March 10, 2014, 11:25 AM

A quick patent troll primer for Internet retailers

Patent trolls are companies that buy patents and make money by demanding licensing fees from other companies. Internet retailers are a frequent target. A patent attorney provides advice on what to do if they target you.

Everyone is talking about patent trolls these days: Congress, the President, even NPR.  These days, most Internet retailers have at least heard of patent trolls and many have been forced to deal with them.

For the uninitiated, patent trolls are simply companies that hold as their primary or sole asset patents that they assert through licensing demands or litigation. They usually did not invent the technology on which their patents are based, and instead simply acquired the patents for the purpose of asserting them against others. Also, in virtually all instances, they don’t actually even practice their patents, meaning they don’t make products, write or develop software, or do anything that is even remotely discussed in or related to their patents. 

Increasingly, patent trolls are targeting Internet retailers with patent claims that allegedly cover the products they sell or the hardware and software they utilize to run their business.  Of course, that begs the question that many retailers ask. “Why me? I did not make the product they say infringes, I got it from someone else.” Or, “I simply bought that software off the shelf to develop my ecommerce platform.”  Unfortunately for the retailer, the patent laws allow a patent owner to sue a company for infringement not only if it makes or sells a product, but also if it merely “uses” a product. 

And to a patent troll, Internet retailers provide a longer list of targets for “using” an allegedly patented technology than the likely handful of software or hardware companies that supplied that technology to those retailers.  And you can figure out the motivation. The more targets, the more licensing fees.

Internet retailers are increasingly coming under fire from patent trolls as opposed to more traditional bricks-and-mortar retail companies.  A lot of Internet retailers, while technologically savy, are inexperienced when it comes to legal matters. They often don’t have the internal resources dedicated to legal functions or the prior experience handling similar legal matters.  And the patent trolls know it.

Also, for Internet retailers, a more significant amount of their business operations are tied up in the technology itself.  As Internet retailers know, it takes a lot of hardware and software to run an ecommerce platform, everything from “shopping cart” software to payments and security applications. Given such commonplace technology applications used by a lot of Internet retailers lead, many savy patent investors specifically hunt for ecommerce-related patents to acquire for future licensing and litigation opportunities. 

When you actually receive a patent license demand, either through a letter or a lawsuit, the first thing you need to do is not panic.  Even assuming it is your first patent demand, it likely won’t be your last.  You also need to remember that you are likely not the only one to receive such a demand, and other people can help you with your problem.

Next, try not to be penny-wise, or you’ll end up pound-foolish.  Contact a lawyer with experience dealing with similar types of patent claims. As mentioned above, you’re likely not the first company (unless you really are the actual first one) to get such a letter, so others may have information and experience they can share, or maybe can refer you to a lawyer that has previously dealt with the same patent troll.

You also need to contact your suppliers who provided you the accused technology. You might have protection in your applicable supply agreements in the form of indemnification from any losses or defense costs. Even if you don’t, it is likely that your supplier has received similar notices from other customers or may even have itself dealt with the patent owner previously. If they don’t take care of the problem for you, they may still be a valuable source of information about the matter.

Finally, you need to make sure that your corporate structure is designed to protect you from liability to the maximum extend allowed by law.  Again, you likely need a lawyer to help you with that, but he or she may be able insure that certain of your assets are protected from legal claims.

For Internet retailers, handling patent license demands is increasingly becoming a cost of doing business in the United States. At least until Congress or the President (sorry, NPR won’t be much help) deal with the problem through meaningful patent reform legislation.  And that’s a discussion for another time.

Alston & Bird LLP is an Atlanta-based law firm whose specialties include intellectual property. Bob Lee focuses his practice on intellectual property litigation, counseling and enforcement matters, with an emphasis on patent and trademark litigation.

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