How could such a problem be best addressed by a new law in the U.S.? How do you reduce the incentives for PAEs to aggressively assert their U.S. patents ?
PAEs (patent assertion entities) become a serious problem in the United-State. Many cases are brought by patent trolls in America. They abuse of the patent system and they have a… Read more
How could such a problem be best addressed by a new law in the U.S.? How do you reduce the incentives for PAEs to aggressively assert their U.S. patents ?
PAEs (patent assertion entities) become a serious problem in the United-State. Many cases are brought by patent trolls in America. They abuse of the patent system and they have a large negative impact on the US economy. That’s why Obama’s Administration invited the Congress to pass legislation to reduce the incentives and the activity of PAEs. The USPTO (United States Patent and Trademark Office) announced that they will take new measures that requires patentees to update register details to make apparent the owner. They also promote a tight examination for software and business methods patent in order to reduce the number granted with claims unclear and obvious. Finally, they will create outreach programs to provide information on how business answer to patent trolls and they will collect more robust data.
The Administration of Obama also announced a review in the practice in the US International Trade Commission in order to see if the criteria for a grant of exclusion orders has to be changed to match the criteria for injunction in District Court cases. It will make harder for NPE (Non practicing entities) to obtain some exclusion orders.
Another way to reduce the activity of PAEs that assert aggressively the US patent is that until 2012, if a business method patent in the financial sector is asserted in litigation, the patent may be put in review at the USPTO with the lawsuit likely to be stayed.
Moreover, some others legislative changes invite the plaintiffs to provide more information and details of the patent claim alleged to be infringed and to introduce some cost rules in order to put the plaintiffs at risk of paying defendant costs. Another way that is proposed is to post a bond to cover defendant’s legal fees and cost for PAEs in order to invite them to disclose the real owner and parties behind them. Furthermore, some people suggest to have a more active use of procedural rules that allow costs sanctions against some plaintiffs who bring frivolous litigation. Finally, one legislative change seeks to protect the public who doesn’t have to participate until the end of the lawsuit against the primary user or manufacturer.
But, what about the risks for patent trolling developed in Europe under the forthcoming patent package ?
Through the unitary patent package, the EU legislature intented to provide unitary protection on the European patent and establish a unified court in this area (excepted for Italy and Spain which don’t participated in the Unitary Patent sytem). However, this new system has some risks. Indeed, a Unitary Patent can be revoked across Europe by one ruling because it doesn’t required a separate revocation in each European country. Moreover, the rulings of the UPC on European Patent will only have effects in the countries for which the European Patent is designated. A a result, a pan-european injunction is a considerable hazard for companies that make their business in Europe because there is a risk concerning the seizure of the stock and the destruction of it. Then, it could lead some businesses to move their manufacturing or distribution centres to countries that are not cover by the UPC in order to keep their stock out of the reach of patentees.
This possibility of pan-European revocation is a reason why some firms will avoid Unitary Patents and will prefer European patent that are out of the UPC system. It will last until they are confident about the quality of the decision of the UPC and how this system works. Others firms might simply switch to filing national patents for certain products which have to be litigated country-by-country in the national courts. As a consequence, by staying outside the UPC area, they avoid the risk of a single invalidity decision that revoke patent rights across all of Europe. Finally, the patentees who choose to file for a Unitary Patent in the framework of the UPC system, will have to invest more time during prosecution in order to obtain stronger patents. It will lead to a shift in quality but not on quantity.
• How could the patent trolls problem be addressed in the US ?
The patent trolls problem is strongly present in the US. It consists in companies acquiring patents in order to put pressure on companies (such as Sony, Google, Research in Motion) so as to extort them money.
First, one of the faces of the problem is that allocating strong property… Read more
• How could the patent trolls problem be addressed in the US ?
The patent trolls problem is strongly present in the US. It consists in companies acquiring patents in order to put pressure on companies (such as Sony, Google, Research in Motion) so as to extort them money.
First, one of the faces of the problem is that allocating strong property rights to individual right-holders leads both higher prices and transaction costs. Therefore, the idea of a more opened, more collective/shared property would be needed, through agreements for instance.
Nevertheless, if private solutions exist to the explained problem, such as patent pools or standard-setting organizations, they might still be hard to apply to particularly large fields (e.g. smartphone production) and might prove to be limited.
Second, and as some authors underlined, the problem might not reside in the fact that patent trolls use their patents in a malevolent way, but that such power was given to them in the first place. Indeed, since they are entitled to such patents, it is hard to see how they could abuse of it : the law permits it, somehow.
Therefore, a proposal could be to put a condition on the grant and the keeping of a patent : only those (individuals or companies) who prove to use their patent in order to produce/innovate might claim the benefice of it. This way, patent trolls, which President Obama recognized himself to be nothing but creatures making money out of some inventor’s ideas without producing anything, wouldn’t be entitled to a patent protection.
Nevertheless, some may argue that such a solution would prevent NPEs (which are companies that have acquired patents but do not produce anything either) to act ; indeed, such companies play the useful role of “patent brokers” by creating links between patent producers and patent holders and might be prevented to do so because of such a solution. Still, such behavior might be included into the item of “innovation” and might therefore allow NPEs not only to continue to exist, but also to continue to act benevolently.
By way of conclusion, the way to solve the problem of patent trolling in the US might be to organize a regular and stronger control of patents, before as well as after they are granted, with special care to the criteria of innovation and production, so as to maintain the benefits of NPEs while suppressing the threats of PEAs.
• What are the risks for patent trolling to develop in Europe ?
The risk of seeing patent trolls emerge all over Europe is directly link to the recent adoption of the UPC system. It is intended to provide a single patent jurisdiction across Europe (Spain and Italy excepted).
On the one hand, a large group of companies showed the opposition to this new system through the signature of a letter stipulating that such system leads to the grant of a dangerous power to patent holders (including potential patent trolls), which consists in the increased leverage of the future patent: it will now be possible to obtain an injunction at the European level (rather than on the much smaller local level). Furthermore, the cost of defense in Europe being very high, it might discourage companies targeted by a patent troll to engage into procedure and force them to prefer a settlement with it.
On the other hand, counterarguments exist, such as the fact that patent trolling to is proper to the specificity of the US procedure and their culture of litigation. Furthermore, both the fact that Germany has already opted for a patent system that gathers features of this new system (and more specifically, the concept of bifurcation), and the fact that the German market is crucial for all companies who wish to make business in Europe, show that Europe would have been subject to that problem anyway, be the UPC system adopted or not.
By way of conclusion, it appears that Europe is under the threat of patent trolling not only because of the UPC system but also because of the German decision to adopt a similar system of patent.
Thanks (please note in relation to the last sentence that the UPC system partly follows the previously existing German model (at least with regard to the bifurcation aspect))
Jan Jirásek
To address the problem of patent Trolls, the U.S. should implement a new rule of patent innovation. It means, that a sort of commission would be created in order to tackle those patent Trolls. How? To impose a law, that ,especially in software patent sphere and business patent sphere, would control whether companies are simply holding the patents or whether… Read more
To address the problem of patent Trolls, the U.S. should implement a new rule of patent innovation. It means, that a sort of commission would be created in order to tackle those patent Trolls. How? To impose a law, that ,especially in software patent sphere and business patent sphere, would control whether companies are simply holding the patents or whether they do innovate. I think a 5-year period of non-innovation would be enough to find potential patent Trolls, who waits to start the litigation process.
This patent-trolling may results in a lower-financing of innovations which would even slow down more the innovation.
With the Unified Patent Court (UPC), the so called bifurcation would slightly diminish. However, the UPC seems to be viewed mostly positive as it ease several procedures and it unifies the whole Europe (except Italy and Spain). The unified patent paves the way for simplification of the patent process in Europe which can cause that not only the companies may become Trolls but also to enhance innovation within Europe.
Some firms own patents but do not use them to manufacture products. These are called “Non-practicing entities” (NPEs). NPEs are usually good and contribute to innovation by creating a link between inventors (patent owners) and manufacturers (patent buyers). The problem is that some NPEs abuse of their power and “threaten to sue thousands of companies at once, without specific evidence… Read more
Some firms own patents but do not use them to manufacture products. These are called “Non-practicing entities” (NPEs). NPEs are usually good and contribute to innovation by creating a link between inventors (patent owners) and manufacturers (patent buyers). The problem is that some NPEs abuse of their power and “threaten to sue thousands of companies at once, without specific evidence of infringement against any of them” to exhort them money. These kind of aggressive litigating NPEs are called “Patent Assertion Entities” (PAEs) or “patent trolls”. In the last years, patent trolls have become a massive problem in the US, starting thousands of patent litigations.
Therefore, there is today a real need to find a definitive solution to stop patent trolls. We will first examine how this problem could be addressed in the US through legislation. We will then try to find some ways to reduce the incentives for PAEs to aggressively threaten and sue companies for patent infringement. Finally, we will wonder about the threat of patent trolls development in Europe under the future patent package (including the Unitary Patent Regulation and Unified Patent Court).
Firstly, how could the patent trolls’ problem be best addressed by a new law in the US? Usually, patent trolls use the uncertainty of the scope of some patents to threaten companies. As there is a doubt about whether a patent has been infringed or not, firms prefer to settle out of court and pay fees to the PAEs, rather than pay legal costs. It is actually the case in the field of technology, smartphones, business methods or automotive. Paying these fees also means fewer resources available for innovation of new products and services. Therefore, as PAEs undermine creation (which is the aim of intellectual property rights), some changes in legislation are needed to render their activities more difficult.
First of all, the conditions for patent infringement and for patent filing (novelty and non-obviousness) in new fields should be clearly set out in legislation. A 2013 White House Study about PAEs also proposes solutions, such as “reducing disparity in the costs of litigation for patent owners and technology users; and increasing the adaptability of the innovation system to challenges posed by new technologies and new business models”. Another way would be to switch from “functional claiming” (which means claiming exclusive rights over any device that performs a given function, regardless of how that function is performed) to “means claiming” (which means claiming exclusive rights only over devices which use the same means to perform that function).
Secondly, we can think of a few ways to reduce the practice of PAEs. One of the ways to reduce the incentives for PAEs to aggressively assert their US patent i to adopt an adapted legislation includes new measures that requires patentees to update register details in a short delay, so that the owner is clearly apparent. The practice can also be limited when examining software and business methods patents to reduce the number granted with claims that are unclear or obvious. Outreach programs may also be created to inform businesses on the ways they can respond to patent trolls, so that those businesses can react fast and avoid a litigation process.
As the proposition has been made in the US, it could be useful to have a bill “aim to require plaintiffs to provide more details of the patent claims alleged to be infringed and to introduce cost rules that put plaintiffs at risk of paying defendants’ costs”. Also, if the PAEs had to post a bond to cover defendants’legal fees, they would be obliged to disclose the real owners and parties behind them. Moreover, allowing cost sanctions against plaintiffs of frivolous litigation may help to reduce the incentives of PAEs.
Finally, what about the risks for patent trolling to develop in Europe under the forthcoming patent package? The UPC aims at creating a single patent system for the whole of Europe. It most notably promises the ability to obtain pan-European enforcement of patent rights in a single set of proceedings. It also provides that the revocation of a patent by one national court leads to the revocation of this patent in all EU countries. This is where the problem could lie: PAEs could use the threat of pan-European revocation (which is much more frightening than national revocation, in most cases) against companies to exhort them money, in exchange of a settlement.
Another difficulty which could arise – even if this procedure already exists in some European countries- has to do with “bifurcation”, which occurs when actions for patent infringement and counterclaims in which its validity is contested are not heard by the same court at the same time in the same proceedings but are dealt with separately by different courts, at different times and with very different consequences (“Bifurcation of European patent litigation: a practitioners’ perspective” on IPKat). This means that an injunction for infringement could be granted by a court, even before knowing whether the patent is valid or not (open letter jointly signed by 16 U.S. and European companies, 26th September 2013). This is even more frightening knowing that the injunction will apply to all European countries at the same time.
Nevertheless, these arguments have to be put into perspective. Indeed, damages for patent infringement are way lower in Europe than in the US, which reduces the incentives for patent trolling. Another counter argument is the fact that, in the US, many cases are judged by juries (this is not the case in Europe), which adds to the uncertainty of the outcome of the patent litigation.
(“Will ‘Patent trolls’ soon appear on the European market?”, A. Strowel on IPdigit). (“Will US patent trolls soon be making their way to the UK?”, C. Thornham on The Inquirer)
Very good at the beginning.
Why do you write that “PAEs could use the threat of pan-European revocation (which is much more frightening than national revocation, in most cases) against companies to exhort them money, in exchange of a settlement”?. I suppose PAEs are threatening companies by asking for a court injunction, not a revocation, right?
De Ridder Florine et Graci Sarah
How could such a problem be best addressed by a new law in the U.S.?
Patent assertion entities (PAEs), commonly called “patent trolls” are companies that acquire many patents not to practice them but in order to pressure other companies to settle out-of-court agreements and pay fees for alleged infringement, under the treat of a costly and risky lawsuit.
In… Read more
How could such a problem be best addressed by a new law in the U.S.?
Patent assertion entities (PAEs), commonly called “patent trolls” are companies that acquire many patents not to practice them but in order to pressure other companies to settle out-of-court agreements and pay fees for alleged infringement, under the treat of a costly and risky lawsuit.
In the United States, different bills have been proposed to address the issue of patent trolls, each proposing relevant solutions.
According to Senate Republicans, the quality of the patents granted in the United States has to be improved in order to reduce the patent trolling issue. Indeed, the legal action might be abusive but often the problem is that the patent shouldn’t have been granted in the first place.
One way to achieve this result is to raise the standards of novelty an invention has to meet in order to be patented and to make sure patents are clear even in new sectors of technology. Indeed, the power of “patent trolls” is based on the confusion about the scope and the validity of their patent and the presumption that some companies will prefer to settle out of court rather than taking the risk to engage costly and time-consuming legal proceedings. Another way could be to strengthen the review process of the patents once they have been granted in order to eliminate bad patents.
The United States also should pay more attention to the abusive phenomenon of demand letter sent by patent assertion entities (PAEs) and measures should be considered in order to increase the transparency of the senders.
Finally, the legal system should be improved in order to increase transparency regarding patent trolls filling lawsuits. Usually, PAEs try to conceal their identity by creating many shell companies and by the widespread use of non-disclosure agreements.
To tackle this issue, plaintiffs could be required to provide more details about their patent claims and the alleged infringement by the defendants. Furthermore, they should be obliged to post a bond in order to cover defendant’s legal fees in the case the sued company appeared to win the trial. Cost sanctions could also be imposed against plaintiffs bringing frivolous litigation.
What are the risks for patent trolling to develop in Europe under the forthcoming patent package?
The question has been raised whether patent trolling might be displaces into Europe. No such risk is high in the United Kingdom whose patent litigation may discourage many patent trolling actions by providing that the loser of a lawsuit pays a large contribution towards the winner’s costs and that a party starting a claim then seeking to discontinue it has to pay the other side’s costs.
However, there might be a higher risk of patent trolling appearing in Germany where infringement and validity of the patent are handled in separate proceedings, and it is possible to get a finding on infringement before one on validity, which may place pressure on defendants to settle.
This also raises the issue whether the future unitary patent and unified patent court might attract patent trolls in Europe that will cover the whole European Union.
The risk to see patent trolls might indeed increase with the new UPC system because of the larger scope of the patent. Indeed, the UPC system will enable a pan-European enforcement of patent rights in a single set of proceedings. There will be a possibility for a unitary patent to be revoked across Europe by a single ruling.
In addressing the controversial issue of “patent trolls”, we will propose possible solutions to deal with the matter.
As a quick reminder a patent is an intellectual property right which excludes others from taking advantage of an invention created by its beholder without his or her authorization. And patent trolls generally refers to a patent assertion entity (PAE), person… Read more
In addressing the controversial issue of “patent trolls”, we will propose possible solutions to deal with the matter.
As a quick reminder a patent is an intellectual property right which excludes others from taking advantage of an invention created by its beholder without his or her authorization. And patent trolls generally refers to a patent assertion entity (PAE), person or undertaking that sues another person or company for infringing its intellectual property right (IPR) in order to gain huge amount of money from licencing fees. Some even refer to this practice as judicial “blackmail” because some PAEs simply take advantage of their position in order to threat companies (cf. Will patent trolls soon appear in the European market, Alain Strowel, Nov. 2013). This act can be very abusive and can lead to huge losses for the companies in various areas (economic, time loss and even negatively affects the reputation of the company being sued).
In the US, patent trolls has become a serious issue that has drawn a lot of attention and worries. Many illustrations (such as Microsoft, Google, Blackberry, Samsung and Apple cases) and lengthy explanations have already been given in the current article and many others.
But the main question remains what can and should be done on order to avoid the loss of billions of dollars due to abusive tactics of patent trolls?
Among the solutions in order to counter balance the negative outcomes of patents and effectively and pragmatically avoid the increase the amount of PAEs are improving the quality of the patents that are granted, increasing transparency and accountability.
Firstly, by delivering two distinct types of patents (A and B); one for companies who will exploit and use their invention and another form of patent for those who are not planning to use their invention. The second type of patent would have to be subject to a more open publicity because since it’s not being used, it would be more difficult for third parties to know its exists and is valid. In addition to that inventors who do not plan to use the outcome of their invention but still exclude others from its use, should settle for a less stronger protection than those who are using their invention (for instance by granting less licencing fees for the infringement of patent B or having to pay more to file for such a patent). This would reduce the incentive for abusive patent trolls which sole aim is to take advantage of other companies from attacking companies for “potential or fictive” infringements. Because they will gain less they will certainly be more vigilant.
Secondly, increasing transparency is a means that will enable companies to know about the existence of a patent, thus they will less likely be taken by surprise by an infringement allegation.
Accountability is essential because patent trolls will avoid risking serious sanctions if their action or allegation is later proved to be false, if these measures are strong enough. The ability for authorities or courts to effectively implement such sanctions is another issue raised in Paul Belleflamme’s article of November 18, 2013, The smartphone patent wars: nothing really surprising…
And what about Europe in all is?
Well the Unitary Paten Regulation 1257/2012 and the Agreement on Unified Patent Court of Feb 18, 2013, has raised a lot of concern about the outburst of huge patent troll actions as known in the US today. In addition to that there might be a fear of European member states of losing more of their control on the issue. This might explain Spain’s action against the European regulations that aim to enhance cooperation in the area of unitary patent claiming it would jeopardize the principles of legal certainty, sincere cooperation and proportionality. But the AG’s opinions, which we insist are not legally binding, rejects Spain’s perspective.
However, granting jurisdiction to the EU as a last resort control on patent proceedings, could create a platform for patent trolls to attempt increasing wealth by carelessly suing many companies before the court. But these regulations obviously took some lessons from the US’s experience.
Nevertheless, only patience will enable us to see how patent trolls will either comply or develop schemes to circumvent the restrictions set forth by the European regulations.
Today, especially in the U.S, there is a rise of patent assertion entities (PAE). We also call them « patent trolls », which are persons or companies who enforce patent rights against accused infringers in an attempt to collect licensing fees, but do not manufacture products or supply services based upon the patents in question, thus engaging in economic… Read more
Today, especially in the U.S, there is a rise of patent assertion entities (PAE). We also call them « patent trolls », which are persons or companies who enforce patent rights against accused infringers in an attempt to collect licensing fees, but do not manufacture products or supply services based upon the patents in question, thus engaging in economic rent-seeking.
Patent trolls are still legal in the US but something should be done in order to fight them once and for all. As action has already be taken at the United States Patent and Trademark Office where there have taken new measures requiring patentees to update register details promptly so that the owner is apparent. Moreover we can also notice the effort to strengthen the review process of the patents after they have been granted so as to eliminate “bad patents”, reforming the law of evidence to make it more accessible, the development of several programs to inform businesses on how they can respond to the aggressive injunctions of the PAEs and so forth and so on. The initiatives are numerous and it is also the case in the Congress and most notably in the Senate where bills have been proposed which are aimed at curbing aspects of PAE litigation conduct. It clearly shows the will of the USA to declare the war to the so-called patent trolls.
Because it is more difficult to pass a federal law in the US, the states should take over. This is what the State of Vermont did by passing a law aimed at preventing “bad faith assertions of patent infringement.” This new law « strengthens the Attorney General’s existing ability to sue patent trolls under the state’s consumer protection law and also creates a new right of action which allows a company who receives a demand letter to sue the sender in state court for damages, equitable relief, and most importantly, attorney’s fees, if they can satisfy certain elements indicating the sender of the letter is engaging in bad faith » . Several states have been influenced by this and have proposed similar bills.
Could we think to other solutions? It may be an idea to avoid jury, not familiar with those delicate issues, increasing the uncertainty on the ruling. This instability forces companies accused of patent infringements to settle instead of going in front of the courts. A complexity exception could be invoked so as to have judges with an expertise in this complex area or at least support the jury with recognized experts.
Even if this phenomenon happens for the most part in the US, there is a risk that it will soon be a problem in Europe because of the new European patent legislation with the establishment of the system of unitary patent and unified patent court. Today, patent trolls are mostly active in the US; however, the new European legislation might bring a change. The new system is intended to provide a single patent jurisdiction across Europe.
The fear of the possibility of a pan European injunction has already been expressed by multinational companies which are doing business in Europe. Some of them (16 US and European companies) even addressed an open letter on 26 September 2013 to European authorities in order to warn them about this new judicial system and to suggest some changes. Among those US and European companies, we can find Apple, Google, Microsoft, Adidas, etc. In their letter they highlight one of their biggest concerns about this new system: the bifurcation procedure. This procedure consists in dealing with an IP rights issue in two separate courts. The first one treats the validity of the patent and the other one the violation of this patent.
But would this new pan European system truly lead to a development of patent trolls in our continent?
This instauration of a unified patent court means that people won’t need to require revocation in every European country; indeed, this unitary patent could be revoked by one ruling. For some, this broader scope would lead to a leverage effect. It means that since the injunction will be effective in 13 countries, companies will feel threatened and would be more willing to negotiate with patent trolls. Nevertheless even though currently decisions can only be enforced in one single country, it is already seen as a “sword of Damocles” for companies. Therefore it is not sure that the leverage effect will be raised in the future.
Furthermore it seems a bit easy to develop a parallel between what is taking place in the USA and what may occurred in Europe since our systems are clearly different. For example, as already said, a lot of cases are judged by jury in the US which is not the case in Europe where skilled and learned judges intervene. This decreases the uncertainty of the rulings and hence weakened the bargain position of patent trolls.
The complexity of this issue raise serious questions and opinions on the concrete danger of those “patent troll” and the real risk of the new pan European patent jurisdiction are diverse among the specialists.
In September 2011, the America Invents Act passed by Congress, had already reformed the US patent law but , President Barack Obama said in February 2013 that US "efforts at patent reform only went about halfway to where we need to go".
Patents trolling is still an issue and in 2014, the Congress (mostly republicans) are thinking of another reform… Read more
In September 2011, the America Invents Act passed by Congress, had already reformed the US patent law but , President Barack Obama said in February 2013 that US “efforts at patent reform only went about halfway to where we need to go”.
Patents trolling is still an issue and in 2014, the Congress (mostly republicans) are thinking of another reform to put an end to it. The reform would “require companies sending “demand letters” to be more specific and transparent when threatening patent infringement lawsuits.”
The problem is that PAEs send demand letters to firms to threaten lawsuits in the hopes that the recipients will settle rather than pay the legal fees to defend themselves but with the reform it will be asked requirements for information that must be included in the demand letters and it cannot mislead recipients about who owns and has the right to enforce the patent, the validity of the patent and whether the recipient has a right to use the patent. The letters must also identify which patent is being infringed, how it is being infringed and contact information to find out more about the alleged infringement.(http://thehill.com/policy/technology/211116-house-republican-releases-draft-demand-letter-bill ). In Europe Patent trolling has not been a problem yet because of the rule that it is the loser that pays the costs of the trial, on the contrary, in the US each party is responsible for his attorney’s fees.
On the other hand, patent trolling has positive effect on innovation and the strategy they use are somehow legal. It is only the right given by the patent to any owner to enforce the monopoly conferred on it.Then to reduce the incentives for PAEs to aggressively assert their U.S. patents i will go in the same way as the White house as it says in its report of 2013 that ” the best approach to resolving today’s patent troll problem is not to ban firms specialized in patent assertion, but rather to reduce the extent to which legal rules allow patent owners to capture a disproportionate share of returns to investment”.
Nevertheless, we do have some changes in the judicial rules and proceedings in the US. For example, Octane Fitness, LLC v. ICON Health & Fitness, Inc.(april 29 2014) where the Supreme Court made it easier for courts to make the “loser pay for all attorney costs” rule (as in Europe), if the lawsuit is regarded as frivolous.
When it comes to Europe, with its forthcoming patent package, there is a risk to develop patent trolling but not for the same reasons as in the US.
First of all because the patent package will have effect on a larger territory and no more in only one country. Then, this unitary system could allow the bifurcation of proceedings started in two different courts that are both competent independentely to proceed with an action for infringement and with a counterclaim for revocation against the same patent.
On september 26, 2013, fifteen companies including Apple, Google and Microsoft, published an open letter to the european union expressing their concerns on the unitary patent (http://graphics8.nytimes.com/packages/pdf/business/26trolls-letter.pdf).
The risk of patent trolls in the U.S. and in Europe : a sequel to a never ending story.
1. How could patent trolls be best addressed by a new law in the U.S.?
To reduce patent trolls problems, it seems to be clear that there needs to be a legislative intervention. Following solutions have been proposed in different articles:
- the… Read more
The risk of patent trolls in the U.S. and in Europe : a sequel to a never ending story.
1. How could patent trolls be best addressed by a new law in the U.S.?
To reduce patent trolls problems, it seems to be clear that there needs to be a legislative intervention. Following solutions have been proposed in different articles:
– the plaintiffs action should be more detailed on what part of the patent claim is infringed;
– the patent assertion entities should be required to prove that they own what they are suing on before they can actually sue another company;
– there should be cost rules that put the defendants’ costs at charge of the plaintiff. This would discourage patent assertion entities from suing companies if they don’t have strong proof that there is an infringement;
– there should be new measures urging patentees to update register details so that everyone knows exactly who the owner is. Those measures would be registered at the United States Patent and Trademark Office (USPTO);
– some criteria such as those of clearness and non-obviousness should be more strictly examined when a patent application is filed;
– an effective review process of patents should exist in order to remove bad patents that have been granted.
2. What are the risks for patent trolling to develop in Europe under the forthcoming patent package ?
The new international system of UPC will have a big impact on Europe. Indeed, it will try to bring a single patent system on Europe. Patents shall no further be organized by the national rules of each county where they’re supposed to apply but they will be organized by one unitary set of rules. The UPC system will also introduce a possible bifurcation in the new European patent order. This bifurcation is when action for patent infringement and counterclaims in which its validity is contested are dealt with by separate courts and at different times. Moreover, different consequences will follow. One of the benefits of this new system is that you can now choose where to sue. This is precisely also a disadvantage if the bifurcation possibility is to be implemented: if there is an infringement action pending before a court and that the defendant makes a counterclaim on the validity of the patent before another court, there might be a decision on infringement even before that the validity of the patent is assessed. In order to prevent that, the court will have jurisdiction to suspend the marketing of the litigated product in at least 13 Member States. This is where there is a risk for patent trolling to develop in Europe. Indeed, patent assertion entities will now have even bigger means of pressure since they can now prevent a product to be developed in at least 13 countries all at once.
On the other hand, this bifurcation system does not mean that there will necessary be patent trolls in the future. Indeed, bifurcation already exists in Germany and one knows that you cannot do business in Europe without existing on the German market. However, this did not lead to the appearance of massive patent trolls.
Moreover, the fact that patent trolling exists in the United States does not mean that it will necessarily occur in Europe. The two systems are very different on many levels: i.e. procedural rules, culture of litigation, award of damages…
No matter what, if these patent trolls were to really appear massively, they would only do so in a few years since unitary patents will not be granted before 2017.
Oscar Laurent and Fayçal Benaïssa and Nicolas Hamon
The problem of patent trolls is rising and rising in the US. As the percentage of patent trolls cases has increased by 2/3 over the last 2 years, the US is willing to find solutions to solve such a problem. In fact patent trolls are very harmful for the US as it has a direct cost for firms that practice… Read more
The problem of patent trolls is rising and rising in the US. As the percentage of patent trolls cases has increased by 2/3 over the last 2 years, the US is willing to find solutions to solve such a problem. In fact patent trolls are very harmful for the US as it has a direct cost for firms that practice patents, a private cost of lost opportunities to commercialize technology and also a social cost as it reduces innovation. At the end of the day patent trolls seem to only benefit to their selfish owners. The US have now figured that out as President Obama said less than a year ago: ”The folks that you’re talking about [PAEs] are a classic example; they don’t actually produce anything themselves. They’re just trying to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them… [O]ur efforts at patent reform only went about halfway to where we need to go and what we need to do is pull together additional stakeholders and see if we can build some additional consensus on smarter patent laws”.
Therefore there is a urgent need to take action against that problem. The US will do so by enacting different measures: until 2020, if a business method patent in the financial service is asserted in litigation the patent will have to be reviewed by the US Trademark and Patent Office (USTPO); higher quality patent will be required as low quality patents lacking of details seem to be essential for patent trolls to exist; a need to create stronger sanctions against frivolous litigation that are just aimed at making benefits for the PAEs will also take effect. Another idea would be for the US to get some inspiration from the UK system where the patent trolls have a lot harder time to live for many reasons: first, the Patents courts in the UK have specialist judges at trial and appeal level that seem to take reasoned decisions where it happen in the US that cases are ruled by a jury; secondly, those courts hear validity and infringement together which makes it harder for the PAEs to put pressure on the companies after a court has figured that they were infringing a patent; thirdly, cases do not last long (12 to 18 months) where in the US Patent cases last for years; fourthly the courts have the discretion to grant an injunction on patent held valid and infringed; lastly those courts seem to determine whether or not patents are essential to technical standards. In addition we believe that there should be a possibility for the judges to assign great punitive damages if the find a patent troll in an issue.
Considering how big the “patent troll” problem is getting in the US we (Europeans) have reasons to fear it especially if the measures above-mentioned have effect. In fact if such measures are efficient the is huge risk to see the “trolls” swim across the Atlantic and come back to their original home: Europe.
In addition the “closer and closer” Unitary Patent Court seem to feared by companies victims of the patent trolls as 16 of them wrote an open letter to the European authorities to explain that those trolls need to be avoided under the new system. In fact in the UPC the patents will have way wider scope as they will have effect in at least 13 countries
The main fear concerns the bifurcation system. In fact such a system (that we can witness in Germany for example) makes the PAEs able to put a lot more pressure on the companies as the cannot put a product on the market if it has been declared infringing the PAE patent even though the validity of the PAE patent is not asserted yet by the judge. This procedure that takes palce at two independent level will be possible under the UPC in some regional division judge’s court that have been used o such a proceedure. However the Rules of procedure of the “closer and closer” UPC seem to make the system able to face troubles coming from bifurcation as the 17th draft version of the still to be adopted UPC Rules of procedure states:” Where the panel decides to proceed in accordance with Article 33(3)(b) [(article 33(3)(b) permits the bifurcation system)] of the Agreement, the panel may stay the infringement proceedings pending a final decision in the revocation procedure and shall stay the infringement proceedings where there is a high likelihood that the relevant claims of the patent (or patents) will be held to be invalid on any ground by the final decision in the revocation procedure”.
Moreover we can see on the UPC website (not a very objective source) that when asked if patent trolls are to be feared under UPC system, the website mentions factors that encourage PAEs in the US and that are not to be seen in the UPC: the cost allocation rules in court (both parties bear their own costs); the contingency fee payments for lawyers that create incentives for lawsuits; the high damage awards and risk of treble damages in the case of “wilful infringement” and the pro-patentee posture of US courts and juries. We agree on the fact that those factors are encouraging PAEs in the US but an answer telling us how the UPC will be able to face the patent trolls might have been more convenient in our opinion.
As a conclusion we feel like considering the damages that patent trolls have created in the US that European authorities as well as European judges are aware of the issue and therefore ready to face it. We also feel like we we are lucky to have the opportunity to use US as a laboratory. In fact we believe that it will be intersecting to see how well the measure that are about to be implemented will work overseas. However UPC will still have to be careful as if the measures are actually efficient there might be a shift of the trolls into our countries.
In the U.S., the « novelty » criteria for patent, is weaker than the one in Europe, for example. It means that almost everything is patentable. And if it is so, you claim a patent infringement more easily.
One of the ways, to curb the proliferation Patent assertion entities (PAE), would be change the novelty criteria. It will be better… Read more
In the U.S., the « novelty » criteria for patent, is weaker than the one in Europe, for example. It means that almost everything is patentable. And if it is so, you claim a patent infringement more easily.
One of the ways, to curb the proliferation Patent assertion entities (PAE), would be change the novelty criteria. It will be better to narrow it.
Other ways to limit the action of PAE would be:
– “To require plaintiffs to provide more details of the patent claims alleged to be infringed and to introduce cost rules that put plaintiffs at risk of paying defendants’ costs” ;
– “Or for PAEs to post a bond to cover defendants’ legal fees and costs, requiring them to disclose the real owners and parties behind them” (Source: Chris Thornham at http://www.theinquirer.net/inquirer/opinion/2288901/will-us-patent-trolls-soon-be-making-their-way-to-the-uk).
There already reactions of the Supreme Court of the U.S., “A recent Supreme Court ruling (Alice Corporation vs. CLS Bank) reaffirms a definition of when a patent is valid. The ruling states that patents must be associated with both an idea and specific concerns as to how the idea will be actionable. The decision invalidated the patents held by the Alice Corporation because they are simply based on an idea without any guidance on the transformation of that idea into an invention or innovation.” (Source: Howard Williams at http://www.forbes.com/sites/realspin/2014/08/04/the-u-s-supreme-court-hopes-to-limit-patent-trolling/).
And different States are taking actions, for example the State of Vermont has adopted a law against patent trolls. In his article, Eric Goldman has written a commentary of that law: “Vermont’s law (H.299, to be codified at 9 V.S.A. §§ 4195-4199) is entitled “Bad Faith Assertions of Patent Infringements.” However, it doesn’t define “bad faith patent assertion.” Instead, it enumerates factors to help judges distinguish legitimate from illegitimate patent assertions. Factors that suggest a bad faith patent assertion include not identifying the patent(s)-at-issue, the patent owner, and exactly how the recipient’s behavior violates the patent; demanding too quick a response or too much money; and making deceptive or meritless assertions. Factors that suggest a legitimate patent assertion include commercializing the patented invention; being either the original inventor (i.e., not having bought the patent for assertion purposes) or an educational institution; and having successfully enforced the patent in court.” (Eric Goldman at http://www.forbes.com/sites/ericgoldman/2013/05/22/vermont-enacts-the-nations-first-anti-patent-trolling-law/ ).
In Europe, the issue that may arise is that patentees will have “mixed portfolios”: the UPC system and the national one. This would lead to a sort of “forum shopping”. Many patentees, especially those with “weak patents” to sue more often and earlier than before. This situation would resemble what we have in the U.S. with PEA.
How could such a problem be best addressed by a new law in the U.S.? How do you reduce the incentives for PAEs to aggressively assert their U.S. patents? Think about some helpful changes in the judicial rules and proceedings that might help to solve the problem in the U.S.
The first way to reduce, a priori, the incentive of… Read more
How could such a problem be best addressed by a new law in the U.S.? How do you reduce the incentives for PAEs to aggressively assert their U.S. patents? Think about some helpful changes in the judicial rules and proceedings that might help to solve the problem in the U.S.
The first way to reduce, a priori, the incentive of PAEs to aggressively assert their U.S. patents would be to impose much more strict criteria concerning the infringement procedure brought by those PAEs. Indeed, they would be compelled to specify precisely their claims, the details about the hypothetical infringement and some kind of personal description of the claimant. Moreover, some preliminary research should be made in order to check if the claimant is actually the user of the patent or if it only owns it technically. In this last circumstance, a possibility to call another company (to which most of the time a big percentage of the patent revenues go) would be a way to insure that any party in interest to the litigation would effectively be part of it. This proposal also underlines the different problems related to the finding of the real owner of the patent in question. A solution would be then to set up kind of a system aimed at updating the different patent data bases in order to follow the evolution and ownerships of the patents. This would then facilitate the procedural part of the infringement procedure brought by those PAEs and then maybe enable the authorities to detect those called “patent trolls” and consequently, the abusive infringement procedures brought by them.
Another more a posteriori way, to reduce this aggressive use of U.S patents could be to sanction abusive court filings. But this would need to increase the judge’s competences in order to give them the possibility to financially condemn those PAEs or other companies to pay, for example, all the costs and legal fees of the company they have sued. By introducing this king of loser-pay rule, PAEs will think twice about suing a company for infringement as their intrinsic nature is to be financially and only financially oriented! The idea of losing huge amounts of money (we insist on the idea that the “financial penalties” must be sufficiently important to diffuse some kind of sense of deterrence) will be impossible in their eyes so that the number of infringement procedures will decrease naturally without any effort coming from whatever US authority. This solution could, in our opinion, be one of the best ways to reduce the influence of patent trolls as well as the number of abusive infringement procedures! But we should realize that the fact of being in a Common law country, based on a case by case approach and not much on rules and laws, will be a factor of “deceleration” as we will have to wait for a strong case law to be implemented and more importantly, recognized by all.
You should as well think a bit more on the risks for patent trolling to develop in Europe under the forthcoming patent package (which includes the Unitary Patent Regulation 1257/2012 and the Agreement on a Unified Patent Court of 19 Febr. 2013 (2013/C 175/01)). You should start to look at the articles referred to in the beginning of this post and the sources quoted (for instance a practitioners’ view on bifurcation). You should as well consult the 17th version (Oct. 2014) of the still to be adopted Rules of procedure for the future Unified Patent Court.
As reminded in the article, the patent trolling process has slowly pierced the sphere of European law. But it seems that the UPC agreements will remarkably accelerate this process. From the various articles which have been provided, we understand that the most pressing issue is the one of bifurcation. This process will be introduced by the agreement. It consists of a double barreled procedure, meaning that two courts can rule on one same patent infringement. This is possible because the first litigation concerns the validity of the patent while the second concerns the potential infringement of the patent. In addition, with this procedure there is a possibility of a priori prevention of the use of the patent. This implies that the commercialization of the patented product will be stopped before the courts have ruled on the issue and, most of all, it will be stopped in at least thirteen member states! Thus, we understand the fears current patent holders. At this point we can perceive the link between bifurcation and patent trolling. Indeed, as a patent holder i.e a company, having the commercialization of a product suspended for the duration of a whole trial is so harmful that the simple threat of a patent troll would make it agree to a settlement rather thant go to court. This very much resembles the way patent trolling is implemented in the US: in plane though realistic terms, it consists of taking advantage of the vulnerability of a firm, it is a real blackmail process in our opinion. Some argue that the UPC won’t prevent the firms from going for a trial because of the differences of judicial systems between the US and Europe concerning the costs of trials. However, we strongly disagree with this assertion, because as we pointed out supra the problem may be a matter of money in the US, in Europe it is a matter of time i.e. a priori control. Isn’t the implementation of various patent trolling companies the proff that it is already too late, that it the UPC agreements are indeed a threat to Europe contrarily to what counter)arguments try to assert? We see that a real problem is in the course of being set up: the UPC agreements will be encouraging patent abuses instead of protecting patent infringement!
In the US :
As it was explained by Chris Thornham, US patent trolls have become a serious issue in the United States of America. So serious indeed, that the Obama administration decided to take serious actions to overcome the dramatic ramifications of patent trolling. As a reminder, the phenomenon represents 62% of patent lawsuits in the US in 2012… Read more
In the US :
As it was explained by Chris Thornham, US patent trolls have become a serious issue in the United States of America. So serious indeed, that the Obama administration decided to take serious actions to overcome the dramatic ramifications of patent trolling. As a reminder, the phenomenon represents 62% of patent lawsuits in the US in 2012 and actually “put a drag on the economy” as the White House itself stated.
Firstly, one action would reinforce publicity measures against companies. They should now show to the administration detailed data that could help the administration to depict any forms or a start of patent trolling. In our opinion, the bill will have to work on a difficult balance between the executive power of the State and the fundamental rights of these companies : the right to conduct business. The State cannot simply go into private files containing diverse private data about people. The State could however put forward the need for public interest but it is a difficult issue here…
Secondly, several changes can be made regarding judicial rules, especially on legal costs. The principle in the US is quite simple : the loser in Court has to pay for the winner… and he has to pay a lot. This is of course what patent trolling is about : it is way to make a lot of money. Justice should no be viewed like this. It is a big problem. Justice is about putting forward your rights and being compensated proportionately because you have suffered a negative treatment. Our concern here with trolling is that the Justice is not seen as a judge but as a bag of gold. One solution is proposed by Senator Hatch : it would be required for plaintiffs to pay a bond that could be used to cover a part of the defendant’s legal cost in case of a win by the defendant. The problem is that the Republicans do not want this ; they actually want the opposite : a stronger loser-pay provision. Thus changing legal costs rules would be very difficult for the Obama administration since arriving to a consensus with republicans is very touchy and certainly difficult since he does not have the majority in the Senate.
Thirdly, an easy solution for Obama would be simply banning NPEs. He has clearly shown that he does not like the fact that these companies own without creating. We agree with him in a sense since it is very illogical to own without creating. It sounds very unfair and he does not hesitate to use the words : “extorting money”. However, Obama confesses : “We’ve got to balance that with making sure that they’re not so long that innovation is reduced”. A balance is needed since NPEs are actually contributing to innovation for the reasons you have stated above. Obama is faced with several issues. He first talks about how fast the technology is evolving and harder and harder it gets to protect citizen’s privacy. Again, a second issue that he does not mention – for political reasons for sure – is the “republicans threat” as I already explained. It is very difficult to adopt bills with two different ideologies. Republicans would first protect companies that are making profits for the State and would more likely see them as allies whereas democrats would be concerned with citizen’s protection and ready to engage a legal war against big companies. Compromises will have to be made…
In Europe :
Recently, an article in the Belgian newspaper “La Libre” published, on October 19, 2013, an article called “Will patent trolls soon appear on the European market?” Journalists wondered if the future UP Court might attract “trolls” in Europe and said that “the risk is not negligible”. In this second part of the essay, we will analyze the potential problems and risks that might appear in Europe regarding the patent trolling trends.
Per se, patent trolls strategies are legal, because it only consists of the right that is given to every owner to ensure respect of his utilization monopoly over the product that is conferred to him with the patent. But the problems with patent trolling is that some companies abuse of their right to ask for a patent granted by Patent Offices. Therefore, quality of those patent should be improved and controlled.
Unlike in the USA, there is no actual serious debate over the adoption of a law that would have as main objective the control and restriction of the patent trolling process. Indeed, in the US, the Republican majority in the Congress is willing to consider a law that would limit those abusive behaviours, just two years after the adoption of the Invent America Act, which amended the US patent law. But the reason why USA is perhaps more interested in the question of stopping patent trolling is that they do have a lot of cases involving battles between big firms that do have a lot of financial resources (Google, Microsoft, Apple, etc.). Thus, economic consequences might be huge for the party who lose the case.
In Europe, things are quite different. Even if the practice of patent trolling already appeared in Europe (see the litigation pending in Germany involving the Nokia and HTC companies, struggling against IPCom company), judicial proceedings are sensibly distinctive. If we look at the specificity of the US procedure and to its culture of litigation, we realize that juries might play a considerable role in the outcome of most of the cases. In fact, about 60% of the american cases are judged by a jury. This implies that we do not know which way a decision can go. This forces US companies to settle, while, in Europe, only professional judges can rule on patent cases, and this limit uncertainties that can be caused by juries. Moreover, damages awarded at the end of those proceedings are much lower in Europe (in 2006, the RIM society, producing Blackberry mobile phones, gave no less than 612, 5 million $ to NTP to stop a litigation pending before the american tribunals). This would mean that companies are much more attracted by starting to manage activites of patent trolling than they would be in Europe.
Problems might rise with the future establishment of the Unified Patent Court (UPC). The main argument to the detriment to this establishment is the increased effects of the future patent, because il will be possible to obtain a legal injunction valid on a large market (while today, court injunctions in case of a patent infringement are only effective for a single country). This implies the potential problem of the bifurcation concept, which is already present in German patent law. This occurs when both actions for patent infringement and counterclaims in which its validity is contested are dealt with separately, by different courts, at different times. The risks of the the new UPC system (which will entry into force after 30 ratifications) are numerous.
First, the possiblity to revoke a Unitary Patent across Europe by one single ruling: effects of the UPC rulings will spread over the whole territory of Europe. Consequently, companies will prefer to stay outside Europe to avoid the risk of a single invalidity decision revoking patents across the entire Europe.
Secondly, the possibility of a “pan-European injunction” will be seriously dangerous for EU companies. There will be a risk of stock being seized (at a preliminary stage), or being destroyed (if the infringement is recognized). This may lead some companies to whether they can lead their business through countries not covered by the UPC.
We can probably assess that most companies will avoid Unitary Patents and choose to ask for external patents until they are confident about the quality of the decisions of the UPC… Thus, this might take a very long time for the UPC to develop its case law…
How could such a problem be best addressed by a new law in the U.S.?
Simply said, the point to avoid sues from PAEs, called Patent Trolls, is firstly a judicial, actual access. In this regard, the problems are, as far as I understand, as follows;
* the legal costs
* The procedure itself
As the article, which provided, mentioned, in the UK thanks… Read more
How could such a problem be best addressed by a new law in the U.S.?
Simply said, the point to avoid sues from PAEs, called Patent Trolls, is firstly a judicial, actual access. In this regard, the problems are, as far as I understand, as follows;
* the legal costs
* The procedure itself
As the article, which provided, mentioned, in the UK thanks to the system, they keep an unattractive legal order to PAEs. As Obama is trying to do, in the US a specific system to burden the legal costs on loser in patent cases and an systematic requirements of review and submission of detailed information and substance of patents. The white house reported the loss due to patent sues is $29 billion, and only one forth were backed to next innovation. However, even I know the request to answer is how do we address such a problem in the best way, I would like to doubt this necessity. Ensuring the accessibility to pursue an adequate compensation by a right patent-holder to big firms, this situation might contribute to the some small companies. Based on their argument, 62 per cent of all lawsuits has been brought by PAEs, 38 per cent, rest of the lawsuits, has been done by proper natural or legal persons. The circulation about “if we increase the difficulty to bring the lawsuits before Courts, how much benefits we will lose” is needed to decide we need to go further or not. Since the campaign of wording “Patent trolls” can be and has been criticized in the way, such as “this is labelling and pressuring on small firms not to exercise their rights”, both perspectives from the big companies and small enterprises.
Assuming the arguments by the white house is correct, I would like to go back to the original question. I would propose not to use a cost disincentive, but to improve a substantial assessment going to details of the patent allegedly owned by a plaintiff. Although this could be a factor for that a small enterprise will not enjoy their rights, it would be much better and less affective on this matter. Every patent must be “useful”, we can set some limits in this light. We can refer an opinion from the International Trade Commission in the US. They have decided to introduce a “Pilot Programme”, which requires a plaintiff to prove upfront that they have a significant presence in the United States before complaining to the commission. In the website, they explain the system, “The commission said it created a pilot program in which its six administrative judges will in some cases determine within 100 days if companies that sue for infringement have adequate U.S. production, research or licensing to use the court.” I believe this is good way to reduce the number of complain and lawsuits actually.
In case the government try to increase the legal costs, at the same time, an aid for a company who runs real businesses would recover the negative effects and supports to take an action against abusers of their patent. Assessing they have real economic life or not is easier than to avoid to include them into the scope of a definition of PAEs.
The risks for patent trolling to develop in Europe is lower than we are anticipating, concerning the procedure in Europe and a culture of lawsuits. As some article already referred, 1 a legal cost will be paid by loser, 2 they can get lower compensation 3 only specialist will judge, not by the jury. Though considering the leverage effects, since the procedure should be improved and enforced in terms of its quality, it will reduce rough, just challenging lawsuits from patent trolls. Having in mind UPC will have dozen divisions under the court, it means we can have many cases and compile the results, in a coherent view by one single system. It absolutely contributes to develop the system itself. Probably in the early stage, some risks will be real, but in the end of the day, we can have more comprehensive, sophisticated, and easier to argue with good substantial review into patents. Regarding a jurisdiction by ECJ, to ensure the substantial legal order, it should be expected not to accept many cases, it can be used, however, to reduce the trolling risk. It might be effective in the way to pressure the PAEs with anticipation to be reviewed in case it is abusive.
(1) Abusive patent litigation (also known as “patent trolls”) is no novelty in the U.S. and can result in two main negative consequences: Firstly, it tends to block innovation, as companies are somewhat reluctant to put their efforts into new products knowing that they could be sued by patent trolls. Moreover, it is a drag on the American economy, because… Read more
(1) Abusive patent litigation (also known as “patent trolls”) is no novelty in the U.S. and can result in two main negative consequences: Firstly, it tends to block innovation, as companies are somewhat reluctant to put their efforts into new products knowing that they could be sued by patent trolls. Moreover, it is a drag on the American economy, because companies losing their lawsuit against patent trolls must pay a great deal of money, which might have repercussions on the customers. Thus, steps have been taken by the U.S. Congress towards “trolling” before it all gets out of control. To date, six bills have been introduced in order to deal with patent trolls.
One of the measures which could help addressing the “trolling”-problem would be to include “a stronger loser-pays provision”. It would reduce the incentives for patent trolls to attack companies, because if they lost, they would be forced to pay a great deal of money themselves. It is one of the reasons why Chris Thornham believes that patent trolls aren’t likely to move to the UK, as their judicial system already provides for a “loser-pays” provision.
The bills also provide for a type of “warranty”. Indeed, when filing a lawsuit, the applicant would have to post a bond. If the defendant wins the case and is awarded legal fees, the Court can use the posted bond, which is a blocked amount of money, to cover the defendant’s legal costs.
Another way to reduce the incentives for patent trolls to file a lawsuit would be to improve the quality of patents, as low-quality patents make it easier for patent trolls to sue companies to their own advantage. As we saw in the course, Europe doesn’t really have that problem as patents are delivered by the European Patent Court (EPC), which is the third largest international organization funded by private sources. Thus, as they have more funds, they can hire more competent engineers and deliver higher quality patents. Although private funding has its benefits, one needs to be reminded that it may open a door to lobbying.
The bills also require that the one filing the action (patent trolls) must give more information about their identity, for transparency is of paramount importance.
(2) The risk for patent trolls developing in Europe is related to the risk of bifurcation. That risk arises when an infringement action, which is brought before a Court, faces a counterclaim regarding the validity of the patent. The issue is that both actions will be brought separately, which creates the risk of a gap between both proceedings. The implementation of a Unitary Patent Court through the “Patent Package” could reduce the risk of an injunction gap. However, several risks may result from a single patent jurisdiction: Firstly, companies could eventually move out of the countries covered by the UPC in order to avoid the seizing and destruction of their stocks. Moreover, patentees will wait to file for a unitary patent until they make sure the system works efficiently. Finally, others might simply file for national patents, as the decision of a national Court revoking patent rights will not have consequences in other countries, whereas an invalidity decision pronounced by the UPC would revoke the patent rights in those countries designated in the “patent package”.
(3) Could the CJEU be a “last resort control” jurisdiction on patent proceedings? As a result of lobbyists, Council and Parliament, when adopting the patent regulation, did not put any provision on infringement in it. It was nevertheless included in the international agreement. As a consequence, the Court of Justice has no competence to rule on infringement litigation. Spain brought an action against Council (C-147/13) and Parliament (C-146/13) arguing that the adoption of the patent regulation without a provision on infringement was illegal. In its Opinion, the Advocate general does not follow the arguments brought up by Spain. Had he agreed with those arguments, the regulation would have to be annulled and thus the agreement that had been negotiated for several years could never come into force. The A.G. finds a construction on which he can say the Court of Justice can nevertheless be competent. That way, the lobbyists’ tricks won’t reach their goal, which was to avoid the jurisdiction of the Court of Justice regarding infringement litigations.
Patent Trolls, also known as Patent Asserting Entities (PAEs), are – for now – mainly an American phenomenon. It is not entirely clear why this is the case, but experts agree both the culture and the regulatory context play an important role in this. An example of the difference in the legal context between the EU and the USA, is… Read more
Patent Trolls, also known as Patent Asserting Entities (PAEs), are – for now – mainly an American phenomenon. It is not entirely clear why this is the case, but experts agree both the culture and the regulatory context play an important role in this. An example of the difference in the legal context between the EU and the USA, is one of the substantive conditions used to assess the validity of a patent: the “usefulness” criterion in the US is much larger than the “industrial application” requirement in Europe. Another example is the ‘patentability’ of software: software is always patentable in the US, while in Europe software is only patentable if it fulfills the “machine
trick.” Regarding the American culture, it could be argued that the USA has a “litigation culture”, whereas Europe has more an “enforcement culture”. It is perceived as less ‘common’ to sue in Europe than in the USA.
Other elements could be classified as being both cultural and legal: indeed, the cost of proceedings is usually higher in the USA, and, similarly, the amount of damages is, on average, higher in the USA as well. Additionally, while in Europe the loser is often the one paying the costs of proceedings, this is not the case in the USA: the general rule in the US is that each party bears its own legal costs. Moreover, the size of the US market is also an important element: the US market is much bigger than any market in Europe, giving patent trolls more leverage (cf. Infra). A final element contributing to the proliferation of patent trolls in the US is the institution of the jury: a jury can go either way: there is less legal certainty with a popular jury than with a professional judge. Therefore, companies do not want to risk going to trial.
Considering all this, it is reasonable to say that the USA has a more favorable environment for the development of such patent trolls.
One possible solution to dissuade patent trolls in the USA would be to change the rule according to which every party bears its own legal costs. Indeed, while the ‘loser pays all’ rule has several defaults, it has two important advantages when it comes to patent trolls. To understand this, one needs to know how patent trolls work. Mostly, they sue a manufacturing company for patent infringement, not because they really want to go to court, but because they want a settlement. The manufacturing company, because of the infringement proceedings, is blocked, and has to support its legal cost. To avoid lengthy proceedings which could cause them to go bankrupt, the manufacturing companies often choose to settle, thereby giving patent trolls what they want (even though it is the best solution for them as well).
If the US would replace its current rule regarding to the costs of proceedings and replace it with a ‘loser pays all rule’, manufacturing companies would not have to support their own legal costs if they win. This would also refrain patent trolls from suing with ‘bogus patents’, seeing as they would support the whole cost of the proceedings when they lose.
Another possible solution would be to require that certain patent plaintiffs post a bond which could be used to cover defendants’ legal costs in the event the defendant wins and is awarded legal fees. This would ensure that patent plaintiffs only sue when they really think they can win and only sue when they really want to sue. It would also help eliminate ‘privateers’. According to L. Thomas, a patent privateer or intellectual property privateer is “a party, typically a patent assertion entity, authorized by another party, often a technology corporation, to use intellectual property to attack other operating companies”. Those privateers often have a limited amount of funds, and so requiring them to post a bond which could be used to cover defendants’ legal costs would oblige them to disclose the real owners and parties behind them.
Another possibility would be the insertion of rules that allow costs sanctions against plaintiffs who bring frivolous litigation.
Replacing the jury with professional judges or expert is a possible solution as well.
As republicans now have the majority in the Senate and the House of Representatives (and thus control both chambers of Congress) and have expressed their interest in tackling the problem of patent trolls, specialist argue that patent trolls might reduce their activities in the US and come to Europe instead.
The future creation of the Unified Patent Court (UPC) only increases the chances of this happening. Two main reasons are advanced for this.
Firstly, the creation of such a unified court will enlarge the European market, giving patent trolls more leverage.
Secondly, the system of bifurcation that might be adopted for this UPC is reputed to be favorable for patent trolls. Indeed, the system of bifurcation implies that actions for patent infringement and counterclaims in which its validity is contested are not heard by the same court at the same time in the same proceedings, but are dealt with separately by different courts, at different times and with very different consequences. This means one court can decide about the patent infringement proceedings without having to decide if the concerned patent is valid. As a result, a court might decide there is a patent infringement even though the patent invoked is in fact not valid. This is very interesting for patent trolls. However, such a system of bifurcation already exists in Germany without too many problems, so some say this will not necessarily be a problem. Others contend that the bifurcation system, though not problematic in se, will be problematic at a European scale, i.e. on a bigger market. Indeed, it will then be possible to obtain a legal injunction valid on a large market (at least 13 Member States, including the three largest countries: Germany, France and the United Kingdom). Today, court injunctions in case of patent infringement can, in principle, only be effective for a single country (no cross-border effect). Defenders of the bifurcation system then answer that, because Germany is such an important market, no product was launched in Europe without launching in Germany, so de facto the German bifurcation system had the same scope as a future European bifurcation system. Thus, the creation of the UPC will not give patent trolls more leverage than before, and the bifurcation system will work fine, just like it does in Germany right now, they say.
Moreover, the 17th draft of the Rules of procedures has responded to this worry of an ‘injunction gap’: Rules 37(5) and 40 of the new draft seek to address this potential problem, notably by providing that, in the case of bifurcation without a stay of the infringement proceedings, the counterclaim for revocation referred to the central division shall be accelerated and, in any case, heard by the central division “prior to the date of the oral hearing of the infringement action”. It remains to be seen whether these changes will be implementable in practice, in view of the respective caseloads of the central and local divisions.
Gilles Hachez & Mathieu Gombault
As we have already said during the course, several issues related to the us patent system may play as an inducement for patent troll. Indeed, we have issues at the level of subject matter as the low-quality standard of the patent, the fact that patents are too easily available for subject matter such as business methods and the fact… Read more
As we have already said during the course, several issues related to the us patent system may play as an inducement for patent troll. Indeed, we have issues at the level of subject matter as the low-quality standard of the patent, the fact that patents are too easily available for subject matter such as business methods and the fact that they are too trivial. There are also issues at the level of enforcement such as the strong presumption of validity of the patent following which patents are too easy to assert and the fact that they are too potent.
The association of elements, which is not present in the european patent system, constitutes an incentive for patent trolls in the U.S. That is the reason why laws have been adopted in order to limit these abusive behaviors such as the patent reform bill that passed in 2011. But according to the U.S. President, « these reforms only went halfway towards reforming the patent system as far as it needed to go ».
These texts seem to bring out some solutions following which the patent problem could be best adressed by a new law in the U.S. :
– Pull together additionnal stakeholders and see if we can build some additionnal consensus on smarter patent laws ;
– Improve the quality of the patents issued by the United State Patent and Trade Office (USPTO) by more and better trained patent examineers ;
– Foresee stronger loser-pays provision to deter PAE’s to assert their patents ;
– Invigorate the review process of the patents in order to eliminate « bad patents » ;
– If a business method patent is detected until 2020, the patent will be put in review at the the USPTO ;
– Increase transparency regarding the PAE’s which file those court actions by requiring plaintiffs to provide more details of the patent claim alledgely infringed, demanding them to disclose the real owners and the parties behind the injuction ;
– Establish cost sanctions against plaintiffs who bring frivolous litigation ;
– Reform the law of evidence.
One other solution might be to entrust the regulation of these patent cases to professional judges only, as in Europe, so as to limit the uncertainties caused by juries. Indeed, the current procedure in the U.S. is a source of ambiguity and puts NPE’s in a strong position to force companies to settle.
These various measures are likely to dampen patent trolls in the U.S. but they might cause the migration of this problem to Europe and U.K.
The establishement of the system of unitary patent and unified patent court is also a reason of the possible shift of the patent trolls to Europe. Indeed, there will be an increased leverage of the future patent and from now on, it will be possible to obtain a legal injuction valid on a large market, creating a major attraction factor regardind PAE’s.
Another main problem would be that the UPC might apply the bifurcation, opening the door to a large wave of patent trolls. Indeed, with the bifurcation, once the judge has statued over the violation of the patent and before another judge pronounces over the validity of the patent, NEP’s enjoy this « injuction gap » in order to put pressure on the companies to negotiate a license.
Moreover, the costs of legal defense can be very important in Europe, encouraging companies targeted by trolls to settle rather than to engage into a lengthy and costly procedure.
Regarding the US system
In the US system, it is the person who is the first to invent who gets the protection of the patent. In this sense, it is easier than in Europe (where people have to file right away).
Therefore, patent trolls (PAEs) can acquire patents of low quality (or for nearly any so-called invention) and without being controlled like… Read more
Regarding the US system
In the US system, it is the person who is the first to invent who gets the protection of the patent. In this sense, it is easier than in Europe (where people have to file right away).
Therefore, patent trolls (PAEs) can acquire patents of low quality (or for nearly any so-called invention) and without being controlled like in Europe. Then, there isn’t any opposition phase available in the US (in Europe, anyone can oppose the grant of a patent during the filing process before the Opposition Division in Munich).
Having these filters would be a great thing for the US system because it would pull the rug out from under the patent trolls’ feet.
Another problem in the US is the functioning of the judicial system.
Patent trolls, as other plaintiffs often do too, are allowed to “court-shop” under article 28 U.S.C. §1404 (a). That is a first thorn in the system.
Moreover, the US system is based on the jury trial and the damages awarded are a lot higher (as are the costs in the discovery process, which is the evidence gathering phase) than in Europe.
For all these reasons, the US is thus an ideal breeding ground for patent leverage by patent trolls.
Regarding the European system
Although the original goal of patent trolls may be laudable (they enhance the value of inventions which would otherwise be used without their owner knowing about it), it has been established that some of these PAE’s make fraudulent use of them. As an example, the US has been the battlefield of 12 lawsuits which resulted in payment of sums exceeding 500 million $ since 1980.
Patent trolling is, on the other hand, less of an issue in Europe. The reason for this is that the EU has a loser-pays-all principle, which is inexistent in the US. The attorney’s fees in the US can be sky-high, but that is generally not the case in Europe, which tries to keep these low in order to convince people into going to court when their rights are being infringed.
The conditions for patentability can be found in Art. 52 of the European Patent Convention. The first paragraph of this article says: “European patents shall be granted for any inventions (1) which are susceptible of industrial application (2), which are new (3) and which involve an inventive step(4)”. Furthermore, the invention has to be licit, lawful (5). All of these conditions (except for the lawfulness condition) are similar to the ones in the United States.
The recent bifurcation of the European litigation system (following the Unified Patent Court Agreement, hence forth “UPC”) has raised a lot of awareness and anxiety on the matter. The new system aims at bringing unification regarding patentability. This means that it would henceforth be possible for a unitary patent to be revoked across whole Europe by a single ruling. This is likely to scare some of the non-European companies doing business in Europe. This possibility of pan-European injunctions constitutes a serious hazard for them.
Some patentees might also be tempted to file national patents for some of their products in the hope that potential litigations be held in national courts. In staying out of the UPC, they hope to avoid being subject of a single invalidity ruling revoking patent rights at a European level.
Regarding the US system
In the US system, it is the person who is the first to invent who gets the protection of the patent. In this sense, it is easier than in Europe (where people have to file right away).
Therefore, patent trolls (PAEs) can acquire patents of low quality (or for nearly any so-called invention) and without being controlled like… Read more
Regarding the US system
In the US system, it is the person who is the first to invent who gets the protection of the patent. In this sense, it is easier than in Europe (where people have to file right away).
Therefore, patent trolls (PAEs) can acquire patents of low quality (or for nearly any so-called invention) and without being controlled like in Europe. Then, there isn’t any opposition phase available in the US (in Europe, anyone can oppose the grant of a patent during the filing process before the Opposition Division in Munich).
Having these filters would be a great thing for the US system because it would pull the rug out from under the patent trolls’ feet.
Another problem in the US is the functioning of the judicial system.
Patent trolls, as other plaintiffs often do too, are allowed to “court-shop” under article 28 U.S.C. §1404 (a). That is a first thorn in the system.
Moreover, the US system is based on the jury trial and the damages awarded are a lot higher (as are the costs in the discovery process, which is the evidence gathering phase) than in Europe.
For all these reasons, the US is thus an ideal breeding ground for patent leverage by patent trolls.
Regarding the European system
Although the original goal of patent trolls may be laudable (they enhance the value of inventions which would otherwise be used without their owner knowing about it), it has been established that some of these PAE’s make fraudulent use of them. As an example, the US has been the battlefield of 12 lawsuits which resulted in payment of sums exceeding 500 million $ since 1980.
Patent trolling is, on the other hand, less of an issue in Europe. The reason for this is that the EU has a loser-pays-all principle, which is inexistent in the US. The attorney’s fees in the US can be sky-high, but that is generally not the case in Europe, which tries to keep these low in order to convince people into going to court when their rights are being infringed.
The conditions for patentability can be found in Art. 52 of the European Patent Convention. The first paragraph of this article says: “European patents shall be granted for any inventions (1) which are susceptible of industrial application (2), which are new (3) and which involve an inventive step(4)”. Furthermore, the invention has to be licit, lawful (5). All of these conditions (except for the lawfulness condition) are similar to the ones in the United States.
The recent bifurcation of the European litigation system (following the Unified Patent Court Agreement, hence forth “UPC”) has raised a lot of awareness and anxiety on the matter. The new system aims at bringing unification regarding patentability. This means that it would henceforth be possible for a unitary patent to be revoked across whole Europe by a single ruling. This is likely to scare some of the non-European companies doing business in Europe. This possibility of pan-European injunctions constitutes a serious hazard for them.
Some patentees might also be tempted to file national patents for some of their products in the hope that potential litigations be held in national courts. In staying out of the UPC, they hope to avoid being subject of a single invalidity ruling revoking patent rights at a European level.
Comments for The risk of patent trolls in the U.S. and in Europe: a sequel to a never ending story
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How could such a problem be best addressed by a new law in the U.S.? How do you reduce the incentives for PAEs to aggressively assert their U.S. patents ?
PAEs (patent assertion entities) become a serious problem in the United-State. Many cases are brought by patent trolls in America. They abuse of the patent system and they have a large negative impact on the US economy. That’s why Obama’s Administration invited the Congress to pass legislation to reduce the incentives and the activity of PAEs. The USPTO (United States Patent and Trademark Office) announced that they will take new measures that requires patentees to update register details to make apparent the owner. They also promote a tight examination for software and business methods patent in order to reduce the number granted with claims unclear and obvious. Finally, they will create outreach programs to provide information on how business answer to patent trolls and they will collect more robust data.
The Administration of Obama also announced a review in the practice in the US International Trade Commission in order to see if the criteria for a grant of exclusion orders has to be changed to match the criteria for injunction in District Court cases. It will make harder for NPE (Non practicing entities) to obtain some exclusion orders.
Another way to reduce the activity of PAEs that assert aggressively the US patent is that until 2012, if a business method patent in the financial sector is asserted in litigation, the patent may be put in review at the USPTO with the lawsuit likely to be stayed.
Moreover, some others legislative changes invite the plaintiffs to provide more information and details of the patent claim alleged to be infringed and to introduce some cost rules in order to put the plaintiffs at risk of paying defendant costs. Another way that is proposed is to post a bond to cover defendant’s legal fees and cost for PAEs in order to invite them to disclose the real owner and parties behind them. Furthermore, some people suggest to have a more active use of procedural rules that allow costs sanctions against some plaintiffs who bring frivolous litigation. Finally, one legislative change seeks to protect the public who doesn’t have to participate until the end of the lawsuit against the primary user or manufacturer.
But, what about the risks for patent trolling developed in Europe under the forthcoming patent package ?
Through the unitary patent package, the EU legislature intented to provide unitary protection on the European patent and establish a unified court in this area (excepted for Italy and Spain which don’t participated in the Unitary Patent sytem). However, this new system has some risks. Indeed, a Unitary Patent can be revoked across Europe by one ruling because it doesn’t required a separate revocation in each European country. Moreover, the rulings of the UPC on European Patent will only have effects in the countries for which the European Patent is designated. A a result, a pan-european injunction is a considerable hazard for companies that make their business in Europe because there is a risk concerning the seizure of the stock and the destruction of it. Then, it could lead some businesses to move their manufacturing or distribution centres to countries that are not cover by the UPC in order to keep their stock out of the reach of patentees.
This possibility of pan-European revocation is a reason why some firms will avoid Unitary Patents and will prefer European patent that are out of the UPC system. It will last until they are confident about the quality of the decision of the UPC and how this system works. Others firms might simply switch to filing national patents for certain products which have to be litigated country-by-country in the national courts. As a consequence, by staying outside the UPC area, they avoid the risk of a single invalidity decision that revoke patent rights across all of Europe. Finally, the patentees who choose to file for a Unitary Patent in the framework of the UPC system, will have to invest more time during prosecution in order to obtain stronger patents. It will lead to a shift in quality but not on quantity.
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• How could the patent trolls problem be addressed in the US ?
Show lessThe patent trolls problem is strongly present in the US. It consists in companies acquiring patents in order to put pressure on companies (such as Sony, Google, Research in Motion) so as to extort them money.
First, one of the faces of the problem is that allocating strong property rights to individual right-holders leads both higher prices and transaction costs. Therefore, the idea of a more opened, more collective/shared property would be needed, through agreements for instance.
Nevertheless, if private solutions exist to the explained problem, such as patent pools or standard-setting organizations, they might still be hard to apply to particularly large fields (e.g. smartphone production) and might prove to be limited.
Second, and as some authors underlined, the problem might not reside in the fact that patent trolls use their patents in a malevolent way, but that such power was given to them in the first place. Indeed, since they are entitled to such patents, it is hard to see how they could abuse of it : the law permits it, somehow.
Therefore, a proposal could be to put a condition on the grant and the keeping of a patent : only those (individuals or companies) who prove to use their patent in order to produce/innovate might claim the benefice of it. This way, patent trolls, which President Obama recognized himself to be nothing but creatures making money out of some inventor’s ideas without producing anything, wouldn’t be entitled to a patent protection.
Nevertheless, some may argue that such a solution would prevent NPEs (which are companies that have acquired patents but do not produce anything either) to act ; indeed, such companies play the useful role of “patent brokers” by creating links between patent producers and patent holders and might be prevented to do so because of such a solution. Still, such behavior might be included into the item of “innovation” and might therefore allow NPEs not only to continue to exist, but also to continue to act benevolently.
By way of conclusion, the way to solve the problem of patent trolling in the US might be to organize a regular and stronger control of patents, before as well as after they are granted, with special care to the criteria of innovation and production, so as to maintain the benefits of NPEs while suppressing the threats of PEAs.
• What are the risks for patent trolling to develop in Europe ?
The risk of seeing patent trolls emerge all over Europe is directly link to the recent adoption of the UPC system. It is intended to provide a single patent jurisdiction across Europe (Spain and Italy excepted).
On the one hand, a large group of companies showed the opposition to this new system through the signature of a letter stipulating that such system leads to the grant of a dangerous power to patent holders (including potential patent trolls), which consists in the increased leverage of the future patent: it will now be possible to obtain an injunction at the European level (rather than on the much smaller local level). Furthermore, the cost of defense in Europe being very high, it might discourage companies targeted by a patent troll to engage into procedure and force them to prefer a settlement with it.
On the other hand, counterarguments exist, such as the fact that patent trolling to is proper to the specificity of the US procedure and their culture of litigation. Furthermore, both the fact that Germany has already opted for a patent system that gathers features of this new system (and more specifically, the concept of bifurcation), and the fact that the German market is crucial for all companies who wish to make business in Europe, show that Europe would have been subject to that problem anyway, be the UPC system adopted or not.
By way of conclusion, it appears that Europe is under the threat of patent trolling not only because of the UPC system but also because of the German decision to adopt a similar system of patent.
Thanks (please note in relation to the last sentence that the UPC system partly follows the previously existing German model (at least with regard to the bifurcation aspect))
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To address the problem of patent Trolls, the U.S. should implement a new rule of patent innovation. It means, that a sort of commission would be created in order to tackle those patent Trolls. How? To impose a law, that ,especially in software patent sphere and business patent sphere, would control whether companies are simply holding the patents or whether they do innovate. I think a 5-year period of non-innovation would be enough to find potential patent Trolls, who waits to start the litigation process.
Show lessThis patent-trolling may results in a lower-financing of innovations which would even slow down more the innovation.
With the Unified Patent Court (UPC), the so called bifurcation would slightly diminish. However, the UPC seems to be viewed mostly positive as it ease several procedures and it unifies the whole Europe (except Italy and Spain). The unified patent paves the way for simplification of the patent process in Europe which can cause that not only the companies may become Trolls but also to enhance innovation within Europe.
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Some firms own patents but do not use them to manufacture products. These are called “Non-practicing entities” (NPEs). NPEs are usually good and contribute to innovation by creating a link between inventors (patent owners) and manufacturers (patent buyers). The problem is that some NPEs abuse of their power and “threaten to sue thousands of companies at once, without specific evidence of infringement against any of them” to exhort them money. These kind of aggressive litigating NPEs are called “Patent Assertion Entities” (PAEs) or “patent trolls”. In the last years, patent trolls have become a massive problem in the US, starting thousands of patent litigations.
Therefore, there is today a real need to find a definitive solution to stop patent trolls. We will first examine how this problem could be addressed in the US through legislation. We will then try to find some ways to reduce the incentives for PAEs to aggressively threaten and sue companies for patent infringement. Finally, we will wonder about the threat of patent trolls development in Europe under the future patent package (including the Unitary Patent Regulation and Unified Patent Court).
Firstly, how could the patent trolls’ problem be best addressed by a new law in the US? Usually, patent trolls use the uncertainty of the scope of some patents to threaten companies. As there is a doubt about whether a patent has been infringed or not, firms prefer to settle out of court and pay fees to the PAEs, rather than pay legal costs. It is actually the case in the field of technology, smartphones, business methods or automotive. Paying these fees also means fewer resources available for innovation of new products and services. Therefore, as PAEs undermine creation (which is the aim of intellectual property rights), some changes in legislation are needed to render their activities more difficult.
First of all, the conditions for patent infringement and for patent filing (novelty and non-obviousness) in new fields should be clearly set out in legislation. A 2013 White House Study about PAEs also proposes solutions, such as “reducing disparity in the costs of litigation for patent owners and technology users; and increasing the adaptability of the innovation system to challenges posed by new technologies and new business models”. Another way would be to switch from “functional claiming” (which means claiming exclusive rights over any device that performs a given function, regardless of how that function is performed) to “means claiming” (which means claiming exclusive rights only over devices which use the same means to perform that function).
Secondly, we can think of a few ways to reduce the practice of PAEs. One of the ways to reduce the incentives for PAEs to aggressively assert their US patent i to adopt an adapted legislation includes new measures that requires patentees to update register details in a short delay, so that the owner is clearly apparent. The practice can also be limited when examining software and business methods patents to reduce the number granted with claims that are unclear or obvious. Outreach programs may also be created to inform businesses on the ways they can respond to patent trolls, so that those businesses can react fast and avoid a litigation process.
As the proposition has been made in the US, it could be useful to have a bill “aim to require plaintiffs to provide more details of the patent claims alleged to be infringed and to introduce cost rules that put plaintiffs at risk of paying defendants’ costs”. Also, if the PAEs had to post a bond to cover defendants’legal fees, they would be obliged to disclose the real owners and parties behind them. Moreover, allowing cost sanctions against plaintiffs of frivolous litigation may help to reduce the incentives of PAEs.
Finally, what about the risks for patent trolling to develop in Europe under the forthcoming patent package? The UPC aims at creating a single patent system for the whole of Europe. It most notably promises the ability to obtain pan-European enforcement of patent rights in a single set of proceedings. It also provides that the revocation of a patent by one national court leads to the revocation of this patent in all EU countries. This is where the problem could lie: PAEs could use the threat of pan-European revocation (which is much more frightening than national revocation, in most cases) against companies to exhort them money, in exchange of a settlement.
Another difficulty which could arise – even if this procedure already exists in some European countries- has to do with “bifurcation”, which occurs when actions for patent infringement and counterclaims in which its validity is contested are not heard by the same court at the same time in the same proceedings but are dealt with separately by different courts, at different times and with very different consequences (“Bifurcation of European patent litigation: a practitioners’ perspective” on IPKat). This means that an injunction for infringement could be granted by a court, even before knowing whether the patent is valid or not (open letter jointly signed by 16 U.S. and European companies, 26th September 2013). This is even more frightening knowing that the injunction will apply to all European countries at the same time.
Nevertheless, these arguments have to be put into perspective. Indeed, damages for patent infringement are way lower in Europe than in the US, which reduces the incentives for patent trolling. Another counter argument is the fact that, in the US, many cases are judged by juries (this is not the case in Europe), which adds to the uncertainty of the outcome of the patent litigation.
(“Will ‘Patent trolls’ soon appear on the European market?”, A. Strowel on IPdigit). (“Will US patent trolls soon be making their way to the UK?”, C. Thornham on The Inquirer)
Show lessVery good at the beginning.
Why do you write that “PAEs could use the threat of pan-European revocation (which is much more frightening than national revocation, in most cases) against companies to exhort them money, in exchange of a settlement”?. I suppose PAEs are threatening companies by asking for a court injunction, not a revocation, right?
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How could such a problem be best addressed by a new law in the U.S.?
Patent assertion entities (PAEs), commonly called “patent trolls” are companies that acquire many patents not to practice them but in order to pressure other companies to settle out-of-court agreements and pay fees for alleged infringement, under the treat of a costly and risky lawsuit.
In the United States, different bills have been proposed to address the issue of patent trolls, each proposing relevant solutions.
According to Senate Republicans, the quality of the patents granted in the United States has to be improved in order to reduce the patent trolling issue. Indeed, the legal action might be abusive but often the problem is that the patent shouldn’t have been granted in the first place.
One way to achieve this result is to raise the standards of novelty an invention has to meet in order to be patented and to make sure patents are clear even in new sectors of technology. Indeed, the power of “patent trolls” is based on the confusion about the scope and the validity of their patent and the presumption that some companies will prefer to settle out of court rather than taking the risk to engage costly and time-consuming legal proceedings. Another way could be to strengthen the review process of the patents once they have been granted in order to eliminate bad patents.
The United States also should pay more attention to the abusive phenomenon of demand letter sent by patent assertion entities (PAEs) and measures should be considered in order to increase the transparency of the senders.
Finally, the legal system should be improved in order to increase transparency regarding patent trolls filling lawsuits. Usually, PAEs try to conceal their identity by creating many shell companies and by the widespread use of non-disclosure agreements.
To tackle this issue, plaintiffs could be required to provide more details about their patent claims and the alleged infringement by the defendants. Furthermore, they should be obliged to post a bond in order to cover defendant’s legal fees in the case the sued company appeared to win the trial. Cost sanctions could also be imposed against plaintiffs bringing frivolous litigation.
What are the risks for patent trolling to develop in Europe under the forthcoming patent package?
The question has been raised whether patent trolling might be displaces into Europe. No such risk is high in the United Kingdom whose patent litigation may discourage many patent trolling actions by providing that the loser of a lawsuit pays a large contribution towards the winner’s costs and that a party starting a claim then seeking to discontinue it has to pay the other side’s costs.
However, there might be a higher risk of patent trolling appearing in Germany where infringement and validity of the patent are handled in separate proceedings, and it is possible to get a finding on infringement before one on validity, which may place pressure on defendants to settle.
This also raises the issue whether the future unitary patent and unified patent court might attract patent trolls in Europe that will cover the whole European Union.
The risk to see patent trolls might indeed increase with the new UPC system because of the larger scope of the patent. Indeed, the UPC system will enable a pan-European enforcement of patent rights in a single set of proceedings. There will be a possibility for a unitary patent to be revoked across Europe by a single ruling.
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In addressing the controversial issue of “patent trolls”, we will propose possible solutions to deal with the matter.
As a quick reminder a patent is an intellectual property right which excludes others from taking advantage of an invention created by its beholder without his or her authorization. And patent trolls generally refers to a patent assertion entity (PAE), person or undertaking that sues another person or company for infringing its intellectual property right (IPR) in order to gain huge amount of money from licencing fees. Some even refer to this practice as judicial “blackmail” because some PAEs simply take advantage of their position in order to threat companies (cf. Will patent trolls soon appear in the European market, Alain Strowel, Nov. 2013). This act can be very abusive and can lead to huge losses for the companies in various areas (economic, time loss and even negatively affects the reputation of the company being sued).
In the US, patent trolls has become a serious issue that has drawn a lot of attention and worries. Many illustrations (such as Microsoft, Google, Blackberry, Samsung and Apple cases) and lengthy explanations have already been given in the current article and many others.
But the main question remains what can and should be done on order to avoid the loss of billions of dollars due to abusive tactics of patent trolls?
Among the solutions in order to counter balance the negative outcomes of patents and effectively and pragmatically avoid the increase the amount of PAEs are improving the quality of the patents that are granted, increasing transparency and accountability.
Firstly, by delivering two distinct types of patents (A and B); one for companies who will exploit and use their invention and another form of patent for those who are not planning to use their invention. The second type of patent would have to be subject to a more open publicity because since it’s not being used, it would be more difficult for third parties to know its exists and is valid. In addition to that inventors who do not plan to use the outcome of their invention but still exclude others from its use, should settle for a less stronger protection than those who are using their invention (for instance by granting less licencing fees for the infringement of patent B or having to pay more to file for such a patent). This would reduce the incentive for abusive patent trolls which sole aim is to take advantage of other companies from attacking companies for “potential or fictive” infringements. Because they will gain less they will certainly be more vigilant.
Secondly, increasing transparency is a means that will enable companies to know about the existence of a patent, thus they will less likely be taken by surprise by an infringement allegation.
Accountability is essential because patent trolls will avoid risking serious sanctions if their action or allegation is later proved to be false, if these measures are strong enough. The ability for authorities or courts to effectively implement such sanctions is another issue raised in Paul Belleflamme’s article of November 18, 2013, The smartphone patent wars: nothing really surprising…
And what about Europe in all is?
Well the Unitary Paten Regulation 1257/2012 and the Agreement on Unified Patent Court of Feb 18, 2013, has raised a lot of concern about the outburst of huge patent troll actions as known in the US today. In addition to that there might be a fear of European member states of losing more of their control on the issue. This might explain Spain’s action against the European regulations that aim to enhance cooperation in the area of unitary patent claiming it would jeopardize the principles of legal certainty, sincere cooperation and proportionality. But the AG’s opinions, which we insist are not legally binding, rejects Spain’s perspective.
However, granting jurisdiction to the EU as a last resort control on patent proceedings, could create a platform for patent trolls to attempt increasing wealth by carelessly suing many companies before the court. But these regulations obviously took some lessons from the US’s experience.
Nevertheless, only patience will enable us to see how patent trolls will either comply or develop schemes to circumvent the restrictions set forth by the European regulations.
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Today, especially in the U.S, there is a rise of patent assertion entities (PAE). We also call them « patent trolls », which are persons or companies who enforce patent rights against accused infringers in an attempt to collect licensing fees, but do not manufacture products or supply services based upon the patents in question, thus engaging in economic rent-seeking.
Patent trolls are still legal in the US but something should be done in order to fight them once and for all. As action has already be taken at the United States Patent and Trademark Office where there have taken new measures requiring patentees to update register details promptly so that the owner is apparent. Moreover we can also notice the effort to strengthen the review process of the patents after they have been granted so as to eliminate “bad patents”, reforming the law of evidence to make it more accessible, the development of several programs to inform businesses on how they can respond to the aggressive injunctions of the PAEs and so forth and so on. The initiatives are numerous and it is also the case in the Congress and most notably in the Senate where bills have been proposed which are aimed at curbing aspects of PAE litigation conduct. It clearly shows the will of the USA to declare the war to the so-called patent trolls.
Because it is more difficult to pass a federal law in the US, the states should take over. This is what the State of Vermont did by passing a law aimed at preventing “bad faith assertions of patent infringement.” This new law « strengthens the Attorney General’s existing ability to sue patent trolls under the state’s consumer protection law and also creates a new right of action which allows a company who receives a demand letter to sue the sender in state court for damages, equitable relief, and most importantly, attorney’s fees, if they can satisfy certain elements indicating the sender of the letter is engaging in bad faith » . Several states have been influenced by this and have proposed similar bills.
Could we think to other solutions? It may be an idea to avoid jury, not familiar with those delicate issues, increasing the uncertainty on the ruling. This instability forces companies accused of patent infringements to settle instead of going in front of the courts. A complexity exception could be invoked so as to have judges with an expertise in this complex area or at least support the jury with recognized experts.
Even if this phenomenon happens for the most part in the US, there is a risk that it will soon be a problem in Europe because of the new European patent legislation with the establishment of the system of unitary patent and unified patent court. Today, patent trolls are mostly active in the US; however, the new European legislation might bring a change. The new system is intended to provide a single patent jurisdiction across Europe.
The fear of the possibility of a pan European injunction has already been expressed by multinational companies which are doing business in Europe. Some of them (16 US and European companies) even addressed an open letter on 26 September 2013 to European authorities in order to warn them about this new judicial system and to suggest some changes. Among those US and European companies, we can find Apple, Google, Microsoft, Adidas, etc. In their letter they highlight one of their biggest concerns about this new system: the bifurcation procedure. This procedure consists in dealing with an IP rights issue in two separate courts. The first one treats the validity of the patent and the other one the violation of this patent.
But would this new pan European system truly lead to a development of patent trolls in our continent?
This instauration of a unified patent court means that people won’t need to require revocation in every European country; indeed, this unitary patent could be revoked by one ruling. For some, this broader scope would lead to a leverage effect. It means that since the injunction will be effective in 13 countries, companies will feel threatened and would be more willing to negotiate with patent trolls. Nevertheless even though currently decisions can only be enforced in one single country, it is already seen as a “sword of Damocles” for companies. Therefore it is not sure that the leverage effect will be raised in the future.
Furthermore it seems a bit easy to develop a parallel between what is taking place in the USA and what may occurred in Europe since our systems are clearly different. For example, as already said, a lot of cases are judged by jury in the US which is not the case in Europe where skilled and learned judges intervene. This decreases the uncertainty of the rulings and hence weakened the bargain position of patent trolls.
The complexity of this issue raise serious questions and opinions on the concrete danger of those “patent troll” and the real risk of the new pan European patent jurisdiction are diverse among the specialists.
Show lessGood, thanks.
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In September 2011, the America Invents Act passed by Congress, had already reformed the US patent law but , President Barack Obama said in February 2013 that US “efforts at patent reform only went about halfway to where we need to go”.
Patents trolling is still an issue and in 2014, the Congress (mostly republicans) are thinking of another reform to put an end to it. The reform would “require companies sending “demand letters” to be more specific and transparent when threatening patent infringement lawsuits.”
The problem is that PAEs send demand letters to firms to threaten lawsuits in the hopes that the recipients will settle rather than pay the legal fees to defend themselves but with the reform it will be asked requirements for information that must be included in the demand letters and it cannot mislead recipients about who owns and has the right to enforce the patent, the validity of the patent and whether the recipient has a right to use the patent. The letters must also identify which patent is being infringed, how it is being infringed and contact information to find out more about the alleged infringement.(http://thehill.com/policy/technology/211116-house-republican-releases-draft-demand-letter-bill ). In Europe Patent trolling has not been a problem yet because of the rule that it is the loser that pays the costs of the trial, on the contrary, in the US each party is responsible for his attorney’s fees.
On the other hand, patent trolling has positive effect on innovation and the strategy they use are somehow legal. It is only the right given by the patent to any owner to enforce the monopoly conferred on it.Then to reduce the incentives for PAEs to aggressively assert their U.S. patents i will go in the same way as the White house as it says in its report of 2013 that ” the best approach to resolving today’s patent troll problem is not to ban firms specialized in patent assertion, but rather to reduce the extent to which legal rules allow patent owners to capture a disproportionate share of returns to investment”.
Nevertheless, we do have some changes in the judicial rules and proceedings in the US. For example, Octane Fitness, LLC v. ICON Health & Fitness, Inc.(april 29 2014) where the Supreme Court made it easier for courts to make the “loser pay for all attorney costs” rule (as in Europe), if the lawsuit is regarded as frivolous.
When it comes to Europe, with its forthcoming patent package, there is a risk to develop patent trolling but not for the same reasons as in the US.
Show lessFirst of all because the patent package will have effect on a larger territory and no more in only one country. Then, this unitary system could allow the bifurcation of proceedings started in two different courts that are both competent independentely to proceed with an action for infringement and with a counterclaim for revocation against the same patent.
On september 26, 2013, fifteen companies including Apple, Google and Microsoft, published an open letter to the european union expressing their concerns on the unitary patent (http://graphics8.nytimes.com/packages/pdf/business/26trolls-letter.pdf).
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The risk of patent trolls in the U.S. and in Europe : a sequel to a never ending story.
1. How could patent trolls be best addressed by a new law in the U.S.?
To reduce patent trolls problems, it seems to be clear that there needs to be a legislative intervention. Following solutions have been proposed in different articles:
– the plaintiffs action should be more detailed on what part of the patent claim is infringed;
– the patent assertion entities should be required to prove that they own what they are suing on before they can actually sue another company;
– there should be cost rules that put the defendants’ costs at charge of the plaintiff. This would discourage patent assertion entities from suing companies if they don’t have strong proof that there is an infringement;
– there should be new measures urging patentees to update register details so that everyone knows exactly who the owner is. Those measures would be registered at the United States Patent and Trademark Office (USPTO);
– some criteria such as those of clearness and non-obviousness should be more strictly examined when a patent application is filed;
– an effective review process of patents should exist in order to remove bad patents that have been granted.
2. What are the risks for patent trolling to develop in Europe under the forthcoming patent package ?
The new international system of UPC will have a big impact on Europe. Indeed, it will try to bring a single patent system on Europe. Patents shall no further be organized by the national rules of each county where they’re supposed to apply but they will be organized by one unitary set of rules. The UPC system will also introduce a possible bifurcation in the new European patent order. This bifurcation is when action for patent infringement and counterclaims in which its validity is contested are dealt with by separate courts and at different times. Moreover, different consequences will follow. One of the benefits of this new system is that you can now choose where to sue. This is precisely also a disadvantage if the bifurcation possibility is to be implemented: if there is an infringement action pending before a court and that the defendant makes a counterclaim on the validity of the patent before another court, there might be a decision on infringement even before that the validity of the patent is assessed. In order to prevent that, the court will have jurisdiction to suspend the marketing of the litigated product in at least 13 Member States. This is where there is a risk for patent trolling to develop in Europe. Indeed, patent assertion entities will now have even bigger means of pressure since they can now prevent a product to be developed in at least 13 countries all at once.
Show lessOn the other hand, this bifurcation system does not mean that there will necessary be patent trolls in the future. Indeed, bifurcation already exists in Germany and one knows that you cannot do business in Europe without existing on the German market. However, this did not lead to the appearance of massive patent trolls.
Moreover, the fact that patent trolling exists in the United States does not mean that it will necessarily occur in Europe. The two systems are very different on many levels: i.e. procedural rules, culture of litigation, award of damages…
No matter what, if these patent trolls were to really appear massively, they would only do so in a few years since unitary patents will not be granted before 2017.
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The problem of patent trolls is rising and rising in the US. As the percentage of patent trolls cases has increased by 2/3 over the last 2 years, the US is willing to find solutions to solve such a problem. In fact patent trolls are very harmful for the US as it has a direct cost for firms that practice patents, a private cost of lost opportunities to commercialize technology and also a social cost as it reduces innovation. At the end of the day patent trolls seem to only benefit to their selfish owners. The US have now figured that out as President Obama said less than a year ago: ”The folks that you’re talking about [PAEs] are a classic example; they don’t actually produce anything themselves. They’re just trying to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them… [O]ur efforts at patent reform only went about halfway to where we need to go and what we need to do is pull together additional stakeholders and see if we can build some additional consensus on smarter patent laws”.
Show lessTherefore there is a urgent need to take action against that problem. The US will do so by enacting different measures: until 2020, if a business method patent in the financial service is asserted in litigation the patent will have to be reviewed by the US Trademark and Patent Office (USTPO); higher quality patent will be required as low quality patents lacking of details seem to be essential for patent trolls to exist; a need to create stronger sanctions against frivolous litigation that are just aimed at making benefits for the PAEs will also take effect. Another idea would be for the US to get some inspiration from the UK system where the patent trolls have a lot harder time to live for many reasons: first, the Patents courts in the UK have specialist judges at trial and appeal level that seem to take reasoned decisions where it happen in the US that cases are ruled by a jury; secondly, those courts hear validity and infringement together which makes it harder for the PAEs to put pressure on the companies after a court has figured that they were infringing a patent; thirdly, cases do not last long (12 to 18 months) where in the US Patent cases last for years; fourthly the courts have the discretion to grant an injunction on patent held valid and infringed; lastly those courts seem to determine whether or not patents are essential to technical standards. In addition we believe that there should be a possibility for the judges to assign great punitive damages if the find a patent troll in an issue.
Considering how big the “patent troll” problem is getting in the US we (Europeans) have reasons to fear it especially if the measures above-mentioned have effect. In fact if such measures are efficient the is huge risk to see the “trolls” swim across the Atlantic and come back to their original home: Europe.
In addition the “closer and closer” Unitary Patent Court seem to feared by companies victims of the patent trolls as 16 of them wrote an open letter to the European authorities to explain that those trolls need to be avoided under the new system. In fact in the UPC the patents will have way wider scope as they will have effect in at least 13 countries
The main fear concerns the bifurcation system. In fact such a system (that we can witness in Germany for example) makes the PAEs able to put a lot more pressure on the companies as the cannot put a product on the market if it has been declared infringing the PAE patent even though the validity of the PAE patent is not asserted yet by the judge. This procedure that takes palce at two independent level will be possible under the UPC in some regional division judge’s court that have been used o such a proceedure. However the Rules of procedure of the “closer and closer” UPC seem to make the system able to face troubles coming from bifurcation as the 17th draft version of the still to be adopted UPC Rules of procedure states:” Where the panel decides to proceed in accordance with Article 33(3)(b) [(article 33(3)(b) permits the bifurcation system)] of the Agreement, the panel may stay the infringement proceedings pending a final decision in the revocation procedure and shall stay the infringement proceedings where there is a high likelihood that the relevant claims of the patent (or patents) will be held to be invalid on any ground by the final decision in the revocation procedure”.
Moreover we can see on the UPC website (not a very objective source) that when asked if patent trolls are to be feared under UPC system, the website mentions factors that encourage PAEs in the US and that are not to be seen in the UPC: the cost allocation rules in court (both parties bear their own costs); the contingency fee payments for lawyers that create incentives for lawsuits; the high damage awards and risk of treble damages in the case of “wilful infringement” and the pro-patentee posture of US courts and juries. We agree on the fact that those factors are encouraging PAEs in the US but an answer telling us how the UPC will be able to face the patent trolls might have been more convenient in our opinion.
As a conclusion we feel like considering the damages that patent trolls have created in the US that European authorities as well as European judges are aware of the issue and therefore ready to face it. We also feel like we we are lucky to have the opportunity to use US as a laboratory. In fact we believe that it will be intersecting to see how well the measure that are about to be implemented will work overseas. However UPC will still have to be careful as if the measures are actually efficient there might be a shift of the trolls into our countries.
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In the U.S., the « novelty » criteria for patent, is weaker than the one in Europe, for example. It means that almost everything is patentable. And if it is so, you claim a patent infringement more easily.
Show lessOne of the ways, to curb the proliferation Patent assertion entities (PAE), would be change the novelty criteria. It will be better to narrow it.
Other ways to limit the action of PAE would be:
– “To require plaintiffs to provide more details of the patent claims alleged to be infringed and to introduce cost rules that put plaintiffs at risk of paying defendants’ costs” ;
– “Or for PAEs to post a bond to cover defendants’ legal fees and costs, requiring them to disclose the real owners and parties behind them” (Source: Chris Thornham at http://www.theinquirer.net/inquirer/opinion/2288901/will-us-patent-trolls-soon-be-making-their-way-to-the-uk).
There already reactions of the Supreme Court of the U.S., “A recent Supreme Court ruling (Alice Corporation vs. CLS Bank) reaffirms a definition of when a patent is valid. The ruling states that patents must be associated with both an idea and specific concerns as to how the idea will be actionable. The decision invalidated the patents held by the Alice Corporation because they are simply based on an idea without any guidance on the transformation of that idea into an invention or innovation.” (Source: Howard Williams at http://www.forbes.com/sites/realspin/2014/08/04/the-u-s-supreme-court-hopes-to-limit-patent-trolling/).
And different States are taking actions, for example the State of Vermont has adopted a law against patent trolls. In his article, Eric Goldman has written a commentary of that law: “Vermont’s law (H.299, to be codified at 9 V.S.A. §§ 4195-4199) is entitled “Bad Faith Assertions of Patent Infringements.” However, it doesn’t define “bad faith patent assertion.” Instead, it enumerates factors to help judges distinguish legitimate from illegitimate patent assertions. Factors that suggest a bad faith patent assertion include not identifying the patent(s)-at-issue, the patent owner, and exactly how the recipient’s behavior violates the patent; demanding too quick a response or too much money; and making deceptive or meritless assertions. Factors that suggest a legitimate patent assertion include commercializing the patented invention; being either the original inventor (i.e., not having bought the patent for assertion purposes) or an educational institution; and having successfully enforced the patent in court.” (Eric Goldman at http://www.forbes.com/sites/ericgoldman/2013/05/22/vermont-enacts-the-nations-first-anti-patent-trolling-law/ ).
In Europe, the issue that may arise is that patentees will have “mixed portfolios”: the UPC system and the national one. This would lead to a sort of “forum shopping”. Many patentees, especially those with “weak patents” to sue more often and earlier than before. This situation would resemble what we have in the U.S. with PEA.
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How could such a problem be best addressed by a new law in the U.S.? How do you reduce the incentives for PAEs to aggressively assert their U.S. patents? Think about some helpful changes in the judicial rules and proceedings that might help to solve the problem in the U.S.
The first way to reduce, a priori, the incentive of PAEs to aggressively assert their U.S. patents would be to impose much more strict criteria concerning the infringement procedure brought by those PAEs. Indeed, they would be compelled to specify precisely their claims, the details about the hypothetical infringement and some kind of personal description of the claimant. Moreover, some preliminary research should be made in order to check if the claimant is actually the user of the patent or if it only owns it technically. In this last circumstance, a possibility to call another company (to which most of the time a big percentage of the patent revenues go) would be a way to insure that any party in interest to the litigation would effectively be part of it. This proposal also underlines the different problems related to the finding of the real owner of the patent in question. A solution would be then to set up kind of a system aimed at updating the different patent data bases in order to follow the evolution and ownerships of the patents. This would then facilitate the procedural part of the infringement procedure brought by those PAEs and then maybe enable the authorities to detect those called “patent trolls” and consequently, the abusive infringement procedures brought by them.
Another more a posteriori way, to reduce this aggressive use of U.S patents could be to sanction abusive court filings. But this would need to increase the judge’s competences in order to give them the possibility to financially condemn those PAEs or other companies to pay, for example, all the costs and legal fees of the company they have sued. By introducing this king of loser-pay rule, PAEs will think twice about suing a company for infringement as their intrinsic nature is to be financially and only financially oriented! The idea of losing huge amounts of money (we insist on the idea that the “financial penalties” must be sufficiently important to diffuse some kind of sense of deterrence) will be impossible in their eyes so that the number of infringement procedures will decrease naturally without any effort coming from whatever US authority. This solution could, in our opinion, be one of the best ways to reduce the influence of patent trolls as well as the number of abusive infringement procedures! But we should realize that the fact of being in a Common law country, based on a case by case approach and not much on rules and laws, will be a factor of “deceleration” as we will have to wait for a strong case law to be implemented and more importantly, recognized by all.
You should as well think a bit more on the risks for patent trolling to develop in Europe under the forthcoming patent package (which includes the Unitary Patent Regulation 1257/2012 and the Agreement on a Unified Patent Court of 19 Febr. 2013 (2013/C 175/01)). You should start to look at the articles referred to in the beginning of this post and the sources quoted (for instance a practitioners’ view on bifurcation). You should as well consult the 17th version (Oct. 2014) of the still to be adopted Rules of procedure for the future Unified Patent Court.
As reminded in the article, the patent trolling process has slowly pierced the sphere of European law. But it seems that the UPC agreements will remarkably accelerate this process. From the various articles which have been provided, we understand that the most pressing issue is the one of bifurcation. This process will be introduced by the agreement. It consists of a double barreled procedure, meaning that two courts can rule on one same patent infringement. This is possible because the first litigation concerns the validity of the patent while the second concerns the potential infringement of the patent. In addition, with this procedure there is a possibility of a priori prevention of the use of the patent. This implies that the commercialization of the patented product will be stopped before the courts have ruled on the issue and, most of all, it will be stopped in at least thirteen member states! Thus, we understand the fears current patent holders. At this point we can perceive the link between bifurcation and patent trolling. Indeed, as a patent holder i.e a company, having the commercialization of a product suspended for the duration of a whole trial is so harmful that the simple threat of a patent troll would make it agree to a settlement rather thant go to court. This very much resembles the way patent trolling is implemented in the US: in plane though realistic terms, it consists of taking advantage of the vulnerability of a firm, it is a real blackmail process in our opinion. Some argue that the UPC won’t prevent the firms from going for a trial because of the differences of judicial systems between the US and Europe concerning the costs of trials. However, we strongly disagree with this assertion, because as we pointed out supra the problem may be a matter of money in the US, in Europe it is a matter of time i.e. a priori control. Isn’t the implementation of various patent trolling companies the proff that it is already too late, that it the UPC agreements are indeed a threat to Europe contrarily to what counter)arguments try to assert? We see that a real problem is in the course of being set up: the UPC agreements will be encouraging patent abuses instead of protecting patent infringement!
annabel bassil and victoria heinen.
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In the US :
As it was explained by Chris Thornham, US patent trolls have become a serious issue in the United States of America. So serious indeed, that the Obama administration decided to take serious actions to overcome the dramatic ramifications of patent trolling. As a reminder, the phenomenon represents 62% of patent lawsuits in the US in 2012 and actually “put a drag on the economy” as the White House itself stated.
Firstly, one action would reinforce publicity measures against companies. They should now show to the administration detailed data that could help the administration to depict any forms or a start of patent trolling. In our opinion, the bill will have to work on a difficult balance between the executive power of the State and the fundamental rights of these companies : the right to conduct business. The State cannot simply go into private files containing diverse private data about people. The State could however put forward the need for public interest but it is a difficult issue here…
Secondly, several changes can be made regarding judicial rules, especially on legal costs. The principle in the US is quite simple : the loser in Court has to pay for the winner… and he has to pay a lot. This is of course what patent trolling is about : it is way to make a lot of money. Justice should no be viewed like this. It is a big problem. Justice is about putting forward your rights and being compensated proportionately because you have suffered a negative treatment. Our concern here with trolling is that the Justice is not seen as a judge but as a bag of gold. One solution is proposed by Senator Hatch : it would be required for plaintiffs to pay a bond that could be used to cover a part of the defendant’s legal cost in case of a win by the defendant. The problem is that the Republicans do not want this ; they actually want the opposite : a stronger loser-pay provision. Thus changing legal costs rules would be very difficult for the Obama administration since arriving to a consensus with republicans is very touchy and certainly difficult since he does not have the majority in the Senate.
Thirdly, an easy solution for Obama would be simply banning NPEs. He has clearly shown that he does not like the fact that these companies own without creating. We agree with him in a sense since it is very illogical to own without creating. It sounds very unfair and he does not hesitate to use the words : “extorting money”. However, Obama confesses : “We’ve got to balance that with making sure that they’re not so long that innovation is reduced”. A balance is needed since NPEs are actually contributing to innovation for the reasons you have stated above. Obama is faced with several issues. He first talks about how fast the technology is evolving and harder and harder it gets to protect citizen’s privacy. Again, a second issue that he does not mention – for political reasons for sure – is the “republicans threat” as I already explained. It is very difficult to adopt bills with two different ideologies. Republicans would first protect companies that are making profits for the State and would more likely see them as allies whereas democrats would be concerned with citizen’s protection and ready to engage a legal war against big companies. Compromises will have to be made…
In Europe :
Recently, an article in the Belgian newspaper “La Libre” published, on October 19, 2013, an article called “Will patent trolls soon appear on the European market?” Journalists wondered if the future UP Court might attract “trolls” in Europe and said that “the risk is not negligible”. In this second part of the essay, we will analyze the potential problems and risks that might appear in Europe regarding the patent trolling trends.
Per se, patent trolls strategies are legal, because it only consists of the right that is given to every owner to ensure respect of his utilization monopoly over the product that is conferred to him with the patent. But the problems with patent trolling is that some companies abuse of their right to ask for a patent granted by Patent Offices. Therefore, quality of those patent should be improved and controlled.
Unlike in the USA, there is no actual serious debate over the adoption of a law that would have as main objective the control and restriction of the patent trolling process. Indeed, in the US, the Republican majority in the Congress is willing to consider a law that would limit those abusive behaviours, just two years after the adoption of the Invent America Act, which amended the US patent law. But the reason why USA is perhaps more interested in the question of stopping patent trolling is that they do have a lot of cases involving battles between big firms that do have a lot of financial resources (Google, Microsoft, Apple, etc.). Thus, economic consequences might be huge for the party who lose the case.
In Europe, things are quite different. Even if the practice of patent trolling already appeared in Europe (see the litigation pending in Germany involving the Nokia and HTC companies, struggling against IPCom company), judicial proceedings are sensibly distinctive. If we look at the specificity of the US procedure and to its culture of litigation, we realize that juries might play a considerable role in the outcome of most of the cases. In fact, about 60% of the american cases are judged by a jury. This implies that we do not know which way a decision can go. This forces US companies to settle, while, in Europe, only professional judges can rule on patent cases, and this limit uncertainties that can be caused by juries. Moreover, damages awarded at the end of those proceedings are much lower in Europe (in 2006, the RIM society, producing Blackberry mobile phones, gave no less than 612, 5 million $ to NTP to stop a litigation pending before the american tribunals). This would mean that companies are much more attracted by starting to manage activites of patent trolling than they would be in Europe.
Problems might rise with the future establishment of the Unified Patent Court (UPC). The main argument to the detriment to this establishment is the increased effects of the future patent, because il will be possible to obtain a legal injunction valid on a large market (while today, court injunctions in case of a patent infringement are only effective for a single country). This implies the potential problem of the bifurcation concept, which is already present in German patent law. This occurs when both actions for patent infringement and counterclaims in which its validity is contested are dealt with separately, by different courts, at different times. The risks of the the new UPC system (which will entry into force after 30 ratifications) are numerous.
Show lessFirst, the possiblity to revoke a Unitary Patent across Europe by one single ruling: effects of the UPC rulings will spread over the whole territory of Europe. Consequently, companies will prefer to stay outside Europe to avoid the risk of a single invalidity decision revoking patents across the entire Europe.
Secondly, the possibility of a “pan-European injunction” will be seriously dangerous for EU companies. There will be a risk of stock being seized (at a preliminary stage), or being destroyed (if the infringement is recognized). This may lead some companies to whether they can lead their business through countries not covered by the UPC.
We can probably assess that most companies will avoid Unitary Patents and choose to ask for external patents until they are confident about the quality of the decisions of the UPC… Thus, this might take a very long time for the UPC to develop its case law…
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How could such a problem be best addressed by a new law in the U.S.?
Simply said, the point to avoid sues from PAEs, called Patent Trolls, is firstly a judicial, actual access. In this regard, the problems are, as far as I understand, as follows;
* the legal costs
* The procedure itself
As the article, which provided, mentioned, in the UK thanks to the system, they keep an unattractive legal order to PAEs. As Obama is trying to do, in the US a specific system to burden the legal costs on loser in patent cases and an systematic requirements of review and submission of detailed information and substance of patents. The white house reported the loss due to patent sues is $29 billion, and only one forth were backed to next innovation. However, even I know the request to answer is how do we address such a problem in the best way, I would like to doubt this necessity. Ensuring the accessibility to pursue an adequate compensation by a right patent-holder to big firms, this situation might contribute to the some small companies. Based on their argument, 62 per cent of all lawsuits has been brought by PAEs, 38 per cent, rest of the lawsuits, has been done by proper natural or legal persons. The circulation about “if we increase the difficulty to bring the lawsuits before Courts, how much benefits we will lose” is needed to decide we need to go further or not. Since the campaign of wording “Patent trolls” can be and has been criticized in the way, such as “this is labelling and pressuring on small firms not to exercise their rights”, both perspectives from the big companies and small enterprises.
Assuming the arguments by the white house is correct, I would like to go back to the original question. I would propose not to use a cost disincentive, but to improve a substantial assessment going to details of the patent allegedly owned by a plaintiff. Although this could be a factor for that a small enterprise will not enjoy their rights, it would be much better and less affective on this matter. Every patent must be “useful”, we can set some limits in this light. We can refer an opinion from the International Trade Commission in the US. They have decided to introduce a “Pilot Programme”, which requires a plaintiff to prove upfront that they have a significant presence in the United States before complaining to the commission. In the website, they explain the system, “The commission said it created a pilot program in which its six administrative judges will in some cases determine within 100 days if companies that sue for infringement have adequate U.S. production, research or licensing to use the court.” I believe this is good way to reduce the number of complain and lawsuits actually.
In case the government try to increase the legal costs, at the same time, an aid for a company who runs real businesses would recover the negative effects and supports to take an action against abusers of their patent. Assessing they have real economic life or not is easier than to avoid to include them into the scope of a definition of PAEs.
The risks for patent trolling to develop in Europe is lower than we are anticipating, concerning the procedure in Europe and a culture of lawsuits. As some article already referred, 1 a legal cost will be paid by loser, 2 they can get lower compensation 3 only specialist will judge, not by the jury. Though considering the leverage effects, since the procedure should be improved and enforced in terms of its quality, it will reduce rough, just challenging lawsuits from patent trolls. Having in mind UPC will have dozen divisions under the court, it means we can have many cases and compile the results, in a coherent view by one single system. It absolutely contributes to develop the system itself. Probably in the early stage, some risks will be real, but in the end of the day, we can have more comprehensive, sophisticated, and easier to argue with good substantial review into patents. Regarding a jurisdiction by ECJ, to ensure the substantial legal order, it should be expected not to accept many cases, it can be used, however, to reduce the trolling risk. It might be effective in the way to pressure the PAEs with anticipation to be reviewed in case it is abusive.
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(1) Abusive patent litigation (also known as “patent trolls”) is no novelty in the U.S. and can result in two main negative consequences: Firstly, it tends to block innovation, as companies are somewhat reluctant to put their efforts into new products knowing that they could be sued by patent trolls. Moreover, it is a drag on the American economy, because companies losing their lawsuit against patent trolls must pay a great deal of money, which might have repercussions on the customers. Thus, steps have been taken by the U.S. Congress towards “trolling” before it all gets out of control. To date, six bills have been introduced in order to deal with patent trolls.
One of the measures which could help addressing the “trolling”-problem would be to include “a stronger loser-pays provision”. It would reduce the incentives for patent trolls to attack companies, because if they lost, they would be forced to pay a great deal of money themselves. It is one of the reasons why Chris Thornham believes that patent trolls aren’t likely to move to the UK, as their judicial system already provides for a “loser-pays” provision.
The bills also provide for a type of “warranty”. Indeed, when filing a lawsuit, the applicant would have to post a bond. If the defendant wins the case and is awarded legal fees, the Court can use the posted bond, which is a blocked amount of money, to cover the defendant’s legal costs.
Another way to reduce the incentives for patent trolls to file a lawsuit would be to improve the quality of patents, as low-quality patents make it easier for patent trolls to sue companies to their own advantage. As we saw in the course, Europe doesn’t really have that problem as patents are delivered by the European Patent Court (EPC), which is the third largest international organization funded by private sources. Thus, as they have more funds, they can hire more competent engineers and deliver higher quality patents. Although private funding has its benefits, one needs to be reminded that it may open a door to lobbying.
The bills also require that the one filing the action (patent trolls) must give more information about their identity, for transparency is of paramount importance.
(2) The risk for patent trolls developing in Europe is related to the risk of bifurcation. That risk arises when an infringement action, which is brought before a Court, faces a counterclaim regarding the validity of the patent. The issue is that both actions will be brought separately, which creates the risk of a gap between both proceedings. The implementation of a Unitary Patent Court through the “Patent Package” could reduce the risk of an injunction gap. However, several risks may result from a single patent jurisdiction: Firstly, companies could eventually move out of the countries covered by the UPC in order to avoid the seizing and destruction of their stocks. Moreover, patentees will wait to file for a unitary patent until they make sure the system works efficiently. Finally, others might simply file for national patents, as the decision of a national Court revoking patent rights will not have consequences in other countries, whereas an invalidity decision pronounced by the UPC would revoke the patent rights in those countries designated in the “patent package”.
(3) Could the CJEU be a “last resort control” jurisdiction on patent proceedings? As a result of lobbyists, Council and Parliament, when adopting the patent regulation, did not put any provision on infringement in it. It was nevertheless included in the international agreement. As a consequence, the Court of Justice has no competence to rule on infringement litigation. Spain brought an action against Council (C-147/13) and Parliament (C-146/13) arguing that the adoption of the patent regulation without a provision on infringement was illegal. In its Opinion, the Advocate general does not follow the arguments brought up by Spain. Had he agreed with those arguments, the regulation would have to be annulled and thus the agreement that had been negotiated for several years could never come into force. The A.G. finds a construction on which he can say the Court of Justice can nevertheless be competent. That way, the lobbyists’ tricks won’t reach their goal, which was to avoid the jurisdiction of the Court of Justice regarding infringement litigations.
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Patent Trolls, also known as Patent Asserting Entities (PAEs), are – for now – mainly an American phenomenon. It is not entirely clear why this is the case, but experts agree both the culture and the regulatory context play an important role in this. An example of the difference in the legal context between the EU and the USA, is one of the substantive conditions used to assess the validity of a patent: the “usefulness” criterion in the US is much larger than the “industrial application” requirement in Europe. Another example is the ‘patentability’ of software: software is always patentable in the US, while in Europe software is only patentable if it fulfills the “machine
Show lesstrick.” Regarding the American culture, it could be argued that the USA has a “litigation culture”, whereas Europe has more an “enforcement culture”. It is perceived as less ‘common’ to sue in Europe than in the USA.
Other elements could be classified as being both cultural and legal: indeed, the cost of proceedings is usually higher in the USA, and, similarly, the amount of damages is, on average, higher in the USA as well. Additionally, while in Europe the loser is often the one paying the costs of proceedings, this is not the case in the USA: the general rule in the US is that each party bears its own legal costs. Moreover, the size of the US market is also an important element: the US market is much bigger than any market in Europe, giving patent trolls more leverage (cf. Infra). A final element contributing to the proliferation of patent trolls in the US is the institution of the jury: a jury can go either way: there is less legal certainty with a popular jury than with a professional judge. Therefore, companies do not want to risk going to trial.
Considering all this, it is reasonable to say that the USA has a more favorable environment for the development of such patent trolls.
One possible solution to dissuade patent trolls in the USA would be to change the rule according to which every party bears its own legal costs. Indeed, while the ‘loser pays all’ rule has several defaults, it has two important advantages when it comes to patent trolls. To understand this, one needs to know how patent trolls work. Mostly, they sue a manufacturing company for patent infringement, not because they really want to go to court, but because they want a settlement. The manufacturing company, because of the infringement proceedings, is blocked, and has to support its legal cost. To avoid lengthy proceedings which could cause them to go bankrupt, the manufacturing companies often choose to settle, thereby giving patent trolls what they want (even though it is the best solution for them as well).
If the US would replace its current rule regarding to the costs of proceedings and replace it with a ‘loser pays all rule’, manufacturing companies would not have to support their own legal costs if they win. This would also refrain patent trolls from suing with ‘bogus patents’, seeing as they would support the whole cost of the proceedings when they lose.
Another possible solution would be to require that certain patent plaintiffs post a bond which could be used to cover defendants’ legal costs in the event the defendant wins and is awarded legal fees. This would ensure that patent plaintiffs only sue when they really think they can win and only sue when they really want to sue. It would also help eliminate ‘privateers’. According to L. Thomas, a patent privateer or intellectual property privateer is “a party, typically a patent assertion entity, authorized by another party, often a technology corporation, to use intellectual property to attack other operating companies”. Those privateers often have a limited amount of funds, and so requiring them to post a bond which could be used to cover defendants’ legal costs would oblige them to disclose the real owners and parties behind them.
Another possibility would be the insertion of rules that allow costs sanctions against plaintiffs who bring frivolous litigation.
Replacing the jury with professional judges or expert is a possible solution as well.
As republicans now have the majority in the Senate and the House of Representatives (and thus control both chambers of Congress) and have expressed their interest in tackling the problem of patent trolls, specialist argue that patent trolls might reduce their activities in the US and come to Europe instead.
The future creation of the Unified Patent Court (UPC) only increases the chances of this happening. Two main reasons are advanced for this.
Firstly, the creation of such a unified court will enlarge the European market, giving patent trolls more leverage.
Secondly, the system of bifurcation that might be adopted for this UPC is reputed to be favorable for patent trolls. Indeed, the system of bifurcation implies that actions for patent infringement and counterclaims in which its validity is contested are not heard by the same court at the same time in the same proceedings, but are dealt with separately by different courts, at different times and with very different consequences. This means one court can decide about the patent infringement proceedings without having to decide if the concerned patent is valid. As a result, a court might decide there is a patent infringement even though the patent invoked is in fact not valid. This is very interesting for patent trolls. However, such a system of bifurcation already exists in Germany without too many problems, so some say this will not necessarily be a problem. Others contend that the bifurcation system, though not problematic in se, will be problematic at a European scale, i.e. on a bigger market. Indeed, it will then be possible to obtain a legal injunction valid on a large market (at least 13 Member States, including the three largest countries: Germany, France and the United Kingdom). Today, court injunctions in case of patent infringement can, in principle, only be effective for a single country (no cross-border effect). Defenders of the bifurcation system then answer that, because Germany is such an important market, no product was launched in Europe without launching in Germany, so de facto the German bifurcation system had the same scope as a future European bifurcation system. Thus, the creation of the UPC will not give patent trolls more leverage than before, and the bifurcation system will work fine, just like it does in Germany right now, they say.
Moreover, the 17th draft of the Rules of procedures has responded to this worry of an ‘injunction gap’: Rules 37(5) and 40 of the new draft seek to address this potential problem, notably by providing that, in the case of bifurcation without a stay of the infringement proceedings, the counterclaim for revocation referred to the central division shall be accelerated and, in any case, heard by the central division “prior to the date of the oral hearing of the infringement action”. It remains to be seen whether these changes will be implementable in practice, in view of the respective caseloads of the central and local divisions.
Gilles Hachez & Mathieu Gombault
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As we have already said during the course, several issues related to the us patent system may play as an inducement for patent troll. Indeed, we have issues at the level of subject matter as the low-quality standard of the patent, the fact that patents are too easily available for subject matter such as business methods and the fact that they are too trivial. There are also issues at the level of enforcement such as the strong presumption of validity of the patent following which patents are too easy to assert and the fact that they are too potent.
The association of elements, which is not present in the european patent system, constitutes an incentive for patent trolls in the U.S. That is the reason why laws have been adopted in order to limit these abusive behaviors such as the patent reform bill that passed in 2011. But according to the U.S. President, « these reforms only went halfway towards reforming the patent system as far as it needed to go ».
These texts seem to bring out some solutions following which the patent problem could be best adressed by a new law in the U.S. :
– Pull together additionnal stakeholders and see if we can build some additionnal consensus on smarter patent laws ;
– Improve the quality of the patents issued by the United State Patent and Trade Office (USPTO) by more and better trained patent examineers ;
– Foresee stronger loser-pays provision to deter PAE’s to assert their patents ;
– Invigorate the review process of the patents in order to eliminate « bad patents » ;
– If a business method patent is detected until 2020, the patent will be put in review at the the USPTO ;
– Increase transparency regarding the PAE’s which file those court actions by requiring plaintiffs to provide more details of the patent claim alledgely infringed, demanding them to disclose the real owners and the parties behind the injuction ;
– Establish cost sanctions against plaintiffs who bring frivolous litigation ;
– Reform the law of evidence.
One other solution might be to entrust the regulation of these patent cases to professional judges only, as in Europe, so as to limit the uncertainties caused by juries. Indeed, the current procedure in the U.S. is a source of ambiguity and puts NPE’s in a strong position to force companies to settle.
These various measures are likely to dampen patent trolls in the U.S. but they might cause the migration of this problem to Europe and U.K.
Show lessThe establishement of the system of unitary patent and unified patent court is also a reason of the possible shift of the patent trolls to Europe. Indeed, there will be an increased leverage of the future patent and from now on, it will be possible to obtain a legal injuction valid on a large market, creating a major attraction factor regardind PAE’s.
Another main problem would be that the UPC might apply the bifurcation, opening the door to a large wave of patent trolls. Indeed, with the bifurcation, once the judge has statued over the violation of the patent and before another judge pronounces over the validity of the patent, NEP’s enjoy this « injuction gap » in order to put pressure on the companies to negotiate a license.
Moreover, the costs of legal defense can be very important in Europe, encouraging companies targeted by trolls to settle rather than to engage into a lengthy and costly procedure.
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Regarding the US system
In the US system, it is the person who is the first to invent who gets the protection of the patent. In this sense, it is easier than in Europe (where people have to file right away).
Therefore, patent trolls (PAEs) can acquire patents of low quality (or for nearly any so-called invention) and without being controlled like in Europe. Then, there isn’t any opposition phase available in the US (in Europe, anyone can oppose the grant of a patent during the filing process before the Opposition Division in Munich).
Having these filters would be a great thing for the US system because it would pull the rug out from under the patent trolls’ feet.
Another problem in the US is the functioning of the judicial system.
Patent trolls, as other plaintiffs often do too, are allowed to “court-shop” under article 28 U.S.C. §1404 (a). That is a first thorn in the system.
Moreover, the US system is based on the jury trial and the damages awarded are a lot higher (as are the costs in the discovery process, which is the evidence gathering phase) than in Europe.
For all these reasons, the US is thus an ideal breeding ground for patent leverage by patent trolls.
Regarding the European system
Although the original goal of patent trolls may be laudable (they enhance the value of inventions which would otherwise be used without their owner knowing about it), it has been established that some of these PAE’s make fraudulent use of them. As an example, the US has been the battlefield of 12 lawsuits which resulted in payment of sums exceeding 500 million $ since 1980.
Patent trolling is, on the other hand, less of an issue in Europe. The reason for this is that the EU has a loser-pays-all principle, which is inexistent in the US. The attorney’s fees in the US can be sky-high, but that is generally not the case in Europe, which tries to keep these low in order to convince people into going to court when their rights are being infringed.
The conditions for patentability can be found in Art. 52 of the European Patent Convention. The first paragraph of this article says: “European patents shall be granted for any inventions (1) which are susceptible of industrial application (2), which are new (3) and which involve an inventive step(4)”. Furthermore, the invention has to be licit, lawful (5). All of these conditions (except for the lawfulness condition) are similar to the ones in the United States.
The recent bifurcation of the European litigation system (following the Unified Patent Court Agreement, hence forth “UPC”) has raised a lot of awareness and anxiety on the matter. The new system aims at bringing unification regarding patentability. This means that it would henceforth be possible for a unitary patent to be revoked across whole Europe by a single ruling. This is likely to scare some of the non-European companies doing business in Europe. This possibility of pan-European injunctions constitutes a serious hazard for them.
Some patentees might also be tempted to file national patents for some of their products in the hope that potential litigations be held in national courts. In staying out of the UPC, they hope to avoid being subject of a single invalidity ruling revoking patent rights at a European level.
Show lessRead more
Regarding the US system
In the US system, it is the person who is the first to invent who gets the protection of the patent. In this sense, it is easier than in Europe (where people have to file right away).
Therefore, patent trolls (PAEs) can acquire patents of low quality (or for nearly any so-called invention) and without being controlled like in Europe. Then, there isn’t any opposition phase available in the US (in Europe, anyone can oppose the grant of a patent during the filing process before the Opposition Division in Munich).
Having these filters would be a great thing for the US system because it would pull the rug out from under the patent trolls’ feet.
Another problem in the US is the functioning of the judicial system.
Patent trolls, as other plaintiffs often do too, are allowed to “court-shop” under article 28 U.S.C. §1404 (a). That is a first thorn in the system.
Moreover, the US system is based on the jury trial and the damages awarded are a lot higher (as are the costs in the discovery process, which is the evidence gathering phase) than in Europe.
For all these reasons, the US is thus an ideal breeding ground for patent leverage by patent trolls.
Regarding the European system
Although the original goal of patent trolls may be laudable (they enhance the value of inventions which would otherwise be used without their owner knowing about it), it has been established that some of these PAE’s make fraudulent use of them. As an example, the US has been the battlefield of 12 lawsuits which resulted in payment of sums exceeding 500 million $ since 1980.
Patent trolling is, on the other hand, less of an issue in Europe. The reason for this is that the EU has a loser-pays-all principle, which is inexistent in the US. The attorney’s fees in the US can be sky-high, but that is generally not the case in Europe, which tries to keep these low in order to convince people into going to court when their rights are being infringed.
The conditions for patentability can be found in Art. 52 of the European Patent Convention. The first paragraph of this article says: “European patents shall be granted for any inventions (1) which are susceptible of industrial application (2), which are new (3) and which involve an inventive step(4)”. Furthermore, the invention has to be licit, lawful (5). All of these conditions (except for the lawfulness condition) are similar to the ones in the United States.
The recent bifurcation of the European litigation system (following the Unified Patent Court Agreement, hence forth “UPC”) has raised a lot of awareness and anxiety on the matter. The new system aims at bringing unification regarding patentability. This means that it would henceforth be possible for a unitary patent to be revoked across whole Europe by a single ruling. This is likely to scare some of the non-European companies doing business in Europe. This possibility of pan-European injunctions constitutes a serious hazard for them.
Some patentees might also be tempted to file national patents for some of their products in the hope that potential litigations be held in national courts. In staying out of the UPC, they hope to avoid being subject of a single invalidity ruling revoking patent rights at a European level.
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