The Internet of Things - Planning for the Next Wave of Patent Litigation
21 September 2016
Dr. Chris Mammen has been litigating patents and technology cases since the start of the first dot.com boom in the late 1990s. His experience spans cellular communications, microchips, HD video compression, high-temperature superconductors, bio-pharmaceuticals, and even an early patent for online pizza-ordering. He is a partner in the Hogan Lovells San Francisco office.
In this hoganlovells.com interview, Mammen looks at how patent litigation will impact players in the Internet of Things (IoT) space and what companies need to do to prepare.
How have patent litigation trends evolved and changed during the past 20 years? What’s next on the horizon?
Mammen: In addition to the trends that are much talked about in the press like “patent trolls” and NPE litigation, we’ve seen during the past 10 or 20 years that there is also a substantial portion that is competitor-versus-competitor patent litigation. Any time there is a big step forward in the technology, there has been a corresponding surge of patent litigation in order to resolve competing claims to ownership of that technology. One big wave was 3G cellular telecommunications. We saw another big wave about eight or nine years ago with 4G telecoms, and we saw the smart phone wars three or four years ago.
What I think we are going to see next — as the Internet of Things moves to a consumer commercial reality — is that there are going to be economic incentives for IP holders in that space to assert that IP in order to determine what the IP and technology is going to look like and who is going to be able to extract royalties from the other players in the market.
What role will NPEs and patent monetization entities play in this space?
Mammen: If there is money to be made in the secondary market for IoT-related patents, or in the monetization of those patents through licensing, enforcement, and litigation, we can expect to see NPEs step into the space. However, there are a couple of big differences in the general patent landscape, compared with what we saw in the recent past. Changes in the rules governing patent eligibility, including the Alice case, together with recent reforms to the Federal Rules of Civil Procedure, and the introduction of inter partes reviews (IPRs) and post-grant reviews (PGRs) at the United States Patent and Trademark Office (USPTO), provide indications that there may not be quite as much NPE activity in the IoT space as there was in other technology areas in the past 5-7 years.
What do companies operating in the IoT space need to do to prepare against an uptick in IP litigation?
Mammen: If companies are developing technology themselves in-house, they need to have a robust program in place to file their own patent applications — even if they don’t plan on going out to assert those patents against others. They may decide that they want to and that’s part of the commercial strategy. But at the very least, having a robust portfolio puts them in a good defensive negotiating position when the inevitable future assertions of IP against them come in. It gives them bargaining chips.
If they are licensing in technology from other vendors, it’s very important to make sure that the agreements for licensing that technology contain robust warranties against infringement and indemnity promises in the event that they are accused of infringement.
There are a couple of reasons why doing a freedom to operate (FTO) analysis may not be a preferred strategy. As we’ve seen in the tech space, there are just so many patents and so many different potential applications of patents and technology that it’s practically impossible and certainly commercially impractical to do a thorough freedom to operate analysis. Also, there are reasons that a patent infringement defendant can be regarded more adversely in patent litigation if they were aware of particular patents earlier. So there is an incentive in our system to not go out and make yourself aware of things unless you are going to proactively avoid infringement. It is much easier to become aware of patents than it is to commit the resources to design around everything you’ve become aware of. So conventional wisdom often suggests that it’s sometimes better to not do that sort of freedom to operate investigation and put yourself on notice of a whole bunch of patents.
Why is Hogan Lovells so well positioned to help clients in the Internet of Things space who are facing patent litigation?
Mammen: It’s because of the thought leadership we have shown in a cross-practice area, getting ahead of the curve on the Internet of Things and certain other technologies. For example, we have incredible depth in FinTech and cryptocurrencies and thinking about the expansive application of blockchain — not just in FinTech — but in a variety of applications. We are well positioned to address not just the technical issues related to a particular patent infringement case but also appreciate the strategic positioning of that kind of case in the broader marketplace. The work we do on issues such as connected cars, privacy, and unmanned aerial systems really tie together with the Internet of Things to show the depth of our offerings.