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The Rise of The End User in Patent Litigation (and Attorney Fee Shifting)


Written by Gaia Bernstein
Posted: June 24, 2014 @ 9:00 am
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We usually think of two players in the patent system: the patentee and its competitor, assuming that competitors will represent the interests of end users. But, in my article – The Rise of the End User in Patent Litigation, which is forthcoming in the Boston College Law Review – I show that this is changing. Increasingly end users are becoming significant players in the patent system. What follows is an executive summary of this article.  

Attention has recently turned to patent assertion entities that are suing vast numbers of customers using patented technologies in their everyday businesses. But, end users were also principal players in some of the main recent patent before the Supreme Court. In Bowman v. Monsanto, Monsanto sued farmers for re-using its patented self-replicating seeds. In Association for Molecular Pathology v. Myriad Genetics, patients and physicians sued to invalidate breast cancer gene patents. And, patients and drug stores repeatedly challenge pay-for-delay agreements between patentees and competitors, claiming they undermine patients’ interests in access to generic drugs. Finally, end users are likely to become even more prevalent in patent litigation, as the 3D printer becomes more popular, making it more likely that an individual or a small business will make an infringing item that will expose them to patent liability.

I define end users broadly to include those using a patented technology for personal consumption and those using it in business, but it is important to emphasize that they are strictly users.  One would still be a user under my definition even if they incorporate the patented technology into a product or service they offer their customers they do not make or sell the technology itself.

End users differ from small technological competitors in three respects.  First, end users usually lack technological sophistication – they are generally not technological companies, and do not produce and supply the allegedly infringing technology. Second, end users usually become involved in the patent conflict relatively late in the life of the patent, after the patented technology enters the market and achieves widespread adoption.  Third, end users are typically one-time players. In most cases the technology is ancillary to their business and they do not have a long-term stake.

One may have thought that the last major overhaul of U.S. patent laws would have addressed the thorny issues of patent litigation and enforcement. Unfortunately  the America Invents Act did not predict and is largely ill equipped to address the growing role of end users. The AIA tried to address the needs of small entities, mainly, by adding and changing procedures to challenge patents in the PTO, providing a cheaper and faster forum for challenging validity. But, the AIA’s novel PTO procedures are largely unsuitable for end users because they permit expansive challenges mostly early in the life of the patent before end users are likely to be involved in the patent dispute.

The AIA’s failure to account for the rise of the end user leaves end users without tools that can put them on equal procedural footing with traditional patent litigation parties.  Fee shifting of attorney fees and litigation expenses to the prevailing party can play a role in end user cases.  I acknowledge that fee shifting, by no means, will motivate all end users to litigate even meritorious cases and challenge potentially invalid patents. The rise of the end user is a complex phenomenon that needs to be addressed by series of reforms (which I address in other articles I am working on). But, importantly, fee shifting is applicable to the diverse array of end user cases and can contribute toward leveling the footing of end users in all type of end user-patentee disputes.

Fee shifting in patent litigation has been a hot topic this year. Recently, the Supreme Court decided two fee shifting cases: Highmark v. Allcare and Octane Health v. Octane Fitness. In Octane Health, the Court lowered the standard for awarding fee shifting in patent litigation. Congress is also considering multiple bills advocating different versions of fee shifting. The problem is that although some of the congressional bills address ’patent assertion entities’ suits against customers, neither these bills nor the Supreme Court decisions address the broader role that end users are now playing in our patent system. With this in mind I believe the case for fee shifting is particularly strong where end users are implicated.

Although end users would benefit from any change that facilitates fee shifting, particularly pro-alleged infringer fee shifting, these are less effective because they do not carry a direct message to end users that their risk in undertaking litigation and incurring huge costs would be decreased. For that reason, I propose to include the end user status as a factor that weighs in favor of fee shifting. And although I define end user broadly in the article, I suggest that as courts determine whether to award fee shifting they should look closely at the specific end user and compare him to the classic end user. For example, users who possess technological sophistication may not resemble a competitor as much as the user innovator, but may still share fewer of the classical characteristics of the end user. In this case inequality between parties may also be reduced and the case for fee shifting would be weaker.

For more information please see my complete article, which is available at: The Rise of the End User in Patent Litigation.

 

About the Author

Gaia Bernstein is a Professor of Law at Seton Hall University School of Law. Professor Bernstein specializes in intellectual property, law and technology theory, law and genetics, information privacy, reproductive technologies and family law. Her scholarship looks at the inter-relations between technology, law and society, examining the dissemination and adoption processes of new technologies, including both medical and communications technologies. Professor Bernstein’s current scholarship and ongoing research focuses primarily on the role of end users in patent law.

 


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7 comments
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  1. When did the law change to redefine infringing use to be “infringing use by a competitor?”

    The foundational assumption of “We usually think of two players in the patent system: the patentee and its competitor” is simply not in accord with the law – your tower falls because your foundation was built on sand.

    The differences you point out are simply immaterial to the law (and should be immaterial to the current law).

    Let’s not engage in an “Let’s-assume-the-law-is-different to get to a different law” tactic. Let’s be intellectually honest and address the law as it is in the first instance. Build your tower on a solid foundation please. You can advocate a change in law still, but please do not do so based on faulty premises.

  2. Anon,
    The assumption may not be in accordance with the law, but it is in accordance with financial common sense. A patent is fairly worthless to the holder if no-one is manufacturing the device or employing the method for financial gain. Any infringer who is financially harming the patent holder (rather than merely wounding his pride) will be working in competition either with the patent owner or a licensee.
    OK, that does exclude those patents which are broad enough to spill over to other technologies, but they are the exception rather than the rule.

  3. Benny,

    You are doing that same thing that I often chastise you about: you cannot separate the law from a legal discussion and depend solely on “common sense.” That path leads far too easily to plain error.

    As to “A patent is fairly worthless to the holder if no-one is manufacturing the device or employing the method for financial gain. you make yet another critical error of assumption. There is no requirement in the patent scheme that a patent must be put to “worthwhile” use, in manufacturing or for financial gain. None.

    You too are attempting to build a tower on a sandy beach. You too will fail.

  4. Anon,
    You appear to be responding to my posts before reading them. I said that the assumption is not in accordance with the law. We are agreed on that obvious point. I stated under which circumstance the assumption is correct.
    As to my statement that a patent is financially worthless to the holder if the disclosure is not being implemented,
    I’d be interested to learn of an example where this is not the case.

  5. No Benny,

    I did read your post. Yes you said “not in accord with the law,” but then you continued. It was the part of your post that you continued that I was referring to as in error.

    It still is in error.

    Do you understand that – regardless of an example – your view of patents as necessarily having some relationship with manufacturing, or with financial gain is simply shifting sands? You want to talk about patents, but you don’t want to talk about the (necessary) legal background of patents. Per my analogy, you want to build a big large tower, but you don’t want to pay attention to the foundation. I feel like the building inspector in telling you that”No, you may not build that tower,” and you are getting all mad and huffy and just don’t care as to why you cannot build that tower. To the legal admission you make, that’s like saying, “Yes, I know that building a tower on a foundation of sand will mean that the tower will crash and possibly crush other people, but I want to build the tower anyway.”

    Don’t build your tower without a proper foundation.

  6. No Anon, you don’t get it.
    The legal requirements for a patent are divorced from the financial logic involved. Filing a patent application when you have nothing to gain from exclusive rights to something which will never exist is legally permissible but otherwise merely a time-wasting exercise.
    Although the author of the article didn’t specifically spell it out in legalese, I still think it is fair to assume that anyone who is infringing your patent is in competition with you over whatever financial benefit implementation of the patent can accrue, and that’s what I understood her statement to mean.

  7. Benny,

    It is abundantly clear that one of us does not “get it.”

    My bet on who that is no doubt differs from you.

    But since I have a background in both worlds, starting my career in engineering, and moving up the management ladder before starting in law (and moving up that ladder), I can guarantee you that I really do “get it.” You seem oblivious to the distinctions I tell you, and want to cling to some notion that no one ever would “waste time” (or money). Your “fair to assume” is not. You lack the appreciation of legal implication. You are thus susceptible to the wrong-thinking that koolaid drinking induces and it is no surprise whatsoever that your comments so often reflect that lack of ability to have a foot in each world of technology and law.

    Not only so you not “get it,” you appear to not understand what “it” is even about. Read again the article and look at what the topic is. The topic is not competition per se. Your seemingly fervent desire to exclude the legal aspects and focus merely on what you would label “real world” places you in a decidedly un-real world where the lack of understanding of the nuances of law allow the concepts of law to be twisted into something that they are not. Your continued protests are along the lines of “My tower is OK because I have really fortified it and made it extra heavy and extra strong.” all the while not realizing that your focus on the tower alone only makes the lack of awareness of the foundation even more pernicious and dangerous to everyone, even those that may take shelter in that beautiful and extra strong (but alas, extra heavy) tower.

    Building permit still denied.

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