Tech Giants Fear Spread of Patent Wars to Europe

http://www.nytimes.com/2013/09/26/technology/tech-giants-fear-spread-of-patent-wars-to-europe.html

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LONDON — The technology industry is expanding its fight against patent trolls to Europe.

In the United States, technology companies like Google, Apple and Microsoft have spent years and hundreds of millions of dollars to defend patent-infringement lawsuits by companies that make a business of buying technology patents primarily for suing software companies and makers of products like smartphones. Now they worry that Europe could soon become a broad battleground for similar court battles.

In a letter to be sent to European officials on Thursday, 14 companies outline their concerns about a coming change that will give most of Europe a unified patent court system for the first time. So far, the technology industry has generally supported this pan-European effort as a better way to protect intellectual property, compared with the current thicket of country-by-country rules.

But in looking at the details of the new approach, tentatively scheduled to begin in 2015, the companies now fear that the new system could be vulnerable to what they call patent assertion entities, less politely known as patent trolls, which make a business of filing patent-infringement suits. Such companies say they play a valuable role in protecting innovators, but many corporations see the suits as frivolous and damaging. In the United States, the Federal Trade Commission has a patent-troll investigation under way.

In interviews, executives of some of the companies that sent the letter said one of their concerns was that court-shopping by patent trolls in some smaller European countries could turn parts of the Continent into the equivalent of the Eastern District of Texas. That federal court jurisdiction has become an American capital of patent litigation known for sympathetic juries and speedily moving cases.

In one notable case there, in 2010, a jury awarded an obscure company more than $600 million in a lawsuit against Apple related to its operating systems, although the award was eventually overturned by the trial judge, and by the United States Supreme Court this year. A host of companies also had to fend off a suit in East Texas filed by a company that claimed to have invented the “interactive Web.”

“Unprincipled plaintiffs would be able to extract substantial royalties” through settlements or verdicts “from European and other companies based on low-quality and potentially invalid patents,” the letter said.

The letter was signed by 14 corporations, including Apple, BlackBerry, Cisco, Google, Hewlett-Packard, Intel, Microsoft, Samsung and Yahoo. It was also signed by some big European companies — like Adidas, Deutsche Telekom and Telecom Italia — and was provided to The New York Times by the companies.

Top officials drafting the rules of the new court system said they were listening to the industry’s concerns — which is perhaps no surprise, since several people involved in the drafting process work for law practices or lobbying firms that count such companies as clients.

Some officials suggested that the concerns were overblown.

“I don’t see it as a major problem at all,” said Kevin Mooney, a British patent lawyer who is the chairman of a drafting committee that is advising a panel set up to oversee the creation of the court system. “We have one set of procedures for all these courts,” he said. “It would be nonsense if we allowed one court, Romania, say, to become the Eastern District of Texas.”

Some companies say the new European system is being too heavily influenced by the German model, which requires that the legal question of whether a patent is valid be handled as a separate issue from whether one patent infringes on another. Breaking cases apart in that way can sometimes enable litigants to obtain a ruling on an infringement suit even before a court has determined whether a patent is valid.

In the letter, the companies say the latest draft of the European patent rules may create “significant opportunities for abuse” because it would allow separate rulings in different courts on whether patents have been infringed and whether they are valid.

Germany has already been a tech-patent battleground. Last year, after Microsoft moved a logistics center to the Netherlands from Germany, the company cited the potential impact of a patent lawsuit filed in Germany by Motorola Mobility as its reason for moving. And Deutsche Telekom had to pay this year to settle patent-infringement claims brought by IPCom, a company that holds more than 1,000 patents.

Mr. Mooney said the European system would be less rigid than the German system and would rely on the discretion of judges.

“The pleading stage of the case, which will occupy around six months, includes both infringement and validity, so the court will get all the information it requires on validity,” he said. “What kind of self-respecting judge would say, ‘I’m only going to decide the infringement part and I’ll send the validity part to France or England?’ ”

Although the new patent court system will have branches in many of the European Union member states, its central division will have three main locales, in Paris, London and Munich.

Paul van Beukering, a Dutch official who is the chairman of the preparatory committee, said courts in countries that have little experience will be sent foreign judges who are more experienced in patent litigation. “It shouldn’t make that much of a difference where you are,” he said.

The court system has already been approved by most of the European Union. Spain has refused to join and has even taken legal action to thwart the move toward pan-European patents, noting that Spanish is not one of the languages of the court system. English, French and German are.

Poland also has yet to sign on, citing concerns that patent litigation could harm its economy. Italy has agreed to be part of the court system but has not embraced the notion of pan-European patents.

For the final plan to take effect, it will need ratification by at least 13 of the 25 member states that have already signed on to the court system in principle.

The industry may have good reason to be nervous. A blog post from IPNav, one of the most prominent patent-litigation firms in the United States, hailed the pending European legislation, calling it “a great benefit to innovators.”

“This is going to cut the cost of litigation down significantly,” Erich Spangenberg, the owner of IPNav, said in an interview.

In the last five years, IPNav has sued more than 1,600 companies in the United States — more than any other entity in the field, according to a report by RPX, a patent risk-management firm. IPNav’s pending cases include lawsuits against Google, Hitachi and Adobe.

While Mr. Spangenberg said he could understand the industry’s trepidation, he added: “It’s also going to save money for both sides.”