Patent Trolls: How To Avoid Being Gobbled Up

Transcription

1 Patent Trolls: How To Avoid Being Gobbled Up Renee L. Jackson Paul B. Klaas Peter M. Lancaster The Dolan Company Vice President and General Counsel Minneapolis, Minnesota Dorsey & Whitney LLP (612) (0) London, England and Minneapolis, Minnesota Dorsey & Whitney LLP (612) Minneapolis, Minnesota J. Thomas Vitt Dorsey & Whitney LLP (612) Minneapolis, Minnesota 1. PowerPoint Contents (available on

2 Patent Trolls: How To Avoid Being Gobbled Up Renee L. Jackson Vice President and General Counsel, The Dolan Company Paul B. Klaas Peter M. Lancaster J. Thomas Vitt Dorsey & Whitney LLP 1

3 Who s a Troll? 2

4 Who s a Troll? The Obvious Ones: Jerome Lemelson The pioneer of trolls 550 patents on bar codes and related technology Over $1 billion in licensing fees Acacia Technologies Over 200 cases filed since 2005 Ronald A. Katz Technology Licensing Over 100 cases filed since

5 Who s a Troll? The Not-So-Obvious Ones: Thomas Edison Over 1000 patents, many never practiced Sold many patents to NPEs The Wright Brothers Licensed inventions because they couldn t commercialize them The inventor of xerography Licensed invention because he couldn t commercialize it 4

6 Who s a Troll? Maybe, Maybe Not: Corporate collector of patents for litigation Sole inventor lacking the resources to start a business or protect his inventions Universities and their researchers Failed or formerly producing product company IP-holding subsidiary of large product company All trolls may be NPEs, but not all NPEs are trolls 5

7 How Big Is The Problem? 6

8 Annual NPE Lawsuit Filings

9 Domination of Patent Litigation by NPEs Different percentages of NPE patent case filings, depending upon who s measuring what: 64% overall 19% when universities and independent inventors are excluded 88% against technology firms 40% of financial services cases 30% of software cases 8

10 If Forced to Litigate to the End, Trolls Aren t Successful In all patent cases, patentees win just 26% of fullylitigated cases Software patentees win just 13% of cases, compared to 37% of other patentees NPEs win just 9% of cases 9

11 Average Patent Litigation Costs (According to 2009 AIPLA Statistics) $7,000,000 $6,000,000 $6,250,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $498,000 $967,000 $1,794,000 $3,109,000 $3,731,000 $0 Less than $1 million at risk $1 - $25 million at risk More than $25 million at risk End of Discovery All Costs 10

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13 Types of Troll Cases 12

14 Types of Trolls and Troll Cases The Kings of Troll Litigation: Acacia Technologies Ronald A. Katz Technology Licensing Millenium LP Plutus IP Sorensen Research and Development Trust US Ethernet Innovations, LLC 13

15 Business Method Trolls: the Bilski Near Miss Four Justices voted to bar all business method patents, and the Court unanimously concluded that a patent on a hedging method was barred because it was an abstract idea But the majority rejected any categorical disallowance of types of patents, including business method patents: Congress plainly contemplated that the patent laws should be given wide scope and contain a dynamic provision designed to encompass new and unforeseen inventions The Court also rejected adoption of any prior Federal Circuit test for patentability: Nothing in today s opinion should be read as endorsing interpretations of [patentability] that the [Federal Circuit] has used in the past. 14

16 What To Do If You Get Sued 15

17 What You Sometimes Have to Accept Plaintiffs choice of venues: the Eastern District of Texas, the Western District of Wisconsin, and Delaware No counterclaims for trolls own actions Imbalanced discovery burdens, because trolls have few documents Imbalanced impact on business, because trolls have no business to disrupt 16

18 What To Do with a Lawsuit After Being Sued by a Troll 1. Don t feel compelled to cave immediately 2. Call your supplier 3. Consider organization of joint defense 4. Consider Reexamination Request Inter partes or ex parte 5. Move to dismiss under Twombly and Iqbal tests 6. Consider trying to force a change of venue 7. Seek early claim construction or summary judgment motion 17

19 The Re-Examination Option PTO grants 92% of reexamination requests But if it does not succeed, or your case does not get stayed... 18

20 Do Iqbal and Twombley Pleading Requirements Help? Bell Atlantic v. Twombly (2007) and Ashcroft v. Iqbal (2009) vs. Fed. R. Civ. P. 84, Form 18, and McZeal v. Sprint Nextel (Fed. Cir. 2007) Plaintiffs allegations must cross the line from conceivable to plausible 19

21 What is false marking? False Marking: A New Species of Troll? Marking an unpatented article For the purpose of deceiving the public 35 U.S.C

22 Forest Group v. Bon Tool False marking statute s plain language requires imposing a penalty on a per article basis Up to $500 per article, rather than $500 for each false marking decision But: District Courts have wide discretion to set the penalty. In the case of inexpensive mass-produced articles, a court has the discretion to determine that a fraction of a penny per article is a proper penalty. Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009) 21

23 Any person may sue The 2010 Explosion in False Marking Litigation As of October 28, 2010, 515 new false marking cases filed since Bon Tool Stauffer v. Brooks Brothers, Inc., F.3d, 2010 WL (Fed. Cir. Aug. 31, 2010) (Section 292 is a qui tam statute, and any person has standing to sue on behalf of the United States) 22

24 Who Are The Plaintiffs? 23

25 Who Are The Targets? Hasbro Electrolux Toys R Us Boeing Procter & Gamble Kimberly-Clark Home Depot Pop Rocks Candy Wham-O The Wiffle Ball Corporation Glock 24

26 How Can Your Company Avoid a False Marking Suit? Most of the suits involve expired patents Check your products, and call your lawyer 25

27 What Is the Real Exposure? Even a fraction of a penny per article piles up fast Wham-O millions of Frisbees Solo Cup billions of plastic cups We don t really know Very few results yet 26

28 How Do You Defend False Marking Claims? 1) Standing challenge Federal Circuit has rejected (Stauffer v. Brooks Brothers) 2) Constitutional challenge 3) Motions to dismiss Role of Fed. R. Civ. P. 9(b)? 4) Motions to transfer venue 5) Quick settlements 6) Defend the merits 27

29 Judicial or Legislative Solutions 28

30 Judicial Patent Reform ebay v. MercExchange (2006) - Injunctions are not automatic, and are unlikely for NPEs MedImmune v. Genentech (2007) Defendants can more easily choose a venue KSR v. Teleflex (2007) Broader challenges to obviousness are available In re Seagate Technology (Fed. Cir. 2007) Enhanced damages and attorney fee awards made less likely Quanta Computer v. LG Electronics (2008) Recovery against manufacturer exhausts rights against downstream purchasers In re TS Tech USA (Fed. Cir. 2008) Transfer ordered out of Eastern District of Texas Lucent v. Gateway and Microsoft (Fed. Cir. 2009) Entire market value rule qualified in vacating $360 million award 29

31 The Problem ebay Addresses NTP v. Research in Motion $600 million settlement to inventor-owned NPE following injunction that threatened to shut down Blackberry service 30

32 ebay There is no bright-line rule: Court rejects the district court s general rule that not practicing the patent may be sufficient basis to deny injunction Court also rejects the Federal Circuit s general rule that an injunction follows determinations of validity and infringement Court holds that injunctions in patent cases should be judged by the traditional four-part equity test 31

33 The ebay Concurrence that Enemies of Trolls Cherish An industry has developed in which firms use patents... primarily for obtaining licensing fees. For these firms, an injunction... can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. [Such] an injunction may not serve the public interest. In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test. 32

34 Will Congress Stem the Tide of False Marking Cases? Congress is considering: Eliminating qui tam plaintiffs, by requiring that the plaintiff suffer a competitive injury Reversing Bon Tool, and limiting fine to $500 per decision H.R. 6352; H.R. 4954; S

35 Comprehensive Patent Reform 34