Login or signup
36
LEGAL ISSUES

In Patent War, Questions About Who's Who
 

A federal case shows that not all non-practicing entities are patent trolls, and many could have legitimate complaints against large companies.

Advertisement

Small companies aren't the only ones that find themselves in the cross-hairs of patent infringement cases.

Big companies can get caught up in them too: As Tuesday's decision by the U.S. District Court for the District of Delaware to hear Intellectual Ventures v. Motorola Mobility affirmsAt issue are three smartphone patents owned by the private partnership Intellectual Ventures, which it says Motorola Mobility, a unit of Google Inc. with plenty of its own patents, has allegedly violated.

The legal merits of this case aside, the attention it's getting in the media and among legal experts alike speaks to the disjointed patent system today. And while the most hotly disputed cases tend to involve small companies that have allegedly infringed on patents, the whole system seems untenable these days. That's particularly true as many so-called non-practicing entities buy up dormant or unused patents with no other goal than to engage real companies in lawsuits.

But attorneys not associated with the case say the overly-litigious environment surrounding patents has been partially engineered by large companies with their own interests. They add that the milieu isn't good for companies with legitimate patents, particularly as Google and other large companies throw their weight behind legislation favoring patent reforms.

Extended litigation, bad for business

The Intellectual Ventures suit has the potential to be like Jarndyce v. Jarndyce in Dicken's Bleak House--stretching on for generations with everyone involved forgetting the original complaint--because of the deep pockets involved on both sides. Even so, the case shows how complicated patent infringement cases can be, with a wide gray zone.

The Supreme Court has a roster of patent suits to work out this year, although it dispatched one case last week without comment. Meanwhile, Congress is considering legislation that would make it harder for so-called patent trolls to prevail. That's great for startups that might otherwise be forced to settle costly patent infringements suits, rather than opt for extended litigation.

Still, not all patent experts agree Intellectual Ventures is a troll, nor do they think that such non-practicing entities are necessarily bad.

"If a patent owner has a legitimate claim of patent infringement, that patent owner has a right to seek compensation in court, regardless of whether the patent owner is a Fortune 500 company, a university, an individual inventor, or someone who saw the inherent value in a piece of intellectual property and purchased it," says Brad Caldwell, a principal at Caldwell, Cassady & Curry in Dallas.

Big lawsuits, no problem

Co-founded in 2000, Intellectual Ventures is run by Microsoft's former Chief Technology Officer Nathan Myhrvold. It owns the rights to tens of thousands of patents, reviews about 35,000 new ones each year for potential acquisition, and has billions in the bank for purchases.

Intellectual Ventures has certainly been fearless about filing suits against large companies, which it often wins. In 2008, for example, it forced Cisco and Verizon to pay between $200 million and $400 million in licensing fees for its patents.

Google's role

For its part, Google has also mounted a rigorous offensive against suspected patent infringers.

The tech giant has been involved in patent litigation with Microsoft and Apple over Google's Android operating system. Additionally, Google's recent acquisition of Nest Technologies has raised concerns because Nest Labs, which sold for $3.2 billion, comes with its own patent portfolio. That company could serve as a patent acquisition arm for Google as it pushes into the home network market.

"Everyone now is so anti-enforcement, and if you are not the original patent owner, and you file a suit, it's kind of a presumption that you are a patent troll," says Corey Donaldson, an associate attorney at Koppel Patrick Heybl and Philpott in Los Angeles.

Other experts worry that in the fever to reform patent law abuses, small businesses could wind up at a disadvantage when they need to bring their own patent infringement suits to court.

"The patent system originated to provide an incentive for people to spend their time and money innovating," Caldwell says. "That goal of advancing the state of the art is achieved when good inventions are created and taught to the public, whether or not commercial realities put the inventor, or subsequent owners, in a position to compete in the market."

IMAGE: Getty
Last updated: Jan 22, 2014

JEREMY QUITTNER is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.
@JeremyQuittner




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Comment and share features
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: