitor taking away its "exclusive" market and used patents to kill it off:

The challenge to Nielsen's meter monopoly was too real to be taken lightly. Charles Wolcott, a top executive of A.C. Nielsen wrote to Mr. Nielsen: "I fail to see how we can turn our backs on the possibility that RADOX could complicate our situation--that is, if RADOX continues to develop, we are no longer exclusively the proud possessors of measurement by electronic means." It did not take Nielsen long to move. RADOX was vulnerable on two fronts--patent and finance--and each front was quickly attacked. Regarding patents, it turned out that both parties had patents pending, and the U.S. Patent Office ultimately declared "interference" existed. Nielsen's major thrust, Sindlinger maintained, was to use the cloudy patent situation to chill the interest of the investor group in any financing help for RADOX.

Years later, Nielsen's son more or less admitted that his father talked investors out of supporting Sindlinger and the RADOX system:

A man by the name of Ralph Bard Sr. who lived in Chicago and had been Secretary of the Navy called on my father. He was considering investing in Sindlinger’s operation and asked my father for his opinion of the company. My father wrote him a letter concluding that Sindlinger’s device would not be a success. In short, in my father’s opinion, this would not prove to be a good business.

A little over a decade later, the FTC actually had to go after Nielsen for using its patents to pressure competitor Arbitron, leading to a consent decree:

A patent infringement suit brought by Nielsen also arguably deflected ARB from competing head-to-head with Nielsen in network television ratings with its Arbitron instantaneous audience measurement system in the late 1950s. More recently, to deal with measurement of cross-platform viewing, Nielsen has used acquisition to build its intellectual property portfolio and continues to use litigation to slow down its competitors.

While the outcome of patent disputes may be uncertain, litigation or licensing undertaken to protect and/or monetize patents does not itself present unusual legal reisk to the patent holder. Such risk does adhere, however, if the patent was fraudulently acquired or was leveraged to extend beyond its rightful metes and bounds. The FTC found Nielsen guilty of such misconduct leading to a 1963 consent decree. Two of Nielsen's business practices that violated the FTC Act were (1) the systematic use of patent proceedings "to discourage potential and actual competitors from developing and using... devices for... measuring... audiences... and has attempted to impede and sabotage the financing of these competitive efforts.

So what does something that happened more than 50 years ago have to do with today? It appears that Nielsen has continued to leverage this particular playbook. First, Nielsen freely admits that it holds a monopoly in the ratings game:

Neither party disputes that Nielsen exercises monopoly power over the television audience measurement services industry, both nationally, for the United States as a whole, and for 210 local markets

And it's still using patent claims to stifle competition. Back in 2016, Nielsen bought Gracenote for $560 million just three years after it had been sold for $170 million. Just what could have represented so much value for Nielsen? Well, just a couple months before Nielsen bought Gracenote, Gracenote had sued a company called Sorenson Media for patent infringement. Sorenson Media had an "automatic content recognition" ACR platform for measuring viewers of TV broadcasting -- exactly the market Nielsen wishes to maintain its monopoly over.

How did that turn out? Well, Sorenson declared bankruptcy last fall (in large part due to an incredibly stupid contract it had signed), but I'm sure the cost of a patent lawsuit didn't help. Oh, and in February, Nielsen bought up Sorenson's assets at firesale prices.

And that's not all. Last year another small competitor, ErinMedia, sued Nielsen, claiming antitrust violations and that Nielsen was using "predatory practices designed to prevent competitive entry by companies like ErinMedia." A few weeks later, the company announced that it was effectively shutting down, noting that Nielsen had "chilled" its ability to close an investment round.

Oh, and remember Arbitron? The company that was at issue back in the 1960s? Nielsen bought them a few years back, leading the FTC to put some conditions on the deal in hopes that it would not "substantially lessen competition." So far that doesn't seem to be working.

And that brings us to the latest Nielsen use of patents against an upstart competitor. Last fall, Nielsen sued upstart competitor Samba TV, claiming patent infringement. The patents at issue -- 9,066,114, 9,479,831 and 9,407,962 -- all are incredibly vague and generic, and appear to be the kind of patents that aren't supposed to be allowed in a post-Alice world.

As Samba notes in its motion to dismiss, nothing here should have been patented in the first place:

For centuries, families and friends have gathered for plays and concerts—and more recently, for television and radio programming. Most silently observe. But others, often because they are already familiar with the programming, offer commentary: about the director, the actors, or the scenes. Some react to the content in order to enhance it: a lawyer presenting an animation typically offers comments at preplanned moments; or a theater employee may need to adjust lighting or curtains at the conclusion of certain scenes. The process of recognizing parts of a video, song, or other content and reacting—either instantly or at a later time (e.g., during a commercial break)—is not patentable. It is an abstract concept involving the three main stages of memory: processing, storage, and retrieval. Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347, 2356 (2014) (a “method of organizing human activity” is not eligible for patenting).

Gracenote’s patents claim abstract concepts without contributing any new inventive technology to achieve them. Instead, the claims merely use existing technologies—technologies Gracenote does not even claim to have invented—as tools to carry out the concepts. The ’114, ’831, and ’962 patent claims use identifiers, called fingerprints, to recognize portions of audio or video signals and trigger responsive actions at predetermined times during the playback, such as providing information about a scene at its conclusion. The patents, however, do not purport to have invented fingerprints or even an improved fingerprinting technique. Using known fingerprinting technology as a tool to perform the abstract concept of signal recognition and reaction is patent-ineligible under 35 U.S.C. § 101.1

And yet, whether or not the court recognizes this and throws out the case, this lawsuit still might be effective in basically stifling a competitor's ability to even exist in the market. As James Madison once warned: "the monopoly itself, in its original operation, may produce more evil than good."

Filed Under: antitrust, arc, ftc, monopoly power, patents, tv tracking
Companies: arbitron, erinmedia, gracenote, nielsen, samba tv, sorenson


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  • This comment has been flagged by the community. Click here to show it
    identicon
    Abner Singleday, 23 May 2019 @ 2:06pm

    Lood Gord! Yet you can't see any problem with Facebook / GOOGLE!

    For some reason you attack a company that affects almost no consumer directly.

    And I'm sure you'll yet again claim that Facebook / Google / Microsoft and others aren't monopolies.

    Advertising is basically hooey that allows parasites to claim they're of value in the market. It can't be rationally explained, so I skip that.

    Solution as always is just tax the HELL out of all corporations, down to about effectively three percent profit, then we'll have innovation and space for numerous smaller corporations. -- BIG IS BAD, as even you're trying to use here!

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 23 May 2019 @ 10:55pm

      Re:

      Even when you agree with an article that says corporations are terrible you can't resist taking a dump on it. Just because.

      out_of_the_blue just hates it when due process is enforced.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 23 May 2019 @ 2:36pm

    The patent system is important for small-time inventors and innovators. I hold patents myself and, without them, would be out of business very quickly after bringing these ideas to market simply due to to large moneyed corporations, with better-recognized brands, stomping me out of existence.

    However, patents are effectively for forever by modern standards and their effective lifespan should probably be reduced. The bar for improvements upon those patents that serve to lock them down for an additional 20 years should also be much, much higher and even so, new parties implementing the original patents should be able to do so without the improvements and without fear of getting sued into oblivion.

    Nielsen's patents should have expired long ago. In this modern age 10 years or even 5 seems much more reasonable than 20. If you can't bring your product to market and make your money in the first 5 years then it clearly wasn't that great an idea to begin with. When those patents make money only from lawsuits we have a problem.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 23 May 2019 @ 2:44pm

      Re:

      What business would that be? In other words citation needed.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 24 May 2019 @ 6:40am

        Re: Re:

        No citation is needed to justify my opinion posted above. If you can't believe that there are small-time inventors out there making modest amounts of money on their patents, well, you're not very observant.

        And I'm posting here anonymously. I'm not going to "out" myself just for your benefit. Whatever you think about the truthfulness of my claims the fact remains there are plenty of non-corporate inventors out there. And patent terms are still too long.

        reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 23 May 2019 @ 3:04pm

      Re:

      I call BS. If any of the big guys thought there was any money in it, they would clone your stuff, file their own patents, and then if you made any noise, they would counter sue you into the poor house.

      Your patents aren't protecting you, it's the perceived size of your market that keeps the big guys out.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 24 May 2019 @ 6:40am

        Re: Re:

        they would clone your stuff, file their own patents

        Maybe you don't understand how patents work?

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 24 May 2019 @ 11:49am

          Re: Re: Re:

          No, you don't understand how patents really work.

          If you patent A and B, they will just patent putting A next to B in 100 different ways. Since they have $$$ for lawyers, they don't care if it's bogus. You'll be lucky to make it through the motions phase of the trial before you are bankrupt.

          Meanwhile, they will be undercutting your prices and stealing all your customers. Once you are bankrupt, they will buy your patents from the bankruptcy trustee for a song and you can cry a sob story all the way to the unemployment line.

          Patents are only worth anything to the big guys who have enough money to pay the attorneys and the trolls who shake down the little guys.

          reply to this | link to this | view in chronology ]

          • identicon
            Anonymous Coward, 24 May 2019 @ 3:03pm

            Re: Re: Re: Re:

            You're wrong, but ok. It's easy to take hyperbolic swipes at a system of which you only ever hear about the bad parts and have no first-hand knowledge. Yes, it's an easily abused system and yes, it needs fixing. But it doesn't need abolishment any more than we need to eliminate all corporate regulation. The patent system serves a need, it just does so rather poorly.

            reply to this | link to this | view in chronology ]

  • icon
    Gary (profile), 23 May 2019 @ 3:18pm

    Clubbing

    Patents are used by clubs by corporations to stifle competition. But if you love the Federal Government telling you want to do, I guess then patents are just wonderful.

    I know everyone here loves it when the Feds tell them what they can't do or say!! /s

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 24 May 2019 @ 6:42am

      Re: Clubbing

      Patents are often used as clubs by corporations to stifle competition.

      FTFY. They do have their uses and in the late 1700's it was their only use. It didn't take long, however, for larger moneyed organizations to start using them as weapons, exactly what the founders feared.

      The patent system needs fixing but we do need the patent system.

      reply to this | link to this | view in chronology ]


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