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Silicon Valley Seeks Answers for Patent Litigation Abuse


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: April 10, 2013 @ 7:55 am
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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.

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.

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Posted in: Gene Quinn, IP News, IPWatchdog.com Articles, Patent Litigation, Patent Trolls, Patents

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

13 comments
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  1. Dealing with just pure PAE’s will not fully solve the problem. There are lots of quasi-trolls out there. Nor can the USPTO be expected to understand the state of the art in any given sector. Real penalties against careless prosecutions and fee awards for JMOL’s, plus more work on the statues creating some reasonable balance of copyright v. patent for end-user application software is essential.

    Great job on the site- much appreciate the work you do. It’s my new favorite subject since getting radicalized by what I believe to be an abusive suit.

  2. To a large extent this is a problem of general litigation abuse, not a problem with the patent system. You see this with personal injury lawsuits, with ADA lawsuits (demanding $5,000 from restaurants because the handicap ramp is not at the right angle, for example), and in the employment law context. Or copyright trolling with porn claims.

    If you look at Judge Rader’s proposed countermeasures, many are not fundamentally about patents–e.g. limiting discovery, more vigorous enforcement of Rule 11, moving the determination of damages to earlier in the case. These are all about fixing the litigation system, not the patent system.

    When a troll demands $20,000 from a small business (or $1,000 per user, as in the email/scan case), the merits of the patent claim play almost no role in the economic decision to settle (the moral question is another matter). The economic decision is all about the cost of litigation. This abuse would happen even with a patent system that’s completely flawless.

  3. To a large extent this is a problem of general litigation abuse, not a problem with the patent system.

    Completely agree.

    Further, those who oppose patents, I believe, are purposefully obfuscating this fact and are attempting to demonize the patent system itself, or are attempting to demonize those who rightfully (and fully legally) obtain and utilize the personal property that a patent is.

  4. So AP, you completely divorce the cost of litigation in relation the operation of “the system”.

    You are also making unreasonable comparisons to general litigation abuse because the way commercial liability insurance operates v. IP insurance, the burden (or lack) to get to a summary judgment, the inherent threat of indirect infringement to business position, and the complexity of the associated laws and practices.

    If they were the same, you would not hear the hue and cry for ‘Patent Reform” separate from the call for litigation reform….but you do…

  5. Martin,

    The reason why you do is the purposeful misrepresentation and conflation from those with an anti-patent agenda.

    It is unreasonable to ignore this aspect.

  6. Martin, the cost of litigation is not always divorced from the operation of the patent system. It can become divorced when a patentee makes a small settlement demands against a lot of small businesses.

    And sure, patent litigation is different from other types of litigation. But why do these differences mean that our American litigation system is not a (or the) main cause for the perceived problems? The Europeans don’t have a litigation abuse problem, in patents or elsewhere. I posit that’s largely because they have a very different litigation system, not because their patent system is fundamentally different.

    A lot of the hue and cry for “Patent Reform” comes from people who’d like to get rid of patents completely, rather than fix problems.

  7. A lot of the hue and cry for “Patent Reform” comes from people who’d like to get rid of patents completely, rather than fix problems.

    Once again, I agree completely.

  8. “A lot of the hue and cry for “Patent Reform” comes from people who’d like to get rid of patents completely, rather than fix problems.”

    That’s an absurd generalization. The vast majority of informed people understand the need for patents and the concept of a valuable invention deserving a temporary monopoly. Most people also understand that obtaining patents for broad and obvious claims is not only possible, but happens by the thousand. People also understand the asymmetry and rank disproportionality of the advantage patentees are granted in the current system. What happens to a great many small and medium tech companies is an immoral outrage, and just glossing over that fact by saying people are just against patents is the weakest of arguments, as is arguing behind an anonymous shield on a site/subject like this….

  9. Martin,

    It’s absurd to think the ‘generalization’ is absurd.

    Have you been living under a rock?

    As to anonymous commenting, I have addressed this several times in the past. You offer a bogus argument. Look up the history of anonymous publishing in this country.

  10. Yes, I’m quite aware of the value of anonymous commenting; when there is some controversy or valuable information that otherwise would problematic for the speaker. Unless you are a federal judge, and your writing shows that you are not, your only excuse might be not wishing to reveal to others what a weak rhetorician you actually are.

    How about this General: link to any respected voice anywhere who wants to “get rid of patents completely” , and while you do that, I’m sure readers of this thread can come to their own conclusions about who is on the right side of this dispute.

  11. Unless you are a federal judge, and your writing shows that you are not

    You assume far too much.

    1) blog writing does not carry the necessity for the exactitude in court writing.

    2) the use of anonymity is clearly NOT limited to an either or of weak arguments or judges.
    – THAT is a weak argument.

    3) the use of anonymity is not only limited to the content – it can be content neutral. The fact that you do not recognize this indicates that you speak too easily on something that you really don’t know, while attempting to pass off that you do know.

    As I have mentioned, I have written previously on the topic of posting in anonymity (even defending a poster known as IANAE). I suggest you find out more about the concept before posting and confirming your lack of knowledge.

    As to weak rhetoric, let’s look at your challenge: “How about this General: link to any respected voice anywhere who wants to ‘get rid of patents completely’

    You offer a logical contradiction, as there are NO ‘respected’ voices anywhere who want to ‘get rid of patents completely.’ There are quite a few people who would like to do so. Another blog (Patently-O) is in fact running a series of articles about a conference at Loyola that is teeming with such people.

  12. OK I’ll invoke the mercy rule on this one with a few short retorts and then retire. http://en.wikipedia.org/wiki/Mercy_rule

    How about a link to ANY voices calling for an end to all patents? Can you find any? Can find a single one at the Loyola conference. Readers of this thread shall see.

    Are you a federal judge? No? Then I don’t assume too much, do I ?

    Is the fact that one’s arguments are weak not a valid reason for not revealing one’s identity?

    And with that, triple zeros on this clock.

  13. Not sure why you are attempting a mercy rule callout (unless you feel that you cannot keep up with the conversation and you want to bow out before it gets too ugly for you).

    For a single person at the Loyola conference, see Dr. Richard Sallman’s comment, as possibly paraphrased by Prof. Jason Rantanen at

    http://www.patentlyo.com/patent/2013/04/liveblogging-from-the-loyola-law-journal-conference-on-patents-innovation-freedom-to-use-ideas-.html

    Generally, though, he thinks we should get rid of patents.

    Mercy rule…? It feels like you haven’t even stepped into the batter’s box.

    Whether or not I am a federal judge remains unproven.
    Perhaps I am.
    Perhaps I am not.
    That’s rather one of the (but as I mentioned, most decidedly not the only) reason for anonymity.

    So yes, in fact, you do assume too much – just as you assume here in your logic, that the single case carries the day for you.

    It does not.

    Mercy rule…? You have shown no hint of a handle of logic to even start a conversation. It appears to me that you are simply parroting the anti-software patent lines, and you really have no connection whatsoever to ground your views.

    Is the fact that one’s arguments are weak not a valid reason for not revealing one’s identity?

    Actually, no it is not a reason to chose anonymity. If one realizes that one’s arguments are weak, they are better served not being made in the first place.

    Your inexperience in dialogues meant to winnow out competing viewpoints is starkly showing.

    Mercy rule…? Those zeros on the clock are not the time – they are your score.

    Methinks that you need to actually show up in order to claim to be retiring.