A federal jury in Marshall, Texas, on Thursday said patent-licensing company Beneficial Innovations breached a settlement agreement with Google by suing its customers. The jury awarded nominal damages of $1, which was all that Google sought because its main goal was to make clear that its customers were covered by the license.
The case illustrates how technology companies are fighting back against patent-licensing firms that sue their customers. Companies such as Google and Adobe (ADBE) are increasingly challenging patents in courts and before the U.S. Patent and Trademark Office, and are asking Congress to pass legislation to discourage lawsuits against the users of technology.
"We have the resources, we understand the technology, we know how our product is supposed to be used, and we're in the best position to defend our customers," said Dana Rao, associate general counsel at San Jose-based Adobe, which has sued patent-licensing companies on behalf of its customers.
Closely held Beneficial, incorporated in Nevada, filed patent-infringement suits against Google in 2007 and 2009, and the two sides reached an agreement in which Google paid for a license to the patents. That 2010 agreement also covered customers using Google's DoubleClick advertising product including Autotrader.com, and Demand Media, Mountain View-based Google said.
"Beneficial went back on the terms of its own license agreement, pursuing our customers for simply using our licensed services," Matt Kallman, a Google spokesman, said in a statement. "This is a great outcome that the jury worked hard to get right."
The patents relate to playing games on a network and a networking system for advertising. Beneficial argued that the customers were only licensed under certain circumstances, which didn't apply in this case, according to court records. Beneficial lawyer Elizabeth DeRieux of Capshaw DeRieux in Gladewater, Texas, didn't provide an immediate comment.
The tactic by technology companies of claiming customers are covered by a patent license has its limits. Apple (AAPL) sought to invalidate patents asserted against developers of applications for its iPhone and iPad computer. The patent owner, Lodsys settled with all of Apple's customers, thus pushing Apple out of the case, and then proceeded against other developers.
Federal law says suits can be filed against anyone who makes, uses, sells or offers to sell a product that infringes a U.S. patent. Sometimes the product manufacturer can't be identified, isn't subject to the jurisdiction of U.S. courts because it only operates overseas, or the product is modified by the customer.
In those instances, users or sellers have to be sued, said Robert Stoll of Drinker Biddle in Washington, who formerly ran patent operations at the patent office.
It's only been since 2011 or so that firms who buy up patents to seek royalties, known by the pejorative "troll," have been going after the users of products made by well-known companies like Google and Adobe, Rao said.
The technology companies can be made to cover any lawsuit costs incurred by their customers, so resolving a single suit avoids multiple payouts. It also just makes good business sense.
"People want to make sure they've got their reputation maintained with their user community," Stoll said. "I wouldn't be buying their products if they didn't step in to protect me."
If a company proves its product doesn't infringe a patent, then all of its customers are off the hook. Should the company invalidate the patent, then anyone sued by the patent owner would be in the clear. Adobe has several trials scheduled for this year, Rao said.
"We'll use all of the tactics to try to take down the patent trolls," Rao said. "The problem is that, while we're able to step in and defend our customers in many district courts, the pace of these litigations is just growing."
Congress is considering legislation that would put suits against end users on hold until litigation is resolved between the manufacturer and patent owner.
In the meantime, more suits like those filed by Google and Adobe, could be in the offing.
"It makes good company sense," Stoll said.