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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)." - Wikipedia
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Posted by Robert Ambrogi on February 18, 2014
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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 of matters.
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 BullsEye, a newsletter distributed by IMS ExpertServices™. IMS Expert Services is the premier expert witness search firm in the legal industry, focused exclusively on providing custom expert witness searches to attorneys. To read this and other legal industry BullsEye publications, please visit IMS Expert Services' recent articles. For your next expert witness search, call us at 877-838-8464 or visit our website.
Posted March 21, 2014