STORES Magazine - July 2010 - (Page 35)

EXECUTIVE SUITE / LITIGATION Troll Insurance Firm offers novel approach to protecting against patent-infringement suits BY SANDY SMITH n fairy tales and fables, trolls are ugly little creatures that live beneath bridges. They didn’t build them and don’t own them, but they charge all who want to use them. Were such a story to be written today, the setting would be quite different, the toll more costly and there would be no assurance of a happy ending. I Patent troll is the pejorative term for those who buy patents — sometimes out of bankruptcy, sometimes directly from inventors – with the intention of pursuing patent infringement Business is booming claims against well-known (read: deep-pocketed) companies. Patent infringement litigation is a growth industry, says AmNon-practicing entities (NPEs) — the official term for these ster, who has spent most of his career in patents, intellectual operators — have long targeted technology companies; tech property and mergers and acquisitions. In fact, it has become firms paid out $3 billion in 2009 alone. But technology adsuch an issue that Bloomberg Businessweek has a daily report vances have become so pervasive to all forms of business that on patents, trademarks and intellectual property issues. patent infringement is starting to have an impact on retailers. Law360, a newswire for the legal profession, reported that all “Because of the nature of the patents that are being asserted, patent suits were up 10.3 percent in the first quarter of 2010. it can take very little work on the part of an NPE to make an “For the biggest technology companies, it is 80-plus percent assertion,” says John Amster, CEO of RPX, a San Franciscoof all the patent litigation that they face,” Amster says. “Eight based firm that helps companies reduce NPE risks by purchasyears ago, it was 15 percent. Where retailers are today is where ing potentially troublesome patents. “Just by the rest of the industries were four or five “If an average of going on a website, I can make a credible case years ago.” $1 million is at stake, that this online operation infringes that Some NPEs have investors to assist in puryou’ll pay $500,000 in patent. It’s not like a semiconductor patent, chasing patents; others may lack capital, but legal fees. If you’re in where you have to pay someone a million dolhave the time and expertise to maximize the lars to reverse-engineer a product. It’s easier return. “Those are generally contingency law court to the tune of detection, so they’re an easy target.” firms,” Amster says. “The investment theory $500,000 to $1 million, The stakes are high, and a single patent suit is in acquiring an asset from an inventor or a you might as well pay can ensnare dozens of retailers. One NPE, for defunct company and then taking on the risk someone $300,000 to go example, sued 144 defendants over a pointof litigation. If you talk to patent lawyers, away.” — John Amster, RPX of-sale patent. Another case snagged a numthey’ll tell you if you sue 30 companies, you WWW.STORES.ORG STORES / JULY 2010 35 ber of online retailers, the largest of which settled for more than $40 million — a hefty return on a patent purchased out of bankruptcy for $2 million. “If you’re an NPE, you want to go after high-transaction volume businesses,” Amster says. “When the volume of transactions is really high, the stakes could be really high. If someone was able to establish a running royalty or per-transaction charge, it could be significant.” http://WWW.STORES.ORG

Table of Contents for the Digital Edition of STORES Magazine - July 2010

STORES Magazine
Editor's Page
President's Page
Retail People
Corporate Leadership
Top 100 Retailers
Location Apps
Food Safety
Risk Management
ARTS Update
Point of View
NRF News
Retail Industry Calendar
End Cap

STORES Magazine - July 2010