What’s New in the Fight Against Patent Trolls? The FTC Jumps In, Federal Legislation Advances, Judges Take Sides, and More…

Whatever you call them – non-practicing entities, patent assertion entities, patent holding companies, patent monetization entities, or patent trolls – businesses that generate revenue not by exploiting patents but rather by licensing them are currently under attack from all sides.

Here’s a quick look at how that fight is going, from attorneys on JD Supra writing on the broad topic of patent trolls:

FTC Seeks Comment on Collection of Information Relating to Patent Assertion Entities (Skadden, Arps, Slate, Meagher & Flom LLP):

“On September 27, 2013, the Federal Trade Commission announced that the four sitting Commissioners voted unanimously to seek public comments on a proposal to gather information to examine how patent assertion entities (PAEs) do business and to develop a better understanding of how they impact innovation and competition. […] The FTC views this as a significant step in the search for answers to a number of complicated questions surrounding the impact that PAEs have on innovation, competition and consumer welfare.” Read on>>

Auto Makers Flatten Patent Troll (Foley & Lardner LLP):

“The Federal Circuit states the District Court’s fact findings supports an implicit conclusion that [non-practicing entity] Taurus subjectively knew that the DaimlerChrysler Patent Suit lacked a reasonable basis and was, therefore, pursued and maintained in bad faith. […] Therefore, the Federal Circuit … maintained the award of Attorneys fee of $1.6 million for the defendants [DaimlerChrysler Company, Mercedes-Benz and Chrysler Group].” Read on>>

Rep. Goodlatte Introduces Second “Discussion Draft” of Legislation Aimed at Curbing “Abusive Patent Litigation” (McDonnell Boehnen Hulbert & Berghoff LLP):

“In order to combat the perceived ‘patent troll’ problem, members of Congress in both the House and the Senate introduced bills last spring aimed at addressing abusive patent litigation tactics. One of the more comprehensive ‘discussion drafts’ was released on May 23, 2103 by Rep. Bob Goodlatte (R-VA), the Chairman of the House Committee on the Judiciary. […] As Rep. Goodlatte explained at the time: ‘This bill helps to address the issues that businesses of all sizes and industries face from patent troll-type behavior and aims to correct the current asymmetries surrounding abusive patent litigation.’ A second version of this discussion draft was released in the past few days…” Read on>>

Alleged Patent Troll Targeted By Vermont Attorney General (Downs Rachlin Martin PLLC):

“[T]he Vermont Attorney General is pursuing patent troll claims against MPHJ Technology Investments, LLC under pre-existing Vermont consumer protection law while Nebraska investigates and Minnesota settles patent litigation against the same company. MPHJ stands accused of a nationwide program of sending hundreds or thousands of threatening letters to businesses accusing them of using technology, without a license, under patents acquired by MPHJ — classic patent troll behavior.” Read on>>

The GAO Issues a Report on Patent Litigation Trends — It Turns Out that the Sky Is Not Falling (McDonnell Boehnen Hulbert & Berghoff LLP):

“[W]hen passing the America Invents Act (“the AIA”), Congress … task[ed] the GAO (Governmental Accountability Office) to conduct a study of the consequences of litigation by non-practicing entities or patent monetization entities (referred to more derogatorily in the mainstream press as ‘Patent Trolls’). The resulting report, entitled ‘Intellectual Property: Assessing Factors that Affect Patent Infringement Litigation Could Help Improve Patent Quality,’ was sent to the congressional committees on August 22, 2013. […] [F]ar from concluding that the patent system was ‘broken,’ the conclusions actually reached by the GAO suggest that even though there may have recently been an increase in low-quality patents, particularly related to software, it is not a cause for alarm. In fact, the GAO noted trends in both the federal courts and the Patent Office that are already seeking to correct these perceived problems.” Read on>>

Patent Troll Required to Explain “Sham Venue” and “Sham Employees” to the Jury (Valorem Law Group LLC):

Judge Alsup of the ND California clearly embraces the concept that “judges already have the authority to curtail [non-practicing entity patent litigation] practices: they can make trolls pay for abusive litigation.” […] The story of how the Judge came to threaten to admit evidence of sham offices and employees is best understood as Judge Alsup seizing an opening on an otherwise innocuous standing issue to “curtail” abusive NPE litigation. Any doubt in this regard is dispelled by Judge Alsup’s lengthy citation to ‘Make Trolls Pay in Court’ at the outset of his order.” Read on>>

The War on Patent Trolls — Congress Prepares for Battle (McDonnell Boehnen Hulbert & Berghoff LLP):

“In case it was not clear that Congress is serious about combatting the perceived problem of ‘patent trolls,’ Sen. Patrick Leahy (Vermont) and Sen. Mike Lee (Utah) published an opinion piece this week on the POLITICO.com website, which is now entitled ‘America’s Patent Problem.’ Both Senators are members of the Senate Judiciary Committee, chaired by Sen. Leahy, the committee which has jurisdiction over patents, copyrights, and trademarks. The article started from the premise that there are patent holders that are abusing the system, and that this abuse has resulted in a drag on the economy.” Read on>>

Non-Practicing Entity Sued Under RICO for Bringing Allegedly Frivolous Patent Infringement Cases (Patton Boggs LLP):

“A company that has filed a series of cases alleging infringement of a patent has found itself named as a defendant sued under the federal Racketeering and Corrupt Organizations Act (RICO). The case … was filed on September 16, 2013 in U.S. District Court for the Southern District of New York. Lumen is alleged to be the exclusive licensee of a patent covering the computer-enabled process of matching two-party or multi-party preferences, in which two or more people enter preferences, rank them, and a computer uses an algorithm to find an optimal meeting point based on both preferences. In May, Lumen sued FindTheBest.com (FTB) for infringing the patent in U.S. District Court for the Southern District of New York.” Read on>>

Setback for Patent Troll Under “Patent Exhaustion” Doctrine Liberates Mobile Technology (Davis Wright Tremaine LLP):

“Helferich Patent Licensing’s (HPL) licensing program has been dealt a serious blow by an Illinois federal judge. On August 14, Judge John Darrah ruled that the New York Times and others could not infringe HPL’s patents because the patents are exhausted. Judge Darrah entered judgment in NYT’s favor in a patent infringement suit brought by HPL against NYT, thus ending a three-year dispute between the companies.” Read on>>

Crowdsourcing: Inciting a Mob to Battle Patent Trolls (Knobbe Martens Olson & Bear LLP):

“The onslaught of non-practicing entities, or “patent trolls,” that aggressively leverage the high price of defending a patent infringement action in order to extract licensing fees, cost defendants and licensees $29 billion in 2011. The number of such lawsuits rose to 62% of all patent infringement cases filed in 2012. The economic drain on the targets of these troll lawsuits, U.S. companies that are actually marketing products and services, has focused attention on the inability of the U.S. Patent and Trademark Office (USPTO) to weed out overly broad patents, and it has bolstered criticism of the patent system for stifling innovation by granting improper exclusivity for less-than-inventive concepts.” Read on>>

Obama Administration and Congress Taking Aim at Patent Enforcement Tactics (Akerman Senterfitt):

“Companies and trade associations within the hi-tech industry have responded to [recent] these legislative proposals with both optimism as well as caution and wariness. The SAS Institute, a developer of advanced analytic software, has recently served as a vocal advocate of supplementary legislation after reportedly spending millions to defend itself against, what it deems, frivolous litigation. However, other major hi-tech companies have stated their concern with the recent congressional and executive proposals. Microsoft and BSA: The Software Alliance, a software trade group, have expressed public dismay after asserting that the proposals could, in themselves, stifle innovation. Intellectual Ventures, a patent enforcement company, has called the proposals ‘misguided and [in need of] further discussion.’” Read on>>

Patent Trolls: The View From Above the Bridge and the View From Below the Bridge (Burns & Levinson LLP)

“I got a glimpse of the view from below the bridge. Several of my clients and co-licensees of my clients, startup companies that had built patent portfolios but did not experience commercial success, decided to monetize their large intangible asset, their patent portfolio. As I had found out in the licensing experience early in my patent law career, ‘carrot licensing’ (where you entice a potential licensee to take a license), is significantly harder and less likely to succeed than ‘stick licensing’ (where you find them infringing and bring them to the table to license). […]That is where NPEs come in. In the situations I experienced, the NPEs did their due diligence – they looked at the patents critically to determine that there was likelihood of success in a suit.” Read on>>

Patent Trolls Play On (Levenfeld Pearlstein):

“The gathering storm of potential legislation against Patent Assertion Entities, otherwise known as patent trolls, has been well reported, but what are the trolls doing in response? In many instances, they have continued to do what they have always done – sue and threaten to sue. […] Smart Search Concepts LLC, has continued to file claims against major retailers, such as Macy’s, Kohl’s, Gap, J.C. Penney, Nieman Marcus and Nordstrom, asserting that the retailers’ websites infringe patents on ‘search-on-the-fly’ technology because the sites let consumers search for merchandise with keywords, drop-down menus and database queries that allow users to refine their searches in multiple steps.” Read on>>

Federal and State Governments Position Patent Trolls in their Crosshairs (Cadwalader, Wickersham & Taft LLP):

“The State of Vermont has taken an aggressive stance against NPEs. On May 22, 2013, the state of Vermont signed into law (to take effect on July 1, 2013) House Bill 299, which creates a right to sue a patent owner for making a ‘bad faith assertion’ of patent infringement. The statutory text of the law explains that Vermont does ‘not wish to interfere with the good faith enforcement of patents or good faith patent litigation,’ but states that ‘[a]busive patent litigation, and especially the assertion of bad faith infringement claims, can harm Vermont companies.’” Read on>>

A Troll Backs Off (Levenfeld Pearlstein):

“The equipment manufacturers who should take on the primary burden of dealing with claimed infringement by use of their products stepped up to the plate and either attacked the patent or negotiated a settlement that took the customers out of the fight. And the threat of state consumer protection litigation has apparently caused the troll to publicly step back from its claims while the patents are under review. The recent public focus on abuses by patent trolls has already brought beneficial effects in at least one arena.” Read on>>

Related Podcast: Why Patent Troll Lawsuits Are on the Rise and Often Against Startups – Polsinelli

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