News that a small British company is to be hauled through the courts for an alleged patent infringement (C&I March, News) has sent alarm bells ringing throughout the process control industry – and much farther afield.
It is not surprising. The claim to intellectual property brought by the subsidiary of an American corporate giant and broadly affecting anything covering `digitally based monitoring of physical phenomena’ could even affect the humble but ubiquitous fax machine. And if the case goes in favour of the plaintiff, prepare to stop using your computer modem – or pay a significant premium for the privilege.
The case has far-reaching implications if it is ultimately proven watertight. But let’s get it into perspective. Of some 20-30,000 UK patents lodged each year, only around 1% go to litigation; around half are ruled in favour of the plaintiff.
Inevitably, court action provokes a secondary debate focussing on a regrettable symptom of legal action: the commercial consequences for small businesses facing legal action from litigants with greater financial muscle. Defendants’ involuntary participation is simply not compensated for in the final account, even if the action is ultimately spiked.
Thus it is that Monitoring Systems, the reluctant co-star to Seattle, US-based Slope Indicator in a landmark David and Goliath show-down, stands to gain little but to lose much from even the briefest legal examination.
The High Court hearing scheduled for April next year is expected to last eight days and will cost Monitoring Systems an estimated £250,000 – not an insignificant sum for a company with relatively shallow pockets, a staff of just 30 and turnover of £1 million.
Even if the action brought by Slope is crushed, Monitoring Systems will be eligible only to recover its legal costs. There is no existing provision in law that would enable the company to claim consequential damages.
Readers will recall that MS was presented with an unattractive ultimatum: suspend manufacture and surrender all existing stocks of the offending equipment; or submit to the spotlight of legal analysis. Unsurprisingly, MS chose to fight its corner.
Slope is a subsidiary of Boart International, and markets a system to measure the sub-millimetric movement of buildings and other structures. It secured a US patent in 1986, which it later enforced in Europe.
Larry Cohen of Hammond Suddards, the London firm of solicitors which is representing MS in the matter, believes the patent (in Europe number EP UK 0325 592) is too broadly written, and will challenge its validity accordingly. Nine out of ten alleged patent infringement cases are defended on invalidity grounds, the remainder are simply denied.
Eileen Burnett, founder and chairman of MS says the case could sink her company, whatever the outcome. It has already scuppered the raising of funds from venture capitalists and an AIM flotation.
The conflict raises a number of issues, which other manufacturers are watching with concern and interest. If the case is ruled in favour of the defendant, it will still be the loser: a British employer left to count the cost of a trial, and whose doors may have to shut to pay off huge legal fees. The winners could be countless other manufacturers and systems providers who, now holding their breath, feared they, in all probability, could be the next target.
In the event of a successful result for the plaintiff, then there are fears that the losers could be many, many more. And some of those could end up switching off the factory lights for the last time.