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.
Current CSIRO US Patent Litigation
The Eastern District of Texas is also the venue for CSIRO's US patent litigation matters covering 802.11a/g wireless technologies.
In February, 2005, CSIRO filed suit against Buffalo Technology, a Japanese manufacturer, and Buffalo USA, its Austin, Texas-based subsidiary alleging that Buffalo's 802.11a and 802.11g wireless devices infringed CSIRO's US Patent 5,487,069.
The CSIRO was subsequently sued by Intel, Dell, Microsoft, Hewlett-Packard and Netgear in the Federal District Court in San Francisco seeking a declaratory judgment that the CSIRO patent was invalid and not infringed. However, that California court has recently agreed with the CSIRO that the Eastern District of Texas is the proper venue to decide on the case brought by Intel and others, because the Texas court is already familiar with the case and has ruled on key issues.
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
Award Winner Loser
1. US$307 million Rambus Hynix Semiconductor
2. US $133 million Z4 Technologies Microsoft, Autodesk
3. US $112 million Texas Instruments GlobespanVirata
4. US $78.9 million Finisar DirecTV Group
5. US $74 million TiVo EchoStar Communications
6. US $65.2 million Ariad Pharmaceuticals Eli Lilly
7. US $53.4 million LG Philips LCD Tatung
8. US $52.5 million LG Philips LCD Tatung
9. US $38.5 million MuniAuction Inc. Thomson
10. US$34 million Power Integrations Fairchild Semiconductor
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 and our Intellectual Property Asset Management service.
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."
(Note: 'P.' prefix stands for patents, 'C.' prefix stands for copyrights,'T.' stands for trademarks).
| Amount(US$) Year Winning party Legal Action Technology
2,500,000,000 2002 Major League Baseball C.License Sports
1,725,000,000 1996 NCAA Basketball C.License Sports
500,000,000 2002 City of Hope Med Cent P.Lawsuit Drug
500,000,000 1998 College Football C.License Sports
500,000,000+ 1990 Texas Instruments P.Settlement Electronic
475,000,000 1997 Major League Baseball C.License Sports
300,000,000 1999 Univ. Minnesota P.Settlement Drug
300,000,000 1999 Professional Golf C.License Sports
220,000,000 2001 FIFA C.License Sports
163,500,000 1999 Procter & Gamble P.Settlement Mechanical
154,000,000 1999 Hughes Aircraft P.Lawsuit Electronics
130,000,000 2001 Warner Brothers C.License Harry Potter
137,500,000 1999 George Foreman T.Buyout Consumer
96,000,000 1997 U.S. Figure Skating C.License Sports
72,700,000 1995 Stryker Corporation P.Lawsuit Medical
63,500,000 2002 Aruze Corporation P.Lawsuit Electronics
57,000,000 2002 University of Colorado P.Lawsuit Chemical
50,000,000 1958 Paramount C.Buyout Movies
32,600,000 2002 Bristol Myers Squibb P.Lawsuit Chemical
32,400,000 1996 SRI International P.Court Electronics
30,000,000 1990 Rodime P.Settlement Mechanical
26,000,000 2002 Cell Genesys P.License Drugs
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