Controlling the Trolls: Federal, State, and Private Actions to Curb Patent Troll Activities (Part 2)

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Can Business Band Together To Defeat Patent Trolls?

Can Business Band Together To Defeat Patent Trolls?
Photo Courtesy of Magnolia Pictures

While state and federal activities to control patent trolls have dominated the news cycle lately, other, non-governmental, opportunities exist for businesses to protect themselves from frivolous patent lawsuits.  Below, I discuss the pros and cons of some of the private (as opposed to governmental, not secret) activities that are currently underway.  One of the interesting aspects that pervades these activities is that, at times, the action requires competitors (and sometimes fierce competitors) to join forces to defeat a common enemy.  This is oftentimes easier said than done.  In fact, Section 299 of the America Invents Act, which limits joinder of patent infringement defendants, was drafted to address issues that arose when competitors were brought into the same infringement lawsuit (which precipitated the possibility that confidential information would be disclosed to a competitor during the course of the lawsuit).  However, while Section 299 did avoid some problems, as discussed below, there can be an advantage in competitors banding together during a lawsuit.  Ideally, a united front would likely be more effective at dissuading patent troll conduct, but unfortunately the creation of such a front is simply unlikely.

As I’ve mentioned previously, none of these solutions – by themselves – will fundamentally shift the game that patent trolls are playing.  However, when combined with other governmental actions, these activities could play a part in quelling the extortionist tactics of trolls.

Private Activities

  • Patent Pools
    • Patent pools are agreements between two or more companies to cross-license patents relating to a particular technology.
      • Pros
        • Patent pools can save businesses time and money by lowering negotiation costs and pooling risk
        • Patent pools can lead to a common cause defense (as the pool members will typically be similar to each other and thus share the same risk of being pursued by trolls)
        • Patent pools, by definition, are an aggregation of a certain technology, and thus can provide support for changing a patent troll’s assertion of infringement or the validity of the asserted patent
      • Cons
        • Generally a business has to have a patent to cross-license before it become part of the pool (but, assuredly for enough money a business can buy its way in)
        • The cost of membership limits availability of protection for smaller businesses
        • May run afoul of anti-trust laws under certain circumstances
        • “Safe” technology options (i.e., those options a business has a license to) may limit further innovation or product differentiation – going outside the “safe” zone increases risk
  • Patent Purchase Entities
    • Similar to patent pools, patent purchase entities (PPEs) aggregate patents; however, as the name suggests, these entities are actively pursuing patents in certain spaces or merely those that trolls have expressed an interest in.  In essence, these entities are trying to beat patent trolls by drying up the store of useful patents for them to broadly assert.
      • Examples:
        • Allied Security Trust (AST) examines its members’ interests in particular patents and under certain conditions AST attempts to buy them.  AST then licenses the purchased patents to the members.  Membership in AST is expensive and limited.  Although the goal is to prevent potentially damaging patents from entering the hands of patent trolls, this exclusivity limits the number that can effectively be pooled.
        • Unified Patents is a recent startup with a focus on providing protection against and attacking patent trolls.  Strategies of Unified Patents include:
          • Early identification of patent troll war-chest building (i.e., suing smaller members) and active evaluation of invalidity arguments
          • Identify and purchase patents that trolls have expressed an interest in
          • Requesting reexaminations on patents being used by patent trolls.
    • Pros
      • PPEs divest patent trolls of patents that could be used to extract fees
      • PPEs can attack patents generally without fear of retribution
    • Cons
      • Requires constant vigilance in order to maintain PPE portfolio
      • Membership is generally limited and is going to be focused only on certain industries
      • May lead to a drain on innovation if patents aggregated by PPEs are not licensed to businesses who are not members of the PPE
  • Joint Defense Agreements
    • Joint Defense Agreements allow parties with shared interest in actual or potential litigation against a common adversary to share privileged information without waiving their right to assert attorney–client privilege.  These agreements can also formalize the structure by which the parties will pay to defend the infringement suit; i.e., the parties can share the potentially high cost of conducting claim construction or proffering an invalidity defense, while each independently paying for their own non-infringement defense.
    • The use of joint defenses can be a real advantage in some cases (and disadvantageous in others).  For example, recently banks in the Northeast filed a motion in a special federal tribunal that oversees related lawsuits pending in different federal courts so as to consolidate their patent lawsuits with related cases already pending in Delaware.  As Bob Stier of Pierce Atwood stated: ‘“This is a huge win for my clients,”  . . . . “So long as the troll could divide and conquer, banks were at a disadvantage.  Today’s ruling is a game-changer because it unites the banks against their common enemy.” (emphasis added).

Next up is a post on my thoughts on additional actions that could be taken by state, federal, and private industry to further limit the ability for extortion by patent trolls.