Litigation abuse driving negative sentiment around patents

By Gene Quinn
March 5, 2015

bart-eppenauer-1On Tuesday, February 10, 2015, I interviewed Bart Eppenauer, who is a partner in the Intellectual Property Group at Shook, Hardy & Bacon. Eppenauer recently rejoined the firm after spending a decade serving as Chief Patent Counsel for Microsoft Corporation. In part 1 of our interview we discussed software patent eligibility, the need for the Federal Circuit really to provide clearer guidance as to how to describe innovations to pass 101 muster, and how the U.S. is in for a tough time if we cease to be the world leader in patenting innovations.

In this final segment of our interview we discuss the prospects of patent reform and issues dealing with patent litigation abuse, in particular demand letter reform. As you will read, Eppenauer agrees that much of the negative sentiment surrounding patents in the general public is due to litigation abuse.

Without further ado, here is part 2 of my interview with Bart Eppenauer.

[Patent-Litigation]

 

QUINN: If you were a betting man, what would you bet? Are we going to get reform, and if yes do you think it will be closer to the Innovation Act or maybe closer to a more targeted narrow version that only addresses the litigation issues?

EPPENAUER: I would put my money on passing a more targeted and narrow litigation abuse bill as having a real chance of success. It seems like that’s pretty close to what’s happening now, but there are quite a few issues in the bill. You could probably cast most of them as litigation reform but not all of them, so it will be interesting. So that’s where I would place my bet.

QUINN: I would place my bet along those same lines. I think that if we were talking about reform that dealt with the demand letter issue and picking up on what the FTC has done, as well as certain State Attorney Generals have done, there would probably be near unanimity in the industry that such reform would be a good idea and it would just rush through both houses of Congress. I think it becomes a little bit more concerning when you get beyond that, not to say that it won’t happen but patents and innovation isn’t typically an issue that drives people to the polls, so I think if we had limited things to where there was great agreement and continued to let the AIA settle out and the Supreme Court decisions settle out, that would probably be a better place to be. I mean do you know of anybody that is saying that we shouldn’t be doing demand letter reform of some kind?

EPPENAUER: I think people generally agree with that, well certainly operating companies, let me put it that way, and perhaps some of the many different consumer oriented companies down the chain that are getting hit with these demand letters would certainly agree with it. What could be challenging is if you get too many State AG’s involved in it doing too many different things and there’s not alignment on how to deal with this, it could just get messy. And so that might be more of a concern and it could go a little further then would be desired where legitimate assertion of patent rights, legitimate meaning companies are trying to license their patents and having communications in a business positive way, could get caught up in demand letter reform. So yes, I think the notion of the demand letter restraint is good. But too many different approaches, that could be a little bit messy.

QUINN: I certainly agree with that. We have a national set of patent laws and I think we just need to have a national response to this. I’m troubled in this space where states get involved in a way that some of them have gotten involved, because then you have different regimes and we’re not talking even about a national marketplace anymore, we’re talking about a global marketplace, so having 50 different laboratories handling these issues differently just doesn’t make a lot sense to me.

But I want to go back to something where you were mentioning about the long term outlook on patents may not be all that great. I think a lot of people share that viewpoint. I tend to think that it really comes from so many of these litigation abusers who are really just engaging in what certain Federal Courts have called “extortion like” activity. Are there any other things that could be done to help clean up the industry and then the second part of that would be is what can industry to do to turn the tide and make patents not feel like a red-headed stepchild?

EPPENAUER: I also would agree with the view that the litigation abuse is driving so many of the issues and so much of the negative sentiment around patents generally. Certainly it’s important to ensure that quality patents are issued, with quality examinations, and quality patents are filed from a disclosure standpoint. The problem is largely addressed with the patent owners and how they’re asserting and using and abusing their rights versus how those rights may or may not come out of the Patent Office.

So some of this more targeted reform on litigation abuse is important, making sure that it can come through in a way that can continue to contain and curtail this abuse. But again there have been so many positive decisions now on patent damages, on injunctions, on willful infringement in the Courts that have addressed a lot of these issues that were truly the hot button issues in the last decade when the AIA was being negotiated. Many of those hot button issues fell away because the Courts started addressing those.

If targeted, focused reform can be done, hopefully that can help with our litigation situation. It’s also just the nature of the American litigation system that’s just so much different from Europe, Japan, China, elsewhere around the world where it is just the way it is and I don’t think that’s going to change anytime soon. Certainly if there could be more connection and understanding between what happens at the Patent Office and how certain cases are litigated in the District Courts that would be ideal. That’s difficult to do. I don’t see anything in the near term dramatic happening in that regard but that certainly could be interesting. One thing that’s happening is in patent litigation so often now Inter Partes Reviews are being instituted and are being sought along with those cases that are filed in District Courts and it seems like District Courts are staying cases and that could be a good thing. That could start to bring together what’s going on at the Patent Office and what’s going on at the District Court to the benefit of improving the patent system at least from an enforcement perspective.

QUINN: I’m glad you bring that up because I for a long time thought that a lot of the reforms that are being proposed really are not aimed at fixing the system in an intelligent way. And we have a system right now where it’s not quite as bad as it was before the AIA because as you’re saying District Courts are waiting their turn. But you would have the Patent Office involved. You would have District Courts involved. You would have the ITC involved and they’re all working on different schedules and different timeframes and you try and move through one faster to influence the others and then appeals goes up at different places and time and then with different standards of review you have different decisions. It strikes me as just the world’s most crazy way to have a dispute resolution system and I would think reform of the system so that the system operated better would really pay enormous dividends.

EPPENAUER: It is interesting. It’s not within the near term realm of possibility, but could there be specialized District Courts that really understand patent law, patent proceedings, and understand patent procedure in the Patent Office? There are still pilot programs going on along those lines. If that could really take hold, that could be a good thing, to just put some more structure, rationality and consistency in patent litigation. That would be a great long term solution. I think it’ll be a long time coming before we see anything like that. But who knows? If people start to see that Inter Partes reviews are really working — it does make more sense to come together along these lines, that could lead to something happening down the road or perhaps those efforts will start to themselves address the litigation abuse and so there won’t be as dire need to try to do something further structurally to the system to get at the problem.

QUINN: I find it odd that in the world we live in today specialization is everywhere except for in the judiciary. We seem to be continuing to cling to this notion that we have to have a generalist decide issues in specialized fields and to me that just seems bizarre. For example, if I were to try and represent somebody in a family law matter or a divorce or to write a will, I would be committing malpractice because I don’t know anything about those areas and yet we have this desire to have a generalized judiciary handle all of these different issues. That just strikes me as counter-productive and bizarre to the extreme given that the world is getting so much more complicated and specialization is everywhere, whether you’re going to your doctor or whether you’re going to your lawyer, whether you’re going to accountants that specialize in certain areas, I would love to see a dedicated Court. You’ve been an observer of the industry for a long time and some of these issues came up when we were talking about having the Federal Circuit in the first place back in the late 1970’s and early 1980’s. Do you suppose we will ever get to a point where we have that specialization that you were just talking about?

EPPENAUER: I think it’s going to be a long time coming. I’m a proponent of it. It would be very useful, but practically speaking that is such a significant step that I don’t see it happening any time in the near term or the midterm. I wish, but I don’t see it happening.

QUINN: I think that that’s unfortunate and that gets me back to where I say that there are so many things I think that we could do around the periphery. If we all got into a room and we had the ability to talk about how to streamline the process, whether it’s at the Patent Office or whether it’s in litigation, there are solutions there that don’t require you to risk throwing the baby out with the bathwater but they seem to be the hardest reforms to actually get through for some reason.

EPPENAUER: That’s probably largely because we’re dealing with a generalized judiciary and once you start going down the road of specialization here, there and everywhere else, it’s a pretty significant step to our system. And that’s probably why people are moving cautiously in that direction. As to the patent pilot program at the District Courts, I don’t think a lot is said about that these days but it will be interesting to see when that pilot is over, what the findings are and whether that leads to any changes or further practices.

QUINN: And we’re not talking about a revolutionary thing here. Many states have divided the civil system from the criminal system with respect to Courts and we have a Court in the U. S. that deals largely with only political matters and political appeals and you have the Federal Circuit so maybe it will come. I guess the question then becomes is where do you draw the line and that’s a harder question to have because I suppose at that point then everybody’s going to want their own personalize Court.

EPPENAUER: I think that that is probably one of the key issues. Patent law is certainly very complex but many other areas of law could be stated as similarly complex, whether it’s from a legal perspective or a technical perspective. So that’s where you get into the discussion of why this one should be specialized and not some of these others.

QUINN: Okay. Well I’ve taken up a lot of your time. I would like to ask you one last question if I can. And if I were to make you say patent Czar for a day, what would be the one or two things that you would change with the system that you think would make the biggest benefit and why?

EPPENAUER: Patent Czar for a day, all right. That’s exciting.

QUINN: And the next guy can’t undo what you have done. [Laughter]

EPPENAUER: Well, I probably wouldn’t want to try and open up the Section 101 issues and try to solve that in one fell swoop, although that would be appealing. Actually, if I could go back and perhaps bring out some of those cases in a different way where the patent eligibility inquiry was instead viewed as a coarse filter, and other parts of the statute were focused on more heavily like Section 112 and Section 103, that’s what I would want to do. So maybe I’ll give you two answers, two parts.

I would really like to see a greater connection, just as we were talking about, between patent litigation and patent enforcement in District Courts and specialization at least in terms of focus, with judges that really focus on and understand these cases, really understand the law, and have a lot of technical assistance. More of a connection between the Patent Office and how patents are granted and the truth coming forward between what happens in the Patent Office and how those patents are litigated in District Courts. I think that so many of these issues, if we could do that, would probably fall away in terms of curtailing the patent litigation abuse. So that’s my long term dream, even though I don’t think it’s going to happen anytime soon. But my long term hope would be the system would evolve in that way.

QUINN: Okay. I really appreciate you taking the time to chat with me today Bart. Thanks for a great discussion.

EPPENAUER: Gene, my pleasure. Thank you for talking to me and I look forward to doing it again and seeing you soon.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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Discuss this

There are currently 1 Comment comments.

  1. JNG March 5, 2015 11:49 am

    “patent litigation abuse”

    that’s just the thing, isn’t it?

    Because “litigation” has become the be-all, end-all of patent discussions, licensing, monetization, etc. And it morphed this way at the behest of greedy, power hungry large patent defense firms, who succeeded in adulterating the law (Medimmune) so that one can’t have a rational dialog outside the confines of a Court proceeding. No rational patent owner is going to “contact” a prospective licensee first, because that just leads to an expensive DJ action somewhere in an unfriendly forum. Hence the current “troll” epidemic where we shoot first, ask questions later. For anyone involved in this biz for more than 10 years we ask: what is the mystery? We know the cause, and we know the cure: reverse Medimmune and true “reform” will be accomplished overnight.