Did Apple Pay $533 Million to a Patent Troll or a Good Guy Standing Up for the Common Man?

(Did Apple Pay $533 Million to a Patent Troll or a Good Guy Standing Up for the Common Man? expands upon our article, An Extensive Collection of Patents Can Deter Lawsuits Altogether.)

Non-practicing entities are sometimes called “trolls” and are typically painted as bad guys in the IP world; however in this case it looks like Apple was seen as the bad guy and the “troll” was viewed as standing up for the little man. We think this case shows the importance of the “story” behind the patent, and how good lawyers recognize that story and use it to their client's advantage, (either in front of a jury or an examiner at the USPTO).
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How Apple lost $533 million to an 8th-grade dropout patent troll, by Philip Elmer-DeWitt at Fortune.com.

 

One of its mistakes was to make a fuss about Patrick Racz’ education in front of a Texas jury. Apple rarely comments on legal matters, and when it does it chooses its words carefully. So I read with interest the statement it issued after it was ordered to pay $532.9 million to Smartflash LLC for willful infringement of three U.S. patents. It’s a classic of the genre:

"Smartflash makes no products, has no employees, creates no jobs, has no U.S. presence, and is exploiting our patent system to seek royalties for technology Apple invented. We refused to pay off this company for the ideas our employees spent years innovating and unfortunately we have been left with no choice but to take this fight up through the court system. We rely on the patent system to protect real innovation and this case is one more example of why we feel so strongly Congress should enact meaningful patent reform.”

You don’t have to love the U.S. patent system or non-practicing entities (A.K.A. patent trolls) to wonder: How the hell did Apple lose this case? It’s a question that took on new urgency when Smartflash turned around two days later and sued Apple a second time, this time for infringement of four new patents. I wasn’t able to reach Apple’s attorneys, but I did have a chat with Brad Caldwell, the Dallas-based patent infringement specialist who represented Smartflash. He tells a curious story.

“I think the reason we won,” he says, “is because we focused on the questions that were going to be presented to the jury: Were the patents valid? Did Apple infringe? Was the infringement willful?” Apple, according to Caldwell, focused on everything but the issue at hand: Three digital rights management patents granted Patrick Racz and others between 2008 and 2012. Apple, he says, “paraded witness after witness through courtroom who couldn’t be bothered to read the patents.”

I haven’t seen the full transcript of the six-day trial, but I’ve read enough to get a feel for what Caldwell is talking about.
When Apple’s lawyers got Racz on the stand they brought up his education (he left school at 8th grade), his horticultural training, the fact that he was from a farming family on the Isle of Jersey. They asked him, according to Caldwell: “Did you invent the Internet?” “Did you invent touch screen technology?” Racz, of course, had not.

By contrast, Augustin Farrugia, Apple’s director of security and its key witness, had previously designed the national banking system for Singapore. On the stand he said he too hadn’t gotten around to reading Racz’ patents. “They thumbed their nose at other people,” says Caldwell. “They acted like we’re Apple and have no need to respect other people’s intellectual property.”

The jury, I’m told, was paying close attention. They took notes. They deliberated for three hours. They found for the plaintiff.
I don’t know whether Apple copied Racz intellectual property or even knew of its existence. I don’t know that it’s worth half a billion dollar. I don’t know where Racz got the technical chops to file these patents, and I’m certainly not qualified to say whether U.S. Patent Office should have granted them. But I think I know now how Apple lost the case.

So, did Apple pay $533 million to a patent troll or a good guy standing up for the common man? The moral of this tale may be as simple as this—it's important to frame yourself as the good guy, both to a jury and to a patent examiner. Especially, if you're seen as just a wee little troll. For more on the subject of Non-practicing Entities, click here.

Whether you’re looking to add to your own arsenal or are looking to acquire your first patent; give Corridor Law Group a call for a free consultation to discuss intelligent strategies that our firm can implement to protect your company’s assets.

An Extensive Collection of Patents Can Deter Lawsuits Altogether

(An Extensive Collection of Patents Can Deter Lawsuits Altogether is a follow-up to our article, Defensive Patent Portfolio Strategies.)

Technology companies often use defensives patents to prevent and/or settle litigation. The strategy involves accumulating an extensive collection of patents to use as protection in the event a competitor attempts to file an infringement suit. Like the Soviets and the United States during the Cold War, competitors often partake in “patent arm races” with neither side ever actually planning on pressing the metaphorical button, since doing so would set off a chain reaction of law suits leading to the “mutual assured destruction” of both parties.
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A well-organized defensive patent portfolio strategy can often help protect your intellectual property—and those patents can deter lawsuits. The legal benefits can include:

  • The ability to force a settlement quickly by threatening a countersuit
  • Preventing competitors and trolls from applying for similar patents

The “patent arms race” is typically seen as an expensive game only the “big boys” can play. (Google's recently spent over $12.5 billion to acquire Motorola Mobility and its portfolio of roughly 17,000 patents to "help protect the Android ecosystem.") However, it’s worth noting that even having a couple of patents can be enough to level the playing field. In Smartflash vs. Apple, Apple was ordered to pay $533 million for patent infringement to patent licensing firm Smartflash LLC.

The moral of the story is, whether you’re a superpower with a patent arsenal large enough to “blow your competitors up" several times over, or a relative newcomer simply looking for respect, having the option to “go nuclear” on a competitor is a very powerful deterrent.

Whether you’re looking to add to your own arsenal or are looking to acquire your first patent; give Corridor Law Group a call for a free consultation to discuss intelligent strategies that our firm can implement to protect your company’s assets.

Developing a Patent Position

One of the most important things for any startup company to do in its infancy, particularly those in a technological field, is to begin to develop a strong patent portfolio. Engaging an experienced IP attorney early on in the company’s formation can help lead to the propagation of strong patent positioning that can then be used to protect the company from competitors at a later time. A robust patent portfolio also increases the price the company can demand in a sale.

Patent Positioning

A patent attorney’s main job is to help position and protect his or her client’s intellectual property from all angles. When developing a strategy he should consider both offensive and defensive patent portfolio strategies.

Through invention "mining," also known as invention "harvesting," an experienced patent attorney can help a company grow its patent portfolio by continuously identifying and protecting inventions early on in the development cycle. Often startup companies are not even aware that they are sitting on hundreds of patentable and commercially viable ideas.

Offensive Patent Positioning Plays

When selecting a qualified firm, budding CEOs should consider the firm's experience, capabilities, personality, and cost. To aid potential clients in making the right decision, Corridor Law Group offers a no obligation 20-minute consultation so potential clients can better understand the process and costs associated with obtaining proper IP protection. This consultation also allows potential clients to get to know the attorneys that will be handling their matters.

Client’s choosing Corridor Law Group gain a unique advantage in that they are getting the experience and expertise of top-tier attorneys without the costs associated with a large law firm. We like to say “you’re getting the doctors without the hospital.”

Building Patent Portfolios for Valuable Technology

Building Patent Portfolios for Valuable Technology

Building a solid portfolio of patents is the most effective tool for protecting your company’s core technology. In fact, a solid patent portfolio essentially defines who you are, since your company’s patents tell the world how much you value your core technology. Your company’s patents also tell the world how determined you are to protect your company’s most important assets.

There are various strategies a company can employ to build an arsenal of patents around your core technologies. These tactics generally fall into three categories:

  • Patent everything
  • Patent core technology and hold everything else as know-how
  • Patent core technology/disclose non-core technology

The “patent everything” approach involves patenting all aspects of an innovation and its uses. Under this approach, multiple patent applications are filed, even for technological concepts that have not yet shown their full commercial potential, in order to obtain an overall blanket of protection. Not surprisingly, the “patent everything” approach is an expensive way to assure that something that could eventually be valuable to the company hasn’t been overlooked.

The “patent core technology/hold everything else as know-how” approach involves filing patent applications only for specific aspects of the company’s technology that can easily be revealed through reverse engineering. This approach carries substantial risks. A competitor may independently discover the same know-how, patent it, and preclude the company from freely using that know-how in its business. Moreover, a mobile workforce carries the risk that at least some employees will leave the company and take the acquired know-how with them to their next employer.

The “patent core technology/disclose non-core technology” approach is a balanced strategy that focuses aggressive protection on core technology through broadly written patent applications, but permits non-core technology to go into the public domain. This focused approach minimizes patenting costs, but only works where an accurate and insightful vetting process is used to identify what technology is core and what is not.

The attorneys at Corridor Law Group have decades of experience in helping companies and inventors to identify the aspects of their core technology that are worth patenting. Conversely, they also help companies decide which aspects of their technology are not likely to become commercially viable and when patent protection should not be pursued. Once the technology is identified as worthy of patenting, Corridor Law Group attorneys craft patent applications that get results, both from the Patent Office and from the key players in your industry that care about those patents.