Canada: Ask An IP Litigator: Patent Trolls (Video)

Video transcript

Ed Fan (00:06): Picture this: you receive a letter from a law firm on behalf of a company or from a business development person of a company that references the certain Canadian patents that belong to that company or patent holder. The letter alleges your company may be infringing one or more claims of those patents. The letter is written in aggressive language, it says the patent holder is prepared to enforce its rights through litigation, which its stresses will be protracted and costly.

The letter even threatens an injunction against your sale or use of your products and services if you don't respond. But the letter also offers the option of an early resolution if you agree to pay the company a licensing fee, then the patent holder won't sue.

Companies behind these types of letters, is what we patent lawyers call "patent trolls". And companies like this can be a major nuisance for businesses in Canada. I'm Ed Fan, and I'm here with Alicja Puchta to talk about patent trolls and what you should do if you're faced with such a letter.

Alicja, why don't we start by discussing what is a patent troll and who sends these letters?

Alicja Puchta (01:12): So, patent trolling. You may be asking yourself, what exactly is one. Patent trolls are also known as patent assertion entities or non-practicing entities, and like that name suggests, there are companies that own patents relating to inventions that they do not actually practice. A traditional patent holder develops an invention that they intend to eventually manufacture or put to commercial use.

A patent is a means to an end protecting that invention. But for patent trolls, the patent is the end of their business model. They have no intention of manufacturing or using the invention. Instead, their business model centers around taking out patents to assert against genuine industry players through the negotiation of licenses and through use of litigation as a tool.

So, if you're trying to figure out if you're dealing with a patent troll, you might ask yourselves these questions. First, are they a legitimate competitor operating in your industry? Do they sell tangible products or offer services? Do they have research and development facilities or a manufacturing base? Do their patents disclose examples of an invention that was actually made, or are they so-called "paper-based patents"? Patents disclosing only theoretical examples of how the invention could be made. Were there patents prosecuted diligently? Or was there patent holdup? A period during which the entity allowed its patents to languish in the patent office while it waited for industry players to implement the claim technologies without knowing they had to have workarounds. And are they frequently involved in litigation, specifically in infringement actions that they've brought?

So, Ed, once you've answered these questions and considered you're dealing with a patent troll, and found that you are indeed dealing with one, how should you respond?

Ed Fan (02:58): Well, first of all, don't panic. Maintaining your composure will help you to deal with these kinds of entities systematically and pragmatically. Second, do your homework. As Alicja discussed, research the entity that sent you the letter. Are they a troll, or are they a legitimate competitor? As Alicja mentioned, check what type of litigation they've been involved in. Or perhaps this entity just writes letters and never actually sues anyone.

You also want to research the patents that there are asserting. Are they still in force? And what do they cover? Does it look like their claims of infringement may actually hold some water? Does your product and services seem to fall within the scope of those claims, or is the letter really grasping at straws and fishing? Through this research, you will learn a lot more about who you're dealing with and what you're up against.

And depending on that assessment on the risk of infringement, your responses may range from doing absolutely nothing, to engaging the patent troll to ask some questions. If you engage, you can ask questions about the patents and how your organization is supposedly infringing. You can ask for detailed explanations, and we patent lawyers call that a "claim chart". Ask the letter writer to produce one. This shifts the effort to the troll. But a flag here, if you engage them that also risks the troll smelling blood and coming back to you.

So ultimately, just remember your goal here, if you respond, it's to get more information from them and not the other way around. You just don't want to invite a fishing expedition.

How do you actually resolve one of these letters once you've done that homework?

Alicja Puchta (04:36): So, obviously if you get one of these letters, that's your aim, is to resolve them. And sometimes a strategy of watch and wait might work. A troll may lose interest if they see no reaction from you, no response to their letter. So, you just want to watch for moves from them and prepare in the background by doing the research we suggested.

But you should know that these entities have nothing but time on their hands. They have no other business to run. All they do is enforce and license patents. So, any response, even no response, will likely be met with ever escalating overtures and threats. The bad news is that most patent trolls just don't go away that easily. They're known as trolls for a reason.

They tend to employ persistent, aggressive tactics. So, you may expect more letters or even a lawsuit to follow. If you find yourself dealing with one of these persistent patent trolls, I'd recommend hiring a patent litigator to help you navigate preparing a response and resolving the issue.

A patent litigator can help you figure out whether the troll's claims of infringement are frivolous or have some teeth, they can help defend your interests in the face of aggressive tactics and work with you to come up with a coordinated and informed strategy to deal with the troll. And as tempting as it may be to get the troll to go away by simply doing what they want, it's important to understand that giving in may set up a precedent for you as a target.

So, in most scenarios, you'll want some level of negotiation to leave you on stronger footing going forward. And whatever you do, don't capitulate to the patent troll's demands, especially without speaking to a lawyer first.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.