Patent Trolls Up to No Good

There are troubling, albeit legal, shenanigans going on not only in the security industry but in several other industries, as well. It is all about patents for products that are on the market, and may have been for quite some time.

Several security equipment manufacturers contacted me about “patent trolls.” I’ve read about them, including those in the security industry, only to find out that what they are doing is perfectly legal, but I wonder if it is ethical.

The situation has affected all entities in the security industry from manufacturer, end user and integrator. All have felt the blunt touch of the legal system, thanks to the patent trolls, so much so that the Security Industry Association (SIA) is urging house and senate leaders to take up companion bills that would crack down on abuses by patent assertion entities.

The main offender, or the company that seems to be on the other ends of the lawsuits, is none other than Hawk Technology systems, LLC. If you’re in the security industry, you’ve likely heard of them, and about them. They have been active in filing patent lawsuits nationwide.

In a letter to House Speaker John Boehner and Minority Leader Nancy Pelosi, SIA is asking the House to pass the Innovation Act (H.R. 9), bipartisan legislation in increase accountability on patent litigation and to stop patent trolls. Letters have been sent to Senate Majority Leader Mitch McConnell and Minority Leader Harry Reid, requesting action on the Protecting American Talent and Entrepreneurship Act (S. 1137), which would increase accountability while thwarting patent trolls.

According to SIA, patent trolls are companies or individuals that threaten businesses with lawsuits based on vague or overly broad patents in an effort to collect money from settlements. Security product manufacturers spend millions of dollars each year defending against frivolous patent litigation.

I had a nice, but short conversation last month with Marc Shulman, who said he was the legal consultant and a partner with Barry H. Schwab, who claims to be the inventor of numerous patents, including the ‘462 patent; now reissued as Patent #RE43462, which is “A PC-based system for monitoring and storing representative images from video cameras that may be utilized for security or other monitoring applications. Camera inputs from digital or analog sources are individually and independently digitized and displayed,and may be stored in digital form on various recording media. Provisions are included for adding detection or alarm systems which will automatically alter image size, sampling rate and/or frame rate of an individual input source, or activate other physical responses. In addition to security system monitoring, further applications of the invention are disclosed for process monitoring in manufacturing environments and also for applications in videoconferencing.”

This kind of activity is not new; in fact, the music industry has been battling this for years, maybe decades.

Well-known and respected attorney Ken Kirschenbaum, said patent lawsuits and costly to prosecute and costly to defend. For the most part, it’s all about the money.

“The security industry invests considerable time, research and development and human capital into developing a wide range of cutting-edge security solutions through their trusted channel partners into various markets,” said Jake Parker, SIA director of government relations. “The aggressive efforts of patent trolls are a significant threat to investment in the next generation of security products.”

Security companies have not sat idly by to see what happens. On-Net Surveillance System Inc. has filed a lawsuit in the Southern District of New York vs., Hawk Technology. OnSSI is seeking a declaratory judgment of non-infringement of the patent in question, and they claim they and their customers have a license to and/or are covered by a covenant not to be sued for infringement of the ‘462 patent.

This is not new business for Hawk Technology. The name itself is somewhat deceiving because they do not manufacture any products or offer for sale any products or services. Formed in 2012, their business is directed to owning and enforcing the ‘462 Patent in litigation. They have been busy. To date, Hawk Technology has filed more than 115 lawsuits for infringement of the patent, and such suits have been filed in judicial districts nationwide.

According to the lawsuit filed of OnSSI, they state, “On information and belief, Hawk has followed each filing with a demand for a quick settlement at a price far lower than the cost to defend the litigation.”

Seems like this is an “anything for a quick buck,” style of litigation. Others have been successful in defending their company practices. For instance, Genetec filed a declaratory judgment action against Hawk Technology in August 2014

Jones Day represented Genetec, Inc. in an action seeking a declaration that it did not infringe, and had intervening rights in, Hawk Technology Systems, LLC’s U.S. Reissue Patent No. RE 43,462, claiming to cover video storage and display technology. Genetec further sought a declaration that the ‘462 patent was invalid. Jones Day resolved the matter for Genetec, ensuring its integrators, distributors and customers were protected from Hawk’s ongoing infringement litigation efforts.Is it legal for Hawk Technology to do this? Yes. Is it ethical? Not so much.

This article originally appeared in the October 2015 issue of Security Today.

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