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 would also add another reason – companies are placing higher value on the monopoly 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 figures 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        199 7       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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