The recent flood of patent troll lawsuits shines a light on a major issue in the technology industry that is gaining more and more attention, not only of vendors but of lawmakers as well. Patent assertion entities—also known as “patent trolls”—make money by buying patents from companies and then asserting those patents against other companies that have products already on the market. Then they file lawsuits themselves and share any proceeds with the business that created the patent.

As of late, tech companies like Cisco and Google have been fighting back against these vicious patent trolls by signing cross-licensing patent deals with others in the industry. Meanwhile, vendor attorneys have been pushing for solutions to protect the companies and customers from being threatened with costly, unwarranted ligitation. In fact in December, the U.S. House of Representatives passed legislation that would require the patent firms to prove that their claims are justified or risk having to pay all of the litigation costs if they lose a case.

A well-known name in this patent troll mess is Innovatio IP Ventures, who after purchasing old Broadcom patents related to Wi-Fi technology, went on the offensive against users of this technology. In 2011, Innovatio had bought some older Broadcom patents, and then targeted coffee shops, supermarkets, retailers, hotels and other businesses that used the wireless routers with over 13,000 patent demand letters asking them to pay licensing fees of up to $5,000.

Cisco, Motorola, and Netgear have since joined forces to sue Innovatio, claiming that its patents were invalid and that the campaign of targeting router users violated the Racketeer Influenced and Corrupt Organizations Act (RICO). The makers of the wireless products filed suit against Innovatio, claiming that not only did the wireless equipment and those businesses using it not infringe on Innovatio’s patents, but that those customers already were licensed to use those patents.

Innovatio, which Cisco officials had accused of trying to leverage $4 billion from business through the licensing demand, has agreed to settle for $2.7 million, or about 3.2 cents per wireless device. According to Mark Chandler, general counsel at Cisco, the settlement at 3.2 cents per device was “a victory” for the vendors and offers full protection for millions of Cisco customers from the overblown claims of an aggressive patent troll.

“I’m proud that we stepped up for our customers,” Chandler wrote. “But, that expenditure would not have been necessary if Innovatio had met its obligations to license on reasonable and non-discriminatory terms, and had come to Cisco seeking a reasonable license first rather than targeting our customers and those of other manufacturers.”

Chandler said there are steps that could be taken, such as requiring such patent firms to register their claims with the FTC and letting customers know they can take those claims to manufacturers like Cisco. “If those provisions were in place, it seems unlikely Innovatio would have engaged in its letter-writing shakedown against end users.”


For more on patent trolls, check out these articles:

Apple pushes back against patent troll litigation

Department of Justice closes Samsung patent probe

Facts and Figures: Patent troll lawsuits rising

Attorneys general, general counsel hold frank discussion on patent trolls, Part 1