Friday, October 3, 2008

Inside IP Law

Patent trolls: Drain on innovation or defense of invention?

By Galen Moore, Special to Mass High Tech

Imagine you’ve developed an innovative product for a competitive market. One week after you launch the product, a lawyer contacts you. His client, a company you’ve you never heard of, claims a small but essential component of your product infringes a patent they own. Unless you settle for a licensing agreement, you’ll find yourself in court in East Texas within a year.

Depending how you look at it, you’re either learning how the U.S. patent system protects inventors or you’re face to face with a so-called “patent troll.”

Reform advocates including the Washington, D.C.-based Business Software Alliance say current patent law makes innovation industries a shooting gallery for companies whose sole business model is to acquire patents and extract licensing income from companies trying to bring products to market. But supporters of this practice say such firms are merely helping small-time innovators protect their rights.

One of the most famous cases occurred in 2006, when Virginia-based patent-holding company NTP Inc. nearly brought Canadian Blackberry maker Research In Motion to its knees with a patent lawsuit over a component of RIM’s hot-selling mobile device.

In June, California patent holder Acacia Technologies Group sued the medical device manufacturer Boston Scientific Corp. over a catheter technology. Like many patent lawsuits, Acacia’s claim was filed in East Texas, where federal court dockets are uncrowded and juries have reputations for generously rewarding successful plaintiffs.

A Boston Scientific spokesman declined comment, citing ongoing litigation. Acacia, a company that last year earned $111.3 million from patent licenses, its sole business, did not return calls seeking comment.

But this is how a patent troll preys on manufacturers, say patent reform advocates — waiting concealed like the mythical beast for opportunities to exact unmerited tribute from innocent passers-by. In most cases, the term is unfairly loaded, say some intellectual property lawyers.

“A patent troll, I think, is whoever is suing my client,” said Boston patent attorney Bruce Sunstein, co-founder of the firm Bromberg and Sunstein LLP. A more neutral term might be “patent investor.” Companies that buy patents and assert them can be a boon to the small-time inventor, who doesn’t have the resources to assert a patent alone, Sunstein said.

Without so-called patent trolls, it would be hard for inventors to get paid for their work, he said.

Moreover, large technology firms are rarely the innocent victims of patent claims, said Gene Landy, a technology business attorney with Boston-based Ruberto, Israel and Weiner PC. Most product development is accompanied by extensive patent research. If conflicting patents are out there, companies usually know about them, and they have the opportunity to negotiate a license, or design around the patent, he said.

“‘Patent troll’ is a new name for something that’s been going on for as long as the patent system has existed,” Landy said.

Some patent laws are so toothy, they provide unwarranted leverage for companies that pursue patent claims, said Emery Simon, attorney for the Business Software Alliance. That’s particularly so in high tech, he said, where one product can contain “thousands and thousands” of patented components.

The Business Software Alliance, which represents Apple, Microsoft, SAP and Cisco, to name a few, has pushed for legislation to weaken provisions that can give patent holders the upper hand in court or in licensing negotiations. A patent reform package has been winding its way through Congress, passing the House this year — but reform advocates concede a Senate version is not likely before next year.

However, recent U.S Supreme Court decisions have accomplished much of what was initially sought. For example, in 2006, the court effectively ended the practice of awarding an automatic injunction once patent infringement is proved.

If patent laws do get watered down, that could hurt the life sciences industry, which relies heavily on patents to ensure profit from its long and expensive research and development ventures, said Andy Brookes, senior director of business development at Cambridge biotech firm Biogen Idec Inc.

“It takes a billion dollars, on average, to get a pharma product to approval,” he said. “You’ve got 10 or 15 years of time invested in that — so you really need to be sure you’re going to be able to hold off copycatters for some period of time to recoup your investment.”

Without strong patent laws, it would be much harder for Biogen and other pharmaceutical companies in Massachusetts to attract investment dollars, Brookes said.

Reform advocates in the high-tech world concede life sciences companies have different interests. However, it is important to put an end to patent trolls, which do more to encourage litigation than innovation, they say.

“The question is, is it a legitimate business model?” said Simon, of the Business Software Alliance. “All they’re interested in is trying to make a quick buck by trying to monetize a patent.” Sometimes, patents held by so-called trolls are not protecting a useful invention, he said. They’re just giving somebody an opportunity to sue someone else. 

Galen Moore is a freelance writer in Boston.