Analysis: UK aims to break curse of the patent trolls

While technology companies extend their sales battles from the high street to the courtroom, other firms are being set up purely to accrue intellectual property and wring every last drop of cash from it.

One of the more brutal recent patent disputes is the ongoing spat between Apple and Samsung. In June, Apple attempted to derail Samsung’s US launch of its Galaxy S III smartphone, claiming that the device infringed two of its patents. In May, it tried a similar tactic with Samsung’s Galaxy Tab 10.1, before successfully getting a judge to ban the firm’s Galaxy Nexus smartphone in the US in July.

The tide then turned in Samsung’s favour, in the UK at least, when judge Colin Birss ruled that the South Korean firm could continue selling its Galaxy Tab 10.1 in the region because the Android tablet is “not as cool” as the iPad and therefore is unlikely to be confused with Apple’s device.

Late last month, Apple CEO Tim Cook and Samsung vice chairman Choi Gee-sung, met in San Francisco in an attempt at peace talks. It failed, and the firms continue to sue and counter-sue one another.

Disputes such as these are common in the technology sector, with Google, Oracle, RIM and Nokia, among others, all involved in recent multi-million dollar claims.

But what of the trend for companies to buy up large volumes of patents because, in part, they see the potential opportunity to make money through litigation?

Microsoft, Google, Apple and RIM, among others, all spent billions acquiring the rights to others’ designs in the last year alone. As with the dispute between Apple and Samsung, one of the main aims of these deals is to use the patents to protect sales by blocking competitors from entering a market, or at least delaying them.

Other firms are being created purely to generate revenue from this model. These are known as non-practising entities (NPE), or more memorably, patent trolls.

“NPEs buy underused patent portfolios and aggressively enforce them against anyone who can be accused to be infringing them,” explains Alistair Maughan, partner at law firm Morrison & Foerster. “They’re mostly based in the US, as the damages are set by jury, and can get very large. If you’re aggressive, you’re rewarded for aggression. If you’re prepared to enforce aggressively, people will pay you to go away.”