Canada: New IP3 Patent Purchase Program Is Industry's Latest Attempt To Combat Trolls

Last Updated: July 27 2016
Article by Fiona Legere and Linda El-Halabi

Most Read Contributor in Canada, September 2018

In May 2016, the Allied Security Trust, a non-profit industry group, announced the launch of the Industry Patent Purchase Program, otherwise known as IP3. This new initiative brings together technology industry leaders including Facebook, IBM, Microsoft, and Adobe, to establish a patent marketplace in an effort to create an opportunity for patent owners to both protect their intellectual property, and acquire valuable patents.

The IP3 follows the footsteps of previous initiatives by tech industry leaders, including an initiative spearheaded by Google last year, the Patent Purchase Promotion Program, that invited companies and start-ups to sell their patents to Google.

These recent initiatives are a backdrop to an increasingly heated battle between innovators and patent trolls. The patent trolls' business model is based on the aggressive enforcement of their patents. Often, patent trolls do not practice their own inventions, and they rather acquire them, or sometimes develop them, for the primary purpose of using them as strategic weapons to sue innovating companies. This growing phenomenon is more pronounced in the U.S., but has become an increasing problem in Canada over the past few years.

However, governments and industry are exploring various strategies to solve the patent troll problem.

First, some countries have undertaken the legal reform of their patent system. For instance, India passed the 2005 Patent Act, which is credited for curbing the incidence of trolling activity. Further, the Supreme Court of the United States held in Ebay v Mercexchange, L.L.C., 2006 547 U.S. 388, that injunctions for patent infringement should no longer be automatically granted, and that plaintiffs had to prove that they would suffer harm if an injunction is not granted. Then in 2014, the Supreme Court's ruling in Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014) that patents are not available for implementing existing business methods onto a computer had the effect of further stifling patent troll activity.

Second, is a grassroots market response. As described in previous blog posts ( here and here), the IP3 program, and Google's recent Patent Purchase Promotion Program, illustrate that market responses designed to curb trolling activity can be effective. In certain industries, notably the tech industry, a single product can rely on a multitude of patents. If a patent troll alleges that one of these underlying patents is infringing, their lawsuit has the potential to shut down the entire product. Programs such as IP3 and others attempt to solve this issue, by preventing patent trolls from acquiring critical patents. Moreover, these programs often explicitly require companies to pledge not to sue each other, creating economic disincentives to litigation. In addition, there are arrangements where owners agree to license their patents to each other, or a third-party sublicenses the pooled patents to others. These programs provide economic incentives for collaboration and reward innovation, making the resort to litigation less commercially attractive.

Market responses, together with legal responses, have the ability to provide economic incentives and disincentives that may result in behaviour modification and a decrease in trolling activity.

Canadian governments have begun to see the potential of economic incentives to encourage innovation. In Canada, the provincial governments of Saskatchewan and Quebec have discussed the possibility of implementing a "patent box" initiative. A "patent box" program provides tax incentives that reward companies for developing, owning, and exploiting their patents. Cooperation between governments and innovators in promoting market responses to trolling is the first step to solving this problem.

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