Editor’s Note: JosÃ© Cortina is a member of the Research Triangle Park law firm of Daniels Daniels & Verdonik, P.A.
_______________________________________________________________________________________In my patent practice I often encounter clients who scoff at the suggestion that it is important to protect their technological innovation by patenting.
They counter that patents are too difficult to enforce, are often invalidated and do not yield significant financial benefits. Many of these clients are early stage companies trying to raise venture capital. These companies go through the motions of filing provisional patent applications, often without any intent to convert them into nonprovisional applications, because “investors seem to like them.”
These assumptions about patents and their lack of value are myths currently circulating widely among the start-up, early-stage company community. To dispel these myths consider the results of following recent patent infringement lawsuits:
1. A judge recently threw out a $450 million settlement agreement between Research In Motion (“RIM”) and NTP, a patent holding company, which would have allowed RIM to continue to offer its BlackberryTM service. Some experts now suggest RIM may need to pay up to $1 billion to settle the case and be able to continue to offer its service.
2. The Federal Circuit ordered eBay to pay MercExchange $29.5 million for patent infringement. The U.S. Supreme Court has agreed to hear an appeal on whether it is proper to grant an injunction against patent infringement pending appeal of lower court decisions.
3. An injunction in favor of Third Wave Technologies was issued against competitor Stratagene, and an award of $5.3 million against Stratagene, in the same case, was trebled to $15.9 million.
4. A $213.9 million verdict was awarded against Alcon Manufacturing in favor of Advanced Medical Optics, Inc. (“AMO”). The award included a trebling of damages and an award of AMO’s attorney’s fees.
Some large companies previously believed in the myth that patents are not valuable, but as a result of litigation they have changed their belief. These same companies have begun to vigorously pursue patent protection in recent years.
Microsoft Corporation is a prime example of a company that initially did not pursue patents vigorously, but has now adjusted its approach. According to current U.S. Patent Office records, Microsoft now owns 4,385 U.S. patents. Its first patent was issued in 1986. Its tenth patent was issued in 1992, and its 385th patent was issued in 1997. However, in 1997 it also had issued, in its name, at least an additional 200 patents. In contrast, since the year 2002 until today, about an additional 2,000 patents have been issued to Microsoft. Thus, in the last three years Microsoft has acquired almost as many patents as it did for the period 1986 through 2001.
Similarly, Red Hat, Inc., an open source proponent and company that has appeared to be hostile to the concept of software patents in the past, has implemented a new patent policy to defend itself. Red Hat now owns four patents, one issued in 2004 and three in 2005.
Ignore Patents at Own Risk
What is the lesson in all this for start-ups and early stage companies? Ignore patents at your own risk, including the possibility of having your company shut down. This is a fate Research In Motion may be facing with its Blackberry service, as described previously. While some may argue that Research in Motion will not be shut down, it still faces a potentially huge damage award settlement.
In light of all this, what is a small company to do?
Small companies do not have the resources to pursue patents in the same manner as the “giants” of the various industries. A prudent patent strategy requires close consultation with patent counsel, and designing a policy geared toward achieving the company’s goals. For example, a small company may decide to pursue patenting of only major developments and/or key limited features which every one will want to copy. To ignore the patent landscape is becoming increasingly dangerous. Notwithstanding beliefs to the contrary, patents cannot be ignored without potentially serious consequences.
Daniels Daniels & Verdonik, P.A. has been serving the legal needs of entrepreneurial and high technology clients for more than 20 years. A. JosÃ© Cortina is a registered patent attorney who focuses his practice on the intellectual property needs of small to large technology companies, including providing patent, trademark, copyright, counseling, licensing, conflict resolution and transactional services. He is experienced in a broad range of technologies, including electronics, communications, computer hardware and software, biomedical, materials, and selected chemical and chemical engineering technologies. Questions or Comments can be sent to firstname.lastname@example.org