Apple to pay $25M to settle Patent Infringement Lawsuit with Non-Practicing Entity

A court battle between Apple and Network-1 from 2008 had a recent development. It all started when a company named Mirror Worlds filed a lawsuit against Apple, due to an infringement of patents describing streams of information in a computer system. A similar functionality is found in Apple’s Time Machine and Cover Flow.

In 2010, a preliminary jury trial, concerning four of those patents resulted in a $625 Million trial against Apple, however the latter managed to successfully appeal the case 6 months later, but dragged the process further.

In 2013, the patents belonging to Mirror Worlds were purchased by Network-1, a non-practicing entity (NPE), who then filed a lawsuit against Apple.

Now, in 2016, Apple and Network-1 have finally reached a settlement concerning one of those patents, where Apple will pay $25 million to Network-1 in exchange for a non-exclusive license to use said patent.

This situation is just one more situation where the so called “patent trolls” have managed to successfully force a practicing entity into paying substantial amounts of money. Effectively, Apple is the no. 1 company to be a target of these entities and the technological industry is one of the most affected by this phenomenon.

The term “patent troll” was first used in its actual concept by Anne Gundelfinger and Peter Detkin, both counsels for Intel, during the late 1990s.

This concept relates to companies or individual subjects who usually do one of the following: Either they purchase a patent, often from bankrupt firms or firms on the verge of bankruptcy and then sue other companies for infringement of said patents; they are the owners of the patent but they have no intentions of manufacturing or using them to any other end other than sue companies for infringement; or they often use patents against small companies to pressure them into paying large sums, even if said company is not clearly infringing on their patent.

While in Europe, this situation is fairly uncommon, since Europe has adopted a judicial regime where the loser will pay the costs of the lawsuit, in the United States, where both parties have inherent costs, there are thousands of lawsuits filed by “Patent trolls”, estimating that in 2012, patent trolls have filed over 2900 infringement lawsuits nationwide.

The reason for the phenomenon is also due to the costs of a patent infringement court case are usually close to the million dollar value, which a lot of small to medium companies cannot afford to pay, which usually leads to settlements for thousands of dollars so that they may receive a non-exclusive license.

To counter this phenomenon, the U.S has enacted several pieces of legislative changes to regulate these cases and make it more costly for the patent trolls to file lawsuits. Effectively, in 2013, Senator Orrin Hatch, representative of the state of Utah, sponsored the bill Patent Litigation Integrity act, which would “make patent trolls pay for the cost of the lawsuits, especially if these lost the lawsuits”.

This situation is not only costing millions of dollars to small companies that are targeted by lawsuits, but also creates burdensome barriers to innovate, forcing companies to move large sums of money from R&D to litigation departments.