This article by
Bob Ambrogi, of
IMS Expert Services, reports on three particular cases making their way through the U.S. court
system and the U.S. Congress might finally be the death knell for the patent trolls' despised
practice. "A patent troll, also called a patent assertion entity (PAE), is a person or company
who enforces patent rights against accused infringers in an attempt to collect licensing fees,
but does not manufacture products or supply services based upon the patents in question, thus
engaging in economic rent-seeking. Related, less pejorative terms include patent holding company
(PHC) and non-practicing entity (NPE)." -
IMS ExpertServices periodically sends me
e-mails that highlight recent key court cases that can significantly affect the effectiveness
of expert testimony, both for the plaintiff and for the defendant. I have no official affiliation
with them other than to gratefully accept an invitation to repost articles I consider beneficial
to RF Cafe visitors.
Robert Ambrogi on February 18, 2014
We’ve all heard the fairy tale of the “Three Billy Goats Gruff,” who outsmart the bridge troll
who threatens to gobble them up and live happily ever after. If life imitates art, then 2014 could
be the year in which three legal billy goats toss patent trolls off the bridge once and for all.
The first of these billy goats, making its way through the U.S. Congress, is legislation that
is designed to curtail frivolous and abusive lawsuits by patent trolls. The Innovation Act of
2013, introduced by House Judiciary Committee Chairman Rep. Bob Goodlatte (R-VA) and co-sponsored
by a bipartisan coalition, passed the House in December by a vote of 325-91 and is now making
its way through the Senate.
The second billy goat is a case to be decided by the Supreme Court, Alice Corporation Pty.
Ltd. v. CLS Bank International (docket number 13-298). It presents the muddy issue of when software
may be patented. Its outcome could make or break a range of patent lawsuits, including many by
so-called patent trolls.
The final goat is the possible expansion of a U.S. International Trade Commission pilot designed
to thwart patent trolls’ use of the ITC complaint process to block imports of allegedly infringing
products. Some industry experts predict the ITC will expand this pilot in 2014 to a wider range
In Congress, Curtailing Abusive Lawsuits
Robert J. Ambrogi is a Massachusetts lawyer who represents clients at the intersection
of law, media and technology. A news media veteran, he is the only person ever to hold the
top editorial positions at the two leading national U.S. legal newspapers, the National Law
Journal and Lawyers Weekly USA. He is also internationally known for his writing
and blogging about the Internet and technology.
In the fairy tale, it was the biggest
goat that finally did in the troll. If the Innovation Act becomes law, it could be that biggest
goat. The Electronic Frontier Foundation calls it “the best patent troll-killing bill yet.” Among
its key components are provisions that would:
Require greater specificity in lawsuits. The bill would require patent holders to provide more
specific details when they file a lawsuit, explaining the patents and claims at issue and the
products that allegedly infringe them.
Require losing plaintiffs to pay. The bill would make it easier for a defendant in a patent
lawsuit to recover the legal fees and costs associated with its defense.
Enhance transparency. The bill would require patent owners to reveal the identities of anyone
who is a “real party in interest” – those who have a financial interest in the outcome of the
litigation. In some cases, if the plaintiff is a shell company, the real party in interest could
be forced to join the litigation.
Delay discovery. The bill would delay discovery until after the court has completed its legal
interpretation of the patent, avoiding discovery in cases where the claim has no legal merit.
Protect customers. The bill would block lawsuits against the end users of a product when the
manufacturer is already defending the patent.
The bill also faces opposition from outside Congress. Smaller businesses and individuals who
own patents fear it will unfairly restrict their rights to protect their patents. Others say the
bill would interfere with judicial oversight of patent litigation.
At the Supreme Court, Assessing Software Patents
At the Supreme Court, meanwhile, the legal billy goat is the Alice Corporation case, where
the outcome could effectively shut down a significant percentage of patent troll litigation. The
issue before the court is whether a computer-implemented invention is a “process, machine [or]
manufacture” eligible for patent protection under federal law or an ineligible “abstract idea.”
The case resulted in a severely fragmented ruling by the en banc Federal Circuit Court of Appeals,
with six separate opinions and no majority agreement on any key issue. As the lawyers for Alice
Corporation said in their petition for Supreme Court review, “The Federal Circuit has left no
doubt that it is irreconcilably fractured.”
Although the case itself does not directly implicate claims of patent trolling, the software
and business patents at issue are the types of patents that trolls routinely invoke. A ruling
invalidating these patents could wipe out the vast majority of these cases.
“Let’s be clear,” Judge Kimberly Moore wrote in her partial dissent in the Federal Circuit
ruling, “if all of these claims, including the system claims, are not patent-eligible, this case
is the death of hundreds of thousands of patents, including all business method, financial system,
and software patents as well as many computer implemented and telecommunications patents.”
At the USITC, Targeting Trolls
The final billy goat is the pilot project launched last June by the ITC that was specifically
designed to curtail frivolous complaints by patent trolls. Under the pilot, ITC administrative
judges make a determination early in a case as to whether a company that sues for infringement
meets the “domestic industry” standard required to use the ITC.
Typically, the decision on that issue has come late in the ITC’s investigation process. By
addressing the issue earlier, within the first 100 days after a complaint is filed, the pilot
aims to weed out claims by patent trolls that exist for no reason other than to sue.
Although the ITC has not formally announced plans to expand the pilot in the coming year, some
industry observers believe it should and will be expanded. “I think it should be applied, to the
extent possible, to every case where compliance with the domestic industry requirement is challenged,”
Ropes & Gray partner James R. Batchelder told the news service Intellectual Property Watch.
But others see the ITC program as misguided and unfairly limiting the rights of legitimate
patent holders. Forbes contributor Tim Worstall, a fellow at the Adam Smith Institute in London,
says the pilot hurts the “egghead professor fussing away in a lab” who licenses his invention
to those who can maximize its value.
“The thing is, our patent trolls and our licensing companies are doing the same thing: using
the patent itself to maximize the financial value of it,” Worstall writes. “And one set of actions
is entirely legitimate: indeed, we’d rather like to see such division and specialization of labor.
But we’d also like to kill off the trolls who file all the frivolous suits.”
Rather than close off cases at the outset, he suggests, it would be better to move the remedy
to the back end and require the loser to pay all legal fees.
So far in 2014, none of our three legal billy goats has directly confronted the troll that
guards the bridge. When and if they do, it is impossible to know which side will come out the
victor. Even so, for all the patent trolls out there, this may be a time to seek cover. And for
those who have been victimized by trolls, there may be a happy ending after all.
Your turn to weigh in. What is your prediction for the future of patent trolls?
This article was originally published in
a newsletter distributed by IMS ExpertServices™.
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