Patent litigation is one of the biggest obstacles to success for mobile application developers today. Non-practicing entities (NPEs, pejoratively known as “patent trolls”) are seeking profit by targeting mobile app development firms with patent litigation lawsuits. Historically, faced with daunting litigation costs and indefinable risk, app developers settle with NPEs. This encourages NPEs to seek more settlement money from developers down the line.

It’s time for app developers and other small businesses to go from victims to victors. Although litigation is a real risk in today’s development environment, mobile app developers can convert the need to protect themselves into an opportunity. With preparation, even a seemingly complex threat like patent litigation can provide a rich arena for businesses to improve their skills and face the enemy. After all, everyone is subject to the obligations of the patent system. Why not tap the benefits of the system instead of bowing in fear?

Running And Hiding From NPEs

Litigation is a real risk in today’s development environment. NPEs sue technology companies, such as app developers, for violating potentially dubious or broadly applied patents. For example, Lodsys, which specifically targets mobile app developers, has issued infringement claims on app developers that offer in-app upgrades, subscription renewals, interactive online advertisements, and online help.

Mobile application developer Rovio, which made the smash hit game Angry Birds, was one of many app developers that received a Lodsys infringement claim in 2011. Lodsys said that Rovio had violated 27 Lodsys patents covering in-app payments. Rovio, ordered to pay Lodsys 0.575 percent of any U.S. revenue earned as a result of using the technology in question, reacted by removing both the features in question and some of its apps.1

Even as defendants, developers can adopt an offensive position against NPEs. The key is to present themselves not as an attractive target, but as a high-risk proposition.There are companies, legal counsel, and educational resources that are available to help, as well as strategies.

Use Prior Art As A Shield

Defendants can “get rid” of an NPE attack at a much lower cost if they add the step of an aggressive prior art search, which may provide a smoking gun basis for driving a no-cost settlement. In addition, by using a public notice approach for the prior art search, the public nature of the search immediately raises the risk of invalidity for the NPE.

This can change the dynamic of the case. For example, the asserted defendant can present that the search notice will be taken off the public Web site upon settlement by the NPE. So risk is presented, and a strategy is presented to remove it. Establishing a reputation of such systematic defensive activity and presenting it to the market reduces the entity’s attractiveness as a target.

Turn Fear On Its Head

NPEs that focus on demanding payment that’s lower than the cost of defense also demonstrate their own economic strategy. These entities want quick payment to avoid risk and cost. The counter-strategy is to give them exactly what they don’t want—cost and risk, up front, aggressively, and without any element of fear. It boils down, once again, to the art of the game. Replacing fear with aggression presents the notion that rather than being a target, the small business is an entity to be feared.

What is the risk that NPEs take—and the only risk? The patent asset that they are trying to wield is actually not worth the paper it is written on. So the strongest action that can be taken to determine the defensive position is to investigate whether a quick settlement payment can, in fact, be turned on its head.

If the defendant can show a clear invalidity position based on prior art, the asset relied on by the NPE, the patent, is put at the highest level of risk. This risk is greater than a non-infringement argument because if a patent is found not to be infringed, it can still be asserted against another entity. But if a patent is found to be invalid, it is extinguished for all purposes—asset annihilation.

So rather than handing the NPE even a nuisance amount of a few tens of thousands of dollars, app developers can invest that money in the potential of finding a key invalidity path. If one is found, the defendant can threaten a number of actions to test the patent, incur significant fees for the NPE (e.g., post grant proceedings such as inter partes review), and drive a no-cost settlement. If a search maintains the status quo, then the defendant can address other resolution approaches. But fueling the NPE with nuisance payments only fuels the next litigation against the business.

Access The Best Legal Resources

Most, if not all, independent and small developers appropriately spend their valuable time growing their businesses. This leaves little time for addressing IP issues proactively. It is akin to hacking their way through the woods with little more than their smart phone’s compass app to guide the way, leaving them vulnerable to IP issues that a third party may raise.

Excellent attorneys who specialize in intellectual property and software for large companies and smaller companies are one key resource. Becoming active with organizations such as Appsterdam and the Electronic Frontier Foundation can help companies tap into the networks of law firms that provide the highest quality defense in the IP area, as well as share counsel with other companies.

Become An Activist

To affect and influence change in a patent system that is currently putting innovation at risk, mobile app developers must become activists. The first step toward activism is education. Judicial reform, including new laws for sanctions and the misuse of litigation, is on the books and should be tapped. App developers should educate themselves about new developments in patent law, including the American Invents Act (AIA) and the Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act.

There are new opportunities for developers to both protect themselves against nuisance suits and create patent assets to improve the value of their enterprise. Everyone is subject to the obligations of the patent system, whether or not they choose to tap its benefits. With litigation being a risk, developers can convert the need to protect themselves into an opportunity.

Developers Are Changing The World

Mobile device adoption will hit the one billion mark in the near future. That means mobile app developers have an incredible impact on the world and the way people interact with it and with each other. Yet the legal system that should be supporting these entrepreneurs is, in fact, making their passion more difficult to practice.

As primary influencers in today’s Information Age, developers have the opportunity to understand the current limitations and possibilities within the patent space. When developers unite and grow stronger, they will be a powerful force toward creating a legal system that truly fosters innovation.

Reference:

1. NPR’s This American Life, “When Patents Attack,” 22 July 2011.