America’s “Patent Trolls” on the Move to Europe?

Signing of the Unified Patent Court Agreement in Brussels Photo:

Signing of the Unified Patent Court Agreement in Brussels this past February

For today’s largest companies, especially those in the technology sector, patent wars are an increasingly prevalent and expensive reality. Many patent wars last many years and have an effect that has consequences across continents. Recently, patents have composed a major topic of discussion, as the European Parliament’s decision to propose a unified patent court system in 2011, signed as the Unified Patent Court Agreement in February of this year, will soon come to fruition in 2015.

The new measure improves intellectual property protection and has received much support. In the future, companies will not have to fight for patents on a country-by-country basis through a drawn out and arduous process. Instead, after the implementation of the unified patent court system, once a patent is deliberated over in one court, it will be automatically recognized in 27 member nations.

The European Commission has highlighted the lower transaction costs in order to obtain a patent as a key benefit. In an article on its website, the EC stated that, “to protect an invention throughout the whole European Union, a company had to pay 32,000 euros in comparison to 1,850 euros in the United States.” European officials believe a unified court system will create an environment more conducive to innovation — comparable to the atmosphere in the U.S. This in turn, they explain, will attract more investors and researchers to the European market, an objective France has been pushing since its recession.

However, support for the law isn’t unanimous among many of the big name companies in the global technology field. In response, 16 companies signed a letter on September 26 addressed to the European Parliament and European Commission and criticized two drawbacks in the law that may encourage the proliferation of “patent trolls” in Europe. Companies like Apple, BlackBerry, Cisco, Google, Hewlett-Packard, Intel, Microsoft, Samsung and Yahoo along with European businesses such as Adidas, Deutsche Telekom and Telecom Italia expressed concerns with the upcoming system.

Already a major topic of concern in the United States and currently under investigation by the U.S. Federal Trade Commission, “patent trolls” are companies created to amass large portfolios of technology patents and later sue software designers like smartphone and tablet makers. This business is particularly lucractive, as the software inside just one smartphone can be subject to thousands of patents. IPNav, one of the most prominent patent-litigation firms in the U.S., said it best. Patent trolls “put a tax on innovation without doing any actual innovation themselves.”

In five years, IPNav has sued more than 1,600 companies in the United States. For companies like Apple, Google, and Microsoft, 29 billion dollars was spent fending off patent infringement lawsuits. With the court system going into effect in 2015, less patenting restrictions may inaugurate Europe as a new battleground for patent wars.

The letter sent to the European member states designates two instances for the possible abuse of the Unified Patent Court Agreement – bifurcation and injunctions. The law stipulates two different courts that will work on a single case. One court will decide the validity of the patent in question, and the other will debate possible infringement. However, the two separate courts may not reach verdicts concurrently and could provide patent assessment entities (PAEs) with an infringement ruling without assuring the validity of the patent.

Having to address numerous different countries, the group that authored the letter argues that sued companies would be placed under excessive settlements due to insufficient guidelines governing the imposition of injunctions. Both of these concerns reveal how the UPC Agreement would foster litigation rather than innovation in Europe. However, these particular companies aren’t left completely to fend for themselves. Some of the top officials drafting the new rules work for law practices or lobbying firms that count the above companies as their clients.

The countries within the European Union that haven’t approved of the new court system have done so for varying reasons. Spain has withheld its approval because the Spanish language is not one of the official languages of the court, which are currently English, French, and German. Italy has cited that it’s not ready to accept pan-European patents, and Poland believes the new system will hurt its economy.

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