Lack of Ethics is a Problem
- By Ralph C. Jensen
- Jan 01, 2017
The pharmaceutical industry is a business exposed
to many unique risks. Attaining capital,
investing in intensive research and development,
the uncertainty of FDA approval and the constant
shroud of legislative risks are merely some of
the many significant challenges that innovative pharmaceutical
companies regularly face.
One of the fastest growing threats for these companies,
however, is the threat of infringement lawsuits
brought by patent trolls.
Also referred to as a “non-practicing entity,” a
patent troll is a person or company that owns one
or more patents but typically does not itself market
any products or services covered by these patents and
instead attempts to enforce these patents against accused
infringers, often far beyond the patent’s actual
value or contribution to the technological field. In
doing so, the patent troll typically attempts to extort a
quick settlement from an accused infringer, knowing
that most accused infringers would rather quickly pay
a small settlement rather than spend significant time
and money litigating a patent infringement case. Voilà,
now we understand the business of patent trolling.
Pharmaceutical companies have long dealt with
patent trolls, but now the security industry is being
forced to deal with them, as well. Patent trolls are
playing a vicious game that affects the manufacturer,
the installer/integrator and the end user.
After spending a significant amount of time researching
and interviewing, I found a patent troll,
Hawk Technology Systems that is consistently filing the
lawsuits. Don’t be deceived, as I was at first; this is only
a legal entity that is filing legal lawsuits. They are not
in the electronics business, only in the lawsuit business.
Here is how the patent troll business has worked
for Hawk: A couple of individuals familiar with patents
focused on an older patent, bought the rights to
it, and then went to the U.S. Patent and Trademark
Office and filed an application to get the older patent
reissued. Once the patent was reissued, Hawk started
looking around to see who might be using security
systems allegedly covered by the patent, and Hawk
then began filing lawsuits, claiming infringement.
The reissue claims they are defending, Hawk’s reissued
patent purports to cover a “PC-based system for
monitoring and storing representative images from
video cameras that may be used 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.”
Hawk currently has more than 210 lawsuits
pending. I have tried in vain
to reach Hawk’s principal Marc
Schulman regarding these cases. I have left messages
pleading for a return phone call, but I have received no
response. Schulman claims to be the legal consultant
for his partner Barry H. Schwab, who in turn claims to
be an inventor of Hawk’s Reissued Patent #RE43462.
According to attorney Justin Hasford, who is a
partner at the law firm Finnegan Henderson Farabow
Garrett & Dunner LLP in Washington, D.C.,
specializing in patent infringement litigation, patent
trolls typically sue end users of technology. They file
lawsuits only in hopes that the defendant will settle
quickly, long before trial.
“A quick settlement avoids the risk that the patent
ultimately will be found by a court or the Patent Office
to cover subject matter that already was out there
in the prior art and thus never should have been issued
in the first place,” said Hasford, who has successfully
defended the pharmaceutical industry. “The
plaintiff sees this as something that can be monetized,
particularly with a quick settlement.”
If a company were to defend themselves against
the troll, it likely would wind up in a federal court far
from home. Hawk, for example, is located in South
Florida and has brought various suits in the U.S.
District Court for the Southern District of Florida.
Many defendants prefer settlement over protracted
litigation. If Hawk settles for a mere $10,000 per defendant,
Hawk takes home a healthy $2 million plus.
Reports have suggested that this industry is worth
more than $4.5 million annually to the trolls.
The smaller end user typically does not have the
resources to engage in protracted patent litigation.
After several filings and legal wrangling between the
attorneys, including attorney’s fees to defend themselves,
an invoice of nearly a half million dollars is
likely to hit a CEO’s desk.
That is money that could be used for research and
development, paying new employees or just plain upgrading
and updating their business model. No wonder
an end user is quick to reach a settlement and put
the troll back under a bridge, where it belongs.
Don Erickson, CEO of the Security Industry Association,
said in an online posting on Security Today,
Dec. 18, 2015, “Most manufacturers would also agree
that patent Trolls who prey upon the ingenuity of security
technology suppliers is a threat worthy of legislative
action by the states, Congress and the courts.”
As a child, I learned the story of Three Billy Goats
who, as end users, had to cross a bridge, placed over
a cascading waterfall. Under the bridge was a troll.
The troll neither invented nor built the bridge. It just
claimed ownership by being mean. In the end, the
troll never succeeded and, in fact, took the wrath of
the biggest billy goat.
Go back, troll, under your bridge.
This article originally appeared in the January 2017 issue of Security Today.