Patent Risk Digest – July 2015

Common Software Technologies Attract Troll Suits

Data shows that online “shopping cart” functionality and other E-commerce tools that companies use every day are magnets for patent trolls. Companies in 2014 faced troll lawsuits targeting search, payment, and store-locator functionality, among other common, customer-facing services.

Technologies on the back-end of company web operations—including cloud storage(a kind of “enterprise technology”)—also have drawn lawsuits. And in the wireless space, one of the most striking examples of a troll attack was that of Innovatio IP Ventures, which in 2011 sued thousands of coffee shops, hotels, and other businesses that had set up Wi-Fi networks for customers.

Most-Targeted Software, Technologies, and Services
Companies with revenues of less than $100 million were sued by trolls most frequently over operations related to the following types of software, technologies, and services as based on 2014 RPX data.

E-commerce
Search
Enterprise Resource Planning (ERP)
Business Analytics
Office and Productivity Applications

Social Networking
Content Streaming
Gaming
Location/Tracking
Suggestion/Recommendation Software

Ruling: Technology Users Aren’t As Safe As They Might Think

A new court decision could put software suppliers—and their customers—at greater risk of patent troll suits targeting a wider range of technologies. According to RPX data, five “downstream” software customers are sued every time a software supplier is sued by a troll.

In Helferich v. New York Times, Helferich Patent Licensing sued 150 companies, including the New York Times, J.C. Penney Corp., and Starbucks, for infringement. All of the companies had been using text alerts with hyperlinks to information on the companies’ websites as a way of communicating with customers on their smartphones—a function Helferich claimed was covered by its patents.

Initially, a lower court agreed with the companies that they were safe. The reasoning was that Helferich had already licensed its patent portfolio to a broad group of smartphone manufacturers, and, therefore, had “exhausted” its ability to sue. But in February this year, a federal appeals court concluded otherwise. That court found that while the smartphone patents in Helferich’s portfolio indeed had been licensed, other patents in the portfolio involving methods related to the text communications had not—exposing the companies to possible infringement claims.

Patent Reform: What Is It — And Where Is It Going?

Congress is once again trying to pass new legislation aimed at curbing abusive patent troll suits. As of this summer, several patent reform proposals are in various stages of consideration.

Two major, competing proposals, one from the House and one from the Senate, include changes to rules related to the awarding of attorney fees (fee shifting), the ability to suspend lawsuits against “customers” or downstream users of technology, notice requirements, pleading requirements, and the limiting of early discovery. Both bills also would change the way the validity of patents can be challenged through the US Patent and Trademark Office (USPTO). A key difference between the two is that the House bill would limit plaintiffs’ choices for venue, which might cut down on “forum shopping” by plaintiffs. The Senate bill would not.

Large technology companies generally support some form of legislative reform. That was true also in 2013 and 2014, when a total of 15 patent reform bills were proposed. Ultimately, those bills were unsuccessful despite great effort to move reform forward.

Your Patent Litigation Risk

Patent trolls—also known as NPEs or non-practicing entities—have a simple business model. They acquire patents directly from inventors, through patent brokers, or from companies selling off assets, then target operating companies that may be infringing those patents and bring legal action to generate a payment.

The legal costs alone of a single infringement litigation can range from six figures to several million dollars. For large companies it is a frustrating problem that can reduce investment and profitability. For smaller companies, a patent troll attack can be fatal. Patent trolls have increasingly targeted companies—both suppliers and users of patented technologies—in a broadening range of business sectors. That means companies can be vulnerable just by running their websites, managing their E-commerce, providing WiFi access, using mobile devices, or deploying enterprise software solutions—all operations that utilize patented technologies.

RPX provides a suite of business solutions to reduce the expense and likelihood of such litigation. One is NPE Patent Litigation Insurance, which combines a traditional claims-paying policy with select, proactive intervention in the patent market. RPX has a uniquely broad and deep store of litigation cost data, and with it has built a highly accurate actuarial model for patent troll risk and cost. Policies are customized to reflect a company’s size and risk profile.

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