From the epic intellectual property war between the mobile communications device titans, insights are emerging for small businesses on how they can successfully wield patent rights and defend against them.
The Apple v. Samsung patent wars originated in the United States in April 2011 and is now being fought in more than 20 cases in 10 countries around the world.
Apple co-founder Steve Jobs once famously told a biographer that he was ready to go to “thermonuclear war” with Google before he licensed Apple technology to an Android manufacturer. This claim was backed up in his final months by the filing of patent infringement lawsuits against HTC, Samsung and Motorola – the three largest manufacturers of Android devices. Assertive patent strategies allow companies to differentiate their product with the features that are covered in the patents – since competitors can’t copy.
However, enforcement has been a mixed bag for Apple, winning in some countries and losing in others. What’s the alternative to all of this? In an interview with Bloomberg, IP advisor Kevin Rivette suggested that it may be time to investigate licensing options. If Apple were to settle with Samsung and license its technology, it may be able to secure $10 in royalties for every Android device sold.
When lining up patent litigation, small businesses should take a careful look at all IP options. Sometimes the most obvious option is not the most profitable.
Know your enemy
In 2005, Samsung announced it would pursue a patent-based business strategy. There comes a point in a business’ life at which the intellectual property developed (whether a specific feature of a product or an accumulation of features) warrants the expense of protection. That is, the potential financial loss (if a competitor copies the technology) outweighs the cost of patent protection.
LG is also busily restructuring its patent strategy to effectively counter patent lawsuits. According to Lee International IP & Law Group, LG plans to establish four regional centres for patents including the United States, China, Japan and Europe. These centres will manage patent disputes filed in the respective regions and support LG in securing patents in those regions.
For smaller businesses, selecting patent attorneys who are both a national expert and expert in the relevant technology area is the key. Your local attorneys should be able to demonstrate to you that the foreign attorneys they coordinate to handle your cases have a suitable background to understand your technology, prosecute your patents and, if necessary, litigate.
Apple’s strategy of applying for multiple design patents for the iPhone has proven highly effective in many countries in ensnaring Samsung design work.
Many R&D companies with significant budgets take an approach of “patenting everything that moves” including the visual appearance of products, by filing registered designs around a particular design theme. A strategy that, incidentally, is also quite popular in the automotive industry.
By fencing off as much IP land as possible, it can make it quite difficult for competitors to innovate in the space and this can buy time for your own products to “get ahead”. A word of caution, however, whilst effective in some situations, this strategy often requires deep pockets, particular as time marches on and is rarely appropriate for small R&D enterprises which are normally better off pursuing IP protection for only key product features or design work.
What makes a good patent?
Whilst military victories are often decided by technology, patent wars are decided primarily based on the strength of patents. So what contributes to the strength of a patent?
Like an advancing line, patent claims must be void of loopholes. When you are facing experienced patent attorneys on the other side, any loophole will be exposed, and the enemy, like water, will find a way around your line.
In the patent world, an advancing patent infringement suit will always be tested. The other side will always investigate the strength of your advance. If it is weak, they will charge with a countersuit for patent invalidity…and you will be defeated. The legal test for patent validity has two primary parts – (i) was the idea new at the time the patent was filed; and (ii) would the idea not have been obvious to someone who worked in the relevant technology area at the time the patent was filed? Clearly then, a knowledge of what has gone before is key to assessing the strength of a patent claim. It is not straightforward, unfortunately, to determine exactly what has gone before without a thorough search of international patent databases. Whilst patent searching can appear expensive, in comparison to the cost of obtaining patent protection and even more so, enforcing patent protection, patent searching is highly cost-effective.
Whether your business is large or small, the same factors will determine the strength of its patents. It is always worth spending a little extra time double-checking your patent claims by brainstorming with your attorney how they might be attacked and in conducting thorough patent searches.
How to make a pre-emptive patent strike
In Australia, Apple recently failed to convince the Full Federal Court to uphold the interim injunction against the sale of the Galaxy Tab 10.1. Prior to this, it seemed that Apple’s pre-emptive strike on the Galaxy Tab 10.1 had the potential to shut Samsung out of the Australian tablet market for some time.
Some other “surprise” tactics used by patent owners include:
- Anton Pillar orders which are a civil equivalent of a search warrant that allows the owner to make a search of the infringer’s premises to search for specifically identified items.
- Applications for preliminary discovery that require a person to give information relating to possible infringement.
How to protect and profit from an R&D investment
In 2010, Samsung Electronics invested nearly AU $8 billion in R&D or 6.1 percent of consolidated sales. According to Samsung, continued investment in R&D is crucial to upholding its “distinctive edge” and from 2006 to 2011, Samsung ranked second in terms of the number of new patents issued in the United States.
The greater the investment in R&D, the more risk there is in other companies leveraging their product development on the back of your hard work. Apart from protection, patents open up broad licensing and freedom-to-operate opportunities. In 2010 Samsung concluded cross-licensing agreements with IBM and Intellectual Ventures, paving the way for freedom-to-operate and licenses with Nanosys and Unidyme to acquire new LCD technologies.
How to avoid rousing the patent dragon
With IP litigation increasing, it is extremely important to ensure that the technology you incorporate into your product, the design work you use and the name you choose do not infringe anyone else’s rights. Third party rights can be searched by patent and trade mark attorneys by what is known as a freedom-to-operate search or by reviewing competitors’ products for intellectual property markings, such as patent numbers. By identifying potential infringement issues during the design stage, product designs that carry a high risk of liability can be weeded out.
One particularly important point to bear in mind for manufacturing companies is that if you are using third party manufactured components in your products, the supply contract includes a warrant that your use of the component will not infringe third party rights. Patent infringement should also be carefully avoided because in addition to the cost, time and energy involved in defending a patent suit, the patent owner will often also have the right to sue your customer. This of course can be very destructive to business relationships.
How should I respond to patent trolls?
As part of Apple’s competitive approach, it has recently, according to VentureBeat, cross-licensed patents to Digitude Innovations allowing that company to sue companies such as RIM, HTC, LG, Motorola, Samsung, Song, Amazon and Nokia for patent infringement. This strategy cleverly immunises Apple from patent infringement suits by VentureBeat in respect of that company’s own IP and sources auxiliary attacks on its rivals.
Patent trolls (companies that file or acquire patents for the sole purpose of profiteering through suing or threatening to sue other companies for patent infringement) are an ongoing danger to small technology development companies, particularly software and electronics companies. In the last few years, patent trolls have been increasingly turning their attention to small businesses, seeking relatively small amounts from large numbers of companies. If a patent troll can get a number of small businesses to roll over they generate the funds required for patent litigation and have a licensing rate set that they can use in such proceedings. When a small business is faced with the decision to fight or retreat across the golden bridge by paying a relatively small amount of money, most businesses just pay.
If you are facing a cease and desist letter, it is likely others are sweating over it too. Why not have a chat to friendly competitors? It’s easier to fight a troll in an alliance with aggregated resources.
–Chris Baxter is Principal at Baxter IP Patent Attorneys.