Why should you care if someone is infringing on your patents or, even worse, what could happen if you infringe on someone else’s?
As companies seek better ways to protect their intellectual property and streamline business strategies the awareness and importance of patents is increasing across the globe.
Patent infringement can either be deliberate or a genuine mistake by a company which has not done its research properly. This is usually the case if a patent has existed for a long time but hasn’t reached commercialisation yet which has led to lack of awareness of this technology.
What is patent infringement?
When a company files a patent for a technology, it gives them the exclusive right to use or sell that technology for 20 years. A patent infringement usually arises when another company develops the same technology, sells that technology or sells the patentees’ technology. This contradicts the purpose of patent protection which involves disclosing a patent in exchange for having a monopoly for a certain period.
The rise of non-practicing entities (NPEs) has intensified the issue. An infringement lawsuit brought by an NPE with its costly litigation and potential damages is a prospect many organisations dread.
NPEs, more commonly known as “patent trolls”, hold patents for a product with no intention of developing it. They usually buy large numbers of patents with the sole intention of filing patent infringement against companies which have potentially used an element of the patent illegally. Some NPEs offer defensive licensing to companies wanting to use the patent to allow companies to eliminate the threat of being sued.
As NPEs don’t develop patents, they are immune from infringement claims or counterclaims from defendants. Most companies end up licensing technology or resolving the dispute in a settlement when they are up against NPEs.
The American Intellectual Property Association conducted a survey1 of the median litigation costs for patent infringement suits. For a claim that could be worth less than $1 million (£808,800), median legal costs are $650,000 (£526,000). When between $1 million and $25 million (£19 million) is considered at risk, total litigation costs can hit $2.5 million (£2 million). For claims over $25 million, the median legal costs are $5 million (£4 million).
The patent application process is expensive but if there is litigation involved, the expense can be extortionate.
Different types of patent infringement
Someone may be infringing by manufacturing a product which is protected by a patent – this is known as direct infringement. A company can also infringe on a patent if they import items which are made by a patented method. This infringement can be avoided if the item has been materially changed by a subsequent process or if it is a trivial component of another product.
Indirect infringement involves an infringer that may be encouraging or aiding another party to infringe the patent. They might do this by supplying a direct infringer with a component of the invention2.
If there is direct correspondence between the words in the patent claims and the device is being infringed, this is known as literal infringement3. By practicing each of the elements in the patent claim, a person infringes.
What are the consequences of patent infringement?
Infringers will be taken to court.
There are several consequences for patent infringement including paying monetary damages or being issued an injunction to prevent further infringement on a patent.
There are some cases where the court may find there has been no patent infringement, such as if the patentee disclosed information about the invention in prior art, whether it was in a book, newspaper, website or magazine. If the invention was offered for sale in the country and was disclosed to the public a year before the application was filed, then it also can be revoked and no infringement will be found.
If there is infringement, an infringer may be required to pay the legal fees for the patent owner at the court’s discretion. This usually occurs if there are unusual circumstances or where the patent owner’s position is unusually unreasonable.
There are many remedies available for patent owners once they have been infringed. Usually patentees want an injunction to prevent further infringement of their patents but others will demand monetary damages.
In the UK, most small business will go to the Intellectual Property Enterprise Court (IPEC) whose cap of £50,000 for damages is highly favourable for smaller businesses that are cost conscious.
Infringement also creates licensees and royalties; companies who have licensed their inventions to other companies will get royalty payments for having the right to use that technology. If a company is liable for patent infringement, that party becomes a licensee and may have to pay royalty for any future sales from the patented technology.
If a party has wilfully infringed on the patent, the court can treble the damages, calculated as three times the financial losses the patentee has suffered. This is to discourage and deter companies from infringing4.
The court may also issue an injunction, an order to prevent the infringer from infringing the patent now and in the future. A preliminary injunction may also be issued during the trial to prevent the infringer from using or selling the products before a ruling is reached.
How to avoid patent infringement?
Ensure that you conduct a good freedom to operate search with your legal team or law firm.
A thorough patent search should identify potential threats. If there are no similar patents, then you are free to patent your invention without any worry of infringement. It is also good to identify NPE’s when doing a patent search so you are aware of potential threats early on.
If you do find that there might be an infringement, find out if you can invalidate the previous patent by searching for prior art whether it’s in a magazine, website or any kind of published material. If it is public and has been disclosed before the patent was applied for, you can invalidate the patent.
However, if the patent is valid and you may be infringing, there could be an option for licensing that technology. The original patent holder could grant a license in return for royalties for using and selling their technology. Usually both parties prefer this because it avoids costly court proceedings.