Several weeks ago Colleen Chien, a law professor at Santa Clara University and a former senior advisor to President Obama on intellectual property and innovation, wrote in the Wall Street Journal that small businesses may want to simply ignore letters they receive from patent owners alleging infringement of a patent.
This is rather astonishing for several reasons. First, a patent is a right granted by the federal government that is supposed to be legally presumed to be valid. A recently departed senior advisor to the President who is advising potential infringers that they should just ignore notices telling them they are infringing speaks volumes about how the Executive Branch views patents and patent owners. Once upon a time patents and inventors were very highly regarded in our society, today they are seen as a nuisance that can and probably should be ignored, even by the White House apparently.
It is also rather astonishing to hear a former senior advisor to the President suggest that it is appropriate to ignore a letter alleging patent infringement given the Obama Administration has been so thoroughly supportive of yet further rounds of patent reform. Various of the pending patent reform bills that are now stalled in Congress have provisions relating to abusive, fraudulent and misleading demand letters sent by patent owners. If ignoring demand letters is both an acceptable and viable strategy why is it necessary to encumber the Patent Act with superfluous and unnecessary legislation? Simply ignore the letter sent by the patent owner and everything will be fine. Nothing to see here; no further patent reform legislation required.
As an attorney, I personally find it astonishing that anyone would ever advise one to ignore a letter putting them on notice that they are, or may be infringing an issued patent. Sure, there are bad actors in the industry who dramatically overstate matters in demand letters, but is someone who is not legally trained capable of making the fine line distinctions between what is an abusive demand letter and what is a legitimate business grievance? If untrained individuals are capable of making difficult legal determinations after considering all the legally relevant facts, interpreting the patent in question and taking into consideration the relevant case law, as Professor Chien seems to suggest, then why exactly are law schools charging students well over $100,000 dollars for an education? If anyone can do this without a lawyer it seems law schools are running some kind of scam themselves.
Of course, law schools are not running a scam, and untrained recipients of a notice or demand letter should no more be making their own legal determinations without counsel than they should be removing their own appendix. Clearly, it is extraordinarily bad advice to suggest that it is appropriate to ignore a letter that suggests the sender has an actionable grievance against the recipient. Indeed, such a suggestion borders on legal malpractice.
Also troubling is how Professor Chien characterizes large competitors who sue small companies as a “patent bully.” As with many complex issues, the issues surrounding the patent system defy simple characterization. Explaining these issues in a few words is difficult at best, and can easily lead the uninitiated reader to believe something that is simply inaccurate. That is precisely what happens here.
The problem I have is with the term “patent bully,” which continues to foster a false narrative about patent owners.
“Bully” is defined as “A person who is habitually cruel or overbearing, especially to smaller or weaker people. A hired ruffian; a thug.”
A patent owner that seeks to prevent another from infringing is NOT a bully, period. A patent owner that takes action to prevent infringement is merely protecting the property right they have been granted; a right purposefully granted by the federal government after a lengthy examination process.
It should be self evident to everyone that you cannot be a bully when you are standing up to protect a right you have been given. It is utter nonsense to even suggest that a patent owner seeking vindication from the trampling of rights could ever in any fair way be characterized as a bully.
Would you consider a business owner who prevented someone from breaking into their store and stealing a tangible product to be a bully? Of course not! They would be taking reasonable steps to protect themselves, and their property, from the thug who was stealing. But if that is the case, why then would you consider a patent owner who protects and defends their rights to be a bully? The truth is you could only consider a patent owner to be a bully if you do not believe patents are a property right. While everyone is entitled to hope and dream, we do have a definitively correct answer. The Patent Act unambiguously says: “patents shall have the attributes of personal property.” See 35 U.S.C. 261. Thus, if a shop owner defending a tangible item against a thief is not bullying then neither is a patent owner defending rights against an infringer. These examples are perfectly analogous from a legal standpoint.
Talking about a large entity enforcing a patent against a smaller entity also suggests, at least to me, that Chien believes that small companies should be allowed to infringe because they are small. There is no de minimis exception that allows infringement when a large company engages in infringing activity. Similarly, there is no exception that allows a small company to engage in infringement either. Patents are intentionally exclusionary. You cannot engage in activity that is infringing unless you obtain the rights from the patent owner. If you do not want to obtain the rights or you cannot obtain the rights because the owner is a competitor then you have to abstain. Of course, you can always engineer around and pursue an entirely new and innovative path yourself. That is the very purpose of the patent system and exactly how the patent system fosters continued innovation.
Is it possible that a litigant might engage in a way that would make it appropriate to label them a bully? Certainly, but that would be as the result of behavior, not as the result of ownership classification. Thus, it is entirely unhelpful to characterize patent owners as bullies. It perpetuates a false narrative that can only be intended to mislead.
Frankly, if we want to be perfectly honest about the state of the industry, we would be talking about those Patent using Entities that Refuse to Pay (PERPs). Thanks to the confluence of patent reform and Supreme Court precedent the people who are getting bullied the most are patent owners. These PERPs simply ignore all inquiries even from those with large portfolios and valid patents that are being infringed. They engage in a game of efficient infringement, or so it is called.
Efficient infringement is such a sanitary way to say – willfully stealing without paying.
Efficient infringement works because companies know immediately, as Professor Chien points out, that not all those who have patents that are infringed will sue. Of those that sue some will give up along the way because they can’t afford to fight. Of those that fight to the end at least some will lose. Of those that do win some will win very little. Of those that win anything, an even smaller subset will ever collect anything given how the Federal Circuit has so thoroughly changed the law of damages over the last decade. Given the climate and Supreme Court precedent and ever more ways to challenge a patent it is quite likely that many cases will never get past a motion to dismiss. The reality is the infringer has to win once; the patent owner has to win every legal battle.
With the deck so substantially stacked against the patent owner companies know that if they simply ignore all inquiries, both legitimate and those smaller number that are extortion, they can willfully infringe patented technology without having to pay anything. So why pay? That is efficient infringement; a cold business calculation that results in the patent owner being screwed.