The threat of patent trolls

A patent constitutes an industrial property right which gives the person who owns it an exclusive right of exploitation over the patented invention. In particular, it allows the holder to prohibit anyone from using the patented invention without authorization. The rights attached to the patent may be assigned to a third party, whether exclusively or not and in whole or in part. Under French law, Article L613-8 of the Intellectual Property Code provides that “ The rights attached to a patent application or a patent are transferable in whole or in part. They may be the subject, in whole or in part, of an operating license concession, exclusive or non-exclusive ”. Thus the patent may be the subject of a license, an assignment, a contribution to a company or pledge. The problem that arises with this possibility of assignment is that it is a purely contractual agreement for which the law does not lay down any precise conditions concerning the will of the parties, for example. This implies that it is possible to assign the patent to a person or a company whose sole purpose is to profit from it, causing the patent to lose its initial scope: to encourage innovation and allow economic, industrial progress, etc. This is increasingly the situation with the emergence of non-practicing entities , more often referred to as patent trolls .

The patent trolls

The patent trolls are companies which take advantage of loopholes in the legal system of patents to divert them from their application – to protect a technical innovation – and to use them as means of initiating legal proceedings. They buy up patents to take advantage of the operating monopoly they confer and sue infringing companies. These companies have no objective of innovation or research and development project, the only goal is to make profit by the threat of legal action, this system is a purely financial strategy which consists in putting pressure on companies . The most penalized by this system are the small businesses that do not have the financial means to engage in a lawsuit and therefore turn to amicable settlements. The question therefore arises as to what are these loopholes that allow patent hunters to take advantage of the system and how to fight against them.

Initially the patent trolls emerged in the United States. Their emergence was made possible by an extremely wide field of patentability, a very high allowance by the American judge of damages and interest as well as an automatic injunction power in the event of patent infringement. By using the weaknesses of the patent system, patent hunters have imposed themselves on large corporations by enticing them to enter into multi-million dollar transactions rather than engaging in extremely costly lawsuits whose outcome is difficult. uncertain. Their operation is simple: a massive purchase of patent then the search for a profit either by the threat of legal actions for patent infringement, or by forcing the companies which use these patents without knowing it to conclude licensing agreements to high and often abusive prices

Until recently, the patent trolls had little impact in the European Union, this is explained by the fact that for the lawsuit they start to be profitable, they must tackle in a market larger than a single nation and within the European Union, the majority of patents are granted nationally. The only way for patent trolls to operate on European territory would be to use a European patent, but the conditions to benefit from it are strict and complex. The European patent is granted by the European Patent Office created by the European Patent Convention of 1973 which brings together 38 European states. For a patent to be recognized by the European Patent Office, the holder must obtain validation from the 38 member states. Article 14 of the European Patent Convention provides that the three languages ​​of the European Patent Office are German, English and French and that “ Any European patent application must be filed in a official languages ​​or, if filed in another language, translatede in one of the official languages. ”. This implies significant additional costs for the holders. To this already complicated procedure, we must add the payment of several fees to file a patent application, involving additional costs, for example Article 78 provides that “ The European patent application gives rise to the payment of the fee deposit and search fee. If the filing fee or the search fee has not been paid on time, the application is deemed to be withdrawn. ”.

The European Unitary Patent

The strictness of the European patent has therefore dissuaded patent trolls from intervening on European territory. Even if we note that some are still passed between the mails of the net. In December 2010, the European Union’s system appeared to fail. A dispute between the companies Nokia and HTC against the non-practicing entities IPCom. The latter brought an action for patent infringement before the German courts. To understand this litigation, you have to go back a few years: in 2003, Nokia was negotiating with the German company Robert Bosch GmbH, a major automotive supplier, over the licensing of Bosch’s mobile communications patent portfolio. Bosch considered it essential for Nokia. Bosh and Nokia made a significant contribution to the standardization process on the first GSM digital mobile communication system. The two companies are committed to licensing all standard essential patents on fair, reasonable and non-discriminatory terms. Licensing negotiations lasted until 2007 and eventually broke down due to lack of agreement between the two parties. This gave rise to litigation and the judges of the 1st instance considered that no license agreement had been concluded, therefore Nokia has no rights in the constituent elements of the patent. . The Court of Appeal’s decision has not been rendered, but despite this, Bosh sold its portfolio of mobile communications patents to the company IPCom. Since then, IPCom’s actions against Nokia have increased, without success for the patent troll , until a decision of the German regional court in 2011. In December 2010, the German Court of patents had ruled on the invalidity of the patent claimed by IPCom, this decision was overturned by the German regional court which awarded a victory to IPCom

Despite this decision, disputes concerning the violation of intellectual property rights which involve patent troll remain in the minority in Europe, but this situation could be called into question with the emergence of a new category of patent. : the European Unitary Patent.

This novelty was introduced by the regulation ( EU) n ° 1257/2012 of 17 December 2012 implementing enhanced cooperation in the field of the creation of unitary protection conferred by a patent which provides that “ The main characteristic of a patent European unitary effect should be its unitary character, ie the ability to provide uniform protection and produce the same effects in all participating Member States . “. The entry into force of these regulations was set for January 1, 2014, when the Agreement on the Unified Patent Court itself was to enter into force. However, this will not apply immediately despite the fact that the 2012 regulations are in force. Indeed, the German Constitutional Court must rule on the conformity of the agreement with the Constitution a second time. It has already had the opportunity to rule on the JUB agreement in 2017 and the judges ruled that the ratification law was unconstitutional. However, we can see that the steps have been taken to have this European unitary patent in place: on June 25, 2015, the European Patent Office approved the proposal relating to the costs of a European unitary patent, the cost will depend on the duration. of the patent, for example for 5 years of protection, the cost will be 5000 €. This represents a 78% reduction in patent costs, so it could facilitate access to the European patent.

Despite the European innovation that this reform may represent, this one canut also to be seen as a danger because it would allow the development of patent trolls . Indeed, its aim is to facilitate access to prosecution throughout Europe. Whereas previously, the owner of a patent who wished to bring an action for infringement had to seize a national court which would apply its own patent law, which implied to find which would be the most favorable, now he will be able to seize a court. unified at European level. Then, this new regulation sets up unitary protection in all the Member States, this allows a reduction in additional costs, particularly in terms of translation and procedural costs because the applicant is no longer obliged to have his patent recognized in each country. .

A state structure that has no inventive activity, but charges for licenses on the patents it manages, if necessary through legal proceedings

Although this simplicity of patent acquisition throughout Europe appears to be beneficial for business development and innovation, it has given rise to many concerns. On September 26, 2013, a coalition of American and European companies such as Google, Adidas and Microsoft, sent the Member States of the Union and the European institutions an open letter to inform them of the risks associated with this reform of the European unitary patent. and their concerns about the development of patent trolls that could arise with this new legislation.

It seems that their request was not heeded because in January 2020, nearly 150 companies gathered to send a letter to Thierry Breton, European Commission for the Internal Market, asking him to take measures to put a stop to the development of patent trolls and to guarantee the principle of proportionality in decisions relating to patent cases by judges of the Member States of the European Union in order to correct existing imbalances in the patent system. The Commission will therefore have to find a balance between defending consumers and combating counterfeiting.

But while the patent troll are viewed in a negative light. They can be assimilated to a means of guaranteeing respect for intellectual property. In France, we have seen the emergence of the public investment fund France Brevets, which aims to promote the patents of companies and public research organizations. Its objective is to constitute “ a large portfolio of intellectual property rights, resulting from public and private research, will enhance them by bringing them together in technological clusters “. This definition is similar to that which we know of patent troll . And its mode of operation seems similar: a state structure that has no inventive activity, but charges for licenses on the patents it manages, if necessary through the courts. This was the case in 2013, when France Brevets initiated legal action against the companies HTC and LG for using patents belonging to the fund in their products. While the LG company agreed to come to an amicable settlement and ultimately found it agreed to sign a license agreement, HTC was unwilling to go down that route. In 2015, the Düsseldorf Court of Appeal finally upheld the decision of the first ^era instance which convicted HTC for infringing the intellectual property rights held by France Brevets on contactless communication technologies.

Strategies to avoid being confronted with this type of company

But the development of these state funds could constitute a means of defense against the patent troll whose only aim is to make a profit. On the contrary, state investment funds are supervised and have another objective which is to encourage innovation and protect intellectual property rights, although their method is similar to that of private entities, the goal is everything. other and makes it possible to limit the excesses of this type of action.

As a result, we see that today the patent troll are present in society and that companies have no other choice but to work with them, yet it is possible to protect against these companies. First of all, it is necessary to know how to recognize them: for what amount is the company offering to settle the case? If the amount is small then it is because it has usually given notice to hundreds of defendants who violate its rights.