Patent trolls: How UK start-ups and tech firms can avoid them

Perhaps the biggest cause of headaches for major tech vendors are ‘patent trolls’ who accuse a business of infringing their patent. We take a look at some major cases and ask law expert Daniel Glazer how to avoid being sued…

Type ‘patent troll’ into Google and you’ll find thousands of bizarre articles, including several big stories going live each day.

“How Apple lost $533 million to an 8th-grade dropout patent troll,” reads one.

“Patent troll claims to own Bluetooth, scores $15.7 million verdict against Samsung,” says another. Then there’s the following: “Symantec must pay $17 million to world’s biggest patent troll.” 

These are just three I picked which have all happened in 2015.

So firstly, let’s understand what a so-called patent troll actually is. Daniel Glazer (pictured below), partner at US law firm Fried Frank online, describes them to PCR as “non-practicing entities that typically make money by amassing a number of different patents, and then using legal action or the threat of legal action to obtain licensing fees from businesses”. 

“Patent trolls generally use the risk of incurring the time and financial cost of legal action to obtain monetary settlement from companies they target,” he says. 

Research shows this type of litigation has cost investors an estimated half a trillion dollars (£775 billion) since 1990. So how do these patent trolls actually win the lawsuits? One particular case that caught my eye was the Rembrandt Wireless Technologies LP vs Samsung case settled earlier this year.

A Texas federal jury awarded won $15.7 million to Rembrandt IP over two of its Bluetooth patents, which Samsung apparently infringed with its Galaxy S phones.

Samsung has even reportedly spent almost $1 million (£645,000) on local projects to appease the community in Marshall, Texas, where the case was held – like opening a branded ice skating rink situated right in front of the court house.

In a separate case earlier in May 2015, networking vendor Cisco was ordered to pay around $64 million (£41 million) to Commil, a holder of a patent for a method of implementing short-range wireless networks. But it won’t be getting the money just yet, as the court said it needs more proof that the defendant (Cisco) knew the acts were infringing – sending the case back to the US Court of Appeals.

While Samsung declined to comment on its case, and Cisco was unable to answer some of our questions, it did offer PCR the following statement: “The federal circuit’s ruling vacating the jury verdict in this case still stands. This decision simply eliminates one of many strong defences available to Cisco and we look forward to the retrial of the case.”

Cisco has also joined a coalition of different businesses, United for Patent Reform, who are working together to ‘fight wanton abuse of the patent litigation system by patent assertion entities (PAEs)’.

While a lot of these cases against tech giants tend to take place in America, there are plenty of reports of smaller-scale patent trolls in the UK. And as it can cost up to around $5 million (£3.23 million) to defend a patent suit, any firm would want to avoid such a scenario – especially a tech start-up who might not be able to afford such fees.

However, Glazer adds: “Startups in the UK looking to expand to the United States should be mindful of the risk – but also not be discouraged by headline-grabbing worst case scenarios.

“To mitigate patent troll risk when doing business in the US, a startup can consider doing business through a US subsidiary that has limited assets that might be of interest to a patent troll. In other words, make yourself a relatively unappealing target. A startup also can consider taking out insurance against the threat. 

“If the startup has been served a lawsuit, it should go straight to an experienced lawyer to formulate a strategy – patent troll disputes very quickly can get complicated and expensive.”

Glazer also advises firms to take basic tax advice, protect their key IP through patent and trademark filings, confidentiality agreements (for trade secrets), and employment and contractor agreements that assign developed IP to the company, as well as talking with a patent lawyer to discuss your invention, though he
reminds firms that “obtaining a patent can be a lengthy process, with some taking up to five years to issue after the initial filing”.

Things may also be looking up for tech firms in the future. Federal courts are now making it much harder for patent trolls to sue over the more unclear ideas, and in 2014, the amount of new patent cases filed in US courts fell 18 per cent to 5,020 (the first decrease in five years).

But judging from the sheer number of articles on patent litigation online today, those trolls aren’t going anywhere just yet.

Image source: Shutterstock

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