Multi-billion-dollar firm Intellectual Ventures (IV) is in the midst of a court battle that, depending on its outcome, could have devastating effects on the patent acquisition business. Such devastation could be great news for Symantec and Trend Micro, the two internet security companies currently challenging Intellectual Ventures' demand for $310 million in licensing fees for their use of the technology that IV bought seven years ago…for $750,000. IV, of course, thinks that this markup is perfectly fair compensation.
What’s unique about this case is the argument being volleyed back by the defendants. Not only are they denying any patent infringement in their use of the malware detection technology in question, but the software security firms are also claiming that IV is gouging them unreasonably by charging over 400 times the patent’s purchase price—a violation of the law prohibiting exorbitant royalties. The logic here, according to Symantec and Trend Micro lawyers, is that a patent license cannot possibly be worth more than ownership of the patent itself.
While U.S. District Judge Leonard Stark of Delaware acknowledged that he understood the sentiment behind this argument, it may or may not be solid enough to stand up in court, according to Thomas Cotter, a patent damages expert unaffiliated with the case. According to Cotter’s economic reasoning, what IV paid the original patent owner seven years ago might not be relevant when it comes to the complex calculation involved in determining alleged infringement damages accumulated over the time that the two companies were relying heavily on the patented technology. The fact that there don’t appear to be any previous court rulings in favor of the perspective brought forward by Symantec and Trend Micro is further indication that this might be a tough case for the defendants to win. What does seem clear, however, is that if IV loses this argument, it would set a dramatic precedent which could mean Game Over for so-called patent trolls. “If the royalty is capped at the purchase price,” Cotter stated, “there's obviously no point in being a patent assertion entity.”
What’s unique about this case is the argument being volleyed back by the defendants. Not only are they denying any patent infringement in their use of the malware detection technology in question, but the software security firms are also claiming that IV is gouging them unreasonably by charging over 400 times the patent’s purchase price—a violation of the law prohibiting exorbitant royalties. The logic here, according to Symantec and Trend Micro lawyers, is that a patent license cannot possibly be worth more than ownership of the patent itself.
While U.S. District Judge Leonard Stark of Delaware acknowledged that he understood the sentiment behind this argument, it may or may not be solid enough to stand up in court, according to Thomas Cotter, a patent damages expert unaffiliated with the case. According to Cotter’s economic reasoning, what IV paid the original patent owner seven years ago might not be relevant when it comes to the complex calculation involved in determining alleged infringement damages accumulated over the time that the two companies were relying heavily on the patented technology. The fact that there don’t appear to be any previous court rulings in favor of the perspective brought forward by Symantec and Trend Micro is further indication that this might be a tough case for the defendants to win. What does seem clear, however, is that if IV loses this argument, it would set a dramatic precedent which could mean Game Over for so-called patent trolls. “If the royalty is capped at the purchase price,” Cotter stated, “there's obviously no point in being a patent assertion entity.”