Patent Risk Digest

Patent Risk’s Next Frontier: Internet of Things

Patent risk tends to increase as new technologies emerge, or as existing technologies combine in ways to create new products and services. The convergence of technologies in smartphones led to a dramatic increase in patent litigation in that sector. Advancements like mobile banking and wearable devices have similarly impacted the financial services and healthtech sectors. So too now with the expansion of Internet of Things (IoT)—referring to the connection of a growing array of everyday products, services, and operations to the Internet—the conditions are prime for a surge in patent risk.

IoT is a rapidly developing technology area that touches many different technologies, from software applications to consumer electronics to the electrical grid. Greater efficiency comes from taking objects, connecting them, and allowing them to share data. Consumer goods like thermostats, cars, lights, refrigerators, and home security systems can be remotely controlled through smartphone applications. Businesses are also turning to IoT to increase operational efficiency in everything from supply chain logistics to customer service. Gartner estimates there will be more than 20 billion connected devices by 2020, with other estimates even higher.

This high rate of growth in technology and connectivity is leading to a significant expansion in activity by patent trolls (also known as non-practicing entities or NPEs). In 2008, these entities launched no new IoT-specific patent infringement campaigns and added only 15 defendants to IoT campaigns that were ongoing. Compare that to 2015, which saw 10 new IoT campaigns, and 175 defendants added. So far in 2016, 34 new IoT-specific litigation campaigns have been launched and 446 defendants have been sued.

Plaintiffs See Opportunity in New Technologies

Patent owners, including NPEs, are setting their sights on IoT technologies, and have begun pursuing familiar strategies to capitalize on its rise.

For instance, Rothschild Connected Devices Innovations (RCDI) launched a campaign in February 2015, targeting more than 60 companies for infringing on a patent relating to products that can be remotely customized based on a user’s preferences—a fundamental aspect of many devices in the IoT sphere. RCDI is one of at least eight entities managed by Leigh Rothschild, often among the most active patent licensors. In this campaign, RCDI began by suing companies developing home security systems, but soon branched out into suing wireless carriers, and, later, automakers. This technique of using overly broad patents to sue wide swaths of companies on a variety of technologies is common among entities like RCDI.

Further, Marathon Patent Group, a successful, publicly-traded patent licensing company, agreed in August to purchase more than 300 patents from Siemens, including 86 patents relating to technologies that support a wide variety of IoT-enabled devices like lights, sensors, security systems, and appliances. With the acquisition of these patents, Marathon—already a prolific patent asserter—clearly stated that it is expanding its reach into what it describes as “a vibrant and growing technology area.”

Companies can take steps now to protect themselves against IoT-related lawsuits, saving time, money, and resources. By partnering early with a third-party that understands the evolving risks in the IoT space, companies can begin to fully assess the risks they face with regard to patent litigation, and can limit their exposure by insuring against it.