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US tech giants join forces against EU ‘patent trolls’

Apple iPhone 5c devices
David Paul Morris | Bloomberg | Getty Images
Apple iPhone 5c devices

Some of the world's biggest technology companies are urging the European Union's leaders to stem the tide of "patent trolls" in Europe.

Companies including Google, Facebook, Apple and Samsung wrote a joint letter Thursday to the European Commission, the executive arm of the 28-country EU, to introduce key changes to draft legislation that hopes to unify patent laws for the European Union.

The U.S. has already fallen victim to the patent troll - a company that does not manufacture products, but instead buys patent rights with the sole intention of suing businesses such as smartphone companies for alleged infringement. An study last year by professors at Boston University found that in 2011, 2,150 unique companies were forced to mount 5,842 defenses in lawsuits, costing an estimated $29 billion. This compares to just 1,401 defenses in 2005, costing $7 billion.

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In their letter to the Commission Thursday, the companies called for "an effective and balanced unitary patent system" that would have "the potential to decrease the costs of obtaining patent protection, increase European competitiveness, and support the long-term growth of innovative industries in Europe and abroad."

Other signatures on the letter were Adidas, BlackBerry, Bull, Cisco Systems, Deutsche Post, Deutsche Telekom,European Semiconductor Industry Association (ESIA), Hewlett-Packard Company, Intel, Microsoft, Syndicat de l'Industrie des Technologies de l'Information (SFIB), Telecom Italia and Yahoo.

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Currently, national courts and authorities of different jurisdictions in the European Union are responsible for deciding on the infringement and validity of European patents. But a new draft rule signed by 25 member states in February aims to create a specialized patent court encompassing all member states. The agreement still needs to be ratified by at least 13 states, including France, Germany and the United Kingdom to enter into force.

Concerns by these companies focus on two key aspects. Firstly, different courts could be allowed to decide on whether a particular patent is valid and, separately, whether it has been infringed. This allows plaintiffs to obtain a quick infringement ruling, along with an injunction barring products from most of the European market, before any determination of whether the patent in question is actually valid, according to the companies.

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Secondly, there are fears that "rigid" application of injunction rules could allow "unprincipled" litigants to "hold up" manufacturers by making unreasonable royalty demands.

Vicki Salmon, member of the Chartered Institute of Patent Attorneys (CIPA) and partner at attorney practice IP Asset told CNBC that she understands the anxiety felt by these companies in the growing battlefield of patent litigation in Europe, adding that she had already seen a rise of "patent troll" cases in both the U.S. and Europe.

"It's a big issue," she said. "I think this is something that has been brewing in Germany for a while."

There has been a growing business case for firms that own a collection of patents without manufacturing products, she said, especially in Germany where cheaper legal fees, speedier action and fragmented processes mean PAEs can benefit, she added.

"It's probably not within the spirit of the patent system," she said.

By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81

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