Over the years since Magnavox sued Atari in 1974 over the user interface for Pong, a cottage industry has emerged based on enforcing patent infringement rights and extracting licensing fees from companies using latent technology. While the Magnavox case involved digital manipulation the company was actively implementing into its own products, the case gave rise to the so-called ‘patent trolls' – individuals and firms who generate revenue by suing companies that knowingly or unwittingly infringe on their patents.
And since that 1974 lawsuit, the video game industry has been at the center of this controversial practice. Patent trolls lurk under bridges along the path to video game development and monetize patents that they own with no intention of using themselves. The patents for intellectual property or processes the trolls either created, bought, or licensed from coders or defunct companies are often used simply to force defendants to settle out of court or pay exorbitant licensing fees in order to continue with their game development work and avoid the possibility of a potentially financially crippling judgment
Patent trolls pose a serious danger to the video game industry as they impede innovation. While attempts have been made to expose and prevent patent trolling, the practice is legal in most countries, and current US patent law makes it a potentially lucrative business.As such, it continues to present a major nuisance for video game companies.
Why should video game companies be concerned about patent trolls?
A patent troll has been defined as an entity that uses its patent rights to aggressively file (often false) “bad faith infringement threats and licensing demands that require companies to spend a significant amount of money to settle these claims without any addition to the public good.”
Also known as Non-Practicing Entities (NPEs) or Patent Assertion Entities (PAEs). Vague and overbroad software patents can act as a disincentive for the video game companies to innovate and create. Patent trolls can represent a thorn in the side for video game companies in particular, as courts may be unclear to what extent game companies and designers develop their games around the technologies involved and how the legal issues and problems manifest in the cases raised by patent trolls. This is one reason expert witnesses often play key roles in patent infringement cases.Judges understand patent law but often must rely on industry professionals to provide opinions based on “knowledge, skill, experience, training, or education” to help the judge or jury understand the relevant science or technology involved in the case.
Moreover, the problem of patent trolls is likely to increase over time and especially for companies which are smaller scale or just starting out. This is because patent trolls increasingly target companies with less than $10 million in revenue. These companies are less likely to fight back. Consequently, smaller video game companies or startups should be all the more cautious of falling foul of patent trolls.
What can video game companies do to prevent patent trolls?
There are several steps which video game companies can take to avoid falling victim to patent trolls:
- Due diligence – Doing your legal homework can illuminate potential patent pitfalls and sketch a blueprint for lower-risk game-development procedures. Information-gathering can help in better decision making. For example, you may discover established plugins that accomplish the same functionality without infringing on existing patents. Due diligence will show which technology would be cheaper to acquire and implement. Some may even exist in the public domain. Several specialized software programs exist that can conduct due diligence for the video game companies, but in most cases they do not provide comprehensive results. For instance, most track only US patents and provide no risk mitigation for other regions such as Asia and Europe. A patent attorney specializing in the video game industry can assist video game companies in conducting due-diligence that covers a broad range of jurisdictions.
- Effective negotiation – Purposeful, strategic negotiation of agreements that support hardware and software licenses, leases or other game development technologies can save developers significant headaches. Aggressively and completely mapping how each game component works and the code to be used will aid in determining which resources to lease or purchase and what a fair price would be. Specific attention must be paid to licensing and purchase clauses dealing with representation and warranties, indemnification, dispute resolution, and jurisdiction. Until 2016, US-based patent trolls predominantly filed suit in the US District Court for the Eastern District of Texas, as it was widely considered to be plaintiff-friendly. Following a 2017 Supreme Court ruling that the cases can be filed only in districts where the alleged infringement occurred or where the defendant has established business, video game companies are able to fight patent trolls on their home ground and not in Texas where the odds would be stacked against them.
- Develop, document, and use your own technology – Video game companies can deter patent trolls by keeping their intellectual property portfolio up to date. Discuss your situation with your attorney to make sure the key technologies used in your games either fall under the protection of your own patented technologies or those from whom you have secured legally sound licensing or partnership deals. Without these assurances, you may find it easier to settle nuisance patent claims rather than fight them, leading to unnecessary expenses.
- Join a trade association or defense network – In response to the growing number of infringement lawsuits, industries have formed organizations that support technology companies in their fight against patent trolls. LOT Network, for example, is a community of technology companies who transfer their patents to other network members for free. This way, if one of them should sell their patent to a patent troll, the troll would be unable to sue them or anyone else within the network. Many emerging technology companies such as those in the AI and blockchain space are members of this network. Video game companies may consider joining a similar organization in their industry or region.
- Make use of other online resources – Video game companies can also access precedent and best practices when litigating against patent trolls. Trolling Effects allows companies who have been victims of patent trolls to submit the details of their cases and find other companies in similar predicaments. This allows companies who have been a victim of patent trolls to defend their claims collectively if they end up taking the claim to the court.
Post-patent troll remedies
While prevention is better than cure, an attorney can aid video game companies in fighting their cases of alleged patent infringement. Video game lawyers will be able to formulate strategies to thwart patent trolls through the courts or quasi-judicial hearings, such as:
- Motion to dismiss – After the patent troll files a suit, a motion to dismiss may be granted if a judge or panel deems it frivolous. The best chance a lawyer has of winning a dismissal comes when a troll files prematurely, without thoroughly investigating the legitimacy of the claim. If you believe the case against you is frivolous, ask your attorney about filing a Rule 12(b)(6) motion to dismiss based on the pleadings.
- Summary judgment – Filed after the Rule 12 (b) (6) filing has been denied and after the discovery process, this motion asks the judge to find that the facts of the case weigh in the defendant's favor and do not warrant a trial.
- US Patent Office hearing – A budget-friendly way to challenge patent infringement allegations. A Patent Office hearing is similar to a trial in that it includes discovery, oral arguments, and motions, but it keeps the case out of the district courts, which is likely to become more expensive.
Despite government and industry efforts to reform the process, patent trolls continue to plague the video game space. Trolls continue to file lawsuits against video game developers allegedly who infringe upon the patents that they hold. Consequently, video game companies must be aware of the risks they face when developing, purchasing, or leasing technology. They should specifically pay attention to the details of the demand letter should one arrive in the mail from a patent troll. A patent lawyer well-versed in the video game industry can help video game companies to pre-empt or combat patent trolls.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.