Once upon a time, there was a troll. This was a special kind of troll who lived for a specific purpose, to snare unlikely suspects in their litigious web. This is the story of a patent troll, and how they poisoned Apple with a 625 million dollar lawsuit. This is the story of a company called VirnetX, which took on one of the most powerful technology companies in the world and won. Perhaps most importantly, this is the cautionary tale of the importance of understanding the details and pitfalls of patent law and the trolls who seek to profit from its many nuances. In order to understand this story one must understand a little bit about patent law.
What Is A Patent Troll?
Image courtesy: Stop Patent Trolls
Patent law serves to protect the intellectual property rights of those who choose to innovate and invent. It represents an agreement between inventors and the public. In theory, it is meant to provide a 20-year monopoly to the creator of a novel invention in exchange for an explanation of how to practice that invention. It is meant to promote ingenuity and innovation. While patent law does not grant the right to produce, manufacture, or sell an invention it does prevent others from using said invention without the explicit permission or license of the patent holder. In a nutshell, patent law offers the holder the ability to control if, how, and when their invention is used by others. Usually, these protections serve as a deterrent to those who would capitalize on the hard work or brilliant ideas of others. That is, until patent trolls arrived on the scene.
Briefly speaking a patent troll is an entity that acquires the patents for various technologies for the sole purpose of litigation or threatening litigation. These companies (or even individuals) will often buy patents at a discount from companies that are down on their luck. They have no interest in using these patents for creating new products or even the continued manufacture of existing products. Instead, these patent trolls sit on their acquisitions like a spider in a web. They attack when they believe a company infringes on their patent, even tangentially; often with the hopes that their victim will settle quickly rather than incurring a long and potentially costly defense.
This is the snare that seems to have snagged Apple. On February 3rd, a Texas jury awarded 626 million dollars to the so-called patent troll, VirnetX. In a case that centered on patents for secure VPN networks and technologies that involve real-time communication over the internet; used in applications for Apple’s FaceTime technology. VirnetX purchased the patents for these technologies from an entity operating as Science Applications International Corporations in 2006. These are just one of 80 patents purchased by the company which acts as a holding company while only selling a single product. The company makes its money by licensing these patents to other companies.
The term patent troll can be controversial, and VirnetX has operated within the bounds of patent law. It is the actions of companies like VirnetX that has led many law makers to call for patent law reform. However, not all entities that buy, sell and license patents do so with malicious intent. In many cases, these patents are valuable assets; important to the financial well-being of its holder. We will explore more on the topic later. For now, it only goes to show that the world of patent law is fraught with nuance and the best way to protect your company is to work with a patent attorney that is well versed in the subtleties of the law. Zachary Hiller can help navigate these difficult waters.
This story’s is far from over and it is difficult to tell who will ultimately have a happily ever after. Apple may be able to appeal their massive $625 million judgment. Or, VirnetX may emerge victoriously. A full copy of the verdict can be found here. One thing that is certain is that a judgment of this magnitude is sure to catch the attention of lawmakers, regulators, and industry leaders. The story of the patent trolls has not reached its happy ending, but for those who work with intellectual property, it is a scary story indeed.
Leave a reply