GTX Corp is threatening to sue a Russian developer. He is accused of violating a patent for one of the main mechanics of freeplay – the creation and sale of in-game currency. The plaintiff is ready to solve the problem in a pre-trial manner for money. To what extent this is a common situation and what a lawyer advises in such cases to do, – I understood App2Top.ru .
The story became known yesterday, February 22, from the then-open post of the general director of the Russian studio*.
update: *We met the studio halfway and removed her name from the publication so that the available material would not create additional potential difficulties for her in the legal field.
In his post, its director said that his studio received a letter some time ago. It reported that his company violated a patent that was registered in 2000.
What is the essence of the patent that the studio “violated”?
Patent number US 7177838 B1. Its full name is “Method and device for making electronic commercial transfers using electronic tokens”. It describes the principle of selling content using digital currency:
“Electronic tokens are issued and maintained by a supplier who also provides products and services that can be purchased or rented with their help. Electronic tokens can be purchased from the seller online (…) Since the supplier is the issuer of electronic tokens, there is no need for transactions to be processed by a third party, such as a bank or other organization. (…) The seller fully controls the price of electronic tokens.”
As its director notes in the post, today this principle can be applied to all digital content distributed using the frituplay model.
Initially, the patent was registered by PayByClick Corp, but now it is assigned to GTX Corp, an American holding company specializing in GPS tracking.
How did it happen that the studio is being sued?
After the company received a letter about patent infringement, he and his lawyers drafted a letter in which he rejected GTX Corp.’s accusations. His position was that the in-game currency, which is present in the company’s games and which is bought for real money, does not fit the definition of tokens from the patent.
The plaintiff compared the answers with the official Terms of Service of the developer (they are always offered for review before the first launch of the product), which have not been updated for a long time, according to the director of the studio, and found contradictions. Thanks to this, the plaintiff was able to challenge all the points of the answer and threatened to sue the developer if the company did not pay several tens of thousands of dollars.
What is the studio going to do?
In his Facebook post, the developer asked colleagues for advice, but already in conversation with App2Top.ru he admitted that his company is not going to pay the money. It’s not about the amount: according to him, the requested money is insignificant for the studio.
“Our position is principled, we are not going to feed patent trolls under any circumstances,” the studio director said. The developer is ready to go to court.
“We believe that if their claims are justified, then all free–play games would have to pay royalties, and if this is not the case, then they just troll us and take fright,” our interlocutor notes.
To what extent is patent trolling a common practice?
This kind of trolling is relevant, among other things, for “legal systems that have historically been famous for the level and elaboration of legislation and practice in the field of intellectual property, such as the United States,” he said in an interview with App2Top.ru Vladislav Arkhipov, Advisor to the international law firm Dentons and Associate Professor at the Faculty of Law of St. Petersburg State University.
According to him, trolling occurs “when the rights to a certain object are protected, described in a terminology that seems to balance on the edge of specifics and can be applied to a wide range of technologies used.”
As an example, Arkhipov cited the story of US patent No. US 7181690 B1 – “A system and method that allows users to interact in virtual space.”
“The specific description was suitable for almost all MMORPGs. According to publicly available data, the patent troll has been trying to benefit from it with varying success since 1996, turning to various gaming companies, but stopped trying after a trial with Blizzard in 2014 over World of Warcraft,” Vladislav notes.
As for the patent, which the Russian developer was accused of violating, in May 2009 Apple, Amazon, Ebay, Best Buy, Barnes & Noble, as well as a number of smaller companies were accused of violating it.
In September of the same year, without explanation, the lawsuits against Apple and Amazon were dropped. Whether this is due to the fact that the companies paid an unspecified amount to the plaintiff, in whose role PayByClick Corp was then acting, is unknown.
How to protect yourself from a patent lawsuit?
“Patent trolling is a phenomenon that almost no one is immune from,” says Arkhipov.
Therefore, it is not surprising that many industrial experts, under the post of a Russian developer and under the reposts of publications in specialized groups, said that the most reasonable thing was initially not to respond at all to the first letter from GTX Corp lawyers.
What should I do if a patent claim is filed?
Vladislav Arkhipov advises to approach the matter very carefully.
“It is strongly recommended to determine the strategy and tactics of resolving the situation with the patent troll with a lawyer specializing in patent disputes, admitted to practice and having experience in the jurisdiction where the patent is granted.
Our American colleagues recommend in such cases, first of all, to assess the risks by analyzing court cases involving a patent troll and about this patent.
If suddenly, for example, it turns out that a lot of disputes were conducted with respect to the patent and most of them were resolved either in favor of the alleged troll, or ended in a settlement agreement – it’s bad. This means that the patent holder still has separate arguments in his favor, which the courts consider reasonable (as a rule, a third party cannot find out about such arguments in advance due to the confidentiality of settlement agreements).
Further, the strategy depends on the integrity of the “victim”, his idea of the persuasiveness of his own arguments and his willingness to bear serious expenses for lawyers of another jurisdiction.
In some cases, depending on the circumstances, it makes sense to contact the representatives of the patent owner with the help of a lawyer and hold negotiations, the subject of which will be, firstly, the amount of the license payment, and secondly, the terms of the license agreement and the accompanying waiver of the claim.
Often, such patent holders act according to the same scheme that, at least, cybersquatters used to act: the amount of deductions required is lower than the potential costs of a serious trial, respectively, it is more economically advantageous for the other party not to get involved in a case with unclear prospects, but simply to pay. It is important to correctly determine the conditions of interaction with the patent holder, excluding subsequent claims, so the assistance of a lawyer is recommended even when deciding on payments. This is exactly what the patent trolls from the USA are counting on, since the cost of conducting a dispute there is much higher than in Russia or in continental Europe.”