Protect This House

You Read About Patent Spats, But What’s Really Going On?

By Griff Griffin, Rob Kohse, Jeremy Spier & Eversheds Sutherland (US) LLP
Illustrations By Kitfox Design
Photos By Kenda Lenseigne and Courtesy Steyr

Companies in the firearms industry invest tremendous resources into developing inventions and innovations. They protect their valuable intellectual property by obtaining patents, on which they rely to prevent others from copying their innovative products. While patents may serve other purposes such as creating corporate value, providing leverage in negotiations, and deterring other companies from suing you due to the risk of your suing them on one of your patents, the two most common reasons are (a) to use the government-granted monopoly provided by a U.S. patent to prevent others from producing a similar product, and (b) to monetize an innovation by licensing your patent to another company. Importantly, however, obtaining a patent is only part of the story in either case.

To stop others from using your patented device or to encourage companies to license your patent, it often needs to be asserted (that is, enforced) in some fashion to achieve its intended purpose. Asserting a patent can be as simple as sending a letter notifying another party of your patent (and the attendant rights) or as complex as the nuclear option of filing a complaint in federal court alleging patent infringement.

One common misconception about patents is that the patent holder is compelled by law to immediately and vigorously enforce its rights. After obtaining a patent, there may or may not be other competitors in the marketplace infringing on it. In other cases, the competitive marketplace may be too small to make enforcement worthwhile. In fact, U.S. patent law allows patent owners to sue even on an expired patent. But the law limits recovery of monetary damages for infringement to the past six years during the life of the patent. As a result, patent owners can, and do, sit on their rights before asserting them against competitors, sometimes waiting for the marketplace to mature, thereby increasing the potential damages to be sought.

One company seeking to realize the value of a patent is Steyr Arms. Steyr filed patent infringement suits against Beretta in 2015 and SIG SAUER in 2017, both in Alabama federal court.

From the outside, it’s difficult to assess exactly what Steyr’s intent was with these suits, but it’s likely the company saw its competitors making money on products allegedly incorporating its patented invention and wanted compensation. Imagine Steyr fishing for royalties from Beretta when suddenly that patent-baited hook snared a great white SIG SAUER, which just landed a $580 million U.S. Army contract. The M17 Modular Handgun System contract, awarded in January 2017, is based on SIG’s P320 pistol — the pistol Steyr accuses of infringing its patent. Before we take a closer look at these cases, let’s take a moment to explain what patents are and how they can be used.

But First – Background on Patent Rights
Patents are essentially a limited monopoly right, backed by the government, to exclude others in the marketplace from practicing the patented invention. This is known as a negative right — it allows one to stop others from using the patented invention, which may help establish the patent owner as a dominant player in its marketplace.

Patents don’t grant the owner the right to do anything; instead a patent allows the owner to exclude others from the marketplace. Specifically, the law defines a patent infringer as any person (or company) who makes, uses, offers to sell, sells, or imports into the U.S. a patented invention. To enforce those rights, a patent owner can sue the infringer to recover damages and/or obtain an injunction preventing further infringing activity. Part and parcel to that right to sue is the right to license others to practice the patented invention; technically, that’s actually an agreement that the patent owner won’t sue the licensee for infringement.

There are two types of patents: utility patents, which cover new and useful products or processes, and design patents, which cover new and ornamental (nonfunctional) designs of an article. Utility patents typically expire after 20 years, while design patents expire after 15.

An unauthorized person or company exploiting a patented invention is referred to as an “infringer.” The scope of what a patent protects depends on the “claims,” a set of numbered sentences at the end of a patent, which is similar to a real estate deed. While a deed defines the exact boundaries of a physical piece of property, a patent claim defines the boundaries of the protectable right.

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