A Haven for Patent Pirates

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Not only do such suits drive up legal costs across the industry, but they also disturb the equilibrium of a system in which technology companies such as Microsoft and Nokia hold off on exercising their patent rights, to avoid the resulting battles that can undermine fast-emerging technology platforms and the lucrative markets that build up around them.

"Anyone in the patent business knows that a patent-infringement suit against these well-protected larger companies will bring a massive infringement counterclaim," Tyler wrote in a 2004 article for Texas Lawyer. "But this tactic is useless against the patent pirate, who typically has no products at all, so there is nothing against which to make an infringement counterclaim."

In another illustrative case, American Video Graphics, a limited partnership, purchased a set of video-game patents once owned by Tektronix of Beaverton, OR. Tyler calls them a "litigation machine." Among their patented technologies is a software method to simulate spherical panning, that is, the sort of roving, three-dimensional player's-eye-view common in many modern video games.

Tektronix's patent (number 4,734,690) was first filed in 1984 and granted in 1988. In August, 2004, nearly two decades after that first filing, American Video Graphics filed a trio of complaints against Sony, LucasArts, Nintendo, and a dozen other gamemakers and device manufacturers.

But visit the American Video Graphics corporate website and you'll get a "coming soon" message and a phone number shared by a Marshall resident. A call to that resident was quickly referred to AVG's legal counsel, the Dallas law firm of McKool Smith, which declined to be interviewed for this article.

Gil Gillam, a Marshall attorney who represented Intel in an American Video Graphics suit, says his client ultimately chose to settle the case rather than fight it. "I think the legal team at Intel would have jumped to try that case, but it just made better business sense to get out of that case at the price they got out at," Gillam says.

The reason for such a situation comes down to patent law itself. Although the topics are generally technical, the legal theory is modeled on the common law tradition of land title and civil trespass. Assuming that a claim has well-marked boundaries, government recognition, and a clear chain of ownership, a patent-holder's motives are nobody else's business. Perhaps it's not surprisingly then, that such a philosophy has played particularly well in a state where many homes, ranches, and farms still enjoy 19th-century homestead protection.

"Buying a patent and forcing your rights has become a new kind of entrepreneurial activity in recent years," says Gillam. "It's also completely legal."