Apple Inc. (NASDAQ: AAPL) was targeted yesterday by a lawsuit filed in Marshall, Texas by Hilltop Technology, a firm claiming intellectual property rights over capacitive type touch panels.
These panels are well known to consumers as the touchscreens used on iPhones and iPads, plus numerous smartphones and tablets manufactured by other firms. Hilltop is a domestic LLC based in Texas, featuring Quey-Len Shang as its managing member. Apple has not issued any statement regarding the litigation directed against it.
Hilltop Technology, LLC, is a firm that has never produced or licensed a product incorporating a capacitive type touch panel. In fact, it has no tangible products whatsoever. It was founded in June 2013, and began lawsuits against three technology companies in September 2013. Touch Revolution, Wintek, and AU Optronics Corporation were all targeted with identical lawsuits stemming from their alleged violation of U.S. Patent 7,864,503, the same touch panel patent now being used against more prominent quarry – Apple, Inc. (AAPL).
Non-Practicing Entities or NPEs, known more informally and perhaps pithily as “patent trolls,” are companies formed solely for the purpose of initiating lawsuits against other firms which actually design and manufacture products. There are currently well over 700 NPEs in existence, with a collective total of lawsuits filed that has climbed to over 32,000. Though “patent trolls” have existed since the mid-1980s, the phenomenon has gained most of its traction since 2000, spurred by the explosive growth of the technology industry.
Google Inc. (NASDAQ: GOOG) and Apple Inc. (AAPL) are essentially tied for the dubious distinction of being in first place as targets for the legal activities of non-practicing entities. NPEs now account for 61 percent of all patent-related litigation, according to Reuters, an increase of 377 percent from the 23 percent of lawsuits initiated by such companies in 2008. An even larger number of claims are settled before the courts become involved.
Though many view NPEs as a purely disruptive force designed mainly to extract money from successful enterprises, others defend them as a mechanism guarding the rights of inventors too poor or too lacking in legal knowledge to defend their intellectual property. Technology companies themselves are highly litigious, as the ongoing brawl between Apple Inc. (AAPL) and Samsung (NASDAQ: SSNLF) attests.
The latest action against Apple is just one of 2014’s most prominent early NPE lawsuits, which, if previous history is anything to go by, will cost U.S. software companies over $29 billion in direct expenditures during the course of the year, and much more in terms of lost productivity and internal resources diverted from production towards legal defense.
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