Nintendo Goes Tilt Over License

How much value does an idea have - specifically a patented idea? Although always a tough question to answer, one way to maximize your patent's value is to try to find as many licensees as possible. In a recent appeals court case the inventor of a tilt sensitive electronic game controller tried to expand the value of his patent by first licensing a supplier of an enabling technology for his controller (Analog Devices) and then suing the enabled manufacturer (Nintendo) for infringement. Was this a legitimate way to get royalties from each step in the value chain or simply trying to get two companies to pay for the same benefit.

Jordon Jacobs owns a US Patent on a tilt sensitive controller for video games . The claims generally cover controllers with any tilt sensing means. Jacobs sued several manufacturers (Logitech, Microsoft) for direct infringement and also sued Analog Devices charging inducement and contributory infringement since Analog sold tilt sensitive components to the manufacturers. Note that Analog did not infringe directly since its product (a micromachined accelerometer) was not a tilt sensitive controller - just an effective component for an infringing controller.

Analog settled with Jacobs and was granted an "irrevocable, perpetual" license to "...make [and] sell...micromachined accelerometers, for use in tilt-sensitive control boxes." In addition, Jacobs "covenants not to sue Analog" for "any cause of action...by Analog or any other party..."

Having made peace with Analog, Jacobs then sued Nintendo for building a tilt sensitive controller with Analog's accelerometers . Jacob agreed the settlement protected Analog against being sued for direct or indirect infringing activities but argued that the protection did not extend to Analog's customers.

The court held that giving Analog the right to sell its accelerometers for use in infringing tilt-sensitive controllers would be meaningless if Jacobs could effectively prevent Analog from making those sales by suing its customers for using those accelerometers for the very purpose for which Analog was authorized to sell them. The court said Jacobs should not be permitted to do "through the back door [i.e., suing Nintendo] what he cannot do through the front door", i.e., by suing Analog .

Thus, even though an inventor is free to license his invention for whatever value he can negotiate he cannot double the value by demanding both the seller and the buyer pay for the same transaction - that would be "gaming" the system.