Patent assertion, the process of enforcing patent rights through litigation, has been a topic of significant interest and debate in the intellectual property (IP) arena. While patent litigation serves as a mechanism for patent holders to safeguard their inventions and monetize their IP, it has also faced criticism for its association with patent trolls and the potential negative impact on businesses.

This article aims to provide an insightful and in-depth overview of patent assertion by highlighting the impact it can have on companies and their allegedly infringing products. Moreover, it explores the industries and sectors most vulnerable to patent assertions and discusses effective strategies to mitigate the risks associated with patent litigation.

Understanding Patent Assertion and Patent Litigation

Patent litigation is the legal process of asserting the validity of a patent and claiming that another party is infringing on the rights of the patent owner. It is a common strategy patent holders use to protect and monetize their intellectual property.

The primary objective of patent litigation is to prohibit the unauthorized use of a patented invention by others, which can be achieved by granting licenses to third parties and permitting them to utilize the invention in exchange for fees or any other form of compensation. Licensing serves as an effective means for patent holders to generate revenue from their patents while simultaneously granting access to the patented technology to others.

Over the years, patent assertion has become increasingly controversial due to its association with “patent trolls.” Patent trolls are entities that acquire patents with the primary goal of asserting them against others rather than using or licensing them. These entities are called Patent Assertions Entities (PAEs) or Non-Practicing Entities (NPEs). They have often faced criticism for using the patent system to extract settlements or licensing fees rather than actively contributing to innovation; however, they always argue otherwise. Despite their criticism, these entities have continued to rule the patent litigation charts over the years.

Despite contrary arguments from the two sides, patent litigation is an important aspect of the patent system. It can be a valuable tool for patent holders to protect and monetize their intellectual property. However, it can also be a controversial issue, and it is important to balance the rights of patent holders with the need to promote innovation and competition.

Patent Litigations in the US

Over the years, the number of patent assertion cases in US courts has been consistent. Figure 1 showcases the number of US patent litigations since 2013. Except for the years falling near the implementation of the America Invents Act in 2012 and Apple’s $1 billion win against Samsung, there is clearly no significant change in activity over the years. In the years 2020 and 2021, there was a 12-13% increase in patent assertion cases as compared to the two preceding years, which may be attributed to the Covid-19 pandemic as more and more companies have tried to monetize their patents.

Understanding Products Vulnerability to Patent Assertion

One may wonder which products/features are most susceptible to patent assertions. As depicted in Figure 2, any product/feature may attract patent assertion – whether it belongs to a Fortune 500 or a start-up. No business is immune to patent assertion, especially those initiated by patent trolls for frivolous reasons. Patent assertion against start-ups are more challenging, as these entities often lack the resources to fight legal battles. Hence, they typically settle on the patent troll’s terms and concede to out-of-court settlements.

Products with high sales and revenue figures are most susceptible to patent assertion due to the damage calculation procedures followed by different courts. The courts generally ascertain damages based on product sales, meaning that the flagship products/features with the highest sales figures are at the highest risk of patent assertions. Therefore, these products must be thoroughly evaluated for IP infringement before their launch, as doing so could significantly reduce the risk of patent assertion.

Now that it is well established that any company can be a victim of patent assertion, one might wonder about the impact of patent assertion on a company and the allegedly infringing products.

Impact of Patent Assertion

Patent assertion can have a significant impact on a company and its market presence. It can affect:

• Company’s reputation: Being sued for patent infringement can severely damage a company’s reputation, especially if the case receives widespread media coverage. This negative publicity can make it more challenging for the company to attract new customers and investors, impacting its market presence.

• Licensing costs: If a company is found guilty of patent infringement, it may be obligated to pay licensing fees to the patent holder. These additional expenses can significantly increase the company’s operational costs, potentially leading to higher customer prices as the company seeks to cover these fees.

• Legal costs: Defending against patent assertion can be costly and time-consuming. Regardless of whether the company is ultimately proven innocent of patent infringement, the legal expenses can still be substantial.

How to Mitigate Risk of Patent Assertion

Certain strategies can help reduce the risk to a larger extent. These include:

• Conduct a thorough patent search: Before developing or marketing a new product or service, it is essential to conduct a comprehensive search to determine if any existing patents cover similar technology. This can help identify potential infringement issues early on and allow one to make any necessary changes to their product or service.

• Obtain a license: If you plan to use patented technology, you may be able to obtain a license from the patent holder. This option can be viable if the patent holder is willing to negotiate a reasonable licensing fee.

• Develop around the patent: If obtaining a license is not feasible or the licensing fee is prohibitively high, one can consider developing a different approach or method to achieve the same goal.

• Get a freedom-to-operate opinion: Before launching a new product or service, it is advisable to get a freedom-to-operate opinion from a patent attorney who can analyze the patent landscape and identify any potential infringement risks.

• Seek legal advice: If you are unsure whether your product or service infringes on a patent, it is crucial to seek the advice of a patent attorney. Their expertise can assist you in comprehending the legal complexities and provide you with the best course of action.

It is vital to note that even with these steps, there is still a possibility of inadvertently infringing on a patent. Therefore, it is important to be aware of the potential risks and take appropriate legal advice when necessary and never easily concede to the patent owner’s terms and look for ways to narrow your losses and nurture in-house innovations.

Conclusion

Patent assertion is crucial for protecting intellectual property rights and promoting innovation. Moreover, patent litigation allows inventors to safeguard their inventions and monetize their IP. However, patent trolls pose challenges by asserting patents without contributing to innovation, while they argue on safeguarding the inventor’s interests. Companies can mitigate the risk of patent assertion by conducting thorough patent searches, obtaining licenses, developing alternative approaches, seeking legal advice, and nurturing in-house innovations. Thus, companies can protect their market presence and contribute to technological advancement by taking proactive measures.

Sagacious IP’s expert team can assist you in developing patent counter-assertion strategies customized to meet your specific needs. Our team of skilled patent professionals is capable of identifying any potential infringement concerns and assessing your case’s strengths and weaknesses. Moreover, we can support you in negotiations with the opposing party to achieve a favorable resolution. For more details about our expertise, please visit our patent invalidity and patent counter assertion service pages.

Mudasir Ibn Bashir (ICT – Research & Analysis) and the Editorial Team