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Consider a common situation.

A patent troll owning US patents finds a fresh target, decides to threaten it, his lawyer looks up the company address and surprise! it's not in the US. Let's say it is EU-based, say in the Netherlands, or perhaps in Hong Kong. His next step?

The company does not sell a product to US customers, but is purely online service free of charge for end-users, earning through advertisement.

Would the patent troll go to a US court and attempt to sue an overseas company? Knowing the company would most likely ignore any ruling since it is only subject to their local laws? The nature of the company does not imply anything illegal or immoral.

Btw, does being hosted in US change anything or it is the incorporation location that only matters?

P.S. It is not an attempt for a US-resident to hide from US courts. I'm not based in the US in the first place and incorporating in US is certainly not the first choice when it comes to it.

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2 Answers

up vote 5 down vote

It doesn't matter where your company is. What matters is where you do business.

Generally, you can only be sued for infringing a U.S. patent if the infringement occurs in the United States. The relevant law is 35 USC 271(a).

If you:

  1. don't sell any products to customers in the U.S., and
  2. don't have any servers in the U.S.

then it will be difficult to sue you for infringing a U.S. patent.

More importantly, it is rare for a startup to get sued for patent infringement unless that startup is very successful. If you don't make that much money, then it is not worth the attorneys' fees to sue you.

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up vote -4 down vote

You definitely can be sued in EU, although technically it will be hard and expensive.

You should look into something else. You may want to set up an offshore legal entity and licence this technology to your company in EU for a fee, but make sure you personally are not listed as this offshore company's founder, and that the offshore company does not have assets that can be taken away if it comes to the lawsuit.

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But that would require me to assign my IP to that offshore company? What if I wish to personally keep my IP? License it to the offshore company which will license it to the EU company? – borr May 14 '12 at 23:10
If you personally hold your IP (although you say a US company holds it in US), you will liable with your personal possessions if it comes to a lawsuit. If an offshore company (e.g. in Panama, Belize etc) holds IP and you only license it, the IP holder will be sued. But if you are not an owner of this company and the company itself has no assets, the party suing will pretty much not be able to get anything, but you EU-based company will not be hassled. But consult a lawyer before you do this. – mvbl fst May 14 '12 at 23:16
If you gift the IP to an offshore company which you don't "own", but somehow control, then you'd be in a bad shape if the original IP owner went after your arms-length company. It is no good to say you still magically "own" the IP after all, and do it all again. Either you own it or you don't. – Steve Jones May 15 '12 at 7:04
"although you say a US company holds it in US" - I never said that. Please read the question. – borr May 15 '12 at 7:08
@Steve Jones: I'm sorry I can't make sense of your comment. – borr May 15 '12 at 7:09
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