CIPA 2013: How to deal with NPEs

Lawyers at the Chartered Institute of Patent Attorneys (CIPA) Congress have been discussing issues surrounding non-practising entities (NPEs) and the impact the growing trend is having on patent strategy.

During the 18th annual CIPA congress in London, delegates were asked to consider questions including how to define NPEs and whether their notable increase in the US could spread to Europe.

NPEs, also referred to as patent trolls, own and assert patents without actually making products; critics claim they often bring frivolous litigation in an attempt to extort easy money from defendants.

Currently, the problem is more prevalent in the US where the filing of lawsuits by NPEs has increased dramatically in recent years.

George Whitten, vice president and patent counsel at Qualcomm Europe, told the meeting the NPE saga had taken on “mythical proportions.”

“Many people have tried to define the entities with different terms but there is still no clear definition,” Whitten said.

Adding that his own company, which makes chipsets for mobile phones and also has a technology licensing business, had been branded a troll, Whitten called for a clear academic study into the issue.

Calling for a measured approach Whitten said, “we need to look at what it is we are trying to stop. Is it individuals or is it behaviour?

“It [the study] should be prepared by economists and lawyers to provide a balanced and measured analysis and then we can move on and start to address the problem.”

Last week the Federal Trade Commission in the US announced it would be using its subpoena power to start an investigation into several NPEs which it claimed would provide a greater insight into their practise.

US President Barack Obama has also waded into the issue outlining legislative reforms to tackle the problem.

However, while the problem is currently predominantly US-based, delegates were told that there had been fears that Europe may become the next hot spot.

Making reference to the ongoing Unified Patent Court (UPC) negotiations, Nicola Dagg, partner at Allen & Overy LLP in London, said that there were some aspects of the framework which could create a potentially attractive environment for NPEs.

“If an injunction were obtained it would cover the 25 member states, which is a very powerful tool in itself,” said Dagg.

However, Dagg added that there were elements of the negotiations which could deter “troll type litigation,” including Article 69 of the UPC Agreement.

Article 69 stipulates that legal costs “shall be borne by the unsuccessful party.”

In the US patent system, however, each party normally pays its own legal fees. "The risk of bearing the costs of litigation would be a deterrent against the filing of lawsuits," Dagg said.

“One of the key reasons why we [the UK] have had much less troll type litigation is because of the loser pays winner costs rule.

“It's good news is that there is a similar rule for UPC, which may yet act as a deterrent,” Dagg added.

The CIPA conference runs from October 3-4.