Colorado is seeing an economic boom as tech and startup companies move to Denver. In August, elected officials welcomed Google’s 4-acre campus to Boulder. Hitachi has expanded its Colorado presence. Such startups as SomaLogic have a bright future. Many of my constituents work in good paying jobs in these industries. Tech companies are mapping new ground with their ideas and products.
But with all that comes unchartered disagreements, particularly in the intellectual patent space. Colorado is one of many states that tackled so-called patent trolls in 2015. Instead of actually creating any new products or coming up with new ideas, patent trolls used patents as legal weapons and engage in the business of litigation or threatening litigation. Congress has been considering bipartisan legislation to combat abusive patent trolls. This is especially important in states like Colorado because small and medium-size businesses are targeted by trolls 80 percent of the time, particularly startups.
In addition to the “traditional” patent assertion entity, a new type of troll could be on the horizon pending the outcome of a high-profile legal dispute that could be especially dangerous to tech companies and startups.
In 2011, Apple sued competitor Samsung in a patent infringement dispute. There were several patents in question — from utility patents such as the “slide-to-lock” feature to unlock the phone to such design patents as the rounded shape of the phone and design of the music app icon. Design patents haven’t seen the same reforms or attention as utility patents and don’t have reasonable damages if infringement is found, yet their applications are increasing as technology advances and firms protect their designs.
A nine-member jury in a federal district court in California originally found that Samsung owed Apple more than $1 billion in damages, an amount later reduced to $930 million. In March, the federal circuit court ruled on the dispute, reversing trade dress claims, but affirming Apple’s design and utility patents claims. The case is likely to end up in the Supreme Court in 2016.
The decision is unique for design patents in particular, where awarded infringement damages are far less uniformly distributed than utility patents — and of interest to tech businesses. As it stands under current policy — and affirmed by the federal circuit court — any design patent infringer can be awarded total profits as damages. In the case of the smartphone, there are thousands of patents that comprise each device — from the software to manufacturing to aesthetic design. The court’s finding suggests Samsung could pay full profits for all infringing devices despite the fact the shape of the phone and music icon weren’t driving sales.
This might seem relatively insignificant to a juggernaut like Samsung, although I’m certain they’d beg to differ. But the real losers are smaller enterprises, entrepreneurs and manufacturers that are now at risk of paying total profits over the shape and look of something that’s patented.
And now, the court ruling incentivizes trolls to shift their focus to acquiring and asserting design patents. The chances of reaping rewards are very favorable, and the possibility of that total profits verdict is harmful to startups and tech firms flocking to Colorado. If the court doesn’t further clarify design patent damages in the retrial, Colorado businesses are ultimately affected with potential business-destroying lawsuits and increased trolling activity over design patents. That would damage Colorado’s economic future.
We passed House Bill 1246 to make it easier for Colorado startups to raise capital. We want technology to flourish. Wrong-headed judicial decisions not only will stymie growth, but also turn back the clock on much of what we’ve accomplished.
Let’s hope our courts will approach this issue with common sense and look forward, not backward. If not, we in Colorado will have to look to Colorado solutions to assure our economy and open arms approach to startups and the jobs they create continue to flourish.
State Rep. Steve Lebsock, a Democrat from Thornton, represents District 34 in the Colorado House of Representatives. Reach him at email@example.com.