The Day All The Patent Trolls Rushed To File New Lawsuits

from the because-of-fee-shifting dept

The Senate is still working on patent reform, despite the House approving it months ago. However, you can be sure that patent trolls and their lawyers have been watching the space carefully. One of the proposed amendments on the Senate side would concern fee shifting — making the losing party have to pay the winning party’s legal bills — and in the amendment it says it would go into effect, on April 24, 2014. Even though the bill has not yet gone anywhere and the amendment may not make it, it would appear that trolls and their lawyers (often one and the same) realized that if they wanted to avoid fee shifting, they’d better get filing. And, boy, did they ever file a lot of patent infringement cases on Wednesday April 23rd: 190 cases. In case you’re wondering, the day before 8 patent cases were filed.

But just that number alone might not give you enough perspective to understand this mad rush to the courts (or, well, as we’ll see, one court in particular) to file patent lawsuits. The good folks over at Lex Machina have put together some data to show just how noteworthy all those patent lawsuit filings are. Here are the daily patent lawsuit filings for the first four months of 2014. Notice any particular outlier?

Of course, trolls have known that fee shifting was a possibility for a while now, so it’s not like they suddenly realized it might be good to get lawsuits in just under the wire. So Lex Machina also went back a few years and looked at the weekly filings of patent lawsuits. You might notice a bit of a trend leading up to the massive outlier: And, with so many filings, they should be distributed widely around the country, right? It’s not like trolls play a silly jurisdiction shopping game in which they all try to file in one random obscure court in eastern Texas, right? Well, let’s look at where most of those 190 cases were filed: Oh, and if you’re wondering why the district court in Delaware seems to be fairly popular too, I’m guessing some research by Mark Lemley may have something to do with that. He compared patent cases in various districts and found that, for cases that actually go to trial, Delaware had a higher win rate than East Texas. Oh, and also that a far higher percentage of patent cases actually go to trial in Delaware as well. East Texas still gets the majority of cases (by far), but Delaware has been the alternative favorite for trolls for quite some time now.

Of course, this also shows that trolls know they have questionable claims and that they fear fee shifting mightily. It’s why any patent reform bill needs strong fee shifting provisions to deal with such bogus lawsuits.

Filed Under: delaware, east texas, fee shifting, lawsuits, patents

Patent Reform Needs Fee Shifting Provisions, Because Judges Almost Never Award Attorneys' Fees

from the necessary-reform dept

One of the key parts of the attempts to reform the patent system is the fee shifting provision, which would make it so patent trolls who bring bogus lawsuits will be required to pay the attorneys’ fees of those they sued. Some patent system defenders, including the chief judge of CAFC, the appeals court who hears all patent appeals, say that this isn’t needed because courts already have the power to award attorney fees. However, as we’ve pointed out, the law on that notes that this power can only be used in “exceptional cases.”

New data from Lex Machina — an awesome startup that is compiling all sorts of legal data — shows that courts almost never award attorneys fees, and the rate at which they’re doing so continues to go down, even as the number of patent lawsuits has gone up. From 2010 through 2012, 997 patent judgments were contested — and only six had attorneys fees granted. Yes, less than 1%. So, for those arguing that fee shifting is already allowed under the law… it’s simply not happening. Patent reform needs a strong fee shifting component to ward off so many bogus lawsuits.

Update: There’s been some discussion in the comments about the data, which require some further clarification. The six awards are the cases where attorneys fees were granted based on “litigation misconduct or frivolous, bad-faith litigation.” Some have pointed out that fees have been awarded in some other cases, but those were for default, willful infringement or inequitable conduct — which are issues unrelated to the point being made here. It’s the frivolous, bad-faith litigation that’s the problem, which happens all the time, and attorneys’ fees are almost never granted in such cases, leading trolls to file frivolous cases all too frequently. Separately, some have argued that the 997 is inappropriate because defendants in many of those cases did not seek attorneys’ fees, but that actually supports the point, rather than takes away from it. Given how rare and unlikely it is for a court to award attorneys’ fees, most defendants don’t see any value in wasting even more legal effort in trying to get those fees, knowing they’re almost certainly not going to come.

Filed Under: fee shifting, patent reform, patent trolls
Companies: lex machina

New Anti-Patent Trolling Bill Released

from the a-good-start dept

Earlier this year, about half a dozen different bills were introduced in Congress trying to tame the patent troll problem. Now, Rep. Bob Goodlatte has basically strung together a bunch of the different ideas from those earlier proposed bills to create The Innovation Act of 2013, which includes a bunch of ideas to limit patent trolls. It’s a good bill that will definitely do plenty to stop some of the most egregious forms of patent trolling, though it doesn’t go nearly far enough in terms of stopping bad patents from being issued in the first place, or allowing all kinds of companies (trolls or not) to attack other innovators. The bill is definitely a step in the right direction — and it’s impressive that Congress really did realize that patent trolling was such a problem, after pretending that it had solved all of the patent system ills a couple years ago with the America Invents Act, which was close to useless.

Among the good things in this bill: (1) in cases of really egregious behavior, the bill will allow for awarding attorneys’ fees to the prevailing party. So in cases where a patent troll files a bogus lawsuit as part of the shakedown, the defendant can get attorneys’ fees. That’s helpful, but it will still require years of fighting and expenses to get to that point. (2) In the lawsuit, suing companies actually have to explain what was infringed and how. I know, it seems crazy that this wasn’t a requirement before, but welcome to the insanity that is our patent system. (3) Limiting the discovery process. Discovery can be incredibly expensive, and trolls have leveraged that to burden innovative companies that they’re suing. This bill tries to limit the power to abuse discovery, though there are always loopholes. (4) “Transparency of ownership.” Basically, patent trolls won’t be able to hide behind shell companies as easily as before. (5) It tries to (somewhat) limit the ability of patent trolls to go after end consumers of products (such as the troll claiming it could sue all WiFi users) or the troll going after anyone using a networked printer/scanner. All it really does here is allow the consumers to continue using the products while other stuff gets resolved if the troll has also sued the manufacturer. This means, if it’s more lucrative, trolls will just avoid suing the manufacturer and go after the users. Again, this protection is not complete, but it’s a step forward.

All of these are useful and positive steps, but won’t stop trolling. It will, hopefully, limit the most egregious cases, but we’ve certainly seen that trolls can get creative in how they troll, so I imagine that, if this becomes law, we’ll start to see new methods pop up quickly. That said, it’s still a long way from actually passing. The fact that the bill is being introduced with a wide variety of powerful backers — Reps. Bob Goodlatte, Pete DeFazio, Zoe Lofgren, Jason Chaffetz, Howard Coble, Anna Eshoo, Lamar Smith, Tom Marino and George Holding — means that the bill actually has a better chance than most of actually getting to the floor and passing. But there will be others fighting against it, and a similar bill needs to get through the Senate as well, though that seems likely. If it can get through Congress, it seems like that the administration will support it, but that’s not definite.

Honestly, the best thing about this is that, contrary to our expectations after the America Invents Act passed, patent trolling behavior became so egregious that Congress was actually willing to step back into this issue. That suggests that if the activity does continue, Congress will actually address it at some point. That’s a good thing, and as EFF notes, we have the patent trolls to thank for that.

Filed Under: bob goodlatte, discovery, fee shifting, patent reform, patent trolls, patents, shell companies

Chief Patent Judge Speaks Out Against Patent Trolls

from the could-have-done-it-earlier... dept

In the past, we’ve criticized Judge Randall Rader, the chief judge of the court of appeals for the federal circuit (CAFC), which, among other things, handles all appeals on patent cases, for being completely out of touch with the ways in which our patent system is broken. His statements seemed to indicate a complete lack of recognition for how patent trolling and bogus patent lawsuits were causing all sorts of trouble for innovation. So it’s encouraging — but surprising — to see Judge Rader team up with professors Colleen Chien and David Hricik — who have studied problems with patents and patent trolls — to write a NY Times op-ed piece about the problems of patent trolls. Yes, the chief judge of the court that handles patent cases is now openly calling them trolls and complaining that they’re a problem. This is good.

The onslaught of litigation brought by “patent trolls” — who typically buy up a slew of patents, then sue anyone and everyone who might be using or selling the claimed inventions — has slowed the development of new products, increased costs for businesses and consumers, and clogged our judicial system.

Their business plan is simple: trolls (intellectual-property lawyers use less evocative terms like “non-practicing entities” and “patent-assertion entities”) make money by threatening companies with expensive lawsuits and then using that cudgel, rather than the merits of a case, to extract a financial settlement. In the apt summary of President Obama, who on Tuesday announced a plan to stave off frivolous patent litigation, trolls just want to “hijack somebody else’s idea and see if they can extort some money.”

What’s interesting, is that the rest of the op-ed mainly focuses on the question of fee-shifting. As we’ve discussed, President Obama’s patent plan includes plans to make it easier for those who bring bogus patent lawsuits to have to pay attorneys’ fees, and there are already a few proposals in Congress that include similar provisions. But the op-ed points out that judges already have this power, and just don’t use it very often. So, he’s suggesting that judges “look more closely” at patent cases, to see if there’s abuse by trolls, and if they ought to use Section 285 of the Patent Act.

To make sure Section 285 is implemented with appropriate vigor, judges must look more closely for signs that a patent lawsuit was pursued primarily to take improper advantage of a defendant — that is, using the threat of litigation cost, rather than the merits of a claim, to bully a defendant into settling.

One sign of potential abuse is when a single patent holder sues hundreds or thousands of users of a technology (who know little about the patent) rather than those who make it — or when a patent holder sues a slew of companies with a demand for a quick settlement at a fraction of the cost of defense, or refuses to stop pursuing settlements from product users even after a court has ruled against the patentee.

Other indications of potential bullying include litigants who assert a patent claim when the rights to it have already been granted through license, or distort a patent claim far beyond its plain meaning and precedent for the apparent purpose of raising the legal costs of the defense.

While this is an interesting point, I’m not sure it’s really that relevant. First of all, Section 285 reads (in its entirety):

The court in exceptional cases may award reasonable attorney fees to the prevailing party.

But that’s the thing: these kinds of trolling efforts are not “exceptional.” They’re increasingly the norm, as was noted in the very same op-ed.

Also, you’d think that, as the chief judge on the court that handles all patent appeals, Judge Rader would have had a chance to not just do what he suggests judges should do… but to create a precedent for district courts to adhere to on that point, rather than just writing about it in the NY Times.

Filed Under: cafc, colleen chien, david hricik, fee shifting, patent trolls, patents, randall rader

Yet Another Anti-Patent Troll Bill Introduced In Congress

from the maybe-something-will-get-through dept

We were just talking about the third attempt by someone in Congress to deal with some aspect of patent trolling, and already we have a fourth bill. Senator John Cornyn has introduced the Patent Abuse Reduction Act, which has a variety of provisions that would make life slightly more difficult for trolls. Some of what’s in the bill has been seen in those other bills, like fee shifting (such that trolls need to pay fees if they lose a case) and identifying who is really behind the lawsuit. As the EFF notes, there’s plenty to like about the bill, but like all of the other bills so far, it still seems somewhat narrowly focused, rather than taking on larger problems, like the granting of bad patents by the USPTO. Still, it’s good to see that Congress seems serious about dealing with patent trolls, and is actually bringing out bills to deal with the issue. Now let’s see if something comprehensive might actually get enough momentum to become law.

Filed Under: fee shifting, john cornyn, patent abuse reduction act, patent trolls, patents