Aug 06

Patent trolls, innovation and Brexit: What the FT won’t tell you:

Inventors beware: the EU’s opening the floodgates.

Opinion In 2017, the EU is going to open the Unified Patent Court. This court will make it much easier for patent trolls and corporations in the US – armed with dodgy patent applications and IP attorneys – to reach into the UK and strangle your startup at birth. Think about it.

Last week the Financial Times reported that two-thirds of patent cases in the US are now brought by “patent trolls”. In the last five years this has cost US startups more than $20bn in VC investment.

Patent trolls don’t innovate or build anything, but specialise in suing legitimate innovative businesses. This activity is primarily enabled by the US’s massively dysfunctional patent system, a system that will rubber-stamp patent applications often with minimal vetting – resulting in a system choked with applications ranging from the spurious to the wildly ludicrous. Patent trolls then tour the world, armed with these “patents”, extorting money out of honest innovators and engineers.

Although patent trolling is now increasing rapidly in Germany, Professor James Bessen of Boston University School of Law says that it is not currently a major problem in the UK – where fewer software patents and a “loser pays” litigation costs regime are real disincentives for that sort of “opportunistic behaviour”.

However, the EU’s new Unified Patent Court will, according a German law expert, “increase patent trolling in Europe” and open the UK up to patent trolling because “a judgment from the UPC will … cover the territory of all participating member states… This significantly increases the business risk.”

In a separate piece last week (“Brexit vote would harm EU unitary patent plans“), the FT reported that: “The long-awaited single European patent, protecting inventions through out the EU, is set to arrive next year – unless Britain votes to leave” the EU.

Everyone quoted in this pro-EU piece was an IP lawyer, yet according to the paper, these same IP lawyers represent a serious existential threat to innovation in the US and Europe. Maybe the FT‘s editor needs to get his story straight. The paper is living up to the jibe that it has become “the Daily Mail of the Europhile elite”.

You’re probably reading this thinking, “Oh no, not more anti-EU scare stories. Besides, it probably won’t affect me.”

Believe me, if you work for (or intend to found) an innovative startup developing some kind of e-business, web-service, AI, app, IoT service, analytics, or electronics this WILL affect you. It will also affect you if you intend to purchase any products or services that contain these technologies. The reason I am writing this piece is because – even under the current European regime – I have been personally affected on a number of occasions by the EPO (European Patent Office) failing to scrutinise illegitimate US patents. US-based entities have tried to assert patent rights in Europe for technologies that I pioneered here in the UK, when details (and even videos) of these technologies had been available in the public domain.

For example, in the early 2000s, I developed a multi-touch flooring technology with a German colleague, which we demonstrated in public and the details of which were available online. Some time later we were alerted that an American company had been granted a patent in the US for a similar technology and that they were trying to register the patent in Europe. We contacted the European Patent Office and provided links to our prior art in the public domain, and the US patent application was duly dismissed by the EPO as illegitimate.

So, you’re thinking, “Great, the EPO did its job”. However, the point of this story is what a European bureaucrat subsequently said to us off the record: that even though the system had worked correctly in this instance, it was apparently extremely rare for innovators to challenge European Patent applications and nip them in the bud. In other words, Europe wasn’t vetting US patents, and neither was the wider tech community – consequently dodgy patents from the US were pouring into Europe unchecked.

According to the EPO’s statistics for 2015, they grant the highest number of patents to the US (22 per cent), with the UK trailing in a distant seventh place with only 3 per cent of the total (this is disturbingly small for a so-called “knowledge economy”. “So what,” you may be thinking, “you can challenge the patents at a later stage.” Well yes, that’s true, if you have seriously deep pockets for legal fees. But if you’re a small business or a startup, you’re in big trouble.

Not-so-paranoid Android

Before the iPhone was even a twinkle in Steve Jobs’s eye, I pioneered a number of other “multitouch” surface technologies. Therefore some years later I was approached by the lawyers of a smartphone manufacturer to help them deal with an illegitimate patent in the area of multi-touch touchscreens that Apple had managed to slip past dozy Eurocrats – maybe even the very same bureaucrats that we had dealt with some years before.

It is my understanding of these “Smartphone Patent Wars” that Apple’s long-term aim was to use its European patents to block the import of ALL Android-based devices into Europe; it was therefore important for the entire European tech community and general smartphone consumers that the manufacturers being pursued by Apple won. Fortunately they did.

If these smartphone manufacturers hadn’t fought Apple with such vigour and at such great expense, it is likely that the EU would have banned all Android devices. Most companies don’t have colossal cash reserves to cover legal fees. What are you going to do when the EU bans your product because you’ve refused to pay off a patent troll? (It will happen.)

And don’t expect any help – the message from the UK government is that patenting is a very expensive business and that you’re on your own. If politicians and bureaucrats are unwilling to protect EU consumers from the malign effects of unscrupulous patent trolls and corporations, then UK citizens need to vote to legally isolate themselves as much as possible from the source of the threat. According to the Financial Times, the greatest of these threats come from the EU and the US.

After Brexit, President Obama threatened that the UK may well end up “at the back of the queue” for US trade deals. But the UK will also be at the “back of the queue” when IP lawyers are looking for the next small European engineering company to “shake down” for a few hundred thousand dollars.

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