Storage Lawsuits: Will You Foot the Bill?

Consider the potential impact of increased IP litigation on storage customers

May 28, 2008

3 Min Read
Network Computing logo

Intellectual property lawsuits are so much a part of the storage IT scene, it seems odd to think of a world without them. After all, protecting patents is part of doing technology business, isn't it? For end users, there's usually little impact -- right?

It may be time to reconsider these assumptions. As the level of patent litigation quietly escalates and storage becomes central to the functioning of IT, it's likely that sooner or later, storage customers will wind up helping to pay the price of at least one high-profile suit.

For one thing, patent litigation racks up huge legal fees. It is complicated and expensive and typically goes on for years. Cases are tough to win, and when they are judged, follow-up suits are nearly inevitable.

According to a study by PricewaterhouseCoopers, patent litigation has risen along with the number of patents awarded. Over the last 18 years, for example, patent litigation has increased by roughly 6 percent annually. In 2007, 2,896 total patent infringement cases went to the U.S. courts.

Of those, at least two -- NetApp v. Sun and Quantum v. Riverbed -- pertained directly to storage technology. And both remain unresolved, although Quantum has indicated it expects a trial date of February 2009 for its case against Riverbed.PwC study also states that from 1995 through 2007, patent holders were successful 37 percent of the time overall in staking their claims. In the same timeframe, 32 percent of summary judgments were appealed, and 59 percent of those judgments modified or reversed.

Those are tough stats, but even so, there's no slowdown in patent litigation. Despite the costs, despite the risks, and despite legislation being considered to slow down the rate of patent cases, companies are going to court as never before. Indeed, the PwC study indicates that fears of recession are exacerbating the trend: "Although the risks in patent litigation have increased, the damages awards remain significant," state the authors. Winning a patent case can be lucrative; it can also slow down your competition.

That's where you come in. If you read the fine print in your favorite publicly traded supplier's financial reports, you'll see litigation listed as a risk. And while most firms also state that legal fees are not material to earnings, it doesn't take much activity to overwhelm newly public firms. And when the stakes are high, you can bank on high fees and a supply chain effect.

"Most likely, the price would be built in to the cost of doing business, which could impact shareholders," says Greg Schulz of the StorageIO Group.

In this light, it's worth questioning the potential impact of big lawsuits on Sun, NetApp, and others whose revenues are a mixed bag.If shareholders are hit and prices increase as a result, customers will eventually be affected.

On the other hand, patent litigation can pay off handsomely if cases are proven and won.

What do you think? Should patent litigation be legislated more strongly? Do you worry about its effect on your daily IT existence? We'd love to hear from you. We've even created a brand-new poll to gauge your concerns. You can also write to us or hit that message board below.Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.

  • NetApp Inc. (Nasdaq: NTAP)

  • PricewaterhouseCoopers International

  • Quantum Corp. (NYSE: QTM)

  • Riverbed Technology Inc. (Nasdaq: RVBD)

  • The StorageIO Group

  • Sun Microsystems Inc.

Stay informed! Sign up to get expert advice and insight delivered direct to your inbox

You May Also Like

More Insights