Patent infringement is a cancer on intellectual property that if left alone without enforcement would stifle and cripple America’s ability to remain the innovation and technology leader of the world.
Today, it is too easy to beat up on the Chinese for their flagrant disregard of the intellectual property rights of others, when some of the most egregious infringements are perpetrated by American companies against American companies.
Because of the high costs associated with licensing and the high costs associated with enforcement of property rights, many companies take their chances on infringe and if caught, seek to settle for less than the costs of licensing in the first place, all the while leveraging the high costs of litigation as well in proffering a settlement.
The bigger the infringer in the marketplace and the smaller the owner of intellectual property in the marketplace makes it enticing for the big to prey on the small.
This creates a “David versus Goliath” scenario where the odds are against the small being able to succeed in enforcement.
It is incumbent upon the owners of valuable intellectual property regardless of size to vigorously defend their property rights.
Just like you cannot go into Macys and take a shirt without paying for it, you cannot take the intellectual property of another without permission and/or remuneration.
A case study for the grwoing problem is litigation currently pending in the U.S. District Court in the Eastern District of Virginia.
In September 2011, the owner of patents, Innovate Protect, (I/P) filed a patent infringement lawsuit in the Eastern District of Virginia against Google, AOL, IAC, Gannett, and Target for "unlawfully using systems that incorporate features claimed in two patents" held by the company.
The patents relate to relevance search technology that the company says has become "the dominant technology used in search advertising to position high-quality advertisements." The following language was taken from the complaint.
The lawsuit strikes at the core of Google’s revenue. I/P is seeking a reasonable royalty for the full past damages period, which, under law, begins up to six years before the filing date of the lawsuit (Sept. 15, 2005), and through the conclusion of the trial, which is scheduled to begin in front of a jury on Oct. 16, 2012.
I/P will also seek an imposed running royalty for the future damages period, from the conclusion of the trial until the expiration of the patents in 2016.
The Eastern District of Virginia is known as the "rocket docket" because the court is famous for moving cases to trial very quickly.
Google generates billions of dollars of revenue because of its search advertising. According to Google’s chief economist, a search engine's "primary source of revenue comes from selling advertisements that are related to the search queries. Since end users tend to find these ads to be highly relevant to their interests, advertisers will pay well to place them . . . Search engine ads are one of the most effective forms of advertising."
Damages are calculated by multiplying the infringers’ total sales of the infringing product, normally the portion attributable to the invention, by a reasonable royalty rate determined at trial.
Lycos, an American company that pioneered search engine technology, originally developed and owned the patents in question.
The lawsuit alleges that Google and others decided that it was better to infringe than to pay for the technology they needed to pursue their own business model.
Many American businesses factor in to their business models the cost of litigation and settlement in their annual budgeting. This is a necessary and prudent thing to do provided that it is not used as weapon instead of a shield with regard to infringement.
Regardless of the outcome of this litigation there are the key issues raised:
1. If companies are free to infringe and exploit the property of others without permission, agreement and compensation then the property rights of all are in jeopardy.
2. Challenges to patent infringement must be vigorously pursued to give value to all intellectual property validly protected by law.
3. Patent holders have an affirmative duty to vigorously protect their property against any and all infringers.
Should the plaintiff be successful either in settlement, trial or on appeal, this case will have great consequence to patent owners and users of technology.
The fallout could be as newsworthy as the famed BlackBerry patent infringement case where the plaintiffs in that case settled for a reported $600 million.
The irony is that even if Google were hit with $600 million or more in damages it would not be adversely affected as a business. Google would simply pay up and go on, perhaps with no lessons learned.
However, should Google ultimately pay up for infringement, it would send shockwaves through the tech world whereby a “David” was able to take down a “Goliath.”
The bottom line is this: The protection and enforcement of intellectual property rights is the foundation of our nations successes in innovation, ingenuity, advancement, protection, and viability.
To read more about the case, read the well-documented litigation history and comment by business blogger John H. Ford of SeekingAlpha.com
Full disclosure: I own Vringo Stock Options. Vringo, Inc. (NYSE Amex: VRNG) merged with the plaintiffs of this lawsuit last week.
Bradley A. Blakeman served as deputy assistant to President George W. Bush from 2001-04. He is currently a professor of Politics and Public Policy at Georgetown University and a frequent contributor to Fox News Opinion. Read more reports from Bradley Blakeman — Click Here Now.
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