In the Wake of Apple V. Samsung: Is Patent Litigation On The Rise?7:00 AM EST Tue. Aug. 28, 2012
With all the attention recently being paid to the lawsuit Apple won Friday against Samsung and the separate, still-pending Motorola Mobility case against Apple, there's no hiding from patent infringement claims. And, those lawsuits seem to be cropping up with increasing regularity. Perhaps getting the most attention are the ones involving major players, like Apple and its wars with Motorola Mobility and Samsung, but smaller companies, too, are affected, both directly and indirectly. With so much on the line -- Apple could lose the right to sell iPhones in the United States, for example, if Motorola prevails -- it begs the question: Are such suits frivolous or legitimate?
"While the intent of patents is to spur innovation by encouraging inventors to share their knowledge in return for a period of exclusivity, the reality seems to suggest that companies are substantially increasing their portfolios to arm themselves with tools to assert against competitors or as a response against those who initiate claims against them," said Birch Stewart Kolasch & Birch partner Quentin R. Corrie. "Have the stakes become so high and the competition so fierce in certain industries [electronics and pharmaceuticals, for example] that the protection afforded intellectual property is now only available to elite Fortune 500 companies?"
It's also likely that there's more intellectual property (IP) litigation because patents for technologies that depend on the Internet were filed in the late 90s and early 2000s and were then issued in the last five years. Today, as new software and devices debut at a rapid pace, those patents are being tested in court. And sometimes, on-lookers scratch their heads and wonder how something as seemingly mundane as a finger swipe, for instance, can be patented.
"One thing I hear a lot is the sense that many companies are suing for infringement on patents that should never have been received in the first place, because they are for methods of doing business that were really very well known," said Joel Rothman, an IP attorney with Arnstein & Lehr in West Palm Beach, Fla. "How can they have these powerful patent rights when it's something being done for a long time?"
In reality, Rothman said, claims to originality are litigated extensively in patent infringement cases. The court recognizes that often there are many different ways to perform a certain task. If the defendant can prove development occurred without infringing a patent, then the defendant is likely to go to court to prove its case.
"When a patent owner seeks to enforce the patent, it's always been the case that the alleged infringer wants to fight or cut a deal; that's no different if you're discussing Internet technology or a better mousetrap. [The parties] need to determine if it makes more sense to fight," Rothman said. "Litigation is scary often, but risks are manageable. Typically, we do a cost-benefit analysis and see if it makes sense to do a licensing deal."
NEXT: Apple V. Samsung: Analysts Surprised No Agreement Was Reached
In the Apple suit against Samsung, Rothman of Arnstein & Lehr said he was surprised that the two parties hadn't come to an agreement earlier. Other IP experts agreed, noting that such monumental cases often end with no clear winner.
"There is no mandate for Apple and Samsung to reach an agreement," said U.S. patent agent D'vorah Graeser, CEO of Graeser Associates International. "Apple and Samsung could easily each obtain a Pyrrhic victory, in which neither can sell all of their existing products as they are but must instead change them to accommodate the patents of the other side -- with the consumer clearly losing out."
Although trials may seem frivolous and lengthy at times, bringing these disputes to a judge and/or jury is a better option than government intervention. The optimal solution, noted Graeser, would be driven from within the tech industry.
"The industry needs to decide that it is better to cooperate on at least some levels. Currently, each company seeks to dominate the others with regard to cellular telephone," Graeser said. "Standards bodies, such as the IEEE, show that it is possible to cooperate for the mutual benefit of all industry players -- but this has to be an outcome desired by the industry itself."
Years ago, antitrust suits were all the rage, said Rob Becker, co-chair of the Intellectual Property practice and chair of the Patent Litigation and Prosecution practice at Manatt, Phelps & Phillips, and today it's patent infringement cases in the spotlight.
"One thing I've noticed is that this is a pendulum. For a bit, decisions are favoring patent holders and then they go the other way," said Becker. "It's a delicate balance where we protect rights, but not [too much], so that we don’t stifle innovation."
The dilemma is a double-edged sword. If patents are too broadly defined, companies will shy away from investing in research and development, fearing their work will put profits in the coffers of competitors. But, too narrow of a definition means similar innovations will be patented, resulting in more litigation and fewer licensing deals. Both result in less incentive to innovate.
The ultimate patent infringement penalty is an injunction, whereby a company can be prohibited from conducting specific business. In Apple v. Samsung, Samsung could have been barred from selling its Galaxy Tab in the United States. However, the jurors did not find that Samsung's Galaxy Tab 10.1 tablet PCs infringed on Apple's iPad design patent.
NEXT: How Solution Providers Can Safeguard Patents
Sometimes the plaintiff wins partially: Becker, of Intellectual Property and Manatt, Phelps & Phillips, pointed to the eBay v. MercExchange case in 2006, which determined that unless a defendant is a direct competitor, the plaintiff is unlikely to secure an injunction. "That was a big deal, because that threat used to be the big hammer. The pendulum swung against plaintiff." In the eBay case, MercExchange owned the patent covering the retail site's "Buy It Now" function.
For solution providers that develop applications and write software, it may seem like a jungle out there. Patent trolls are lurking, waiting to pounce on the hapless soul who unwittingly infringes a patent. To help safeguard against such trouble, Becker offered some tips:
Avoid the Drama
1. It's easy to do research and see what sorts of lawsuits are out there; so many people are accused of using the same patent. You can also hire a search firm.
2. Note that it is difficult to do a patent search to see if you're free to operate. Often, the only option is to move forward and wait for a cease and desist letter. If it arrives, and if you desist, the issue goes away. Many companies opt to monitor the situation, waiting to see if another company goes to court with the plaintiff. Should the defendant win, you can start up again, and you've saved the cost of a trial.
3. Go to the patent office and look at the patents of your competitors. Learn who are the most litigious. Forewarned is forearmed.
PUBLISHED Aug. 28, 2012