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Patent Troll in India?
First Publication Date: 10th June 2010
NTP has filed a patent infringement suit in a US District Court against Apple, Google, Microsoft, Motorola, HTC and LG. It alleged in the suit that the companies are liable for infringing eight of its patents relating to sending emails over wireless networks. This suit is significant because of two reasons:
a. NTP is a patent troll, whose business model revolves around acquiring patents and licensing or enforcing them. It does not have any research activity and allowability of patent trolls for the said reasons had therefore been the subject of debate at the policy level; and
b. NTP had earlier won a 612 million dollar damage award against Research in Motion, which sells black berry devices and is expected to pose serious hurdles to many large companies.
While we await the decision of the US court, I thought that it would be a good idea to discuss about the viability of patent troll as a business model in India. The Indian patent law does not prohibit the existence of patent trolls but poses challenges for their operations. As mentioned earlier, a patent troll’s business model is based on acquiring patents and licensing or enforcing them. Most patent trolls choose an area of business interest and acquire patents to build a portfolio in specific technologies. Once a strong portfolio is built, they generally wait for technology to mature and then pursue licensing opportunities aggressively or file patent infringement suits to obtain damages and thereafter licenses.
The patent law in India poses problems to patent trolls in two important ways. Firstly, in order to license or enforce, a patent troll must acquire patents in a specific technology area. As patents may be held by different persons, the acquisition process will take some time. Once the portfolio is built the troll must wait for the technology to mature before taking any action. This process may not be viable because the Patents Act requires a patent holder to work or use a patent in India and in case of non-working a compulsory license may be granted. To monitor working of patents, the law requires filing of statement of working of a patent at the end of every financial year.
In such a situation, the patent troll will have to operate within a time frame of three (3) years to avoid a compulsory license as the law permits such period of non-working before granting a compulsory license. Therefore, the process of acquiring patents and waiting for technology adaptation to mature must be completed in three years. Else, the business model will fail. The three year period may be too short for the functioning of a patent troll. Having said that, a troll may consider alternative strategies such as licensing the patents to one entity atleast to satisfy the working requirements. The alliance can be strategically structured to avoid any issues under competition or other laws.
The second problem a patent troll will face in India is with respect to the remedies. Indian courts in general are not patent friendly and are not known to grant injunctions easily. Furthermore, after succeeding in a case, which may last long, the damages granted would not be sufficient to sustain the business model. The weaknesses in the enforcement mechanism makes the business of patent trolls difficult to sustain.
In the light of the hurdles, patent troll may not be a viable business option. It will be interesting to wait and watch if patent trolls will enter the Indian market.