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Fighting transparent patent infringements
CONTRA VISION, ENGLAND, is a small licensor of one-way see-through graphics technologies, located near Manchester. Roland Hill, founder and Managing Director of Contra Vision Ltd., is very familiar with painful patent experiences – and how one can effectively battle patent infringements.
Roland Hill, Contra Vision: "I now know that any successful invention will be infringed!"
Inventors of ingenious ideas that depend on basic technologies can bet on being ripped off – even with intellectual property in place. Take Roland Hill for example. In his 20 years in the business of one-way vision, he has seen companies infringe his patents, had licensees refuse to pay royalties and has been involved in half a dozen litigations involving patent infringement.“ I now know that any successful invention will be infringed,” he says.
From invention to prevention
Mr Hill is a civil engineer by training. He set up Contra Vision Ltd. in 1985 after designing and developing the world’s first squash court with four unobstructed one-way vision walls for televised competitions on behalf of the UK engineering firm Campbell Reith & Hill, where he was a partner. He also invented the squash court wall material, made of acrylic plastic sheets that allowed live audiences and television viewers to see into the court, while players inside the court saw only white walls. Sensing that the technology could be improved, Mr Hill then invented seethrough graphics panels and methods of making them: panels which could be applied to many fields. In 1993, Mr Hill resigned from the engineering firm and bought the patents from his fellow partners, who shared their ownership and a stake in licensing them.
Today, Contra Vision Ltd. is an intellectual property company which licenses its patents, trademarks and proprietary know-how related to its one-way see-through graphic panels.
The team includes just seven staff members, and many functions are outsourced. For example, the manufacturing work for its direct sales of windscreen visors on construction vehicles and the more than 800 advertisement campaigns it has supplied for a telecommunications company’s phone booths are done out of house. Universities supply some research and development work. Outside patent attorneys play a key role too.
Contra Vision is profitable with £1.9 million in sales through licensing royalties from companies such as 3M in the US and Japan’s Toppan Printing, and through direct sales to companies such as Volvo in Europe and Kawasaki in the US. Contra Vision owns 150 patents in 12 families, as well as various trademarks. Currently, it earns royalties from 25 licences. It has one in-licence. The company has received numerous awards including the Prince of Wales Award for Innovation and Production.
Two decades of progress, however, have been marked by serious challenges – with patent infringement chief among them. These infringements have proved costly and time-consuming and, indeed, have affected the way the company operates. In fact, few companies better illustrate what small companies are up against when licensing out fairly basic technologies in international markets.
Contra Vision is in the business of managing IP. Battling patent infringement makes up a significant part of the work. Mr Hill spends a third of his time dealing with this issue, while an in-house lawyer spends half her time on it. In addition, lawyers are employed in various markets and Mr Hill does not shy away from using the best ones he can find – even if it means paying as much as £500 an hour. Roughly £250,000 a year is budgeted for IP protection, exploitation and defence.
A case example illustrates the risks
Mr Hill has good reason to be so zealous. Contra Vision’s troubles with patent infringement started with one of its very first licensees, and the story illustrates the intricacies of licensing patents, the risks and the costs. Contra Vision had exclusively licensed its technology to Company A, a huge US-based multinational. (Contra Vision does not name companies with which it has, or which are relevant to disputes.) For the first two years, Company A had no sales related to the licence in North America and only small sales in Europe. Then, three years after signing the licensing agreement, Company A withdrew from it. Fortunately, a friend with experience in licensing had advised Mr Hill to include an upfront sum, minimum royalties each year and a termination fee in the licensing contract.“ If we didn’t have any one of those three things, we wouldn’t be here today,” says Mr Hill. Then the infringement problems started.
While holding the exclusive licensing agreement, Company A had granted two exclusive sub-licences in the US, for which it had not asked permission. When Company A ended its licensing agreement, it persuaded Contra Vision to take over these sub-licensees by offering a $50,000 incentive, in addition to the agreed upon $50,000 termination fee.“ It was the worst decision I ever made,” says Mr Hill.
Not long after taking on the sub-licensees, one of them, Company B, an SME in America, stopped paying royalties on the licence. Its owner explained that he had cash flow problems and would resume payments soon. He did not. Contra Vision’s lawyers advised Mr Hill to terminate the contract and sue for the $45,000 in outstanding royalties. He did, but much to his surprise, Company B counter-sued, arguing that the two patents it had licensed from Contra Vision were invalid.
Eventually the two companies settled out of court, but not before Contra Vision had the validity of the two patents confirmed by “reexamination” in the US Patent and Trademark Office and racked up half a million dollars in legal fees. Although IP insurance covered it, there were other costs as well, such as Mr Hill’s time and the efforts of his employees.“ It saps the energy of a company,” he says.
Worse, the story did not end there. As part of the settlement, Contra Vision re-licensed the technology to the same company, resulting in further non-payments and ultimately more litigation and another $150,000 or more in legal bills. This time a US judge ordered Company B to pay $250,000 in unpaid royalties. It filed for bankruptcy instead. This incident is just one of many.
Disputes are costly
Small companies can only afford to fight so many of these battles. Contra Vision sets aside cash for disputes, but they are costly even when they do not go to court. For example, it burned through £100,000 in eight weeks battling a group of patent infringers in the UK before settlement. In some cases, it cannot do more than point out the infringement and hope for the best.
Such hope is often unwarranted. Mr Hill has been shocked to discover how some managers at offending companies have treated its patent violations. A large automobile manufacturer in the US, for example, infringed upon Contra Vision’s patent in an advertisement it ran on the side of its headquarters and also violated a supply agreement to source patented products from Contra Vision or a nominated licensee. When Mr Hill confronted the company’s head of IP, showing him a picture of the advert and the supply agreement, the man first denied the validity of the agreement, then questioned the signature appearing on it from one of the car maker’s employees and, when that failed, claimed the advert was not necessarily theirs – even though it was for one of the company’s cars and was displayed on its own building. Indeed, the manager had boasted earlier during the same meeting about how the advert had been so successful that it had practically stopped the traffic.
In some cases Mr Hill has gone over the heads of these managers. He writes letters directly to the CEO “shaming” him or her into acting more honourably by pointing out how the infringement violates the company’s stated values. This has resulted in at least one CEO of a multibillion dollar US company writing back and saying he hoped to reach a settlement. They did. Then again, in the case of the car maker, Mr Hill has written numerous letters since that initial meeting, but has so far received only one letter back, asking for clarification about the sum being sought.
To stave off future infringements, he has turned to more proactive measures, such as marketing the fact that the company is the owner of a relevant patent for a particular product and is prepared to defend it. At one trade show, Contra Vision featured a floor to its booth with a list of patent claims that at the time were being infringed – all in bright red ink.
An unexpected discovery
In one case, Contra Vision’s relationship with a large US-owned multinational, Company D, helped it out of a jam. Mr Hill was riding in a taxi in London one night when he saw a phone booth advertisement clearly using his company’s patented technology without paying for it. Mr Hill asked the driver to pull over. He took some photographs.
As luck would have it, the next day he had a meeting with American Company C responsible for posting the advert, a multibillion-dollar media business. He mentioned the infringement during the meeting, but it got him nowhere. He says that a company manager told him that Contra Vision was not getting their business and that the company depended on their suppliers to avoid IP issues.“ That’s when we started litigating,” says Mr Hill. As it turned out, Company D owned another patent also being infringed, which it had licensed exclusively to Contra Vision for such products.
This fact gave Contra Vision unexpected leverage when negotiating with lawyers representing at least one of the parties in the infringement case, a print broker who supplied advertisements to Company C. In this instance, Contra Vision had also notified a large British telecommunications company, which had given permission to the media Company C to advertise on the phone booths. A letter from Contra Vision’s lawyers made it clear to Company C that they were also infringing. In addition, during a meeting Mr Hill told the print broker’s lawyers about multinational Company D’s patent and that it was in-licensed by Contra Vision.“ You could just see their faces drop,” he says.
Ultimately, Contra Vision settled the dispute. But Mr Hill says he was lucky.“ If the large media Company C had counter-sued, we’d probably be out of business.” Contra Vision received no direct payment from the big companies involved. However, it did get a promise to end the infringement and also indirectly received compensation in the form of new business. One of the printers agreed to license the patents from Contra Vision.“ We have found that such adversarial or assertive licences can be converted into co-operative relationships,” says Mr Hill.“ In any case, they are generally preferable to the expenditure of ongoing litigation.”
Check the strength of the case before litigation
Inventors tend to think of licensing as a failure, explains Mr Hill, but despite his experiences with patent infringement and some troublesome licensees, he still thinks it a good option. He cautions that inventors should wait until a patent is published internationally before publicising it. Most importantly of all, small companies planning to fight infringement cases should be sure they are right about their claims.“ So many people get caught up in litigation in the blind wish to believe they’re right,” says Mr Hill. “I would be absolutely certain of the strength of your case. If you’re right, the other side will want to settle. If you’re not, it’s a very quick route to your company disappearing.”
Product facts
Contra Vision panels are made of a transparent material with a design or colour visible on one side, and a seethrough view from the other side. This technology is used in more than 400 product applications in industries including advertising, architectural, automotive and security industries. The product can be seen as advertisements on shop windows, buses and payphone kiosks in major cities around the world. The technology is also used in areas that go unseen, such as in covert observation operations in airports.
Company profile
Contra Vision Ltd. has over twenty years of experience in inventing, licensing and selling one-way vision and other vision control products. Continued innovation and investment in intellectual property has helped to establish Contra Vision as the market leader in see-through graphics technology.
Staff: 7
Key product: One-way and other see-through graphics technologies.
Customers: Licensing: 3M and Toppan Printing.
Direct sales: Volvo and Kawasaki.
Contra Vision Supplies Ltd. (CVS)
Cambridge House
37 Bramhall Lane South
Bramhall, Stockport,
Cheshire SK7 2DU
UK
www.contravision.com
IP background
Patent protection: 150 patents in 12 families.
Patent filing order: US first and then the PCT. It sometimes files first in the UK if addressing a particular market.
Department: Contra Vision is an IP management company. It has an in-house lawyer and uses external patent attorneys for patent matters and other lawyers for enforcing licences and IP.
Budget: £250,000
Success factors: First mover advantage and attention to IP issues.
Challenges: Cost of patent translations and legal fees. Cost of fighting infringement.
Recommendations: Inventors should consider licensing instead of manufacturing their inventions. They should also be sure they are right before making infringement
claims.
Contact
European Patent Office
Erhardtstr. 27, 80469 Munich, Germany
Tel.: +49 89 2399 4636
E-mail: sme@epo.org
www.epo.org
The UK Intellecutal Property Office
Awareness, Information and Marketing Team
Concept House , Cardiff Road, Newport,
South Wales NP10 8QQ, United Kingdom
Tel.: +44 1633 814768
E-mail: marketing@patent.gov.uk
http://www.ipo.gov.uk/