Patent injustice for small software companies
Published: 29 Jun 2005 18:15 BST
Once a technology becomes successful, it is cheaper for a large company to prove another company's patent is invalid, than it is for the large company to pay royalties to the patent holder, says Mitchell.
Ali Guryel is the boss of another small business that has had its patents challenged by a larger organisation — in this instance, the UK government. The managing director of Frontline Technology, had a patent for school attendance registration system, challenged by the UK Department for Education and Skills (DfES).
Guryel filed the patent in 1993 but it was only once when it was successful that the DfES launched its challenge. "I invested and took so much risk. It took eight years until we had a market breakthrough and then big companies started muscling in. They lobbied the government, who then took us to the high court to revoke the patent," says Guryel.
The Secretary of State for Education at the time, Charles Clarke, admitted that challenging the patent was cheaper than paying license fees. "These proceedings were primarily brought because the patent restricted schools' access to a full range of technology. Additionally, my Department assessed the potential additional costs to schools for licence fees, based on Frontline Technology's published terms and scale of charges, to be substantial over the life of the patent to 2013…the litigation costs incurred to date are a fraction of the potential cost that schools could have incurred by way of licence fees," said Clarke in a written answer to the House of Commons.
Although the judge in this case accepted the DfES' claim that technology used by a college in Solihull in the 1990s predated the Frontline's claim, he did not totally revoke their patent, according to a Guardian report on the trial.
Unisto has had fewer problems defending its patents, but Hayward admits that if it went to court it would probably prove too costly. "If someone violates your patent and makes a product you should go after them. If you hit them hard — 'I will sue you for x, y, z and damages' they will often back off," he says. "The chances of you following that through are slim — you will probably never defend it as it's a waste of time. It's much better to spend your money marketing your product and establishing your brand."
Proposed solutions
Concerns with the difficulty that SMEs may have defending their patents, lead the UK Patent Office to investigate possible solutions. A study carried out by a UKPO working group last year stated that "the cost of patent litigation is an obstacle preventing SMEs from enjoying the benefits of the patent system".
One of the main solutions proposed by the UKPO following this study was a mutual assurance scheme, where through paying subscription fees, members have access to legal advice and services. Although the UKPO is likely to look to the government to kick things off by providing some seed money, eventually the scheme could be wholly funded by members.
The UKPO hopes to set up such a scheme in the near future, but has not set any deadlines as yet, according to Smith-Higgins. "We are in negotiation with one of the large insurance companies with a view for them to come up with a scheme to take this forward," he says.
Another solution being investigated is a service offering non-binding opinions to the two parties involved in a patent case. If one of the parties decides to ignore the advice and later loses the case, the court is likely to take this into account when deciding on what damages the losing party must pay. Smith-Higgins says he has "no doubt" that this service will eventually be offered, and is likely to cost around £200.
As for the cost of filing a patent, the UKPO says there is little it can do to reduce this. "Our official fees for a patent from start to finish is £200 — this is a small amount if you consider the time and effort put in by our organisation to get the patent into its final stages," said Smith-Higgins.
Although the UKPO's suggestion may make a difference, the costs of both filing and defending patents will continue to be more difficult for SMEs than their larger brethren. As multinationals scoop up more than their fair share of patents there is a risk that they can use these patents as a barrier preventing small companies from producing a competing technology.
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