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Blocking patent trolls threatens genuine innovators

We need to make sure legitimate innovators don't become collateral damage in the battle against patent trolls, says John-Paul Rooney.

by John-Paul Rooney
Last Updated: 25 Apr 2016

There is a real danger that some of the UK’s most innovative businesses could get caught in the crossfire if European Courts become aggressive in blocking patent trolls. Some may need to change the way they operate as a result.

In general, we can say that patent trolls exist solely for the purpose of acquiring intellectual property assets and pursuing legal action against any organisation that uses their patented technologies. They do this by suing, or threatening to sue, as many organisations as possible for alleged patent infringement. Those targeted by such claims often feel pressurised to settle rather than spend valuable resources defending themselves.

Legitimate innovators in Europe have been keeping a close eye on the activities of these so-called ‘patent trolls’ in the US and elsewhere amid growing concerns that their litigious behaviour could undermine intellectual property assets this side of the pond. News that a relatively-obscure patent troll recently targeted 70 US corporates - including the likes of Netflix, Yahoo and Pinterest – for the alleged infringement of some of its patented technology, which is used to encrypt data, has heightened the concern. Could such unsolicited litigious attacks become more common in Europe?

Before they can block patent trolls, European Courts will first have to decide what they are, and differentiating between the actions of legitimate non-practising entities (NPEs) and patent trolls is not easy.

Legitimate non-practising entities (NPEs) are similar to trolls in that they hold patents for products or processes they don’t directly bring to market. However, beyond this there is a fundamental difference in that although they develop products themselves they work closely with manufacturers, usually through long-standing collaborative relationships. They also tend to invest heavily in R&D and the development of new technologies. While they may choose to enforce their IP assets through the Courts, legitimate NPEs have a more positive role to play in fostering innovation and helping to bring new products to market.

Some of the UK’s most innovative companies are in fact NPEs and this business model tends to work particularly well in fast-moving sectors, such as consumer electronics. Some of the world’s leading fabless semiconductor developers, for example, are based in the UK and while they tend not to manufacture anything using their own technologies, they invest large sums of money in R&D and support innovation.

In Europe, fears are growing that progress towards a Unified Patent Court system could cause litigious patent trolls to step up their activity. At the moment, patent trolls face significant upfront costs if they want to sue organisations operating in different European countries. If they decide to bring a court action and their case fails, they would be required to pay court costs.

However, in the future, under a system controlled by a Unified Patent Court, patent trolls are more likely to bring a legal action if they think they may be able to secure an injunction spanning the entire European marketplace in one fell swoop. To guard against this, lawmakers in the EU are already taking steps to ensure that the Unified Patent Court can decline to award a pan-European injunction to patent trolls.

Of course it is positive that those responsible for designing the legal framework in Europe are aware of the risks posed by patent trolls and are prepared to take action to block them. However, there is a risk that some legitimate European NPEs could get caught in the crossfire and find it more difficult to operate as a result. To avoid suffering in this way, these organisations may prefer to reshape their businesses so they can’t be confused with patent trolls in the future.   

Whatever happens, it is vital that the European court system is equipped to block patent trolls, but they should also strive to protect the interests of legitimate innovators in the process.

John-Paul Rooney is a partner and patent attorney at intellectual property firm, Withers & Rogers.

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