Patent Trolls and the UK
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Written on 16 December
Patent trolls otherwise known as Patent Assertion Entities
(PAE) can be described as an individual or shell company that purchase
patents with a view to extracting large sums of money via progressive
litigation on the company that is supposedly infringing the patent.
They generally don’t tend to be inventors themselves but
rather business opportunists looking to make an easy deal in the patent
market. Companies that are most often targeted are generally within the
software development and telecoms industry as the patents in this area
are generally broadly written and difficult to decipher. PAE’s will
find a target and threaten them with litigation unless they pay
royalties or licensing fees for the patent. This in turn can have a
negative effect on the economy with company’s focusing more on
litigation than on research and innovation. Defending lawsuits can be
costly especially in the U.S. where each party has to bear their own
legal costs. Companies will often choose to settle out of court,
thereby creating a very lucrative market for PAE’s. It has been
estimated that a patent lawsuit can range anywhere from a few thousand
to a few million dollars and with only a handful being able to bear
these costs they often pay out and settle in secret and quickly.
As patent trolling can be very lucrative there is no doubt
that many entrepreneurs are catching on to this concept. One such
company is Intellectual Ventures. The exact amount of patents they own
is difficult to know, however Business Insider estimated this to be
around 30,000 and was described as the “mother of all patent trolls”.
Intellectual Ventures has many subsidiary branches making it difficult
to ascertain the exact amount of patents they really own. This coupled
with many deals most likely agreed privately raises concerns as to the
extent of this activity.
The Obama administration at the White House has called for
urgent action to tackle this before it can further cripple the economy
and burden the courts any further. A notable piece of law that passed
in 2011 was the America Invents Act (AIA) designed to keep pace with
evolving technology, including making the patent system more reliable.
The AIA requires companies which are targeted to report PAE’s and in
turn this is meant to discourage trolling. However the fees recommended
are still too low and the amount of claims have continued to rise and
Further measures have been recommended by the administration
to tackle these issues, namely:
1. Patent owners having to disclose who owns the patent which
in turn may discourages PAE’s hiding behind shell companies and making
2. Make the demands public to ensure they are legitimate.
3. Allow the courts to award the losing party’s costs to be
borne by the winner therefore giving an incentive for targeted companys
to tackle PAE’s.
Currently PAE’s have not entered the UK or European markets,
on a large scale at least. However with technology and internet not
necessarily restricted demographically, the concept may soon catch on
to aspiring entrepreneurs here and/or companies here may be targeted by
US patent trolls.
In 2012 the European Parliament agreed on the patent package,
which allows for the unitary protection of patents in the European
Union, and this has subsequently been approved by 25 Member States.
Although not ratified yet, one of the key points to note in this new
reform is they have largely adopted the UK system in terms of awarding
costs. In the UK the courts have discretion to award litigation fees of
the winning party to the losing party which in some cases would be
PAE’s. This in turn should hopefully mitigate future applicants hoping
to cash in on patent trolling. As discussed above the US are looking
into instigating a similar model and hopefully deter those trolling
other companies which have been the prime factor as to why those
previously targeted rather paid out than challenged the PAE in court.
About the Author
Solicitors offer services and advice for litigation,
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are experts in commercial law with a heavy emphasis on Intellectual
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Article Published/Sorted/Amended on Scopulus 2014-01-14 13:07:46 in Legal Articles