With hopes of patent reform fading in Congress, major IT firms look to beat trolls by outbidding them.
With efforts at patent reform stymied in the U.S. Senate, the nation's
leading technology companies have formed a unique trust to buy valuable
intellectual properties as a protective first strike against so-called patent
The leading members of the trust include Cisco, Google, Hewlett-Packard,
Motorola, Sun Microsystems, Ericsson and Verizon Communications, according to a
June 29 Wall Street Journal article. Each member pays approximately $250,000 to
join Allied Security Trust I
and places $5 million in escrow to purchase patents.
Also known as patent holding companies, trolls acquire patents for the
purpose of initiating litigation against technology companies in hopes of
forcing expensive settlements. Patent holding companies produce no products or
services using their patents.
"The trust was formed in reaction to a marked increase in patent
assertions and litigation involving high-tech companies by patent holding
companies," stated the trust's Web site. "The trust provides
opportunities to enhance companies' freedom to sell products by sharing the cost
of patent licenses."
The tech industry once held high hopes the 110th
pass significant patent reform, reducing the increasingly high cost of
litigation engulfing IT companies due to patent disputes.
In September, the House approved
a bill hailed as the first
significant overhaul of patent law
in half a century. Approved on a 225-175
vote that crossed party lines, the Patent Reform Act of 2007 (H.R. 1908)
narrows the definition of willful infringement and limits infringement damage
awards to the actual value of the technology involved instead of the overall
value of a completed product.
The bill also creates a "second window" in which to challenge
patents issued by the Patent and Trademark Office. In addition, the legislation
would create a first-inventor-to-file system to replace the current
first-to-invent standard, moving the United
States closer to international patent
Led by large pharmaceutical and manufacturing interests, the bill has all
but died in the U.S. Senate.
According to the Allied Security Trust, it costs
operating companies "an average of $3.2 million through the end of
discovery and $5.2 million through trial to defend these cases when there is
more than $25 million at stake. Even a small claim is highly disruptive and
requires significant time and legal costs to defend."