Posts Tagged: "Patent Trolls"

A federal jury in the Eastern District of Texas returned a verdict on Saturday, January 18, 2014, following a week-long trial presided over by the Honorable Rodney Gilstrap, that found that Google infringed SimpleAir’s U.S. Patent No. 7,035,914. The services accused of infringing the ‘914 patent were the Google Cloud Messaging (GCM) and Android Cloud to Device Messaging (C2DM) services. Those services are used by Google to process and send instant notifications for Android applications, such as Facebook, Twitter, and Gmail. The damages issue will be decided by a separate jury in a second trial limited to the issue of damages. SimpleAir has announced that they will seek damages in excess of $125 million for Google’s infringement in the damages retrial.

It seems that this article caught the attention of Newegg’s Chief Legal Officer, Lee Cheng, who proceeded to contact me through LinkedIn and berate me in bizarre fashion throughout the day yesterday… Cheng first reached out to me with a simple message: “You are hilarious.” I responded: “Thanks for reading IPWatchdog.com. I hope you learn something.” And then I got a real look into the top legal mind of Newegg. The only word I can use to describe Cheng, at least based on this exchange, is schizophrenic. He went from telling me I was “a smart guy ” that he wanted to meet to someone who was nothing more than an incompetent patsy on the patent troll payroll. This occurred over the span of only several e-mails.

MPHJ employed a strategy of targeting small and medium-sized businesses, which in and of itself is not legally problematic. The fact that MPHJ acquired patents of dubious validity is interesting, but again, patents are presumed valid, so that is not terribly probative either. The problem with the MPHJ strategy is that it was deceptive. They sent out letters to a large number of small businesses in an effort to extract small, nuisance-value license payments from them. Indeed, some patent trolls seek far less than even a fair nuisance-value, asking for $500 or $1,000. It is this type of behavior that is the hallmark of a patent troll. The mere fact that one has acquired patents and seeks to license them is in and of itself irrelevant because that activity is completely legal. In the letters sent by MPHJ hundreds of New York businesses were told that it was “likely” that they were infringing MPHJ patents and, therefore, needed to take a patent license. By saying that they were “likely” infringing an impression was created that MPHJ had conducted at least some kind of individualized analysis of the targeted company’s business. But MPHJ did no investigation, choosing merely sent out form letters in bulk to companies of a certain size and industry classification.

Patents and patent reform has been in the news, even the popular press, on an increasing basis. The issue of patents generally and patent litigation specifically has been the subject of intense debate over the last 8 years. Congress passed the America Invents Act (AIA) in 2011, with the bill being signed into law by President Obama on September 16, 2011. The overhaul of U.S. patent law was extraordinary, but not all of the parties involved were happy. Some thought the law went too far in some ways, others thought the law did not go far enough. Despite the AIA being the most significant change to patent laws since at least 1952, Congress is considering further reforms again, with the House of Representatives already passing the Innovation Act (HR 3309). Companion legislation in the Senate is likely to move forward during Q1 2014.

“Patent trolls have a surprising ally: universities” ran in the Washington Post on November 30, 2013. Two days later “Techdirt” threw the follow up: “Patenting University Research Has Been A Dismal Failure, Enabling Patent Trolling. It’s Time to Stop.” Their titles and parallel arguments suggest that both articles arise from shared talking points. Both immediately set up their victims by linking them with patent trolls. Casting anyone as an “ally of patent trolls” after huge amounts of money have been invested vilifying the term in the public mind is meant to quickly knock opponents to their knees and drive them from the field. Ostensibly the focus of their wrath is university patent licensing, but the real target is the patent system itself.

2013 turned out to be a very big year for IP, and especially patents, and the year took a course that few would have predicted this time last year. At that time, the senior team at the PTO was primarily focused on the imminent departure of our then-boss, David Kappos, and the end of what had clearly been an extraordinarily active and successful tenure. The AIA had been almost entirely implemented, the new Patent Trial and Appeal Board was up and running, and most of us expected 2013 to be focused on implementation and execution of the AIA and the other initiatives that had been set in motion under Director Kappos.

The major beneficiaries are not the patent trolls- but the thousands of single patent owners and small high tech start ups who for the first time ever-are able to monetize the enormous investments in time, money and ingenuity that they have made in their inventions. The fact is- today, small patent owner and small tech start ups have real options to liquidate their intellectual property assets that they didn’t have before Intellectual Ventures and Acacia Research Group entered the market in the mid-2000s. If patent trolls sue big companies- then the owners of these patents were able to liquidate their investments. When the multinationals have to worry about these entities suing them it is good for the owners of the patents.

The Federal Trade Commission has extended the deadline for public comments on its proposed study of patent assertion entities (PAEs), which it announced on September 27. To provide additional time for interested parties to submit comments on the proposed study, the deadline has been extended throughDecember 16, 2013. The Commission will not consider requests for further extension. Comments can be submitted electronically.

The testimony further discusses the Commission’s interest in the problem of “patent hold-up” that can arise during an industry standard-setting process. Patent hold-up occurs when the holder of a standard essential patent (SEP), which has previously committed to license that SEP on reasonable and non-discriminatory (RAND) terms, violates its RAND commitment and uses the leverage of the standard setting process to negotiate higher royalties than it could have before the patent was incorporated into the standard. The FTC recently pursued several enforcement actions related to patent holders who seek injunctive relief or exclusion orders for alleged infringement of their RAND-encumbered SEPs.

This paper proposes amending 35 U.S.C. 271 Infringement of Patent with elements drawn from § 2-403 of UCC Article 2, Sale of Goods, and with elements of the Patent Exhaustion Doctrine. This amendment, if enacted, would prevent patent trolls from proceeding against Bona Fide Purchasers for Value with respect to certain specific infringements, in order to strengthen consumer confidence in the marketplace, by ensuring that vendors can deliver the products that they sell, free of threats of patent infringement litigation against such innocent buyers.

Other important positive externalities of patent enforcement, including by NPEs, may be realized when competitors are encouraged to design-around the asserted patent. Incentives to design around patents usually materialize only upon patent enforcement lawsuits, but when design-arounds are commercially successful, they may result in substantial increases in social welfare: design-around patents have been documented to spur new manufacturers’ entry to the market, unleash fierce price competition, and reduce deadweight losses of the patentee’s monopoly pricing. From a dynamic efficiency perspective, the greatest potential social welfare enhancement due to the designs-around appears downstream over many years even in areas other than the patented technology.

Professor Feldman has found striking new data on patent trolling and the effects of the America Invents Act, which to me suggests that the AIA has clearly been successful in its intended goal of reducing the number of defendants in a single patent infringement litigation. Professor Feldman’s new analysis was developed by breaking down the massive data set she collected into a month-by-month analysis of patent infringement lawsuits. The data examines all patent lawsuits over four key years, which represents approximately 15,000 patent infringement lawsuits and 30,000 patents asserted. Not surprisingly to those of us who have closely followed the America Invents Act, but there was an enormous spike in litigation leading up to the implementation of the AIA in September 2011.

The App Developers Alliance is joining with law schools nationwide to help startups battle patent trolls. The Law School Patent Troll Defense Network is a consortium of law school clinics that will provide free legal representation to small app developers and other entrepreneurs that have been threatened or sued by patent trolls. Clinics participating in the Network may also represent the Alliance in major patent cases affecting developers and the app community.