September 30, 2010, Posted by Omar Jabbour
30 sep
The past few decades have seen a surge in patent litigation, much of it driven by nonpracticing entities (NPE). Corporate counsel [this writer included] have spent many sleepless nights contemplating the best legal strategy in responding to a demand letter from an NPE. faced with allegations of infringement of innumerable patents, and demands for exorbitant sums of money, the alleged infringer is often unsure of their own rights, next steps, and how to reply.
NPEs multiplied in numbers following the dot com bust of 2001 and have proliferated as of late. As a matter of practice, most NPEs seek to enforce broad software and business process patents that should not have been granted by the US Patent & Trademark Office in the first place according to some critics [insert citation]. Targeting multiple defendants, NPEs take advantage of the complexities inherent to the process to try and intimidate defendants into settling. NPEs seek enforcement in favorable venues, and assume extremely aggressive postures throughout. Many Retailers simply cannot afford to engage in patent litigation, where costs can rapidly escalate into the millions. The results achieved validate the success of the NPEs' chosen methods:
“In 2009 the resulting legal fees and settlement payments were more than $3 billion, estimates the Global Semiconductor Alliance [GSA]. Meanwhile, the median damage award won by patentees from 2005 to 2009 was $5.29 million, according to Professor Paul Janicke of the University of Houston Law Center.” [California Lawyer, http://www.callawyer.com/story.cfm?eid=906584&evid=1]
Although companies such as Google and Microsoft have taken the position of refusing to negotiate with NPEs, most Retailers lack the financial resources to engage in costly patent litigation. Retailers are best served by avoiding patent litigation to begin with. Having a Patent Attorney review your software code base can be even more costly and is still no guarantee. Retailers are advised to look to purchase or develop ecommerce solutions based on the offerings of established, reputable ecommerce solution providers such as ATG, IBM, Intershop, and Fry, amongst others. There remains no substitute for due diligence and the risk of being on the receiving end of a demand letter alleging intellectual property infringement cannot be eliminated entirely, but there is some peace of mind to be had from using a platform that has been developed, sold to the public for some length of time, and is backed by a company some repute. Retailers should also examine their business insurance policies regarding coverage for intellectual property infringement claims.
Omar Jabbour is General Counsel and Vice President of Marketing for SysIQ, Inc. and has over 10 years of experience in the ecommerce industry. The opinion expressed herein is not intended, nor offered as legal advice. The law will vary between jurisdictions and readers are advised to consult with legal counsel familiar with their specific business needs
