Patent Risk Digest

January 2017

A monthly update on market activity, legal developments, and policy related to patent litigation
SUBSCRIBE SUBSCRIBE

Target On Your Back

Never been sued for patent infringement? Revenues of $100 million or less? You’re just the kind of company that the most litigious plaintiffs in such cases are looking to target in their next lawsuits.

Litigation data through 2016 reaffirms that “first-time” defendants have accounted for 50-60% of the thousands of defendants sued over the past few years. This is because, in theory, it is easier to extract quick and lucrative settlements from inexperienced defendants. These defendants—navigating unfamiliar terrain and wary of fighting back—are likely to overspend on settling. Likewise, about two-thirds of patent infringement litigation targets in 2016 were companies with revenues that are reported or assumed to be below $100 million.

In either case, plaintiffs figure that these companies are less equipped to effectively fight back—or that they don’t have the third-party support that RPX can provide as an insurer, dispensing of these suits for companies at about half the typical cost.

Lawsuit Machines

The success of entities like IP Edge LLC and Shipping & Transit—now two of the biggest sue-and-collect operations in business—explains why many risk managers make protection against patent lawsuits part of their standard liability coverage.

The Wall Street Journal described a company that was “dumbfounded” when it received a demand from Shipping & Transit to pay $25,000 for the right to email tracking numbers to customers when they place orders. The company was one of 188 companies that Shipping & Transit has sued in a classic infringement litigation “campaign” that asserts a broad patent against as a large number of defendants as possible. And IP Edge in 2016 alone sued more than 400 defendants, making it the year’s most prolific of all so-called patent trolls—entities that acquire patents for the sole purpose of suing other companies for infringement.

RPX insures against patent litigation by both patent trolls and regular “operating” companies across industries. But it’s patent trolls that present the most significant threat given their broad reach and the strategic advantage they gain by blindsiding their targets. Just some of the suits that IP Edge filed against companies for making, selling, or even just using the technology described in the patents they own involve:

  • Wireless data transmission
  • Organizing electronic files into folders
  • Mobile banking apps
  • Text messaging in mobile banking
  • Call tracking and resolution management
  • Keyword searching of music or video content
  • Automatically changing video channels
  • Remote control of networked devices
  • Translating GPS location data into map data
  • Selling a “storage device with network capability” (smartphones or tablets)
  • Provision of smartwatches and other wearable computing devices
  • Vehicle batteries
  • Distributing musical products over the Internet

 

Your Business Sector: What’s the Risk?

From retail to automotive, E-commerce to financial services, or healthcare and fitness, your type of business determines the kind of patent litigation risk you face. Here’s what the landscape looks like.

Certain market sectors consistently see the heaviest concentration of patent infringement suits; companies engaged in E-commerce or software development suffer the biggest share of cases. However, plaintiffs often assert patents involving widely used technologies against a much broader range of companies that may not make or sell the technology at issue, but simply use it.

Some examples:

E-commerce and Retail

Companies across sectors that engage in E-commerce have been sued for providing or using technology related to online payment methods, search functionality, text messaging, email security, websites and display carousels, among other areas. In one campaign, BSG Tech LLC sued more than 50 companies over use of technology related to storing and managing information in a database with search, filtering, and annotation capabilities. In another, Kobace LLC sued nearly 40 companies over a single patent generally related to context-based advertising. Yet another campaign (by eCeipt LLC) targeted companies that provide digital receipts from a point-of-sale (POS) system.

Healthcare and Fitness

Technology used in fitness devices, online medication ordering systems, and medical record-keeping, remote health monitoring, and GPS are just some of the technologies that device manufacturers and providers have been sued for purveying. An entity called Preservation Wellness Technologies LLC recently sued companies over patents related to systems that allow both doctors and patients to access medical records but limit patient access. Blackbird Tech LLC has sued a range of large and small companies over patents related to pedometers, fitness equipment, and fitness devices.

Financial Services

Mobile payment methods and peer-to-peer communication between devices have been the focus of just some of the patent infringement suits hitting the financial services sector—spurred by innovation in digital marketing, online banking, crowd-sourced funding, peer-to-peer lending, and high-speed trading platforms. CryptoPeak Solutions sued dozens of banks, credit card companies, investment advisors—but also hotel chains, retailers, communication service providers, and social media platforms—over patents related to security systems on their websites. EncodiTech LLC launched a campaign targeting companies that offer ATM or electronic payment platforms utilizing secure peer-to-peer communication between devices.

RPX can provide further detail on current litigation and risk particular to these and other sectors. Factors such as company size, history of litigation, litigations against peer companies, and trends involving the transaction of patents between companies—when and how patents change hands—figure into each company's inividual risk profile, also available by request through RPX.