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09/03/2020

What You Need to Know About Patent Trolls

It’s been a tough year for our industry. With a global pandemic in place, restaurants are looking for ways to keep their guests and employees safe. As a technology provider, my company, Givex, has met the need by offering online ordering, contactless payment and gift cards. In a time of disruption, we know that our customers need technology partners that provide reliable solutions.

Our philosophy has always been to be a partner to our clients, not just a vendor. Valuable partnerships require thought and action that extends beyond the obvious. Recently, we took our commitment to our clients a step further: in times of economic uncertainty, the last thing that our industry needs is the financial upheaval of unexpected litigation. We became the first Canadian retail tech company to join LOT Network, to shield our customers and our community from the growing threat posed by patent assertion entities (PAEs, or “patent trolls”).

PATENT TROLL PROBLEM

Patent assertion entities (PAEs or more commonly known as “patent trolls”) are companies whose business model is to secure patents in order to sue other companies for infringement. PAEs are responsible for over 84% of U.S. high-tech patent litigation[1]. Over half of companies sued by patent trolls make less than $10 million in annual revenue, and the average cost to defend against a patent troll lawsuit is more than $3.2 Million USD[2]. Patent trolls have historically targeted the software industry, but as technology converges, increasingly, all industries use software -- thus leaving them exposed.

We’ve seen historically that in recessionary periods, companies are either looking to offload their assets due to financial distress or as an active part of their patent strategy. This is a prime opportunity for patent trolls to secure assets for their arsenal -- and likely why we see a spike in patent litigation following tough economic times. Data from the Stanford NPE Database shows that the Great Recession of 2008 resulted in many companies selling patents to PAEs. In the years that followed, high-tech companies saw an immediate rise in the number of costly PAE lawsuits filed.

HOSPITALITY TECHNOLOGY NOT IMMUNE
Hospitality and retail technology companies are not immune to the threat that patent trolls pose. Patent trolls began targeting retail companies as an industry group in the mid-2000s and the trend quickly escalated. The increased use of technology in retail operations likely drew the attention of PAEs initially, but the fact that retail companies had little experience with patent litigation made them particularly vulnerable.

And in 2011, a high-profile case involved one such patent troll suing a national retail chain for allegedly violating two patents that cover methods for loading money onto gift cards and activating them at the point of sale[3].

By joining LOT Network, we are protecting our clients from exposure to patent troll lawsuits that could arise from using our products and services. Members agree that if and only if a member’s assets fall into the hands of a patent troll, they will grant a license to all other members — thus rendering them immune from patent troll litigation using those assets. All traditional uses of patents, such as selling them or using them to sue other companies, are retained.

RISK AND REWARD

Patent troll litigation is up 4% year over year[4]. This uptick in litigation can mean millions for a company that potentially could have a financially devastating result. For companies just starting out, this could certainly shut down their entire business.

While we are providing our customers with a defensive shield against PAE litigation arising from use of our products, our customers can also further protect themselves against lawsuits involving over 2.5 million patents by joining LOT Network themselves -- it’s free for companies with less than $25 million in revenue, and a low-cost preventative measure.

The more companies in our ecosystem that join, the greater the protections we all enjoy. In the case of patent troll litigation, there is certainly strength in numbers -- not to mention the opportunity to learn strategies and experiences from companies that have been sued.

NO ROOM FOR DISRUPTION

Hospitality technologies are needed now more than ever by our clients. Our customers have come to expect a seamless omnichannel solution that’s free of unexpected disruptions - like lawsuits from patent trolls or global pandemics.

As technologists, we need to be reliable service partners to our clients. They count on us to anticipate risks and ensure their operations are well-supported and technology doesn’t become another issue. The peace of mind from gaining preventative protections allows us to focus on our primary task at hand: to keep businesses of all sizes running seamlessly.

 

About the Author
Since joining Givex in 2003, Brittain Brown has held various managerial roles in the National Accounts and Operations divisions and has been responsible for some of the company’s largest client successes. As President, Brown has driven Givex’s international expansion efforts and overseen the successful acquisition of new additions to the Givex family of companies. His leadership and passion for people have been instrumental in the company’s explosive growth.