Patent troll thinks it has a better shot in Federal Court

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MPHJ has filed for removal of the Vermont Attorney General’s (AG) lawsuit against it to federal court.  As is clear from the filing, MPHJ is trying to insert issues of patent law into the lawsuit in order to justify removal – unfortunately for MPHJ, none of those issues truly exist as the AG’s complaint doesn’t allege that MPHJ’s patents are invalid, unenforceable, or even that the Vermont businesses that MPHJ has chosen to send demand letters to don’t infringe.  If the AG seeks remand, it is certainly not a sure thing for MPHJ that it would remain in federal court.  A nice analysis of the issues MPHJ faces is over at The Essential Patent Blog.

The motion is here.

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.

Vermont Set to Send Strong Message to Patent Trolls: Don’t Mess with Our Businesses

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Vermont Takes On Patent Trolls in New Legislation

Vermont Takes On Patent Trolls in New Legislation

As with many other pressing issues of the day, Vermont has once again taken unprecedented steps toward addressing problems that Washington has not been able to concern themselves with.  Earlier this week, the Vermont legislature passed H.299, which attempts to place barriers in front of entities looking to extort money from businesses based on bad faith assertions of patent infringement (e.g., some patent trolls).  Although, as I wrote earlier, I believe the bill could have been stronger, I also believe that this bill can have an immediate beneficial impact on Vermont businesses and is a starting point for future legislation that will continue to frame Vermont as a place that looks out for its people and its business community.

The primary benefits of the bill are twofold.

The Bill Exists

The first benefit is that the bill exists – it puts legislation on the books that makes bad faith demand letters a violation of state consumer protection law and its mere existence makes the playing field more complex and more risky for unscrupulous entities looking to make a quick buck by threatening businesses (and in some cases nonprofits) with expensive litigation.

Patent trolls and other entities that engage in aggressive licensing campaigns will need to reevaluate the risks associated with going after a Vermont business or organization, because of the potential risk of being hailed into state court to answer a state law claim.  Even with the possibility of removal to federal court, this risk is one that some patent trolls may not want to take.  This may be especially so when the modus operandi for some patent trolls is to extract a quick settlement with little expenditure on their own part.  In fact, some patent trolls that get hailed into federal court on a declaratory judgment action fold as quickly as possible to avoid litigation costs.  Thus, this bill may change the perceived cost benefit equation of patent troll tactics.

Attorney General Involvement

The second, and likely greatest, benefit of the bill is the potential for the Attorney General (AG) to investigate and initiate lawsuits against entities that engage in bad faith assertions of patent infringement.  While the AG would need to clear the same hurdles (mentioned in my previous post) as a patent troll target (e.g., business or organization), the state’s involvement could be significant.  When facing off against the AG, the patent troll won’t be able to rely exclusively on a target’s unwillingness, lack of wherewithal, or lack of funds, to engage in a lawsuit to defend itself.  Moreover, as those who have litigated against government entities know, there certainly isn’t any “easy money” to be made in that game.  The equation – and the troll’s motivation – will change very quickly if there is a risk that the “answer” to a demand letter might come from the AG’s office.

Making the Most of the Law

To make the most of this bill, two things need to happen.  First, it must be made widely known to the business community that this state court cause of action is available, and especially that the business community should report all suspect demand letters from patent trolls to the AG’s office.  It might be wise for business associations and the Vermont Chamber of Commerce to consider focused PR campaigns in and outside of Vermont to let both businesses and would be patent trolls know about the new law.  Second, to make the perception of risk real, the AG’s office should invest the necessary resources in investigating and, where appropriate, prosecuting bad faith demand letters served on Vermont businesses and nonprofits.  The more widely known the bill and the more likely it seems that the AG will become apprised of bad faith patent assertions, the higher the risks for patent trolls, and consequently the greater the likelihood that they will decide to leave Vermont businesses alone.