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Protecting Innovation in the Cyber World from Patent Trolls
Cybersecurity firms have a tremendous responsibility. They work 24/7 to protect many of the world's most trusted and valued companies and brands. Their clients rely on their expertise to protect crucial assets, and consumers trust that they are keeping client information safe and secure. At the same time, cybercrime is still a very real threat. In fact, "Cybersecurity Ventures predicts that cybercrime will cost the world $6 trillion annually by 2021, up from $3 trillion in 2015." (Cybercrime Magazine, Dec. 18, 2019).
With trillions of dollars to keep watch over, the last thing we need is the distraction of costly litigation brought on by patent assertion entities (PAEs or "patent trolls" as they are commonly known). PAEs are companies that don't make any products but instead seek royalties by asserting their patents against those who do make products.
|Patent Litigation Can Happen to Virtually Any Business
At Trend Micro, we know first-hand how patent trolls attempt to extract millions of dollars from a business. A few years ago, a patent troll came after our IP with threats of infringement. Intellectual Ventures, a known patent troll, develops and licenses IP, and in essence they bought tens of thousands of patents and leveraged those patents against companies in an attempt to generate billions in royalties for themselves. In Trend Micro's case, we were confident that the patents Intellectual Ventures asserted against us were invalid, and always held the belief that our products and innovation never infringed upon them.
We held our ground and litigated the case for six years, leading to a successful outcome. However, litigation like this comes at a price — time, energy, financial resources and more. Companies just starting out in the cybersecurity world may not have the means to spend six years in court fighting a patent troll — and that is what patent trolls rely on. They are opportunists hoping to engage an unsuspecting company who will eventually give up and settle for millions out of court. And for companies who have been around for a while, protecting their assets from potential litigation should be a part of their IP strategy.
|Patent Litigation on the Rise
In the last few years, patent litigation has been on the rise. Unified Patents reported that in 2019 alone, patent litigation was up 4% across all industries. The majority of new patent disputes involve the tech industry. In fact, the report shows that 84% of all PAE assertions filed in 2019 involved high-tech companies. By contrast, only 10% of non-PAE litigation involved companies in the high-tech sector. What does this mean for cybersecurity firms?
Cybersecurity firms have the responsibility of protecting consumer data and information; but these same companies have an equally enormous task of reducing the risk of a costly patent litigation brought on by a patent troll. While cybersecurity is still considered a fairly young field, one where a culture of licensing hasn't quite taken hold, proven tech leaders IBM, Philips, Red Hat, Sony, SUSE and The Linux Foundation — all familiar with licensing — joined forces to form the Open Invention Network in 2005, a defensive patent pool and community of patent non-aggression which enables freedom of action in Linux. These companies recognized the importance of working together to combat threats to innovation.
|Costly Litigation Costs Everyone, But Protection Doesn't Have To
The cost of defense through trial ranges from $500,000 to $5 million or more and patent trolls are associated with more than $80 billion a year in lost wealth for defendants. Firms forced to pay patent trolls are estimated to spend $211 million less on R&D causing a significant hit to any company's bottom line as well as to a company's innovation. This impact can be easily avoided with an IP strategy that includes protecting your company from patent trolls.
A well-rounded defense against patent troll litigation requires multiple strategies. One is for a company to join a community of like-minded companies who all agree to work together to fight back against patent trolls. While Open Invention Network is great for companies who work with Linux, an example of a community that protects companies across industries is LOT Network. LOT Network is a non-profit community of more than 600 companies, including Amazon, Facebook, Google, Microsoft and Cisco, that agree if a patent owned by a member company falls into the hands of a patent troll, that company grants the other members a license to that patent. That means that the patent can no longer be used by trolls to sue the members of the community. The usual uses of patents, like buying and selling, and suing other operating companies who infringe on your IP, are still preserved.
Trend Micro's patents are an essential part of our success, protecting intellectual property that is the cornerstone of innovative products and platforms such as Cloud One, XDR and Apex One. Together, these innovative solutions help to protect more than half a million public and private sector organizations and more than 250 million endpoints across the globe.
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John Chen is Associate General Counsel – Chief IP Counsel at Trend Micro, Incorporated. He is currently responsible for all IP matters, including litigation, licensing, patent prosecution and portfolio management and IP diligence in all major M&A's. He also manages the product counseling team, which oversees open source compliance and privacy compliance. Prior to Trend Micro, he worked in-house at a number of Silicon Valley companies including Integrated Device Technologies, New Focus, SoniceBlue and Quantum. John holds a Bachelor of Science from University of California, Berkeley and a Juris Doctor from University of San Francisco.
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