Patent Wars: Return of the Troll

Patent Wars: Return of the Troll

Tuesday 5 January 2016 - Ammar Thair

From the field of technology to the realm of lawsuits, Apple needs no introduction. Amongst its plethora of accomplishments the company has succeeded in redefining its product market, not least with the addition of a single letter. However, despite being best known for its unique brand of phones, laptops and music devices, its involvement in countless litigations solidifies its status as a veteran of the courtroom.

For instance, it was only back in February of this year that Apple was ordered to pay $533 million for improperly using someone else’s patented technology in its iTunes media store. Now, since Apple is the corporation that posted the biggest quarterly profit in history, and has cash reserves in the region of £90 billion, that initial figure of damages may not seem as large as it first did before one were to reach the end of this sentence. However, it’s value remains in more ways than one. Symbolically, it conveyed a huge victory for an organisation, Smartflash, supposedly wronged by a corporate giant, Apple. Alas, it is not so simple.

Though Apple may have been guilty in violating the patents in question, which specifically involve access to data storage through payment systems, the organisation that owns them does little else. Essentially, the company does not offer any products of its own, but rather gains its substantial income through the impact of patent licenses and lawsuits, and so its business model depends largely on litigation. On account of this, Smartflash is typically considered a patent troll. Apple itself has argued that the company is “exploiting” the marketplace, and the US Court of Appeals had put a nearly identical suit against Samsung on hold, on the grounds that the US Patent and Trademark Office should first consider the validity of the patent, and in doing so, the credibility of its owner.

Ultimately in Apple’s case, the figure of $533 million in damages had eventually been rendered void, however, this was primarily on the grounds of incorrect calculation, as opposed to the status of the patent itself. Regardless, there is no doubt that the issue of patent trolls is a problem. The comedian John Oliver, undoubtedly one of Britain’s finest exports, expertly covered the issue within the context of American litigants. His television segment brought to light the fact that many so-called trolls are stockpiling patents, with the sole purpose of targeting possible infringers for monetary gain. Much of his ire was directed towards the US patent system, leading to his condemnation of patents as “legally-binding dibs”.

However, patents in themselves are clearly not the problem. The problem is their abuse and a culture of tolerance towards such abuse that serves to undermine the legitimate protection afforded to those who seek to innovate, something that only a patent could provide.

Certainly the most well known of Apple’s ‘Patent Wars’ has been its billion dollar clash with Samsung. Since the verbal warning of August 2010 and the first lawsuit in April 2011, the battle lines for this unprecedented showdown were drawn when Apple fired the first shot in what some have called one of the “bloodiest corporate wars in history”. The litigation began on the argument that Samsung had “slavishly” copied Apple’s product designs, a claim that was swiftly met with a countersuit alleging infringement of Samsung’s 3G technology patents, who additionally issued claims in three other countries. This initial confrontation between Apple and its former supplier would paint the picture of an international battle of over 50 lawsuits continuing to this very day. What’s significant however is that patent trolls are already abusing a recent patent ruling between Apple and Samsung.

On June 2nd 2015, shortly after a landmark ruling against Samsung was upheld, Colorado-based Intellectual Capital Consulting, Ltd. (ICC) filed a patent infringement lawsuit against a dozen companies, including Samsung, Apple and BMW for the apparent violation of smartwatch patents. On the same day, ICC’s Managing Director sent a cease and desist letter to Samsung, and, alarmingly, referenced within it the very case that Samsung had lost against Apple, incidentally the one that many feared would inspire such a response. Many feared the result of this action would be a wave of design patent lawsuits and overcompensations, entirely inconsistent with “the limitations imposed in others areas of intellectual property law”. Indeed the former is already true, and given the rise in new ‘smart’ technology- whether it be ingrained in your car or nestled on your wrist- a rise in predatory claims is simply inevitable.

Therefore, in turning back to Apple it would seem that after so much experience, nothing could be left to surprise the technology giant. Thus, it came as a great shock on the 16th October 2015 when a court ordered Apple to pay $234 million in damages, to the University of Wisconsin. Never before had Apple tussled with a public University, much less one that had a reputation for being ‘patent-savvy’. The dispute centred on Apple’s A7 smartphone chip, a chip that improves battery life significantly, but allegedly infringes a patent owned by the University of Wisconsin in so doing. Given that the University had settled a lawsuit over the same patent with Intel, with Intel paying $110 million to license the patent, perhaps Apple should have seen it coming. After all the University’s licensing arm, WARF (the Wisconsin Alumni Research Foundation) has gained a reputation as “an aggressive litigator” having filed 33 lawsuits against 31 different defendants since 2,000.

Moreover, some have questioned whether publicly funded schools should engage in such hostile forms of patent litigation, leading to comparisons of the behaviour of supposed patent-trolls, aggressively seeking license royalties, rather than being “good stewards (of taxpayer money)”. The University, on the other hand, would argue that taking such action against Apple would be key to “monetising inventions” made at research universities, with the benefit of protecting patents leading to the encouragement of innovation. Though if one were to apply the criteria for a patent troll, they may find similarities in the sense that a University may rarely intend to manufacture a product using its patent, the situation is nevertheless distinct. Whereas a University may seek to preserve the integrity of its patents through demanding adequate licensing, a patent troll is an entity that purchases and pursues an array of patents with the sole aim of charging others for its use. WARF is arguably just a non-practicing entity, and not a patent troll. Thus, it seems this unfamiliar foe presents a new challenge for the veteran litigator, especially given claims that WARF may pursue additional lawsuits against Apple for its use of the A7 Chip in its new iPhone 6s and iPad Pro.

Clearly, the Patent Wars are far from over. On the wider issue of patent trolls, one can only speculate that with the increasing digitalisation of our products and services, the incentive for trolls to snap up new patents and pursue opportunities for litigation can only increase. The need for greater clarity and sense within the context of patents is therefore more necessary than ever, if we are to combat the inevitable return of the troll. 

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Author: Ammar Thair