Last week some of the world’s biggest technology companies co-signed a document intent on staving off the threat of “patent trolls” taking “unprincipled” litigation cases against them in European courts.
The companies – including Apple, Cisco, Google, HP, Intel and Microsoft – released a joint letter to the European Union member states warning that "an effective and balanced unitary patent system" will be harmed under new EU-wide legislation if it doesn't tackle "litigation shops", as Google put it, which "extort money from productive companies" and "place a huge drag on innovation".
The companies fear patent trolls – also known as either non-practicing entity (NPEs) or patent assertion entities (PAEs) and who cost US businesses $29 billion in 2011 – could flourish under the new draft of the rules of procedure for the EU's long-promised Unified Patent Court (UPC), which is due to come into being in 2015.
Dublin-based European patent attorney, Michael O’Connor said PAEs, NPEs and patent trolls “essentially try to hoover up available patents which are still in force and then see whether the patents read on to technology that currently exists out there in the public domain and [is] being used by large companies”.
Patent owners will, he said, approach these trolls who will help confront the company in question before asking for royalty payments or seeking an injunction. While the companies being sued may believe the claim is "invalid" added O'Connor, "it's going to take some time to prove that", leading often to large payments to help the claims go away.
Rise of the trolls
IP solicitor and partner at Harrison Goddard Foote, Martyn Fish said companies who fall under the NPE or PAE banners are there to "manipulate the system to try and generate as much income from the patents as possible", adding that there is a fear amongst IT companies "that the trolls could rise up in the European Union" in the wake of UPC's establishment.
Speaking to The Irish Times, Darren Smyth, a patent and design attorney partner with London-based IT legal firm EIP, was quick to caution that "one man's troll is another person's company whose rights are being trampled on".
However, Mark Chandler, general counsel and senior vice president for Cisco's legal services, emphasised the annoyance the company feels regarding such "unprincipled litigants".
"Today we have 60 patent lawsuits, all of which are with non-practicing patent entities. These suits are built around litigation gamesmanship, not innovation and making sure technology finds its widest and most productive social use," Chandler wrote in an email to The Irish Times.
Adding that he felt the new European system will unfortunately be “subject to the same game-playing that has turned America’s intellectual property system for high technology into a casino that largely benefits financial speculators and lawyers”.
Chandler also revealed the software and services company spends “over $50 million a year just in legal expenses related to these suits”.
Gene Sperling, assistant for economic policy to US President Barack Obama, recently told how lawsuits in this area have tripled over the past two years, in turn costing the American "economy billions of dollars and undermining American innovation".
Troll profile
One company which has been deemed to fit the patent troll profile on a number of occasions is IPNav, a Dallas-based business with its second largest office in Dublin city centre where they employ mainly "patent analysts".
According to the New York Times, IPNav sued "more than 1,600 companies" in the US over the past five years, and Barry Leff, who handles corporate communications for IPNav told The Irish Times the company gets "more calls than we can manage" from patent owners interested in their services such as claims analysis and strategic prosecution.
“The whole thing with patent trolls is that it’s like name-calling that doesn’t serve any useful purpose,” said Leff. “Our business is working with patent owners which can be sometimes individual investors, sometimes universities, it really doesn’t matter to help them basically earn money from their patents. If there are companies infringing on the patents we’ll approach them for licence.”
Patent owners turn to the company, he said, “because patent litigation is very expensive” with a large number of US cases “costing over a million dollars”. Saying that “in general” patent cases taken by the company “are settled much more than they go all the way through full litigation”, Leff said the company felt the unified direction Europe’s patent legislation is heading in is “definitely the right direction”.
