21 Nov Patent enforcement: What you don't know might hurt you
This is part one of a two part article. The next installment covering the enforcement tactics and proactive measures to take will appear next week.
You or your company may have no patents and, generally, little perceived need to be concerned with patent matters. However, there is a growing group of entities that consider enforcing patents to be a main or significant source of revenue. As a consequence, more and more businesses have to be concerned with patent matters.
In the past, most patent lawsuits involved competitors, each making and selling products containing proprietary technology into the same market suing each other. But patent enforcers often sue retailers or end users of products or technologies, not the manufacturers. In addition, patent enforcers often do nothing other than buy or otherwise procure patents.
So, the classic scenario has changed. Patent owners are suing purchasers rather than manufacturers or direct competitors.
End users often have no involvement in the creation of the technology that is alleged to infringe, don’t know the details of how the technology or products they use or sell work, and lack the technical or legal savvy to defend against infringement allegations. In addition, many end users have found that they do not enjoy legal warranties or indemnities concerning infringement. Even when they are fortunate to enjoy warranties or indemnities, end users and retailers may still have to spend time and money to defend themselves against or settle patent infringement claims.
When first presented with that upside-down scenario, many defendants are confounded. Regardless, use of this relatively new enforcement model is likely to grow. Buoyed by successful licensing and enforcement programs of Jerome Lemelson and others, patent enforcers see many possibilities for generating revenue.
Patent fundamentals
The U.S. and many foreign countries do not require an inventor to actually build or implement his or her invention. An inventor need only create a design. Patents issued on designs are sometimes referred to as “paper patents,” because the inventor never builds a prototype before filing the patent application and may never actually build a product or implement a process embodying the invention.
In some cases, the inventor may not have any intent to sell products or services that implement the patented technology. As a consequence, the issuance of paper patents can lead to situations where inventors invent patents rather than patent inventions. As a result, even though the patent system is based on the premise that in exchange for making his or her invention public and free to all once the patent expires, there are instances where the inventor may not have contributed all that much to the accumulated knowledge of mankind.
For the most part, the issuance of paper patents is not a problem. Many paper patents contain viable designs and contribute to the art. Further, most inventors obtain protection only for what they have contributed to the field. If the contribution is small, the patent is usually narrow. Also, most inventions never achieve commercial importance. Thus, the patents that cover them are not significant. However, whether a paper patent or not, some patents are broad enough to cover widely used technology. As a consequence, those patents are incredibly valuable. Further, some patents issue in error. Thus, some patents can create havoc in an industry.
The patent statute states that “[e]xcept as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention … infringes the patent.” There is no requirement that the patent owner make or provide a product or service embodying the invention. Nor is there any requirement that the infringer make the infringing device. In simple terms, a plaintiff must prove just two things: ownership of the asserted patent and that the accused device or process (regardless of who made or designed it) is covered by at least one claim in the patent.
However, until recently most patent lawsuits involved a plaintiff company practicing an invention suing a competitor who was making and selling a product or service thought to infringe the patent. Retailers and end users were rarely sued even though their activities may have constituted infringement. Many patent owners do not sue end users because those users are either current or potential customers. It rarely makes sense to sue the entities that buy your goods and services.
In addition, large scale licensing of patented technology is a relatively new phenomena. In the 1980s, companies such as IBM, AT&T, National Semiconductor, and others began to successfully license their patent portfolios on a relatively large scale.
Lemelson actions fostered change in approach
Those activities demonstrated how patents could be licensed broadly. By the 1990s, Jerome Lemelson had started an enforcement campaign against hundreds of companies, asserting that his patents covered such ubiquitous technology as bar coding. Most companies settled with Lemelson.
Regardless of the merits of any particular case, taking a license or entering a settlement was often cheaper than litigating the matter. Settlement also provided an assurance to a defendant that it would be able to continue an on-going business activity important to its commercial success. As his enforcement activities continued, others quickly noticed Lemelson’s success.
Knowing that patent lawsuits can be very expensive and have devastating effects (e.g., an injunction) on a losing defendant, and having seen the success of other enforcement efforts, some individuals started companies with the sole or main purpose of finding patents of broad (or purportedly broad) applicability and then enforcing them against entire industries.
There are some other consequences of that model. First, since they don’t manufacture or provide any products or services, patent enforcers are generally not interested in a cross-licensing arrangement, where the defendant licenses its patent or patents in exchange for a license to the plaintiff’s patent or patents. Second, long-term business relationships and other commercial considerations are not always important to patent enforcers, because they are generally not, other than by enforcing their patents, participants in the marketplace.
Part two of this article covering the enforcement tactics and proactive measures to take will appear next week.
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.