Sonos is a clear American success story. It has grown into a multi-billion-dollar audio business, with a well-recognized brand, and products loved by millions of consumers.
In the process it has done what so many U.S. businesses have done before it; developed market-leading technology and protected its technology with a strong portfolio of intellectual property. And yet, despite all of that, it’s still not enough.
That’s because over the last fifteen-plus years, intellectual property rights have been eroded in the U.S., allowing Big Tech companies to ride roughshod over U.S. government granted patents and drag innovators into long and costly litigation. It’s a dynamic that poses a serious threat to the innovation lifecycle.
As an example, Sonos, a pioneer in connected speaker technology, has been seeking to protect its hard-earned innovations from infringement by Google since early 2020 when it sued the tech giant for patent infringement.
Sonos’s CEO admitted at the time that the company had been left, “with no choice but to litigate in the interest of protecting our inventions, our customers, and the spirit of innovation that’s defined Sonos from the beginning.”
As well as filing cases in U.S. district court, and in Germany, Sonos brought a case at the International Trade Commission (ITC), a Washington D.C.-based quasi-judicial federal agency that handles trade-related disputes, which, among other things, adjudicates patent infringement cases. Recently, the ITC upheld an earlier decision that Google had infringed five Sonos patents and issued an exclusion order preventing the importation of those Google products that have been found to infringe Sonos’s IP.
To the casual observer you might think that would be the end of it but, despite Sonos insisting that Google infringes more than just the five patents in the ITC case, Google has already put in place software to remove some of the infringing features in its own products. So, instead of taking a license to its rival’s IP, which it has now been found to infringe, Google would rather continue to hold out than pay to use Sonos’s patented technology.
This problem of patent holdout has become a growing scourge to American innovation as it forces a company like Sonos to divert dollars that might have gone into R&D into the kind of expensive, high-stakes litigation that few American innovators can afford. A district court case can cost several million dollars, and a case before the ITC is even more expensive, in addition to the cost and added complexity of additional global lawsuits that are increasingly necessary to get infringing companies to pay fair value for the use of innovators’ technologies.
Sadly, a growing number of innovators have been forced to pursue this kind multi-jurisdictional strategy, because hold-out behavior is not effectively discouraged by the U.S. system.
The result of a 2006 Supreme Court decision has made it virtually impossible for an innovator to be awarded an injunction against an infringer in a district court case. Without the threat of a sales ban, companies like Google can simply opt to infringe a rival’s IP globally, all the while knowing that the sternest penalty it is likely to face are damages for U.S.-only sales that are a drop in the ocean compared with the billions of dollars of profit that the company earns each quarter, not just from sales in the U.S. but also globally.
If legislators or the courts fail to effectively discourage holdout and offer support to innovators, by, among other things, making it easier to obtain injunctive relief, then leading companies like Sonos will struggle to get fair compensation for their innovation.
And Sonos is not alone. My company, InterDigital, has been a pioneer in mobile wireless technology for 50 years, making key contributions to 2G, 3G, 4G, and 5G-enabled smartphones. Like Sonos we have been forced into litigation by infringers who take the view that it’s financially more efficient to drag us into the courtroom, because ultimately, they believe their worst-case scenario in litigation in the U.S. is paying us what we are already legally obligated to offer them, a fair and reasonable royalty for the use of our patents. And, also like Sonos, we have had to divert money from our R&D that benefits billions of consumers into expensive litigation.
This kind of system only works for serial infringers and high-priced lawyers, not for American innovation.
Robert Stien is InterDigital’s Chief Communications and Public Policy Officer.