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Dealing with Trolls

Not Lord of the Rings trolls but patent trolls. Patent trolling has been around for several years. The practice is particularly prevalent in the United States but trolls have global reach.

Trolling takes many forms but a common aspect is that the patent trolling company buys a range of patents in a particular field eg: patents dealing with how screens on smartphones operate. The patent troll isn’t interested in commercialising the patents itself but rather, looks around the world to see which companies may be using technologies or processes in a way which the troll says infringes its patents. The troll then approaches the other party and alleges infringement of its patent, accompanied by an offer for the other party to take a licence of the troll’s patent. The troll’s motivation is to make money by forcing the other party into a licensing arrangement. There has been spirited debate about the pros and cons associated with patent trolling.

A recent UK High Court case has given those approached by patent trolls a potential useful defensive weapon.

In the case, the UK company Ticketogo Ltd (“Ticketogo”) owned a patent relating to ticketing systems. Ticketogo alleged that the ticketing system used by the Big Bus Company Limited (“Big Bus”) was infringing its patent. Consistent with the usual scenario, Ticketogo wanted Big Bus to take a licence of its patent. While Big Bus considered that it was not infringing Ticketogo’s patent and considered that the patent may not be valid, nevertheless Big Bus wanted to resolve the dispute by a commercial agreement because of the expense associated with litigation. In negotiating licence terms, Big Bus wanted Ticketogo to give evidence of other licences already granted by Ticketogo, so that Big Bus could assess what would be fair licence terms. Ticketogo refused to provide evidence of other licences. In the face of Ticketogo’s refusal, Big Bus asked the court to make an order compelling Ticketogo to disclose other licence agreements, in what is known as a “pre-action disclosure” application. Australia has a similar process known as pre-action discovery.

Ticketogo raised a number of arguments as to why the court should not make the order for pre-action disclosure to Big Bus of Ticketogo’s existing licence agreements. However, the court did not accept those arguments and granted the order, compelling Ticketogo to disclose prior licence agreements. This disclosure would put Big Bus in a much better informed position to negotiate fair licence terms.

While the decision is from the UK High Court and is not automatically binding on Australian courts, the principles established may well be applied in Australia and may be relevant beyond patent infringement matters. Conceivably, the principles enunciated in the case could be applied wherever transparency in the negotiation of price or other terms is fair and appropriate. Parties approached by a patent troll that wants to enter into a licence to resolve an infringement allegation should consider asking the troll to disclose its existing licence agreements. This will enable the alleged infringer to determine whether the troll has been successful in getting other parties to enter into licences and if so, on what terms.

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