Congress and the courts are getting serious about intervening in the thriving American business known as patent litigation.
While critics claim the U.S. patent system is a sordid mess that desperately needs fixing, all the confusion and controversy could get worse before it gets better as the result of two Supreme Court rulings and patent-reform legislation reintroduced in Congress.
Patents suits have become common fare in the corporate world, particularly in the high-tech and wireless sectors, with intellectual property lawsuits seemingly filed with the same regularity as product announcements. The consequences can be unpredictable, and potentially deadly dramatic. A company can be on top of the world one day, only to see its survival in jeopardy tomorrow because of patent infringement-proven or merely alleged. Last year, Research in Motion Ltd., the Canadian-based
BlackBerry maker, was on the ropes until it agreed to pay a small Virginia firm $612.5 million to settle a protracted lawsuit contesting patent claims previously rejected by the U.S. Patent and Trademark Office. The Supreme Court last year reined in the relative ease with which companies have in securing injunctive relief from judges. The high court directed U.S. district courts to apply a four-prong test to determine whether a company can be frozen in its tracks when another firm asserts patent infringement.
Time and money
Indeed, the stakes are high in patent litigation. Court awards and settlements can run into the hundreds of millions, even billions, of dollars.
Patent and related licensing fights can take years to sort out. The spats often take on a life of their own, as CDMA leader Qualcomm Inc. and mobile-phone kingpin Nokia Corp. can attest.
Qualcomm, among other things, is ensnarled in a nasty patent lawsuit brought by Broadcom Corp. The case went to trial last week in a California court. Meantime, the International Trade Commission is expected to rule in two weeks on whether a remedy-including importation restrictions-is necessary as a result of its finding that Qualcomm violated two Broadcom patents involving radio frequency/analog circuit design.
All the while, financial markets are taking note.
Vonage Holdings Corp., the high-flying Voice over Internet-Protocol company, is suddenly fighting for its life as a result of losing a patent dispute to Verizon Communications Inc. It is unclear what, if any, implications the Verizon-Vonage patent litigation has for the introduction of VoIP technology in the wireless space.
Microsoft Corp. last week was ordered by a federal judge to cough up $1.53 billion to Alcatel-Lucent in a digital music patent lawsuit. The ruling roughly coincided with a Supreme Court decision giving the software giant a victory in a patent suit filed by AT&T Inc. by limiting the reach of patent law beyond U.S. shores. Indeed, the high-court’s ruling could help Microsoft challenge monetary damages in the Alcatel-Lucent case.
Courts chime in
“In many fields there may be little discussion of obvious techniques or combinations, and market demand, rather than scientific literature, may often drive design trends,” the Supreme Court stated. “Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, for patents combing previously known elements, deprive prior inventions of their value or utility.”
Experts say the high court’s ruling could help companies retain legitimate patents, while triggering an avalanche of suits contesting questionable patents.
The high-tech industry applauded the two Supreme Court rulings.
“These decisions are a clear victory for promoting patent quality and more equitable damages standards, and will go a long way in enhancing future innovation and productivity,” stated the Business Software Alliance.
