UK-based trade association to U.S.: Rein in 'patent troll menace'

By Jessica M. Karmasek | Feb 20, 2014

LONDON, United Kingdom (Legal Newsline) -- A London-based trade association representing the United Kingdom's games industry is calling on the United States -- President Barack Obama, in particular -- to pursue patent reform.

According to its website, TIGA's members include independent games developers, in-house publisher-owned developers, outsourcing companies, technology businesses and universities.

On Wednesday, the trade association released a new report, "Trolls, Innovation and Thermonuclear War," on what it deems the "patent troll menace."

"Lawsuits for accidental patent infringement currently represent a clear and present danger to any company whose software products are distributed in the U.S.," said Vincent Scheurer, CEO of Sarassin LLP, a London-based consultancy for video games, and co-author of the report.

"The UK government should work with its U.S. partners to encourage the same 'loser pays' approach to litigation costs that we have in the (European Commission). This could go a long way to mitigating the threats UK businesses currently face. "

Generally speaking, a patent troll, or non-practicing entity or patent assertion entity, purchases groups of patents without an intent to market or develop a product.

In some cases, but not all, the entity then targets other businesses with lawsuits alleging infringement of the patents it bought.

Dr. Richard Wilson, TIGA's CEO, said Wednesday that patent trolls are not common in the UK.

But when they hit businesses, particularly games developers, they hit hard.

"Typically, the troll's approach is to blanket mailshot an industry likely to operate in the field of the patented product or invention," he explained. "The troll will, with confidence, allege infringement on the part of the recipient, generally without detail. The troll may also demand that the recipient must enter into a license agreement that, of course, attracts a considerable fee.

"The recipient has to determine whether to expend valuable time and resources to determine whether there is any truth to the allegation, or risk ignoring the troll's demands and face legal action."

Mark Fardell, head of legal for Jagex Games Studio and co-author of the TIGA report, said his company experienced, first-hand, the time, effort and cost involved when a business is sued for infringement by a U.S. entity.

"Fortunately, Jagex is a successful business with the financial resources and expertise to defend itself," he said.

"If a smaller UK business had been subject to this sort of litigation, it might well have either folded or at the very least been seriously affected."

Among other things, the trade association's report found there has been an increase in patent trolling, but noted it is a greater problem in the U.S. because of its patent litigation system, which enables such entities to conduct "patent hold-ups" without risk of costs if they lose.

In the EU, the loser pays the winner's costs. TIGA found that this results in fewer active trolls.

The TIGA report also found there has been an increase in the number of high-profile and expensive legal cases waged by larger technology companies over alleged patent infringements.

The trade association pointed to Steve Jobs, Apple's late chief executive, who vowed to wage "thermonuclear war" on Google's Android mobile phone software.

TIGA's report argues that such patent wars are a potential cause for concern.

Instead of investing in research and development or workforce development, the trade association contends technology companies could end up spending "excessive" money on legal costs and defensive patenting.

In addition to calling for the U.S. to reform its patent system and forcing losers to pay, TIGA is recommending that businesses take steps to protect their intellectual property, retain their IP and exploit their IP, regardless of trolls.

The trade association also agreed that business methods -- a class of patents that disclose and claim new methods of doing business, such as e-commerce, insurance and banking -- should continue to be excluded from the list of patentable products within the EU.

Meanwhile, in the U.S., federal lawmakers are carefully considering the Innovation Act, a piece of legislation introduced by U.S. Rep. Bob Goodlatte, R-Va.

The bill, which aims to increase transparency in patent ownership, passed the House in December by an overwhelming bipartisan vote; however, it remains in the Senate.

In his State of the Union address last month, Obama urged Congress to pass patent reform legislation.

The President said doing so would help bolster the nation's economy.

"We know that the nation that goes all-in on innovation today will own the global economy tomorrow. This is an edge America cannot surrender," he said.

"Federally-funded research helped lead to the ideas and inventions behind Google and smartphones. That's why Congress should undo the damage done by last year's cuts to basic research so we can unleash the next great American discovery -- whether it's vaccines that stay ahead of drug-resistant bacteria, or paper-thin material that's stronger than steel.

"And let's pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation."

From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.

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