The patent wars reach Australia: Telstra sued by British patent company over alleged infringements

A British company is suing Telstra for patent breaches, accusing the telco of misusing patents related to technology allowing users to make purchases with mobile phones while overseas.

However, experts in Australia say Upaid Systems, the business which is targeting Telstra, is “unusual”, and unlike similar companies which gather patents and generously pursue litigation against alleged infringements.

Such companies are generally given the unflattering term, “patent trolls”, associated with their hunger for legal action against companies using their patents without permission. The tech industry in the United States is rife with patent-based litigation.

But as TressCox partner Alistair Little explains, Upaid differs from many of these companies by claiming to have developed technology in-house.

“There is suggestion made that Upaid has not actively tried to exploit its patents. They sit on their patents,” he says.

“It has an unusual business model which appears to be that it waits until someone uses the patent and then they either come to a licensing arrangement, or if they can’t come to an agreement, litigation is commenced,” he says.

On its website, Upaid says “a necessary aspect of our business is enforcement”.

“We do not shy away from that,” it says.

Upaid Systems has more than 35 patents which have been granted in more than 25 countries.

The company filed documents in the Federal Court yesterday claiming Telstra is infringing two of its patents by charging customers who are roaming overseas and purchase goods through Telstra’s Bigpond portal. Another patent covers sales of certain services to prepaid customers.

Upaid said in a statement chief executive Simon Joyce invented the technology which allows mobile phone users to conduct business with a large number of merchants.

“Companies that build their business on intellectual property that they do not own or license do so at the peril of their stakeholders,” Joyce said in a statement.

“Upaid has invested a great deal in defending and enforcing its patent portfolio. As a result, we are well prepared to move expeditiously and expect to prevail,” he says.

Traditionally, businesses which operate as “patent trolls” buy patents rather than inventing the technology behind them and then turn a profit through litigation.

In a regular technology business, the company would try to actively use and commercialise the technology it creates.

A statement from Upaid says it’s recently tried to negotiate a licensing agreement with Telstra for using the technology and alleges Telstra was aware of the patents as early as 2004, but the parties were unable to come to an arrangement.

SmartCompany contacted Telstra this morning but received no response prior to publication.

In comments given to The Australian Financial Review, Telstra said it was “disappointed” Upaid had refused its offer of good faith discussions and decided to proceed with legal action.

Upaid is seeking payment for past damages and injunctions restricting the use of the technology.

Little says it’s difficult to predict just how much Upaid would be awarded should it be successful, but there is scope for winnings in the millions. .

“In Australian patent cases that are punitive, exemplary damages tend to be smaller than in the United States.”

“When awarding damages which are compensatory, the court works out what profit Telstra gained from the technology, or if this isn’t possible or it’s not an appropriate figure, the damages would be based on what a commercial licencing arrangement between the companies would have been,” he says.

Little says should the case be successful, there is a chance other Australian telecommunication companies could be targeted.

“Exactly what the patent is for is not clear, but it certainly looks generically like something which is broadly utilised, so there could be a real risk of other law suits.

“Upaid could have decided by going for someone at the top of the tree there could be a trickledown effect to other phone companies and the like, which could make others inclined to sign a licensing agreement,” he says.

This isn’t the first patent case pursued by Upaid. It began proceedings against NTT DoCoMo in Japan earlier this year and in 2005 targeted US companies Verizon and Qualcomm. Both companies are now in licensing agreements with Upaid.