Patent arms race

One of the speakers at the IPBusiness Congress in Amsterdam in late June was Peter Spours from TomTom.
Peter described how TomTom’s recent rapid growth has made them a target for patent suits from many fronts. (Marshall Phelps, David Kappos and others were no doubt saying ‘welcome to my world’.)
Peter then described how they went searching for patents to countersue on, and finding nothing (at all) in their own patent portfolio, identified and acquired some patents, counter-sued, and ultimately forced settlement.
So, here’s the question – should you do a full freedom to operate analysis before you sue someone for infringement of one of your own patents? If you find something (not owned by your intended defendant), should you acquire it or at least make a call about the likelihood that the third party would transfer or licence it to your intended defendant?
(Sure, the trite answer is to always be doing freedom to operate analyses and be fully aware of the patent landscape, but that is simply not practical in every situation.)

6 Comments on “Patent arms race

  1. My perspective is as a US patent attorney.  In this country, patent litigation often runs up into the millions of dollars to get to the trial stage.  For example, several years ago when I was in private practice, our client regularly got a bill for $300K monthly during the heat of discovery.  Multiply that over many months, and you are talking “real money”.
    From this vantagepoint, I believe that conducting a search for relevant patents is critical, but too often overlooked, aspect of a patent litigator’s planning. I say “litigators” here because planning for a countersuit or settlement opportunity due to the defendant’s acquisition of a relevant third party patent should be part of the litigation strategy.  If a company is going to spend the millions of dollars it typically costs to bring a patent suit, there is no excuse not to conduct a search for relevant third party patents that could be acquired by the defendant and make the lawsuit go away after substantial litigation investment by the plaintiff.  Whether to approach the owner of the third party patent will, of course, depend on the circumstances.  However, I am inclined to say not contact them because the cost of acquisition would likely go up.  Just obtaining knowledge about them may be enough, as there is great value in managing the strategic risk of litigation (whether litigation risk or otherwise) by gaining knowledge of what could happen and using that knowledge to develop and execute on litigation strategy. 
    Although the question was about third party patents, I would be remiss in not saying that I think it borders on legal malpractice for a patent litigator not to conduct an analysis of the putative defendant’s patent portfolio prior to bringing suit to get a sense of whether the defendant will be able to bring a countersuit.  The litigator should also look into his client’s business to see if there exists non-patent legal grounds for the putative defendant to bring suit against the plaintiff.  In my experience, however, the few litigators do a good job of investigating and predicting the ability of the defendant to countersue.

  2. Thanks JackieDo you agree that the need to do this varies with country and industry?  (Not really a problem at all in pharma in the US, for instance and rarely a problem in other industries outside the US.)Most definitely a major problem in the US in IT / Communications industries, though.  This reinforces the logic behind patent pools such as Allied Security Trust, What do you think?Are there other contexts in which the need to search for third party patents is much lower?

  3. Duncan, I am not sure that I would say the need to search for third party patents varies with industry or country.  Rather, the need varies based upon the sophistication of the attorney, company or company funding source on the other side.  Using your term “arms race”, one defends against an “enemy” with the ammunition that is needed. 
    If the product is a low tech consumer product, but the defendant is a large and sophisticated company, I would certainly recommend doing a search for third party patents because this defendant could have the knowledge and inclination to use an offensive patent acquistion strategy to defend against a lawsuit.  In your Tom Tom example, I expect that the folks managing this company had the knowledge to understand this offensive strategy or they had the funding to hire expensive patent litigators who recommended this strategy. 
    However, even if the technology is high tech, if the defendant or his attorney is not sophisticated or money is tight, then the offensive strategy of third party acquisition is either not going to be thought of, or if it is, they will be less able to execute on the strategy.  So, a search may not be the best way to use the litigation budget.
    On balance, I think you have to think about patent litigation as you would any other “game”.  The subject matter is less important than indentity of the players.  To use an analogy, if you are playing chess against a 8 year old chess prodigy, it matters more that they are a chess prodigy, than they are an 8 year old, right? 

  4. Thanks Jackie – great points.As you say, understanding your opponent is obviously critical as it leads to understanding how they might ‘play the game’.  However, there’s a lot more to the game than that.  There’s ‘terrain’ for example (which probably roughly equates to the rules of the game).  The rules of the game are different depending on the country you’re in and the industry.In your example, you sit down to play chess against an 8 year old, you find out he’s not a chess master, but a novice.  However, it turns out that you’re not playing chess, but  ‘go’ – and you don’t know the rules.So, to pick up the example I gave before – in pharmaceutical litigation in the US, it is all about Paragraph IV certifications and generic companies fighting for 180 days of exclusivity.  There is no point at all in acquiring other patents and counter-suing the innovator company – because of the regulatory overlay in that game.  There’s a lot more point in forcing a co-marketing agreement with the innovator, which gives the generic earlier access as an ‘authorised generic’ and allows the innovator a cut of the generic version’s sales as well.Similarly – most other jurisdictions award attorney’s fees to the winning party in any litigation.  This and other procedural factors acts as a large dampener on counter-suit based on acquired patents.  It simply doesn’t happen any where as frequently outside the US as it does within the US.There are other factors besides the nature of your opponent and the terrain but maybe this is better for a subsequent post.

  5. Hi Michael – thanks (sorry about the delay in publication of your post – there’s a second button to hit after you post your comment for it to go live.)Right.  But be careful of taking confort from this without making everyone think about it properly.

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