Patent Trolls, Your Time May Finally Be Up

Patents are a valid protection against intellectual property theft. They are granted by the relevant authority on behalf of a sovereign state: for example, the US Patent Office in America, and the Patent Office in the UK. Once granted, patents assign exclusive rights to the assignee (inventor) for a limited period (usually twenty years) from the award of the patent.

This is a very strong protection of the inventor of a thing, as it prevents other, more established players from copying their ideas without licensing it. It is a valid and correct way of dealing with the protection of Ideas.

Unfortunately, over the last twenty years or so, the system has appeared to have begun falling apart and harming the very innovation that it was supposed to protect. Companies have sprung up that have a business model of buying up patents from dead companies and then suing other companies for infringements. Why do these people and companies chase these cases? Well, the rewards can be large for the victor and very damaging for the losing party.

Trolls v Patents
Trolls v Patents

The scourge of the patent troll appears to be more prevalent in the US than in Europe. This is most likely because in Europe, there is a precedent that the loser of a case will pay not only damages but also the costs of the winning side. This obviously increases the risks for the plaintiff significantly.

Until recently, the US used what is termed the “American Rule,” which provides that each party is responsible for paying its own attorney’s fees and costs. This lowers risk, and with the prevalence of paid corporate lawyers, it has made the task of patent trolling a relatively cheap and risk-free adventure for the unscrupulous. It also favors those attempting to stifle innovation and thereby protect their incumbent market by shoehorning patents to kill those ideas that are disrupting their market. See my recent post for an example.

However, the US Supreme Court, coupled with the US government, is attempting a fight back to make such vexatious claims more expensive and less lucrative to the plaintiff. In the cases Octane Fitness, LLC v. ICON Health and Fitness, Inc. and Highmark Inc. v. Allcare Health Management System, Inc., it lowered the threshold for awarding the costs of the winning party to the costs of the losing party. This means that the court can now make the losing party pay not only damages, but also the court costs and attorney’s fees of the winning party. Considering that a large majority of cases move to an appellate or even supreme court, these can be considerable.

The biggest change to patent law has come about with the recent decision in Samsung Electronics Co., Ltd., et. al. v. Apple Inc. In this case, Apple sued Samsung for infringement of its design patents (for size, shape, look and feel, etc.) The core point of law being argued in this US Supreme Court case concerned the amount of damages that were due to Apple. Samsung was not disputing the result of the appeal; it was just requesting a ruling on the way damages were to be awarded. Remember that Samsung was on the hook for almost $1 billion in damages to Apple.

According to Case Collard, a partner at international law firm Dorsey & Whitney, who focuses mainly on intellectual property disputes:

“The Supreme Court has given Samsung a slight reprieve. This decision was only about damages, so Samsung’s liability for infringing Apple’s patents still stands. But now, the…award will likely be much less…. [My emphasis.] The Supreme Court’s decision brings damages law for design patents into line with the damages law for utility patents. No longer can a patent holder get all of the profits from the sales of a product infringing a design patent. Instead, they may recover the profits attributable to the infringing feature. Design patents are an often-overlooked tool to protect IP. While they are still very valuable, this decision reduces slightly the advantages of a design patent by limiting the amount of damages that can be recovered.”

Why Is This Important?

To understand this fully, you need to know the difference between a design patent and a utility patent in US law.

A design patent relates to the look and feel of an invention; a utility patent relates to the functional aspects of an invention.

Now we need to understand why design patents have had more stringent damages applied. This is most likely due to the criminal concept of passing off (forgery). This is where a thing is made to look exactly like another thing to fool the purchaser into believing it is the same item. Samsung, in its attempt to make its phone look and feel like an Apple Phone, was stealing the look and feel from its major competitor.

Design patents, although not as prevalent as utility patents (utility patents make up over 90% of all submitted patents) are still a valid protection method. Even though this decision reduces the damages that can be awarded for an infringement, it is a fair and balanced position. These two changes will bring a better balance to the law surrounding patents, and at the same time make it a lot less attractive for trolling.

 

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