The threat of patent trolls

On Behalf of | Sep 17, 2018 | Industry Patents And Infringement, Intellectual Property Litigation |

A patent troll, also called a patent assertion entity (PAE), is someone who wreaks havoc on legitimate companies by attempting to make money off of invalid patents. His goal is to make money from a lawsuit, not the manufacture and sale of a product.

Here’s how it works

The troll obtains a patent for an idea without the intent of ever developing that product. The troll then sues the company, or companies, that manufactures a product based on that idea, claiming patent infringement.

Big money at stake

In addition to threatening valid companies with loss of sales, as well as loss of reputation, these suits can cost the business being sued millions of dollars. Trolling can also hold up manufacturing processes for years at a time, and prevent or defer innovative products from coming to market.

In a recent case, Apple had to pay more than $500 million to VirnetX, an internet-based communications company, which claimed it held patents for the ideas for FaceTime and iMessage. The battles went on for over eight years and involved numerous suits and appeals.

In another case, which settled in March of this year, medical device manufacturers won a battle against a patent troll on appeal. Abbott’s St. Jude, Biotronik, and Pacesetter won a case against Atlas IP, the holding company of an invalid patent. The medical companies won their case because the court ruled that the patented idea was “unpatentable,” based on obviousness grounds.

Trolls often go after smaller businesses, sending them patent demand letters that accuse these businesses of patent infringement. The “accused” lack the capital and experience to respond and, instead, pay the trolls licensing fees, damages, and royalties for fear of being sued.

How is this possible?

The trolls lie in wait for a manufacturer whom they can sue. When a manufacturer finally does produce the product or a similar one, the troll files suit. Some jurisdictions lean more in favor of older laws regarding patent infringement, which allow the troll a better chance of winning the lawsuit. In the case of VirnetX, suit was filed in East Texas with a jurisdiction traditionally seen as more favorable toward older patent laws which helped VirnetX win its case.

These suits can cost the company being sued sometimes in the millions of dollars. Delays caused by litigation can also hold up manufacturing processes and progress for years.

In another patent case, reported August 2, 2018, Apple was ordered to pay a patent troll $145.1 million. The patent troll is a Canadian company call WiLan which holds over 10,000 patents. By definition, this company is a patent troll as they have no plans to produce the products they patented, which in this case involve use of wireless technology. WiLan’s CEO was quoted as saying any products that use wireless technology would be infringing on their patent rights. Apple plans to appeal the verdict.

What can be done?

An experienced patent attorney can employ cost-effective strategies, including litigation strategies, to deter trolls from their sabotage tactics against your business, as well as preventing their attorneys from pursuing a case against your company.

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