There are two reasons for the sharp uptick in the number of patent claims against PR firms. First, there has been a significantly increased amount of digital-based work that PR firms are doing for their clients. Second, there has been an increase in the number of companies aggressively using patents in the digital age. If an infringement claim has yet to happen to your firm, consider yourself lucky. In fact, this author has handled no fewer than 10 such claims for PR firms in the last six months alone.
A patent typically protects a new invention and grants a 20-year monopoly to its owner, preventing others from using or exploiting it. There are also business method and software patents. These protect methods of doing business or software processes. Sometimes such patents extend to what PR agencies consider basic website functionalities.
In many cases, PR firms have been targeted because their communications work typically includes building digital channels for clients, such as websites and social media platforms. PR firms may unwittingly be infringing on one or more software or business-method patents when they perform these digital services for clients.
A “patent troll” is a company that buys patents solely for the purpose of asserting them against other companies to turn a quick profit. Why are patent trolls using software and business-method patents with such increased frequency? They can easily assert the same claim (or bring a lawsuit) against a large group of companies whose websites or digital platforms contain the same technology that they argue is covered by their business-method or software patents. Therefore, a patent troll has the chance for a large aggregated recovery, even if it only receives modest settlements from individual firms.
There is nothing a PR firm can do to completely prevent patent trolls from asserting claims against them. There are simply too many patents issued (over 8 million today). There is no way to practically search for all potentially infringing patents before a PR firm, for example, uses a business method or software code in building a website. Moreover, the uncertainty and high costs associated with patent litigation have made insurance for infringement claims extremely costly.
However, there are three steps your agency can and should take in order to keep claims against your clients from negatively impacting your balance sheet:
- Review with legal counsel the indemnification provision in your current form of agency-client agreement, including in any specialized contracts and riders for website development.
- Resist the assumption of liability for patent infringement claims in the indemnification provisions. While this issue may have been of little concern for PR firms a few years ago, the landscape has changed dramatically. To the extent an agency is forced to assume such risk, however, it should try to limit liability, such as with a total monetary liability cap on patent damages.
- If you must, your firm may assume the risk of indemnifying a client concerning allegations of patent infringement, but in doing so you should make sure that the fee for services is sufficient to cover the contingent liability.
The cost to a PR firm of defending patent infringement claims against its clients can be significant, especially in light of the increasing number of “troll companies” whose entire business model is to purchase patents they can use to sue other companies. These types of claims are typically not covered by insurance, so the potential financial impact can be substantial. Acknowledging this new reality is the first step toward minimizing the effect these modern-day trolls can have on a PR firm today.
Michael Lasky is a senior partner at the law firm of Davis & Gilbert LLP, where he heads the PR practice group and co-chairs the litigation department. He can be reached at email@example.com.