Patent infringement damages skyrocket

A Bloomberg article by Margaret Cronin Fisk this week is a lightning bolt blast on the rising costs of patent infringement.

US figures need to be adjusted to assess their implications for the much smaller Australian market, but here too patent litigation burns dollars. In the bullet points below I've condensed the ideas in the Bloomberg article.

Read the "Bloomberg Top 10" list below with great care in Australia. This is because of several factors.

Rising damages awarded by US courts for patent infringement

• Juries in the US awarded US$1 billion in patent damages in 2006, almost triple the 2005 amount. (The US$1 billion amount excludes the US$612.5 million Research In Motion Ltd agreed to pay patent licenser NTP Inc in an out-of-court settlement of a dispute over Research in Motion's Blackberry phones. The payment by Waterloo, Ontario-based Research in Motion to NTP of Richmond, Virginia, was the fourth-largest legal settlement of the year.)
• Three of the top 10 patent verdicts came in suits filed in federal court in the Eastern District of Texas, where inventors and other patent owners have won jury verdicts 90% of the time since 1994. (See side bar story.)
  

Why are damages skyrocketing?

The reasons given in the Bloomberg article, quoting US attorneys, are that companies are more willing to go to court to protect patents because:

• the computer and communications technologies have rising value;
• patent holders and accused infringers wish to avoid being shut out or hindered in their exploitation of computer and communications technologies and markets; and
• jurors perception of the value of technology has increased.

These points were noted by attorneys such as - Ken Nissly of San Jose, California, whose client Hynix lost the Rambus verdict and Ernie Brooks, a Southfield, Michigan attorney, who represented Z4 Technologies Inc in a dispute with Microsoft Corp and Autodesk Inc over a method to prevent software piracy. I woud also add another reason - companies are placing higher value on the monopoloy rights a patent provides, hence the Monopoly Man graphic used for this post.

Bloomberg's Top 10 Patent Awards in 2006

Once you get up off the floor over these numbers, the takeaway is the need for new technology and business models to check for potential patent infringement as soon as possible at their concept or R&D stage. This forms part of our standard IP audit service. For example see Intellectual Property Asset Management and Services - IP Auditing Brochure [PDF].

Why should you read the above figure with care for the Australian context? Here are some reasons. First, Jury trials are very rare for commercial matters in Australia. It seems all or a considerable number of the 2006 US patent cases involved jury trials. There is a belief that juries can be more generous than judges. Second, in the US attorneys can act on a contingency fee basis that is far less restrictive than it is in Australia. Third, another difference is the US approach to court costs. In Australia the general principle is "costs follow the award" with the losing party paying a substantial percentage (rarely, but sometimes, 100%) of the winning party's legal costs. This may affect the number of cases that go to a hearing rather than settling out of court.

Another caution is that the Bloomberg numbers include awards in cases that are on appeal, eg by Microsoft and TiVo.

Patent infringement lawsuits or licensing awards

For a useful historical perspective on the Bloomberg fitures I'll turn now to numbers collected on intellectual property infringement and licensing by Gregory Aharonian, a San Francisco-based patent consultant, analyst and well-known commentator.

What follows is Ahronian's table, distributed via his enewsletter in September 2002, listing what he describes there as "the monetary awards that companies have received because they were either victorious in an IP infringement lawsuit, or they negotiated deal in the absense/presence of a infringement lawsuit, or related technology litigation such as antitrust. The following monetary awards are culled from media reports of such victories/successes, and may have been reversed/reduced in later appeals, though I constantly update the table to include more awards, and more history on each award."

Aharonian’s data rich Bust Patents website also has a useful webpage table setting out "Patent or copyright infringement lawsuits or licensing awards ".