NPEs
of accused infringers per action, nor is it likely to strengthen its generous interpretation of the ‘domestic industry’ requirement.
So, how do NPEs acquire their patent rights? Te answer is quite interesting. Some companies have formed with the goal of attracting finance to purchase patents from others, in order to enforce them against accused infringers. Very few, if any, obtain patents solely from employees who create new inventions.
A case study
A company that has attracted a great deal of
attention is Intellectual Ventures (IV).
Characterised as an NPE, IV was founded in 2000 by Nathan Myhrvold and Edward Jung, former Microsoſt chief technology and architect officers. IV has aggregated some 35,000 patents and applications in diverse fields such as life sciences, medical devices, semiconductors and computer soſtware. It holds the fiſth largest patent portfolio of any domestic US company, and is armed with billions of dollars from many large companies such as Apple, Google, Sony, Microsoſt, Nokia, and German soſtware firm SAP AG.
Despite accumulating this incredible number of patents, IV filed no patent infringement lawsuits until 2010. Tis changed when, as reported in the January/February 2011 issue of World Intellectual Property Review, “the sleeping giant (IV) armed with its multibillion dollar war chest … awakened with a roar”. IV filed three patent infringement lawsuits against nine defendants, including Symantec, McAfee, Trend Memory, Hynix Semiconductor, Altera, Microsemi, and Lattice Semiconductor.
IV had a good year in 2011, signing patent licensing deals with a host of companies, including American Express, Samsung, HTC, RIM, Pantech, SAP, Micron and Wistron. On November 8, 2011, IV announced a patent agreement with LG Electronics. Since then, IV’s assets have further appreciated.
Despite IV’s great efforts to encourage accused infringers to take a licence from it, a number of such companies have resisted. On July 11, 2011 IV sued memory chip makers Hynix Semiconductor, of Korea, and Elpida Memory, of Japan, in the US District Court for the Western District of Seattle. It also named accused infringers of patents covering various computer applications and devices as defendants. Tese included Acer, Adata Technology, Asustek Computer, Asus Computer, Dell, H-P, Kingston Technology, Logitech, Pantech Wireless, Best Buy and Wal-Mart.
On October 6, 2011, IV brought a patent infringement action against Motorola in the US District Court of Delaware, alleging infringement of six IV patents by Motorola’s products such as its Atrix, Photon 4G, Milestone, Triumph and Brute i680. Google, an investor in IV, acquired Motorola’s Mobility mobile phone division, which placed it on both sides of this particular dispute.
Ten, on October 26, 2011, IV filed a patent suit against Nikon and its US and Japanese affiliates in the same court, alleging infringement of five patents relating to image editing, image sensor fabrication technology, touch screen methods, and a virtual reality camera.
Te parade of patent lawsuits continued in February 2012, when IV filed a patent infringement lawsuit against AT&T, Sprint
and T-Mobile, alleging
infringement of 15 patents covering a variety of mobile technologies, such as message transmission between mobile terminals, mobile service blocking and network customer service access. As reported on February 16, 2012 in
PCMAG.com, Melissa Finocchio, the chief litigation counsel of IV, said in a statement: “We previously attempted to discuss licensing options with each of these companies, but none was responsive.”
NPEs have come under attack from many quarters. IV is not your typical NPE. Most have not acquired the same magnitude or high quality of patents. Te typical NPE has increasingly become the target of companies accused of patent infringement or who see themselves as potential targets. In large part, the patent bar has seen NPE activities as reckless and distasteful, especially when they have filed meritless lawsuits.
Te courts are not afraid to award sanctions, such as attorneys’ fees, to meritless lawsuits, and when the requirements of Rule 11 of the Federal Rules of Civil Procedure have not been met. Many legislators have come to view NPEs as an enemy
46 World Intellectual Property Review Annual 2013
Paul J. Sutton, with a juris doctor degree, an ‘AV Preeminent’ highest Martindale-Hubbell rating, and four decades of IP law counselling and litigation
strategy experience, was
honoured by Super Lawyers magazine, and is listed in Strathmore’s Who’s Who. He is adjunct professor of law at the Polytechnic Institute of New York University. Prior to practising law, Sutton was a member of the team that designed the Apollo Saturn third-stage booster rocket structure, which carried the first US astronauts to the Moon.
www.worldipreview.com
“IN LARGE PART, THE PATENT BAR HAS SEEN NPE ACTIVITIES AS RECKLESS AND DISTASTEFUL, ESPECIALLY WHEN THEY HAVE FILED MERITLESS LAWSUITS.”
of US business and commerce, and a threat to practising entities. Tis is best evidenced by the AIA, which was signed into law by President Obama on September 16, 2011.
Among the new law’s aims is to prevent situations where large numbers of small defendants who have been sued decide that a token payoff is less trouble than mounting a defence. Accused infringers may not be joined as defendants in one action, based solely upon allegations that they each have infringed the patent(s) in suit. Plaintiffs must initiate a single filing for each individual defendant, thus increasing plaintiffs’ costs and making settlements more likely. Increasing NPEs’ costs of litigating is but one of many strategies being implemented.
Time will tell whether the attacks upon NPEs will be successful. Te assault will certainly increase their business costs. I expect to see increasing instances of courts sanctioning them for meritless claims. I also expect to see awards of attorneys’ fees against NPEs where they are unsuccessful in litigation.
Whether investors will continue to find their business model attractive is an open question. One thing is for certain: NPEs will feel increasing pain in the future.
Paul J. Sutton is a founding partner of IP boutique law firm Sutton Magidoff LLP. He can be contacted at:
paul@suttonmagidoff.com
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