Silicon Valley Seeks Answers for Patent Litigation Abuse

Recently I learned that Drinker Biddle & Reath LLP and NERA Economic Consulting are teaming together to co-sponsoring a luncheon on May 8, 2013, at the Four Seasons Hotel Silicon Valley at East Palo Alto to discuss effective responses to patent infringement claims and threats of such claims from patent assertion entities – also known as patent trolls. According to Bob Stoll, former Commissioner for Patents who is currently with Drinker Biddle, “Our program will explore the reasons for the steady — some would say explosive — rise in PAE enforcement practices in recent years and what various categories of the targets of these practices might do about it.”

The reason this luncheon discussion caught my attention was because it cross through my e-mail box at a time when I was already working on updating patent litigation statistics I have accumulated dated back to 1980. See The Rise of Patent Litigation in America: 1980 – 2012.

Certainly there is an increase in the number of patent litigation lawsuits brought, particularly over the last several years. Many want to blame patent wars over smart phones and pretend that they are something unusual, when in fact patent wars over important technologies are hardly new. In fact, there were 600 patent lawsuits brought over an 11 year span relating to the invention of the telephone. See Worldwide History of Telecommunications. Yet, Apple has been involved in 142 patent lawsuits relating to the smartphone since 2006 according to the NY Times.  This should help put into perspective the so-called smartphone patent war problem. The smartphone patent wars are of a much smaller scale and hardly the first battles of their kind. Amazing how telephone technology prospered even with 600 patent lawsuits. The patent nay-sayers would have you believe that is impossible, but we know it happened.

But what is the solution? Do we even need a solution?

The answer to the second question is a resounding YES. Despite the fact that the anti-patent forces ignore history and make claims that are wholly unsupported about the scope and overall problem of patent litigation and patent thickets (which by the way always result in an explosion of technology), there is a troubling problem with really bad actors who seek to enforce specious patent claims against increasingly small defendants. They engage in activity the federal courts has characterized as extortion like, and they do present a significant drag on the economy because they target job creators.

[Patent-Litigation]

Stoll told me that many believe that the escalation in patent litigation is owed to longstanding flaws in the patent system, which bad acting PAEs have become skilled at exploiting.  He believes that ultimately solutions lie in more meaningful patent law and PTO reform. He says that is why “[t]here is much interest in (a) the ‘Shield Act’ that would require a PAE that loses an infringement suit to pay the defendant’s attorneys’ fees and other costs which has supporters and detractors.”  But is there more appetite for patent reform? It seems that there may be, so those that care had better stand up and take notice otherwise by the time you clue in it will be too late to do anything about it.

Stoll also explained to me that the rise in patent litigation is why some are quite interested with the USPTO initiative to require public disclosure of the real-party-in-interest; namely the party that owns the patent. Truthfully, it wasn’t until recently that I started to understand how the real-party-in-interest rules tie into the litigation abuse matter. This will be one important way for district courts to gain information about who owns the patent rights and how they have come to own the patent rights, which could conceivably help identify the truly nefarious patent litigation abuses by those who merely engage in mafioso-like shakedowns. Something has to be done about these shakedowns because they are increasingly hitting small to mid-size companies.

So what is going to be discussed at the Drinker Biddle luncheon? Stoll says there will be discussion of…

[N]ovel applications of (a) Section 7 of the Clayton Act, the “anti-merger” statute, to challenge multiple transfers of patent portfolios from operating companies to PAEs with resulting “massive” aggregations that create both the ability and the incentive of the PAE to engage in exclusionary conduct; (b) Sections 1 and 2 of the Sherman Act to challenge agreements between transferring operating companies and the transferee PAEs that govern the PAEs’ enforcement undertakings and that then result in exclusionary conduct; and (c) Section 5 of the FTC Act, which prohibits “unfair methods of competition” and “unfair or deceptive acts or practices,” to catch a potpourri of other and related abusive practices.

I’m not sure I like the antitrust angle. That is a genie that really ought not be brought out of the bottle unless absolutely necessary. I also worry that some will use this for their own reasons to attack the companies and individuals in the industry that are enforcing valid patent rights rather than focusing on those who are engaging in litigation abuse. However, it is about time that those who are targeted by specious patent litigations stand up and fight back. I have long been an advocate of getting creative, and I am dying for someone to bring a RICO action against those who conspire to shakedown those who are clearly not infringing.

In any event, if you are interested in the Drinker Biddle program the featured speakers include:

• Cynthia Bright, Associate General Counsel, IP Litigation & Public Policy, ?Hewlett-Packard Company
• Michelle Lee, Director, USPTO Silicon Valley Office
• Fiona Scott Morton, Professor, Yale School of Management and former Chief Economist of the Antitrust Division, U.S. Department of Justice

The program is complimentary, will run from 12:00pm to 2:00pm Pacific time, and will also be available via webcast.

For more on patent litigation abuse please see: Chief Judge Rader Speaks Out About Patent Litigation Abuse and IBM Chief Patent Counsel on Patent Litigation Reform.