Interactive SOFTWARE PATENT LIABILITIES
Software patent claims and the risks to service availability
As the public cloud services market continues to mature and grow – up from $178bn in 2015 to $209bn in 2016 - the concentration of computing resources into cloud data centres is increasingly attracting the attention of NPEs as a target for patent litigation.
At a time when data security and privacy risks are front of mind for cloud service providers (CSPs) and their users, the intellectual property (IP) risks to cloud service availability posed by NPE patent claims are rising up the business agenda.
Richard Kemp Founder of Kemp IT Law
Richard Kemp is widely recognised as one of the world’s top IT lawyers and has 30 years’ experience in the industry. He has built an outstanding reputation for advice that combines commerciality and client service with innovative legal solutions to the business challenges of technology development, deployment and regulation.
NPEs (Non-Practising Entities) are businesses that assert patents through litigation to achieve revenues from alleged infringers without practising or commercialising the technology covered by the patents they hold. NPEs are uniquely well placed to monetise their patents at each stage of the litigation cycle. Tey have access to capital and all necessary forensic and legal resources; and an NPE doesn’t practise its patents so is immune to a counterclaim that a defendant might otherwise be able to bring against a competitor, or a cross-licence that the defendant could otherwise offer.
NPEs’ activities may attract attention as arbitraging the patent system, but that is to miss the point: the defendant in a patent claim brought by an NPE generally has an unattractive real-world choice between the cost and distraction of litigation and the cost of settlement which, whilst low in relation to likely litigation costs, is high relative to the perceived merits of the claim.
P62 NEWSWIRE / INTERACTIVE /
247.COM
Although the number of patent litigation cases filed in the US has declined from a high point of 6,500 in 2013 to 5,600 in 2015, this is still almost double the 3,000 or so launched in 2009, and correlates fairly steadily over the last few years at around two per cent of US patents granted. With claimant success in US jury trials running at over 70 per cent and legal costs and time-to- trial (two and a half years on average) increasing, PwC in its 2016 Patent Litigation Study notes that ‘NPEs still carry a big stick’, with damages awarded in NPE cases three times greater than for other claimants.
According to the PwC report, software ranks in the top five US industries for patent claims, with NPE claims accounting for half the total. Whilst recent US cases have made it more difficult to patent and enforce computer-implemented inventions, cloud-based software patent litigation is increasing: NPEs appear to have doubled down over the last five years, acquiring more cloud patents for their armoury as well as filing more patent cases.
From the NPE’s standpoint this makes sense. Claiming that software in the CSP’s PaaS (Platform as a Service) or IaaS (Infrastructure as a Service) infringes the NPE’s patents can be an efficient way to threaten alternative objectives:
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