Over the last decade, patent trolls have become a prominent intellectual property (IP) issue. Patent trolls are companies that exploit IP as tools for litigation instead of innovation, using purchased patents to threaten other companies to enter into a licensing deal or face a patent infringement lawsuit. Companies targeted by patent trolls can face huge financial costs and large reductions in innovation. For example, a 2012 survey found that the average cost per litigation for troll-targeted companies was $8 million USD. Furthermore, the companies that lost their cases tended to significantly reduce their investment in research and development by approximately $163 million USD. Consequently, patent trolls pose a potentially serious problem for companies.
Although the issue is serious, it is not a hopeless one. Recent developments in both the United States and Canada offer some hope for companies on how to defeat patent trolls .
This past Spring, the US Supreme Court denied certioari for Personal Audio v. Electronic Frontier Foundation, giving the Electronic Frontier Foundation (EFF) a firm win against patent trolls. The issue arose in 2013 when Personal Audio LLC sent letters to several podcasters and companies to force them into a licensing deal or face a patent infringement lawsuit. Personal Audio held a patent for “a system for disseminating media content representing episodes in a serialized sequence” and claimed that this covered all forms of podcasting. Amongst the targeted podcasters was comedian Adam Carolla, who was sued by the company for patent infringement and raised half a million dollars in a crowd-funded campaign to fight back. Although Carolla later settled, the issue was far from over.
In 2013 the Electronic Frontier Foundation (EFF) challenged Personal Audio’s patent with an “inter partes review”. Amongst their points of contention, the EFF argued that the patent had a priority date of 1996, however, systems for delivering episodic content already existed on the internet well before this time. They gave examples like CNN’s “Internet Newsroom” and the Canadian Broadcasting Corporation’s show “Quirks & Quarks”, which operated on platforms that enabled episodic content but originated before the priority date. EFF was reportedly successful in their challenge and the US Patent and Trademark Office invalidated the patent. This decision was later affirmed in the US Court of Appeal and the Supreme Court denied certioari. With EFF's firm victory over Personal Audio, this case will surely influence future cases regarding patent trolls.
Meanwhile, in April 2018, Canada announced its national IP strategy, which included amendments to key IP legislation to combat patent trolls. Amongst the amendments is a new requirement for patent demand letters to include minimum standards of information, such as details on the specific patent being infringed and how it is infringed. This requirement is aimed at reducing vague or deceptive demand letters that are often used by patent trolls. Government officials also said the proposed amendments will give Canadian companies that are targeted by patent trolls the home court advantage in litigation, with any infringement claims made against Canadians restricted to Canadian courts.
Taken together, it seems that the opposition against patent trolls has made some headway, however, we will have to wait to see the lasting effects of these events.
Imtiaz Karamat is an IPilogue Editor and a JD candidate at Osgoode Hall Law School.