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The CIO and Patent Lawsuits

The recent Bilski Supreme Court decision has made it far, far too likely that your company may face a patent lawsuit at some point.

You may think that the last thing on earth that could happen to your company would be that your business might be sued because it used a particular software program. You’d be wrong.

In the aftermath of the Bilski Supreme Court decision, the Supreme Court did nothing to stop software or business method patents. As a result, not only software development companies but all businesses are now in more danger from patent lawsuits than ever before.

That’s because as Keith Bergelt CEO of the Open Invention Network (OIN), a non-profit, patent-protection consortium, observed, “Patent lawsuits have been doubling for the last three to five years, and I expect this trend to contribute.”

In particular, you can expect to see more attacks from patent trolls, companies that exist for the sole purpose of extorting money from businesses by threatening them with lengthy and expensive litigation. Bergelt estimated that win, lose, or draw, it costs $3- to $5-million dollars to defend against a patent lawsuit.

Ouch!

According to Bergelt, the reason why patent trolls will bring more lawsuits to large enterprises, rather against a business rival, is that these companies can make money from patent lawsuits. Bergelt said that a great deal of capital is out there now and that “People are spending billions to acquire patents, largely software patents. Their business strategy is to sue the Linux distributions and their 20-25 biggest customers.”

While Bergelt is most interested in patent issues that affect Linux, this is in no way, shape, or form a Linux operating system problem. All software vendors, and increasingly hardware vendors, are being targeted by patent trolls. For example, NTP, the company that nailed Research In Motion for $612.5 million, recently started a patent lawsuit against Apple, Google, Microsoft, LG Electronics, HTC, and Motorola. Software or hardware, the assault is based on the premise that all these companies have violated their eight patents that cover the delivery of e-mail over wireless communications systems.

NTP’s not the only company in this business. Increasingly powered by private-equity funds, patent holding companies such as Acacia Technologies, Intellectual Ventures, Amphion Innovations, and Rembrandt IP Management are expected to become much more aggressive. Expect them to pursue not just software companies but enterprises that use products from these companies that might infringe on their ever-growing patent portfolios.

One can certainly argue, as does Columbia Law School professor Eben Moglen and head of the Software Freedom Law Center (SFLC) does, that patents shouldn’t be granted for software or business practices. That being said, that’s simply not the legal and business environment that you’ll be facing in the next few years.

So, what does this mean for you as a CIO? After all, it’s not like either you or your vendor can predict when a patent lawsuit will come swooping out of the blue. Acacia, in particular, is noted for alerting you by a lawsuit that you or your vendor may have violated one of their patents, said Bergelt.

The one thing you can do is to talk to your internal counsel, CFO, and CEO. Make them aware that patent lawsuits are an issue that they need to keep in mind, even if no one in your company ever writes a line of code. In the 21st century, no business can count on being safe from patent lawsuits.


A version of The CIO and Patent Lawsuits was first published on July 22nd 2010 in IT Expert Voice.