The patent system is open to various forms of abuse. One such is practised by patent trolls (often more formally referred to as patent assertion entities – PAEs – or non-producing entities – NPEs).
A classic patent troll is a company that obtains a patent (or often multiple patents) without doing research and development itself, for example by purchasing them, and without any intention to exploit the technology itself by manufacture or sale. The troll then approaches firms that are already established in the marketplace with a threat of patent infringement proceedings and a demand for payment.
If that sounds to you like a legal form of extortion, we would be hard put to it to disagree. Patent trolls damage legitimate business and the economy as a whole. We regard it as regrettable that more effective measures to curb such activities have not yet been adopted by national governments. The financial demand often comes out of the blue for the troll’s victim, who has created or adopted the technology in question in good faith.
Often the technology at the heart of such disputes is computer-related. The patents used by trolls may in many cases be weak but the threat of infringement proceedings can be a difficult one for the victim of the troll to ignore for several reasons:
- the stakes for the victim may be high – a court injunction that keeps the victim out of its marketplace or forces it to adopt an inferior technical solution can cause severe damage. The troll, of course, having no real business of its own to defend, risks less
- patent litigation involves substantial cost and substantial expenditure of management time, which may – and in real cases we have dealt with actually does – outweigh the cost of a negotiated settlement involving payments to the troll
- the question of whether the patent is valid – which may well be what the case turns upon, from a legal point of view – is often open to a great deal of argument and uncertainty.
The victim is thus presented with a difficult choice between paying the troll off and standing its ground.
Conventional wisdom is that patent trolls are mostly to be found in the United States, whose court system has in some respects been favourable to this form of abuse and where trolls are able to attract capital funding on a large scale to enable them to make good on their threats to bring lawsuits. The problem has grown hugely in the past decade. Estimates of the costs of trolls to US business are in the tens of billions per annum. Many authors suggest that the majority of patent lawsuits in the US are brought by trolls.
Patent trolls have however made their way to Europe and specifically to the United Kingdom. It also seems likely that the forthcoming creation of the Unified Patent Court (UPC) in Europe will create a more attractive environment here for trolls.
At Bartle Read we have been acquiring practical experience in fighting trolls.
There are various possible strategies:
- the most direct and aggressive approach may be to apply to revoke the troll’s patent, or at least to leverage the threat of revocation proceedings to arrive at a favourable settlement
- it may be possible to “design around” the asserted patent – that is, to modify what the victim makes or what it does for its customers in such a way that the patent is not infringed
- analysis of the patent may show that it is not in fact infringed, giving the victim either a negotiating tool or the confidence simply to face down the threat
- if the commercial situation justifies it then it may sometimes be necessary to stand up to the troll – refuse their demands and be ready to fight a court action if necessary. Statistics suggest that standing up to the bully is often a successful approach.
The decision about which approach to take should in most cases be informed by a careful analysis of the legal position – (a) is the patent actually infringed and (b) is it valid – which are issues at the heart of our professional expertise and experience. A firm view on these questions may make it easier to stand up to the troll with confidence.
It is encouraging in this context to note that of all the possible outcomes of a patent case in the UK, revocation of the patent is the most common by some margin. The fact that the patent has been examined and granted by a Patent Office should not be taken as a strong indication that the patent is actually valid.
The threats made by patent trolls generally include a response deadline. If your firm has been contacted by a patent troll or requires advice on the subject for any reason, professional advice from an IP specialist should be sought at an early stage, in order to settle your strategy in good time. We will be delighted to advise in a free initial consultation. Please contact us.