“The system has given big players like Google a host of tools to delay justice and inflict pain on smaller competitors at little risk to their deep pockets.”
The debate over patent reform is heating up again. Last month, Google published a blog post on patent reform, purportedly aimed at promoting American innovation. In it, Google decried the rising tide of “wasteful patent litigation,” railed against the disfavored practice of “forum shopping” and advocated for pending legislation aimed at making it easier for large companies to challenge the validity of patents owned by smaller rivals — all in the name of promoting a patent system that “incentivizes and rewards the most original and creative innovators.”
It should come as no surprise that Google’s reforms have little to do with promoting innovation and everything to do with helping Google. If Sonos’s experience is any guide, Google’s basic approach to patent litigation is to try to drive up the costs for its smaller rivals, while taking forum shopping to an absurd extreme. In so doing, it exploits weaknesses in our patent enforcement regime, many of which it helped create. Its actions, and the policies for which it advocates, don’t really foster and reward innovation, but they do, instead, protect Google’s freedom to imitate.
Sonos knows what it means to bring a righteous patent case. For years, Google has been infringing dozens of Sonos patents. These are not paper patents. They arose out of Sonos’ trailblazing inventions in the field of multiroom home audio systems—inventions which have been repeatedly lauded by both the technical press and the market. After years of watching
Google launch copycat products, and after many failed attempts to negotiate a fair patent license, Sonos finally sued Google on five representative patents. Google threw the kitchen sink at us, challenging validity and infringement in every way imaginable. But the International Trade Commission (ITC) ruled that Google infringed all five valid patents.
One might think that a court establishing Google to be a wholesale infringer would result in a change of heart. If they truly cared about fostering a culture of innovation, being told that they were dead wrong about all of their claims that Sonos’ patents were invalid and not infringed — that they would want to reach a fair settlement. But because that is not their goal, and because
of weaknesses in the remedies available in patent cases, big-company infringers, like Google, have a perverse incentive to keep fighting and keep infringing.
Without Change, Google Will Continue to Gobble
These companies know that, absent changes in our system, at the end of the litigation road, they still will probably end up paying little more than the royalty they should have paid to the inventor up front. With little extra to lose, it’s economically rational (and Google’s apparent strategy) to attempt to grind down inventors rather than actually reward innovation. That sends
a chilling message to the many other innovators that Google copies and lets Google gobble up promising markets while the litigation plays out over years.
Some call this process of infringe/delay/grab market share process “efficient infringement” because it makes economic sense for the infringer. It should be called predatory infringement—because it’s not efficient for anyone other than Google. Certainly, it is not efficient for the economy overall, nor does it advance the cause of fostering innovation.
Forum Shopping Spree
Google also makes matters worse by blatantly abusing every procedural mechanism available to it—including the “forum shopping” that it claims to abhor. After Sonos brought suit at the ITC, Google countered for patent infringement in five countries (the U.S., Canada, Netherlands, France, and Germany). In each case it asserted the same family of patents that Google acquired (similar to how a patent troll might assert weak patents it acquired). Sonos has beaten Google in every case that’s been decided. But by filing a slew of cases Google has forced Sonos to spend money defending itself against parallel claims in multiple jurisdictions. And when Sonos wins in one jurisdiction, Google just drops those claims and continues on with virtually identical claims in another jurisdiction. It is literally attempting to use the same patent in multiple places to arbitrage different judicial systems.
A few examples: Google sued Sonos for allegedly infringing a “search” patent in the U.S., Germany, Netherlands, and France. In the U.S., a federal court dismissed the claim because it found Google’s patent clearly invalid. A skeptical German court sent the same patent off for reevaluation of validity. And Google abandoned its claim on this patent in France. Still, Google
is pursuing the case in the Netherlands.
Similarly, Google sued on an “echo cancellation” patent in the U.S. and Canada. The case was so obviously meritless that Sonos threatened to file a motion for sanctions in the U.S. if Google did not withdraw its claim. But while Google gave up the patent in the U.S., it continues to pursue it in Canada, where the legal regime does not provide for sanctions.
Then there are Google’s four suits based on a digital rights management patent. German, French, and Dutch courts have ruled that Sonos does not infringe the patent. Yet Google continues its case in the U.S.
Forum shopping anyone?
Focus on Improvements that Will Work
Google is right about one thing. Our patent system could use improvement. We do have a problem with non-practicing entities buying up near expired patent portfolios on the cheap for the sole purpose of using litigation or the threat of litigation to extort settlements. That’s unproductive and it does nothing to promote innovation.
But this issue of so-called patent “trolls” is not the biggest issue facing the patent system and can serve as a distraction that companies like Google use to push patent reforms favorable to themselves. The much bigger problem — the problem which stifles the innovation that patents are meant to foster — is the inability for competitors to enforce strong patents effectively, especially against well-funded companies that, like Google, are economically incentivized not to enter into fair licensing deals. The system has given big players like Google a host of tools to delay justice and inflict pain on smaller competitors at little risk to their deep pockets.
The moral to this story is that, if we want to foster innovation and rein in bad conduct, we need to watch not what Google says but rather what it does, and modernize the law accordingly. It would be helpful, for example, if patent holders with strong cases could have better access to injunctive relief and for damages to have more bite by, for example, clearly including compensation for lost market share and other real-world effects of infringement.
Not a Moment to Lose
And the issue goes far beyond reforming patent law. Predatory infringement is a piece of the anticompetitive strategy that companies like Google use to maintain their position and disadvantage smaller rivals. Congress has bipartisan bills before it, like the American Innovation and Choice Online Act, to modernize antitrust law and re-level the playing field. In a world where justice delayed as innovation denied, there’s not a moment to lose.
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