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IA Labs: ‘Patent troll’, or another small business steamrollered by larger opposition?

Nintendo announced last week that it has acquired the patent portfolio of IA Labs, a Maryland-based company specialised in ‘exergaming’ technology which had filed suit against Nintendo in April 2010 for patent infringement.

In that original lawsuit, IA Labs claimed that Nintendo’s Wii console and associated products including the Wii Remote, Wii Fit and Balance Board infringed two of its patents. According to a report from gaming site Gamasutra, documentation filed as part of the infringement claim revealed that the two companies had previously been involved in licence negotiations and that Nintendo had been in talks with IA Labs regarding the latter’s Sqweeze product.

Nintendo successfully defended the case and IA Labs’ subsequent appeal was quashed in June last year. IA Labs was ordered by the court in Montgomery County, Maryland, to pay Nintendo’s costs – something which the smaller company failed to do. As a result, the Montgomery County sheriff ordered the sale of IA Labs remaining assets – including its patents, which were snapped up by Nintendo.

In its press release announcing the acquisition, Nintendo describes IA Labs as a ‘patent troll’. However, it is difficult to ascertain that IA Labs is merely a holding company, that it did not practise its patents to offer products or that it asserted patents for nuisance value. IA Labs quite clearly developed a range of technologies and attempted to market these to industry, as its previous licensing talks with Nintendo would suggest.

By purchasing IA Labs’ patents, Nintendo keeps them out of the hands of NPEs that could use them to launch future litigation. The patents may also give Nintendo freedom to operate as it continues development around the Wii platform, and might provide a deterrent against competitors seeking to assert against the company. Either way, it would appear that IA Labs’ portfolio must hold some strategic value for Nintendo.

It is interesting to consider this dispute in the light of the Goodlatte Innovation Act which was approved by the US House of Representatives in December and is now awaiting a Senate vote that could see it become law. As this blog has stated previously, the likely result of this proposed legislation is that the assertion of patents will become more expensive, making it an even more risky prospect for smaller businesses lacking the deep pockets to engage in lengthy litigation. The inability of IA Labs to pay up in this case led to its demise, with its patents ending up in the hands of the much larger corporation it had accused of infringement. We may well see this scenario – of big companies buying up the patents of bankrupted smaller businesses at a cut price – play out more often if the Innovation Act is approved by the US Senate and becomes law.

Jack Ellis
IAM Magazine
13 January 2014

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Licensing, IP politics, IP litigation, Patents, IP business

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