Patent infringement is when someone else uses your patented idea without permission. The strict, legal definition is when someone infringes or performs every limitation of at least one patent claim. This is found in 35 USC 271.
Many inventors and entrepreneurs believe that having a patent means they are “protected.” Having a patent just means you have a patent – whether someone infringes the patent (and you can actually enforce the patent) is a completely different question.
Patent infringement lawsuits are incredibly expensive
The costs of patent enforcement are staggeringly high, with even a “small” lawsuit costing more than the amount of money in dispute. Which is why there is patent insurance that covers any type of patent-related litigation.
Think about that – the cost to litigate is often higher than the total amount of money at stake. In other words, a company might spend $2M on patent infringement litigation when there is only $1M of damages. Not only that, both parties have to spend $2M to fight the battle, so $4M of attorneys fees are spent to fight over only $1M. Why is that?
Some patent lawsuits are not about the money
Big money lawsuits over a (relatively) small amount of damages happen when it is not about the money. These lawsuits happen when competitors are fighting over much bigger markets. A patent infringement lawsuit might be strategic to remove a competitor from the market. These lawsuits are not about the money, they are about a much longer term competitive strategy.
Lawsuits are one mechanism to negotiate deals with competitors. A joint venture, for example, might come out of a lawsuit where two large companies squabble over a relatively small amount of money.
Another outcome might be a license or cross license. Cross licensing is done in the stratosphere of deals between very large companies. These types of deals are done by very large companies with very, very large patent portfolios.
While large company lawsuits are not the bulk of patent infringement cases, they are very powerful weapons when large companies seek to license their core technologies to other players in the market. For example, Ericsson has sued Apple a couple times to try to get them to take a license.
Some patent lawsuits are all about the money
Many patent infringement cases are all about the money. These are often when contingency-fee law firms get involved.
Every patent infringement lawsuit filed by “non-practicing entities” (sometimes called “patent trolls”) are about the money.
This is simply because one party is often a patent owner who does not sell products. This can be a startup company that failed for whatever reason, or these patents can come from independent inventors who never intended to bring a product to market.
For practicing entities, there is often a strategic value for having a competitor cease-and-desist from competing. A patent lawsuit can accomplish this.
However, then there is no strategic value for having a competitor cease-and-desist, the patent lawsuit becomes all about maximizing the financial royalties that can be collected.
Infringement of a patent starts – and ends – with the patent claims.
When it comes to infringement, the patent claims are the most important part of a patent, not the description of the invention.
Patent infringement occurs when someone performs every element of at least one of your claims.
The first step of any infringement analysis is to construct a claim chart.
A claim chart is a spreadsheet that lists every element of your claim in the left-hand column, and evidence of infringement in the right-hand column.
If there are any elements of the claim where you do not have evidence of infringement, there is no infringement. If the spreadsheet can be completely filled out, that will constitute infringement.
Where problems arise
Many inventors might think that a big company infringes their patent, but they might not be familiar with what might constitute patent infringement.
Many software patents are undetectable.
A huge problem with software patents is that infringement is often undetectable.
Many software patents contain algorithms or other techniques that are performed inside the “black box” of a computer. It may seem like someone infringes your patent when their software does something similar to your patented invention, but you may need access to their source code to verify actual infringement.
Any time you need access to source code to verify infringement, you will almost never succeed in a lawsuit.
Divided infringement is when two companies each perform a portion of a patent claim.
This can happen when one company performs several steps of a claim, but another company performs other steps.
Divided infringement is a huge problem, since neither party infringes the whole patent claim, so it is unclear who you drag into court. Once they are in court, there is a huge burden to show that the two companies acted together with a goal of performing the elements of the patent claim.
There are successful lawsuits where divided infringement has been successfully found, but it is very difficult.
Bad claims drafting
Many problems with patent litigation come from bad practices by the original patent attorney.
Patent attorneys have a conflict of interest. They do not work for their clients, they work for a law firm.
The patent attorney’s duty of care is to get a patent through the examination process. The patent attorney takes no risk and is not liable if their patent has no value. They are never held negligent if their patent can never be used in a patent infringement lawsuit.
Countless patents issue with undetectable claims, multi-actor claims, and other conditions that make the patents worthless in litigation. This is not the fault of the patent attorney, it is the fault of the client.
It is the client’s fault if the patents are worthless, not the patent attorney. This is why most sophisticated patent holders have inhouse patent counsel who manage the patent process.
Remember: do not read the specification, read the patent claims
Every patent has two distinct parts: the specification and the claims. The specification is the description of the invention. The claims are what you get to enforce.
If someone infringes your patent, they must infringe your claims not your specification. Just because your patent application described your competitor’s product does not mean you can enforce your patent – what matters is what the claims say.
Different Forms of Patent Infringement
Other parties may infringe on your patent in a variety of ways, including:
- Direct Infringement: A patent-protected product is created/sold/imported without permission. This is the best type of infringement to enforce, because it is clear-cut.
- Indirect Infringement: This comes in two flavors: contributory infringement and induced infringement. Indirect infringement is harder to prove because there are extraneous factors.
- Induced Infringement: There is no direct infringement by the infringer, but their product causes or induces someone else to infringe. An example might be a company that provides a product that causes a consumer to perform an infringing method, especially when the product instructions specify the patented method.
- Contributory Infringement: This is a little further removed from induced infringement. The infringer knowingly manufactures a product that is used by a direct infringer, and the product can only be used in an infringing manner. For example, there is no contributory infringement for a nut and bolt manufacturer on an infringing product because a nut and bolt can be used in many other ways. If a manufacturer knows that their product violates someone else’s patent and there is no other practical use of the product, they are contributory infringers.
- Literal Infringement: This occurs when there is a significant correlation between the terms in the patent claims and the infringing device.
- Doctrine of Equivalents: Sometimes, a product might not violate the patent claims word-for-word, but there may be infringement under the “doctrine of equivalents.”
- Willful infringement: Willful infringement occurs when someone or a company knowingly and intentionally uses another person’s or firm’s patented ideas or products. When someone knowingly infringes, they are liable for triple damages. If you get a Freedom to Operate Opinion from your attorney, that is usually evidence of no willful infringement.
Avoiding patent infringement.
If you manufacture, sell, or import a product, provide a service, or perform a method, you may infringe someone else’s patent.
There are two strategies for avoiding patent infringement lawsuits, and they are diametrically opposed to each other.
Bury your head in the sand strategy.
The first strategy is to bury your head in the sand and hope you never get sued.
This strategy is practiced by most startup companies, and it is a legitimate strategy. The thought process is that you have very little money, so you will never be a target for an infringement lawsuit.
This is not always true.
Big companies use the bury-your-head-in-the-sand strategy.
When I was an engineer at HP in the 1990’s, their policy was to avoid *any* patent searching. In fact, the patent attorney who briefed the engineers told us in no uncertain terms: if you do a patent search, you will be fired. Immediately.
The reasoning was simple.
If a company knowingly infringes someone else’s patent, they are liable for triple damages.
HP’s corporate policy at the time was that the risk of triple damages was far greater than the benefit of doing a patent search.
Smaller companies are often targets of patent infringement from trolls.
The classic patent troll strategy is to start with the smaller players, collect some money, and build a bankroll to sue larger companies.
In this strategy, a patent owner sues a small company and agrees to settle for a “small” amount, which may be $50,000, $500,000, or whatever they think they can get. When several of these lawsuits settle, the patent owner has enough money to sue a big company for patent infringement. This is because the cost of patent litigation is staggeringly high, often $3-5M.
Small companies have exposure through indemnification.
One of my friends had a small company that sold a chat-bot product. They were three people in a garage, but they landed a huge client. This multi-billion-dollar customer put their chat-bot product on a website.
The giant customer attracted the attention of a patent owner, who sued the giant customer for patent infringement.
However, since the patent infringement was caused by my friend’s small company, the giant customer turned to the startup and said “this is your problem. Defend us.”
So, the startup was stuck with defending a multi-billion-dollar company in federal court. Just by selling a $300/mo chat-bot product. The net result is that the startup had to declare bankruptcy because it did not have patent insurance to cover this issue.
The “bury your head in the sand” strategy comes with enormous risks and can cost you your company.
Proactive strategy to avoid patent infringement.
A proactive strategy avoids patent infringement by performing a freedom to operate search for each product or service you sell.
A freedom to operate search looks for any active patent that could be asserted against you.
In a typical freedom to operate search, a patent attorney performs a very thorough search. The patent attorney will identify patents that might be a problem. For each of the problem patents, the attorney will do a claim chart or analysis to see if and how you might infringe a patent.
Modifying your product or service to avoid patent infringement.
If you find a patent that you infringe, you can avoid a patent infringement claim by changing your product to avoid the patented invention.
Most patents are poorly written and are relatively easy to design around. By changing one or two elements of the product, you can avoid patent infringement.
Some patents, however, are difficult to design around. While these patents are rare, they can pose a business problem. In this case, you have the option of proactively taking a license to the patent or purchasing the patent outright.
I used to work for a consumer products company who had this problem pop up. They discovered, to their horror, that an independent inventor had a patent that could pose a problem for them.
The company sent two people to literally knock on the inventor’s door and offer to buy the patent. Their offer was generous enough that the inventor signed a license agreement on his doorstep.
Problems with the Proactive Strategy
The biggest problem with the proactive strategy is that if you knowingly infringe a patent, you are liable for three times damages.
Hewlett Packard’s strategy (at least during the 1990’s) was to bury our heads in the sand to avoid triple damages.
Many larger companies in the technology space do not perform patent searches for this reason. However, in the consumer products space, many very large companies perform freedom to operate searches routinely to minimize their patent infringement exposure.