Policy: Technology

Patent litigation threat looms over network providers

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Op-Eds,Supreme Court,Apple,Class-action lawsuits,Law,Technology

What if patent holders could take companies to court over potentially patent-infringing activities performed by third-party businesses? In a case currently pending before the Supreme Court, that's exactly what is at stake.

And this won't just affect tech gurus and software providers. The technologies we enjoy are produced by networks of companies that work together; allowing one company to be sued over actions of another will stop innovation in its tracks, crippling small businesses and putting many of the products and services nearly all Americans use out of reach.

Recently, Solicitor General Donald Verrilli recommended that the Supreme Court hear the case of Limelight Networks v. Akamai Technologies in an upcoming session.

The court should weigh in, and rule in favor of Limelight and innovation. Ruling against Limelight will create a dangerous new legal doctrine that threatens the whole industry.

Akamai sued Limelight in 2006 for allegedly infringing on their patent for a process of delivering Internet content to consumers. Two lower courts ruled that Limelight did not infringe.

However, on en banc review, a one-vote majority of the U.S. Court of Appeals for the Federal Circuit said that Limelight might have infringed by carrying out certain steps of Akamai's patent while its customers performed others.

In other words, the court argued that Limelight could be guilty of violating patent law because third-party companies performed actions over which Limelight had no control.

This is a radical departure from the settled patent law the wireless industry relies on. Software and telecommunications patents already tend to be most subject to litigation. A ruling that a network provider can be taken to court over its customers’ activities would be a death blow to the industry.

There are more than 790 wireless devices available to customers in the U.S. and more than 3.5 million apps that can operate on them. Every one of these devices and apps is the result of components, features, designs and processes that are patented.

In fact, it is common for hundreds and even thousands of patentable elements to be present in one product. To take just one example, as of 2012, there were 250,000 active patents that had an impact on smartphones. This is what we call a patent thicket.

More than nine in 10 U.S. households have a cell phone, according to Consumer Electronics Association market research. Any ruling that threatens the wireless industry will directly impact all of us.

The CEA joined the Wireless Association and MetroPCS Wireless earlier this year in filing a friend-of-the-court brief, highlighting how the Federal Circuit’s ruling will subject wireless providers to smothering litigation.

What's more, the ruling will stifle innovation because innovators will have to worry about what activities third-party entities might perform in relation to their product.

Household names like Google, Apple, Samsung, LG Electronics, Verizon, AT&T, Sprint, Netflix, Amazon, Panasonic, T-Mobile and Dish Network would be affected by this ruling.

The precedent set by one court’s poor decision would impact products, prices and consumer availability across the board. In addition, such a ruling would give patent trolls the ability to go after even more companies for an easy profit.

Some experts argue the litigation could even be retroactive. Patent trolls dissatisfied with past judgments could re-file their complaints under the new infringement doctrine. It would be open season on the industry.

Patent law reform is needed, not new litigation that further entrenches abuse of the system, at the expense of innovation and progress. The Supreme Court must act to reverse the Federal Circuit’s decision and work toward meaningful patent law reform.

Gary Shapiro is president and CEO of the Consumer Electronics Association.
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