Rupert Bent, legal director, and Jon Fell, partner, at international law firm Pinsent Masons LLP discuss all things patents.
2011 was a year when patent wars returned to the headlines with a vengeance. Why do you think this was?
There are two main reasons. Firstly, it is vital to bear in mind the current economic environment. In a global recession companies want to safeguard market share and protecting your new innovations legally from being copied is a crucial part of this.
Secondly, we’re living in a period where technology innovation is extremely rapid, with a plethora of new developments being introduced in a wide number of areas across the telecoms ecosystem, expanding the potential for litigation. In such an ultra-competitive sector being first to market is critical, which can lead to companies sailing closer to the wind than in the past when it comes to respecting the patents of others.
Finally, once lawsuits start it does have a domino effect, both encouraging counter claims and forcing other companies to look at protecting and profiting from their own patents.
What is the most important lesson that telcos should take from the events of the last 12 months?
Overall it shows the importance of protecting your intellectual property – understand what patents you have in your portfolio and what they are being used for. It also demonstrates that telcos need to be extremely careful when creating products and services that could be considered as similar to those of competitors – take advice on what you are doing. Otherwise it could be both embarrassing and costly when it comes to both punitive damages and the impact on your brand.
Can we expect 2012 to follow a similar pattern?
Most definitely yes. For a start most of the litigation from 2011 is still ongoing and there are new lawsuits (such as BT vs Google) that are likely to come to court. Game changing innovation, and the subsequent scramble by competitors to catch up, is a big driver behind patent cases, so the mooted launch of Apple’s iPhone 5 is also likely to spawn new areas for litigation, depending on its features.
Given this plethora of patent litigation, is the value of patents becoming inflated currently?
It does seem to be inflated at present. Google’s acquisition of Motorola Mobility was largely motivated by a desire to build out its portfolio with the company’s 17,000 patents. In some quarters this price inflation is being driven by business strategies as companies rely on holding an increased number of patents to innovate or to restrict competition and prevent new entrants to their traditional fields.
Much of the litigation centres around whether a patent has been copied. What can telcos do to mitigate this threat?
The easiest way is to develop all new products from the ground up in a clean room environment where there’s a full audit trail and no chance of patent infringement. However in the real world this is unlikely to be possible so we’d recommend taking a high level view. Understand what your patent needs are and any potential grey areas when it comes to infringement. Then take decisions, based on independent advice, on how to mitigate risk, either by buying or licencing patents or using existing patents that you own. A lot of companies, including telcos, still don’t have a comprehensive view on their own patents and how to best exploit them.
When assessing the value of a patent, what are the key points that telcos need to consider?
The key point is that on its own a patent may be worthless – just because it was granted doesn’t mean it will stand up to close legal scrutiny. It needs to be a valid patent that can be shown to be novel, a new invention or a step forward that is not immediately obvious. Bear in mind that the first response of anyone being sued for patent infringement is normally to try and get the patent declared invalid.
Secondly, is it something inherently useful that fills a gap in the market? A patent for hover boots may be novel, but could they be made and does anyone want to buy a pair?
The most valuable patents are those that are associated with real game changing innovations – such as the touchscreen interface on the original iPhone. Prioritise your thinking around these points when you are valuing your portfolio.
From a business strategy point of view, do you think telcos are assigning too much, too little or about the right amount of time and effort to patents currently?
It very much varies. It is important to protect innovation and have appropriate measures in place but also step back and take a top level view. The telecoms ecosystem is interdependent – do you want to be suing your biggest customer/partner over patents when it could sour the overall relationship?