The dramatic increase in the number of mobile industry lawsuits is forcing changes in the legal system and spurring new business models around patent licensing.
The number of handset patent lawsuits in U.S. courts went from 24 cases in 2006 to 84 in 2010, said David McDonald, an attorney at K&L Gates.
The spike in suits is happening for a number of reasons. "Today, it's a lot more complex to resolve the IP gap between what you own and what you need," said Mario Obeidat, head of licensing for telecommunications at Intellectual Ventures, a company that primarily acquires patents and earns revenue by licensing them. A mobile phone today requires 70,000 to 100,000 patents, he said.
It used to be that just a few companies controlled the bulk of the necessary patents and they would sign cross-licensing deals with each other, often without any money changing hands, he said. Now, however, with smartphones that include new functionalities, patents from companies in other industries, like photography, are required. Cross-licensing deals are much more difficult to make if the bulk of each company's licenses are irrelevant to each other. "The dynamics are much more complex," he said.
The U.S. International Trade Commission and prominent judges are beginning to make some changes to handle the surge of cases, McDonald and other legal experts said this week during a Law Seminars conference in Seattle.
"If you have the same six administrative judges you had 15 years ago [in the ITC] and the case volume has quadrupled, something has to give," said McDonald.
One way the ITC appears to be trying to reduce its case load is to address the question of whether "non-practicing entities," or organizations that collect patents but don't use them to build products or services, should be able to bring cases in front of the ITC. Since the ITC takes cases that have an impact on U.S. domestic industry, there's a question about whether simply owning a patent and licensing it constitutes a domestic industry, McDonald said.
Last month, the ITC issued a new rule that comes into affect this Friday that will allow the ITC to require participants to submit information regarding the impact of a case on the public interest. The new rule will also allow more public comment on the potential public impact of cases before the ITC. Such submissions could allow the ITC to decide against considering some cases if it finds that they are unlikely to have much impact on the public.
There also may be some changes to the way that the courts handle patent cases. Recently, a prominent judge gave a speech where he suggested that courts should start determining how much time they spend on a case based on how much the case might be worth. "The court may then tailor its timing and procedures to make sure a billion-dollar case gets a 'billion-dollar' process and a thousand-dollar case gets its due as well," said Judge Randall Rader, who presides over the U.S. District Court for the Eastern District of Texas but also serves as the chief judge of the Court of Appeals for the Federal Circuit.
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