22 Apr 2009

Patents worth the trouble when entrepreneurship at stake

Sydney, 22 April 2009: Software company Uniloc's US$388 million victory in its long-running patent infringement dispute with Microsoft is a win for the patent system and should encourage patent holders who are prepared to go all the way to protect their rights, according to Clayton Utz intellectual property partner Jim FitzSimons.

Mr FitzSimons, who advised Uniloc founder Ric Richardson back in 1993 to patent his innovative software distribution technology, said the decision highlighted the value of patent protection for the right technology.

"This case serves as a reminder that a patent system can indeed be a very powerful ally in any IP protection structure," Mr FitzSimons said.

"While it is not always appropriate to obtain a patent, the protection delivered by the patent system can well justify the cost of doing so."

Mr FitzSimons said in patenting his technology rather than simply relying on copyright protection, Mr Richardson put Uniloc in the position of being able to prevent others from using the idea behind the technology without Uniloc's permission – regardless of how the third party might embody the idea in actual software. Microsoft's actions constituted an infringement of the patent which then entitled Uniloc to take action.

"I remember very clearly the day that I first met Ric Richardson. I thought his software was going to change the world," said Mr FitzSimons. "In those days software piracy was a huge problem and so was software distribution. The ability to patent software was still relatively new, particularly in Australia, but clearly something as world changing as this needed to take advantage of the patent system if it was at all possible.

"In this case, clearly the very basic point was to protect the idea by means of a patent before it became public. Once an idea becomes public the opportunity to patent it is lost forever and so early and decisive action can be very important.

"There is an opportunity to lodge a patent specification and keep alive the possibility of obtaining patent protection around the world, or at least in key markets, for several years before it is necessary to dig too deeply into one's pockets. Even then it is possible to provide a large measure of protection by obtaining the patent only in key jurisdictions such as the US."

Mr FitzSimons said while the patent system was often regarded as expensive, the money Uniloc had spent on obtaining and maintaining its US patents had been minimal compared to the ultimate damages award it obtained.

"It is perhaps fortunate for patent holders that the world's biggest market also has arguably the best developed contingency fee system. This allowed Uniloc to fight its claim through various hearings - including an earlier appeal on the merits of Uniloc's patents - and up to the present point without having to dig too deep into its own pockets," said Mr FitzSimons.

Clayton Utz also helped to keep costs down by appropriately matching resources to Uniloc's needs at the outset and maintaining regular communication.

Mr Richardson said were it not for Clayton Utz' strategic advice over 15 years ago, Uniloc would not be in the position it is today. "It’s been a long time since Jim sat down opposite me in our first big discussions over Uniloc’s intellectual property, but in retrospect, over a decade later, it was one of my best decisions," Mr Richardson said. "With recent events it seems I can’t put off making good on the promise I made to Jim, when he had to give up his tickets to the tennis to attend one of the important early meetings, that in recompense I would get him to the US Open!"

Mr FitzSimons said Uniloc's victory should hearten small business owners who felt powerless to take action against major corporations for breaches of intellectual property rights. "No matter how big you are, you cannot expect to ride roughshod over other peoples' technologies. Even a very small company which takes an inventive step can ensure that it is rewarded for that inventive step provided that is perseveres. It can be a long time coming, but the rewards are certainly there if you have the right technology."

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.