Tag Archives: troll

Should You Fight a Patent Infringement Demand Letter or Ignore it?

cease and desistRecently in The Wall Street Journal, Colleen Chien—an associate professor at Santa Clara University School of Law—suggests that the best way to respond to a cease and desist letter alleging patent infringement “may be to take a deep breath—and then do… nothing.”  Ms. Chien clarifies that “[t]his means… looking at the claim, determining that a license isn’t needed—and then filing the letter away, rather than responding.”  According to Ms. Chien, patent infringement demand letters often originate from so-called “patent trolls” on fishing expeditions looking for a quick settlement.  A “patent troll” is a pejorative term for a non-practicing entity that earns the majority of its revenue from the licensing or enforcement of its patents.  The Wall Street Journal article found patent trolls brought the majority of patent cases in the U.S. between January-June of 2015 and half the time targeted companies making less than $100 million.  Patent trolls also embark on campaigns that target entire industries for their use of another’s technology, such as Wi-Fi.  In these cases, a company’s contract with its technology provider might provide for patent infringement indemnification.  Ms. Chien recommends that “[a] company that keeps cool and does nothing is more likely to fly below the radar.”

On the other hand, The Wall Street Journal article cautions that there are times when doing nothing simply “won’t work.”  For instance, a larger competitor might file a patent infringement lawsuit against a startup to disrupt their business or squash the competition.  Other times, patent holders may be seeking high damage awards from a jury and are therefore more willing to pursue a patent infringement claim.  Indeed, The Wall Street Journal article points out that “any company that’s worth investing in will likely eventually appear on the radar of a patent troll.”  Ms. Chien recognizes that in these circumstances such attacks “aren’t likely to go away if ignored.”  Unless addressed quickly, a legitimate patent infringement claim could result in a finding of willful patent infringement and an award of treble damages.  Thus, it is important to speak with a patent professional at the onset of receiving a cease and desist letter to investigate the merit of any patent infringement allegation, determine the validity of the patent and recommend an appropriate response, whether it be a design-around, obtaining a license, or simply filing the letter away and resolving the threat by “doing nothing.”  See Colleen Chien, The Best Way to Fight a Patent Demand May Be to Do Nothing, The Wall Street Journal, November 23, 2015 at R5, available at http://www.wsj.com/articles/the-best-way-to-fight-a-patent-demand-may-be-to-do-nothing-1448248065.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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“Patent Trolls” In The United States Supreme Court

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On May 26, 2015, a United States Supreme Court Justice used the derogatory term “patent troll” for the first time in the United States Supreme Court’s recorded history.  In Commil USA, LLC v. Cisco Systems, Inc., 135 S. Ct. 1920, 1932 (May 26, 2015) the Court was asked to decide whether a company’s good faith belief that a patent was invalid could be a legitimate defense to patent infringement, specifically induced infringement.  The case involved a patent held by Commil USA, an accused patent troll, for improving the implementation of a wireless network over a large area.  A “patent troll” is a pejorative term for a non-practicing entity (“NPE”) that earns the majority of its revenue from the licensing or enforcement of its patents.  Commil USA sued Cisco Systems for patent infringement based on Cisco System’s use of similar technology, and inducing its customers to also infringe.  In defense, Cisco Systems admitted that it knew about Commil USA’s patent and that it’s use of Commil USA’s patented technology could constitute infringement.  Nevertheless, Cisco Systems argued that it shouldn’t be liable for patent infringement because it believed, in good faith, that Commil USA’s patent was invalid.  The Court was encouraged to allow a belief-of-invalidity defense in order to combat “abusive patent assertion” by the so-called patent troll Commil USA.

In a 6-2 decision, the Court ruled against Cisco System, holding accused patent infringers can’t evade claims of “induced infringement” by arguing they had a “good faith belief” the patent was invalid.  Notably, the Court recognized patents have a statutory presumption of validity.  Thus, Cisco System’s mere belief that it was acceptable to infringe Commil USA’s patent simply because the patent was no good, undermined the statutory presumption of validity.  The Court’s decision ultimately took away a powerful defense for accused patent infringers.

While the Court’s decision was significant in itself, Justice Antonin Scalia’s strongly worded dissent was further noteworthy.  Disagreeing with the majority, Justice Scalia argued it was “impossible” for anyone to induce infringement if they believed the patent was invalid in the first place.  Justice Scalia claimed the majority’s decision had ultimately “increase[d] the in terrorem power of patent trolls”—the first time the contentious term had ever been used in a United States Supreme Court opinion.  Thus, Justice Scalia’s reaction to the majority’s decision in Commil USA, LLC v. Cisco Systems, Inc. indicates the debate over how to combat abusive patent litigation is far from over.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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Update On Patent Trolling Legislation In The 114th Congress

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H.R. 3309, “The Innovation Act”

On December 5, 2013, the U.S. House of Representatives passed H.R. 3309, the “Innovation Act,” to address the growing problem of abusive patent litigation by so-called patent trolls.  A “patent troll” is a pejorative term for a non-practicing entity that earns the majority of its revenue from the licensing or enforcement of its patents.  Key provisions of H.R. 3309 contained heightened pleading standards; required patent plaintiffs to name anyone who had a financial interest in the patent being litigated; required courts to delay the discovery process until after claim construction was determined; created a voluntary process for small businesses to postpone patent lawsuits while their larger sellers defended similar patent lawsuits against the same plaintiff; and allowed a manufacturer to intervene in a lawsuit against its customers, with the action stayed for the customer if both the customer and manufacturer agreed.  The centerpiece of the legislation was a controversial fee-shifting provision that required courts (with some exceptions) to award prevailing parties reasonable attorneys’ fees and other expenses when parties brought frivolous lawsuits or claims that had no reasonable basis in law or fact.

Supporters of H.R. 3309 praised its passage as instituting important patent reforms made necessary after passage of the “America Invents Act” (P.L. 112-29).  Proponents included the technology sector and notable internet companies such as Google, Microsoft, Amazon, and Apple.  H.R. 3309 was also favored by brick-and-mortar industries such as restaurants, retailers, realtors, hotels, casinos, airlines, and the auto industry.

On the other side, opponents of H.R. 3309 were concerned that the fee-shifting provision would likely favor wealthy parties while discouraging small businesses from pursuing legitimate patent infringement claims.  Opponents included the biotechnology and pharmaceutical industries, the Intellectual Property Owners’ Association, patent attorneys, and even universities – which warned that the legislation would harm their patent-licensing revenues.

H.R. 3309 passed with bipartisan support in the U.S. House of Representatives by an overwhelming margin of 325-91 votes, however, its companion bill failed to clear the U.S. Senate.  Problems originated in the Senate when Judiciary Committee Chairman Patrick Leahy, D-Vt., attempted to create his own bill that removed the contentious fee-shifting language from H.R. 3309.  After votes on the Senate counterpart bill stalled repeatedly, Senator Leahy withdrew the bill from the Senate Judiciary Committee’s agenda last May.

H.R. 9, Reintroduction of “The Innovation Act”

In the wake of the 2014 midterm elections, Republicans vowed to take up patent trolling legislation early in 2015.  On February 5, 2015, House Judiciary Committee Chairman Bob Goodlatte, R-Va., reintroduced the “Innovation Act” (H.R. 9) with 20 co-sponsors including eleven Democrats and nine Republicans.  The bill is identical to H.R. 3309, and its reintroduction was immediately hailed by the Information Technology Industry Council, the Computer & Communications Association, the National Association of Broadcasters, and the National Cable & Telecommunications Association.  On the other hand, a host of 250 companies, startups, universities and innovators—including Qualcomm Technologies, Merck & Co. and Monsanto—objected to the bill and cautioned Congress about overcorrecting a patent system that was overhauled by the 2011 “America Invents Act” and reined in by recent United States Supreme Court decisions.

In light of these concerns, the U.S. House of Representatives Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on February 11th, 2015 examining the effect of the U.S. Supreme Court’s decisions on patent trolling and the continued need for patent litigation reform.  During the hearing, Congressman Darrell Issa, R-Ca. – who leads the subcommittee and himself owns dozens of patents – concluded that any changes to H.R. 9 will be “minor” and must increase the vote count.  In the Senate, Senator Charles Grassley, R-Ia., replaced Leahy as Chairman of the Committee on the Judiciary.  Senator Grassley has signaled his intention to make patent reform a priority and believes patent reform can be accomplished early in the first session of the 114th Congress.  This appears to be one issue the new Republican Congress and the White House will agree on in 2015, as the White House has signaled universal support for legislation curbing abusive patent litigation.

What does this mean for you

If you are a patent owner, speak with a registered patent attorney about how H.R. 9 may impact your patent rights.  Continue to monitor this legislation as it makes its way through the U.S. House of Representatives Committee on the Judiciary and voice any concerns you may have over the fee-shifting provision to your local Congressman and Senators.  Alternatively, if you have received a cease and desist letter from a patent troll alleging patent infringement, speak with a registered patent attorney about the legitimacy of these claims and the measured response you should take.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation in a variety of technology areas including agriculture, medical devices, mechanical, computer, pharmaceutical, chemical, biotech, and life sciences. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; law clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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