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Print articleSo You Know How to Protect Your IP But Do You Know How to Defend It?
September, 2005 - Joanna Boag-Thomson
Businesses in the UK are often willing to spend substantial sums of money on acquiring robust protection for their patents, trade marks and other intellectual property. Assets such as these help to set apart one business from its competitors. However, businesses have traditionally been less inclined to spend money on taking court action against competitors that infringe their intellectual property.
A granted patent provides a quid pro quo whereby the owner of a patent gets a territorial monopoly right in return for full disclosure of an invention. This means that competitors become aware of new technology and are able to gain valuable knowledge. Businesses are often reluctant to take action against unauthorised use of their intellectual property and, until recently, patent legislation in the United Kingdom has seemed to discourage businesses from taking any sort of speculative court action.
The United States provides a clear contrast to this philosophy and US companies are much quicker to resort to court action – so much so that legislation to reform the US patent process was put before Congress in June of this year to combat the rise of so called "patent trolls". These are companies which acquire patent portfolios in respect of products which they never propose to manufacture or otherwise exploit but patent trolls actively pursue potential infringers of those patents in the knowledge that a percentage of companies will settle out of court, rather than incur the cost of litigation through the US courts. The patent trolls' success is based on a recognition that intellectual property litigation is a costly business. In March of this year, for instance, a US jury found Toshiba liable for $380 millions for infringing Lexar Media's flash memory trade secrets.
Previously, UK legislation appeared almost to favour the unlawful infringer as provisions in the patent legislation meant that businesses needed to think long and hard before issuing a letter requiring a competitor to cease its infringing action. The legislation referred to "unjustified threats" and meant that the party against which a threat of legal proceedings was made could raise counter proceedings against the person making the threat. The Patents Act 2004 seeks to address this imbalance and to give greater flexibility for businesses to take action against potential infringers. The change in legislation should lower one of the barriers to litigation by allowing businesses to serve "cease and desist" letters more often, although these letters need to be drafted very carefully to stay within the terms of the new legislation.
Despite this legal modification, it seems unlikely that the UK will follow the US in terms of the amount of litigation relating to patents. Although intellectual property insurance can help to offset some of the costs of litigation, it is ultimately a difficult and expensive process with little commercial certainty of outcome and a tendency to divert management attention away from running the business. Accordingly, businesses should adopt a clear intellectual property strategy which should include assessing the importance of intellectual property to the business and considering the steps which the business is willing to take if it becomes aware of a competitor's unlawful action.
A granted patent provides a quid pro quo whereby the owner of a patent gets a territorial monopoly right in return for full disclosure of an invention. This means that competitors become aware of new technology and are able to gain valuable knowledge. Businesses are often reluctant to take action against unauthorised use of their intellectual property and, until recently, patent legislation in the United Kingdom has seemed to discourage businesses from taking any sort of speculative court action.
The United States provides a clear contrast to this philosophy and US companies are much quicker to resort to court action – so much so that legislation to reform the US patent process was put before Congress in June of this year to combat the rise of so called "patent trolls". These are companies which acquire patent portfolios in respect of products which they never propose to manufacture or otherwise exploit but patent trolls actively pursue potential infringers of those patents in the knowledge that a percentage of companies will settle out of court, rather than incur the cost of litigation through the US courts. The patent trolls' success is based on a recognition that intellectual property litigation is a costly business. In March of this year, for instance, a US jury found Toshiba liable for $380 millions for infringing Lexar Media's flash memory trade secrets.
Previously, UK legislation appeared almost to favour the unlawful infringer as provisions in the patent legislation meant that businesses needed to think long and hard before issuing a letter requiring a competitor to cease its infringing action. The legislation referred to "unjustified threats" and meant that the party against which a threat of legal proceedings was made could raise counter proceedings against the person making the threat. The Patents Act 2004 seeks to address this imbalance and to give greater flexibility for businesses to take action against potential infringers. The change in legislation should lower one of the barriers to litigation by allowing businesses to serve "cease and desist" letters more often, although these letters need to be drafted very carefully to stay within the terms of the new legislation.
Despite this legal modification, it seems unlikely that the UK will follow the US in terms of the amount of litigation relating to patents. Although intellectual property insurance can help to offset some of the costs of litigation, it is ultimately a difficult and expensive process with little commercial certainty of outcome and a tendency to divert management attention away from running the business. Accordingly, businesses should adopt a clear intellectual property strategy which should include assessing the importance of intellectual property to the business and considering the steps which the business is willing to take if it becomes aware of a competitor's unlawful action.
Footnotes: Joanna Boag-Thomson is a partner specialising in media and technology with commercial law firm Shepherd and Wedderburn. +44 (0)141-566-8570 |
