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Patent Trolls – Time for a change in strategy?

Written by Muhammed Poswall on 29 August 2014

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Patent trolls are organisations which acquire rights to a patent and then seek to enforce those rights against an unsuspecting third party who may have developed something which falls within the scope of the patent. The patent troll is not necessarily the original inventor, owner of the patent or involved in manufacturing or providing products based on the patent. They are often referred to as a non-practicing entity (NPE).

As litigation has become more expensive, a start up company is very unlikely to want to take on a patent troll that is requesting some form of licence fee. As a result many firms either end up settling the matter out of court complying with the patent trolls demands, entering into a joint venture with a NPE/third party or closing/selling its business. This approach has become prevalent in the US with even President Obama weighing in on the matter, but not as much in the UK. In particular the reasons why this is a growing issue in the US comes down to the way it conducts litigation, in particular:

  1. there is no groundless threats provision which a defendant can rely upon;
  2. even if the Defendant is successful he would have to pay his own costs, no concept of loser pays;
  3. the patent owner can insist upon jury trials (generally patent owner friendly);
  4. the level of damages awarded by juries;
  5. the risk of triple damages for wilful infringement;
  6. the cost of the disclosure process; and
  7. the options available to defendant for an application to strike out spurious claims.

The odds are therefore very heavily stacked in favour of the NPE’s. However the tide does seem to be changing. Beneficial Innovations were recently ordered by a US District Judge to pay $1.3 million in legal fees to Google. The case does set down a marker that there will be no more smooth sailing for NPE’s. With the US government also looking at introducing legislation to restrict NPE’s taking advantage of its position and stifling innovation, NPE’s may want to consider adapting their approach. It may be that NPE’s need to take less of an adversarial approach and seek to work with the company to develop the products and promote innovation, in other words becoming investors. It will be interesting to see what approach the US takes and whether they will seek to introduce provisions similar to those in England and Wales.

If you have received a letter threatening patent infringement or require any further information about any aspect of patent litigation please feel free to contact Michael Coyle at michael.coyle@lawdit.co.uk.

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