The thing about these patent suits is that they (almost) end up being settled out-of-court in a cross licencing deal. The terms of the deal are (almost) never public, which makes the patents seem more valid (the company can claim they have been licensed for huge amounts of money the next time they sue another company over them) .
The court cases are usually just a way of changing the bargaining position.
There's money back and forth between these companies all the time. It's just behind closed doors for 90% of it. Patent suits are the equivalent of tabloid coverage of a public argument. It could very well be resolved behind closed doors like many other suits.
Whilst this is purely speculation on my part, I have always assumed the reason they settle rather than go to court is because they don't actually want the patents invalidated. The patents serve as a barrier to entry into the market. Had Microsoft - for instance - gone to court, and had the patents invalidated, Valve would not have been sued now.
This discourages competition from smaller outlets, and thus allows the big players fewer competitors. Though, again, pure speculation on my part.
Is that because there is actual infringement of a valid patent or the patent holder is offering a settlement that's lower than the court costs to attack the patent?
It is possible they have successfully settled out of court because the fee is much less than the cost to litigate, and an IP lawyer might suggest that. A case could go on for multiple years, but it could also just get thrown out if you are able to easily prove prior art from before 2002 when the patent was initially filed. It's always worth talking to an IP lawyer though. It isn't expensive to talk for a couple of hours.
Not to mention that the whole patent system is stacked to produce settlements, because winning (to say nothing of losing) is so much more expensive. A tiny fraction of cases actually go to trial.
Yes. Their business model relies on the fact most people will settle if the offer is about the same cost as a successful defense or less. If they actually had to litigate all these cases they could never make money.
My impression is they'd rather not go to court, since there's always a chance they could have their patent busted.
Big players see their share of cases as well, if not more. Settling or licensing the technology will generally be cheaper in the short term than litigating the case.
exactly. in a jury trial, it allows the patent owner to state, "look,all these other companies took a license (settled)", they all think the patent is valid.
Not lawsuits, patent extortion. If only there were actual lawsuits, but I don't think they've won anything from actual lawsuits. They just pressured companies into giving them money.
Patents are often framed as something that protects the small, but in reality it has been a rigged game from the start. For one thing, patent litigation is expensive and risky. It's uncertain whether a given lawsuit will be successful. And one of the risks is invalidating the patent itself, so litigators often will take a deal (and earn less than what would be owed if infringement were found)
Meanwhile big companies can just spam patent applications, amassing a strategic stockpile that makes it less devastating if one of them is invalidated
This whole structure serves the interests of big companies even if they are infringing!
If the patents are legitimate it seems like a business model similar to debt collectors or "cash now for annuity" companies. A small company might have a winnable case of damages but doesn't have the resources or risk appetite to take the case to trial. It's a rational decision to sell off the claim to another company for X% of the expected value and let them take risk of enforcing the claim.
Those big companies depend heavily on their patent portfolios for both offensive and defensive uses. Once in a blue moon someone will win something like this, but most of the time their fancy big company lawyers will stave it off (and indeed, it sounds like they may avoid this liability because the patent they've infringed may be invalid), often by sheer legal force ("How are you going to afford to fight my army of $1k/hr lawyers?").
When it's business as usual, these companies rather enjoy the benefits of having large portfolios filled with patents of dubious validity. They don't want to get the ball rolling on something that may end up costing them money in the long run, like drawing attention to the dubious nature of most patents or starting an initiative that may backfire by invalidating some of their own IP.
You'll find this is common with big companies. The law governing a certain type of conduct may be a totally incomprehensible, unpredictable, and uneven disaster, but incumbent players don't mind because for the most part, it enables them to scare off any upstart challenger by intimidation. The challengers who are too foolish to back down will generally struggle to keep representation and eventually end up completely destroyed (see Facebook v. Power Ventures), which makes a fine example to warn off any other cheeky upstarts who think they'll play hardball with the big conglomerate.
These big companies know that their peers won't press the legal matters or try to get the law improved because they benefit from the same effects. Instead, two big companies with beef will, after some legal posturing, eventually come to a mutual licensing deal (which may be in the form of a settlement) where they each send the other a large check every month to license the patents that could be construed as covering components of each others' products.
The matter is only pressed when there's no mutually-beneficial agreement to be had, like in Oracle v. Google regarding the Java API; Google wants the right to re-implement the Java API as they see fit, without having to pay royalties, and Oracle wants the right to exact payment from anyone implementing the Java API. Indeed, some Sun insiders consider Google's refusal to license Java components (they had apparently been in talks at some point) as one of the final blows that forced Sun to sell.
However, the way that that intellectual property law is written, it's difficult to have firm, universally-applicable precedents established. Fair use is fundamentally a case-by-case basis, which means even if Google gets it established that their use of the Java API is fair (afaik, it has already been established that APIs are protected under copyright, so fair use is the applicable defense), it doesn't necessarily apply to anyone or anything else. That means big companies can still intimidate little guys by threatening to drag them through 10 years of ultra-expensive court proceedings, plus the risk of a judgment finding damages, injunctions, etc., if they don't immediately comply with the BigCo's demands.
Convoluted and murky law benefits the massive corporations, who would much rather pay lawyers a few million to dispose of a plucky competitor than actually have to fight that competitor in the marketplace.
Legal battles are competition of a sort, but competition usually means competing products in the marketplace. Lawsuits don't have the same effect on prices or quality of goods sold.
You can argue that there are good reasons for patents, but the whole point of them is to create a legally protected monopoly, which prevents competition at least to some extent.
The court cases are usually just a way of changing the bargaining position.
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