Intellectual Property Disputes Spiked in 2011 and Signals More for 2012

Feb 15, 2012

By Kerrie Spencer, staff writer – February 15, 2012

There were numerous and challenging intellectual property (IP) lawsuits filed in 2011, and five of the top ones merit to be discussed more than others. Each of them has a lesson that is important for the legal industry and businesses. All of them seem to prove that intellectual property challenges may well be recession-proof. After all, when someone is fighting for the rights to something they created, they want to retain ownership of what they created. This asset is not for others to take and make money off of without proper licensing and partnerships.

Truth be told, intellectual property challenges have been filed every year for decades in one form or another. It is just that within the past three or so years, the numbers filed seem to have taken a huge jump. For example 2,892 patent holders brought infringement suits in 2010, which is a five percent hike over 2009. Trade secret cases rolled out with a 13 percent increase in 2010. [1][2] Indeed, 2011 was a bellwether year for those wanting to protect their IP rights. What will 2012 bring? Only time will tell, but it looks to be an interesting year in the process of unfolding.

Apple and their cadre of IP lawyers took aim at S3 Graphics. The California company, which is a graphic chipmaker, started the legal avalanche in May 2010 by suing Apple, and stating their iPhone infringed four of its patents. In a surprisingly fast resolution to the case, an administrative law judge ruled for S3.

This was not over until November 2010 when a panel reversed the S3 Graphics victory and stated Apple did not infringe any of the patents in question. This was a major loss for S3, as well as for HTC Corporation in Taiwan, a world leader in manufacturing Android phones. Prior to this ruling, HTC was rumored to want to acquire S3 for an estimated $300 million so they could get a better stance to defend themselves in patent fights. This loss more or less saw that plan dissolve. [3][4]

HTC had a hard year in 2010, as the S3 decision was not the only one to affect them. In December 2010, the International Trade Commission (ITC) banned the import of some HTC phones. In banning the phones, they banned Google and its Android O/S. Steve Jobs was heard to say, while still alive, that he would not drop any lawsuit relating to this issue. He felt they stole the product. [5]

Again, ITC judges ruled HTC had infringed one of Apple’s patents dealing with a feature relating to how data was formulated. The ban affected the importing of HTC phones that used that feature; this ban, by the way, kicks in April 19. Currently, HTC is hinting about working around this issue. [6][7][8]

While this may sound relatively cut and dry, it is not. Apple originally sued for patent infringement of ten patents, withdrew six, and had an ITC administrative law judge indicate that HTC infringed on two of the four remaining patents. Who knows if the other six that were dropped will be resurrected or not?

And then there was the suit involving Hitachi Global Storage Technologies, Shenzhen Excelstor Technology and MagSil Corporation. Hitachi and Shenzhen are hard drive makers. MagSil is their fiercest competition. The case came to an explosive head in February, just before the patent infringement trial was slated to hit the courts. [9][10][11]

Hitachi’s attorneys argued with a judge to invalidate the patent MagSil declared against Hitachi in 2008. He did, and the rest is expensive history. The ruling let Hitachi slip out from under a lawsuit that was claiming more than $100 million in damages. This ruling also affected other lawsuits waiting in the wings; suits whose plaintiffs opted to settle out of court given the precedent this case set.

Trade secrets being stolen also made headlines as one of the biggest awards in a case like this involved $919 million. The case involved E.I. du Pont Nemours and South Korea’s Kolon Industries. In 2009, du Pont sued Kolon for hiring one of their former engineers, then sweet-talking him out of valuable information concerning Kevlar (used in bulletproof vests).

Du Pont’s legal team was victorious by obtaining a pretrial ruling that said Kolon’s management deliberately destroyed critical evidence relating to the matter. At trial, the judge suggested to the jury that they could conclude it was evidence that would have damaged Kolon’s case. Part of the fallout, aside from the enormous damage award Kolon would have to pay, was a precedent set for foreign companies to mind their P’s and Q’s when doing business in America. When in America, American laws apply, and that includes the discovery process.

And last, but not least, there was one patent case that made it all the way to the U. S. Supreme Court. While you might not think that is unusual, it is, as they typically do not hear that many patent cases. When they do, everyone sits up and takes notice. And, take notice they did, when Microsoft appealed a 2009 patent infringement trial.

Microsoft wanted the court to vacate a $290 million award handed to Canadian company i4i Limited Partnership, and they wanted an important principle of patent law changed. It is rare that a federal judge will invalidate a patent, as they demand clear and convincing proof that they should do so. What Microsoft wanted was for the court to accept a lesser standard of proof, which is one based on a preponderance of evidence. [12][13]

Their lawyers thought the argument may work, as the court had dropped hints over time that they might be interested in changing the stand of proof. The U.S. Supreme Court affirmed i4i’s initial win and opted to keep the clear and compelling evidence rule for patent invalidation. [14][15]

What’s in store for 2012? While it may be hard to predict, it is safe to say that IP and trade secret issues will be some of the more interesting cases for the year. It will be worthwhile to keep tabs on what will be trending in technology law.
















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