February 3, 2014
A patent trial is opening in federal district court in Delaware involving one of the leading commercial patent aggregators, Intellectual Ventures (IV). This case will receive significant attention as it highlights both the positive and negative aspects of the patent aggregation process.
Patent aggregators are commercial enterprises that acquire a portfolio of patents. The aggregators then attempt to derive revenue from those patents by licensing them and when necessary, initiating patent infringement litigation to enforce the patents.
Proponents of patent aggregators contend that they perform a useful economic function. They assist inventors to realize commercial gain from their creative work. The aggregators can more effectively negotiate licenses and enforce the patents through litigation than the inventors could on their own.
Opponents of patent aggregators often call the aggregators “patent trolls.” They claim that the aggregators drain economic resources by forcing productive users of technologies to defend themselves in patent litigation that is frequently frivolous and intended primarily to force the technology users to make payments in order to avoid the far greater costs associated with litigation.
IV has sued the Motorola Mobility unit of Google, Inc. IV alleges that Motorola infringed on multiple patents now controlled by IV involving technologies used in smartphones. The technologies involved include detachable handset mechanisms and systems used in the “Google Play” app.
Unlike many other patent aggregators, IV rarely litigates. IV focuses on acquiring the most promising technologies available and it emphasizes development of licensing arrangements. Its past reluctance to litigate has differentiated IV from many other patent aggregation companies.
Clearly, the monetary aspects of this case are significant for both parties. However, we should also note that part of IV’s reputation is on the line in this litigation. IV presents itself as a responsible patent aggregator, one that does not engage in frivolous and unreasonable legal actions. Given this stance, it is important that when IV does choose to litigate, it must win.
Patent aggregators can perform a useful economic function. It is, however, all too easy for those aggregators to act in an irresponsible manner which undermines economic efficiency.
To date, the record suggests that IV has served as one of the best examples of the potentially beneficial impact that responsible patent aggregators can provide. In order to preserve that record, IV must choose its litigation carefully.
The technology community will be watching this case closely. Congress and other policymakers will likely monitor it as well, as they continue to consider the appropriate role of patent aggregators in the overall economy.