What is a patent lawsuit?
Patents are a territorial form of intellectual property right. Patent owners have the right to enforce patents only in a country where they get the patent grant. Also, patents have a specific ‘life’ or validity of 20 years from date of filing.
If a patent claims your technology or product then you are infringing the patent. Whether you do it intentionally or unintentionally, it is still called infringement. Patent owners can file a patent lawsuit against you for infringing their patent. It is best not to use, import, sell or make a patented invention without permission from the patent owner.
Payouts of large compensatory damages are common in patent lawsuits. Samsung vs. Apple is a famous example. Judges awarded One Billion Dollars to Apple for design patent infringement by Samsung.
An essential aspect of a patent lawsuit is the claims on which one allegedly infringes. Claims define the scope of the patent application and what the owner seeks to protect by the claims. Thus you will infringe upon a patent if any of your product’s features match its claims.
Who files lawsuits?
Patents give you the legal ownership of an invention. Sometimes, it takes years of R&D and innovation to come up with a novel solution to a problem. Besides, the patenting procedure itself is a laborious process. So, companies would want to protect these inventions as assets. While the inventors may be employees, the company owns the patents. Companies use patents as rights to have a monopoly on the patented technology. Competitors will thus file a lawsuit to stop you from using their invention.
The biggest threat is not from competitors. Afterall, they are trying to protect their business. The biggest threat of patent infringement lawsuits are from patent trolls. Patent trolls are also called Patent Assertion Entities (PAE) or Non-Practicing Entities (NPE). They are not involved in manufacturing or services. Their entire business model is buying patents and suing others for damages. Sometimes these NPEs force companies to sign patent license agreements for royalties.
NPEs have a vested interest to sue companies. Their business model has no risks and all rewards.
Marathon Patent Group (MARA) and Xperi Holding Corp. are examples of NPEs worth more than $400 million.
Why do they file patent infringement lawsuits?
Most NPEs buy or license patents from failed businesses or universities. Cost of defending a lawsuit is high. NPEs arm-twist alleged infringers to license the patents for yearly royalty payments. Licensing will be necessary if the patent is vital for your business.
NPEs also file lawsuits to advertise their patent portfolio in the market. Yet other instances when they file lawsuits are to intimidate someone. Many times threats of lawsuits are on frivolous grounds. NPEs might file frivolous lawsuits to elicit a reaction, and you end up paying them for nothing! So the next time you get a legal notice for patent infringement, check if it is a frivolous lawsuit.
Competitors might use similar tactics as those of a patent troll. But, there can be other reasons too. For example, if a firm wants to stop you from selling in a country, they may file a patent lawsuit. These can be ploys to establish authority and monopoly in a technology.
For example, Indian SaaS companies Zoho and Freshworks were at the receiving end of NPE lawsuits in the USA.
Patent lawsuit prevention strategies
Facing a patent lawsuit can prove harmful to the fortunes of a company. It can lead to turmoil and affect day to day business activities of a firm. Defending against lawsuits can cost millions of dollars. So, it is a good practise to ensure you don’t face a lawsuit before launching your product. We will look at various strategies you can adopt to prevent a patent lawsuit in this section.
Patent pool as a defensive strategy
Patent pools are an effective defence strategy to avoid IP disputes. So what are they? Patent pools are an agreement by two or more companies to collect their patent rights in one place for mutual benefit. Then, members of the pool can license the patents to each other or third parties. Patent pools help companies in similar technology areas use and improve existing technology. All members of a patent pool are party to license of all patents in the pool. Even companies that compete with each other can be safe under the terms of a patent pool. There are many patent pools available. We are discussing some that are relevant to the software industry, below.
Open Innovation Networks
Open innovation helps companies co-create solutions and collaborate with external agencies. Companies can engage with external partners rather than relying on internal knowledge alone. Open invention network (OIN) is a patent pool of Linux and Open Source software patents. OIN members contribute to the pool all patents related to Linux and Open Source software. All members are automatic license holders of all the patents in the pool. The members of OIN also agree not to sue any other member for any Linux or Open source technology. In return, members receive cross-license from OIN for its entire portfolio of patents.
LOT Network
License On Transfer Network (LOT) is a not-for-profit organization. It helps companies battle patent assertion entities (PAE). It is a community of members who agree to give immunity to one another if any of their patents get used by a PAE. Member companies pool their patents in the LOT network. Even if PAEs get ownership of these patents, they cannot sue LOT members. This prevents possible abuse from PAEs.
Members of the LOT network can cross-license their patents but are subject to a “triggering event.” A triggering event occurs when a PAE gets a member’s patents by acquiring the member. A member company becoming a PAE is also a triggering event. In such situations, LOT cross licenses the involved patents to all LOT members.
Started by Google, Canon and Red Hat, more and more companies are joining the LOT. Having more members in the patent pool gives the advantage of more access and lesser resistance to innovation. LOT members must pay an annual network fee for the membership. Yet, members who have a yearly turnover of less than $25 million can join the network for free.
Defensive Licensing
Defensive licensing is another troll-proofing method to protect innovators. Defensive patent license (DPL) is also a patent pool network where all members come under the ambit of a defensive patent license. DPL requires that the member entities license all their patents under DPL. The members each have to grant a free license to all other DPL members for their patents. However, if you do not have a patent, you can still join this community. If you do get a patent in the future, you must guarantee a license to the other community members.
DPLs come as a benefit-for-all solution. All members of the community get a license for free to any patent in the network. You can still sue a non-member for infringing on your patent.
Perform Freedom To Operate Searches
Whether you’re planning to enter a new market or want to search for existing competition, a freedom-to-operate (FTO) search is vital. We also know these as clearance or infringement searches.
FTO is a search on active and pending patents around the technology of interest in a particular jurisdiction. It checks if a product infringes on the claims of any of those patents. Thus an FTO gives an insight into what technologies have received patent protection, their expiry and the patent holders. It can be very effective and conclusive to provide you with an idea of what to expect before entering a new market. It helps you identify potential threats in a jurisdiction.
Moreover, FTO searches can save you time and money in product development. If your product needs changes, you can make them before potentially infringing a patent. If it doesn’t, you can patent your product and focus development accordingly. Having performed an FTO search, the next step is to get an opinion on the search. An attorney gives a legal opinion on whether your product infringes on a patent or patent application claims. Then you can decide on how to act on the result.
Patent Invalidations
If you suspect that your product infringes on the claims of any patents, you have a few options.
1. You can approach the patent holders for licensing their patents. A patent license will give you the right to market and sell your product.
2. You can attempt to invalidate the patent. An invalidation search or opposition search aims to find any evidence of prior use of an invention. It will kill the patent by destroying its novelty aspect and making it obvious.
There are various tools available to conduct an invalidation search.
Unified Patents is an association of international members to deter NPEs. Most NPEs target small and medium businesses. Unified Patents focuses on helping such businesses take action against lawsuits by NPEs. These actions include conducting invalidity searches, prior art searches, and analytics. Patroll under Unified Patents, conducts patent invalidity contests.
Article one partners is another platform that helps in invalidation searches. It holds crowdsourcing contests to find prior art online. Contestants help invalidate patents by finding good prior art.
Conclusion
Patent lawsuits are a reality of doing business in a global world. Before getting sued for patent infringement, smart businesses can take preventive steps. This article described tactics like invalidation, patent pools etc. These are simple cost effective strategies to prevent lengthy and costly lawsuits.
These steps can help enter a new market with less challenges, and utmost preparedness.