A United States company that sells mobile phone ring tones, but specialises in the monetisation of intellectual property, is pursuing the Australian arm of international telco ZTE.
US company Vringo’s website appears to sell mobile phone apps, videos and ring tones, but its parent company, Vringo Incorporated, turns a profit by chasing business patent infringement.
Patent monetisation is not a new business and something companies such as Apple regularly engage in by litigating patent infringements.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
What is new is the emergence of businesses based solely on patent assertion like Vringo.
The derogatory term for businesses like Vringo is “patent troll”. Patent trolls are people or companies which aggressively and opportunistically enforce patents, regardless of whether or not they intend to market the product.
Vringo has an IP portfolio of over 500 patents and patent applications covering telecom infrastructure, internet search and mobile technologies.
The latest company on its radar is ZTE Australia, the Australian body of one of the world’s largest mobile phone companies. ZTE operates in 160 countries worldwide.
Vringo yesterday filed a law suit in the Sydney Federal Court and, according to a statement from the company, it alleges patents relating to telecommunications equipment infrastructure and mobile devices have been breached.
“The ZTE products in suit include a base station and server infrastructure used in mobile networks and also a number of 4G mobile devices,” the statement says.
Vringo is seeking a declaration ZTE infringed its patents and orders restraining ZTE Australia from “selling, disposing, using, importing or keeping for sale or offering to sell, dispose of, import or use, or keep for sale or other disposal or use, relevant products without the license or authority of Vringo”, according to the statement.
Vringo is also seeking damages or “an account of profits and interest accrued on any sum found due”, and is also pursuing the British, French and German bodies of ZTE.
SmartCompany contacted ZTE and Vringo but received no response prior to publication.
Last year, Vringo took on and defeated Google, AOL and three other companies for patent infringement and recently settled with Microsoft. In the Google and AOL battle, Vringo won the case and was awarded $US30 million, although it had originally claimed damages of $US493 million.
Both Google and Vringo have appealed the court’s decision, with Vringo seeking a greater sum.
TressCox Lawyers partner Alistair Little told SmartCompany patent trolls are a serious problem in the US.
“Patent trolls have generated a great deal of patent litigation in the US in the past few years. There are a number of companies which do this and they buy up old patents, and while many will be of no value, sometimes you can track one down which is still being utilised in areas where technology is developing rapidly.
“The business often isn’t even aware there is a patent they are infringing,” he says.
Little says businesses using fast-developing technology need to be aware of what patents exist.
“Once the patent troll gets its hands on the patent, the result is these forgotten patents can become powerful weapons in the hands of someone who wants to bring legal proceedings.
“If you’re a patent troll, you need to have a team of skilled patent attorneys and lawyers and determine which technologies out there are using technologies which are patented. It’s been a lucrative business in the US for patent trolls since most patent cases are actually tried before juries and they often get extraordinary verdicts with massive sums,” he says.
Little says the court system in Australia operates differently and patent cases are not determined by juries. This has prevented the practice from becoming prominent.
“I can only assume Vringo is confident it has a good claim on this matter and has decided ZTE has a sufficiently large volume of product sales to mean there is a reasonable damages claim available,” he says.