Combating Patent Trolls: Third-Party Solutions and Defense Strategies in Post-Grant and Litigation Leveraging Counterclaim, Summary Judgment and Other Tactics; Utilizing Legislative, Insurance and Third-Party Tools Today’s faculty features: 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10. THURSDAY, JANUARY 29, 2015 Presenting a live 90-minute webinar with interactive Q&A Kevin Jakel, CEO, Unified Patents, Los Altos, Calif. Michael L. Kiklis, Partner, Oblon Spivak McClelland Maier & Neustadt, Alexandria, Va.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Combating Patent Trolls: Third-Party Solutions and Defense Strategies in Post-Grant and Litigation Leveraging Counterclaim, Summary Judgment and Other Tactics; Utilizing Legislative, Insurance and Third-Party Tools
Definition: “[A]n agreement between an officious intermeddler in a lawsuit and a litigant by which the intermeddler helps pursue the litigant's claim as consideration for receiving part of any judgment proceeds." Black's Law Dictionary (9th ed. 2009).
Refac Int'l, Ltd. v. Lotus Dev. Corp. 131 F.R.D. 56 (S.D.N.Y. 1990) – Plaintiff was assigned a 5% interest in the patent in suit in exchange
for an obligation to sue at least two alleged infringers in federal court within the month. Defendants moved to dismiss pursuant to Rule 12(b)(7) for failure to join the 95% patent owner.
– The court granted the motion “[b]ecause [plaintiff] is a 5% owner of the patent in question simply for the purpose of pursuing litigation on [patent owners]'s behalf[;] [plaintiff]‘s agreement with [the patent owner] is nothing but a hunting license -- which is to say, it is champertous and therefore void.
• “If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.” Fed. R. Civ. P. 68(d).
Issue: Standard for whether a case is “exceptional” under § 285
Holding: Rejects Brooks Furniture as “overly rigid” Rather than having to show that the litigation was both “brought in
subjective bad faith” and is “objectively baseless,” one merely has to show that the case “stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.”
District courts “may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.”
Lowered the evidentiary burden of proving entitlement to fees, from clear-and-convincing evidence to preponderance of the evidence.
– CAFC applied the regional circuit’s (2nd Cir.) law: “[L]iability for Rule 11 violations ‘requires only a showing of objective unreasonableness on the part of the attorney or client signing the papers.’”
– Source was required to “perform an objective evaluation of the claim terms” to satisfy its obligation to conduct a reasonable pre-suit evaluation.
– Source failed to meet this standard by ignoring the canons of claim construction.
* Final written decisions on the merits. ** Judgments based on Request for Adverse Judgment. *** Incl. terminations due to dismissal. + 95 cases joined to 59 base trials.
America Invents Act increased requirements for joinder • Parties may only be joined as defendants if:
1) “relief is asserted against the parties jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences” related to the infringing acts and
2) there are questions of fact common to all defendants or counterclaims defendants that will arise in the action.
• Helps to keep trolls from cheaply filing one large multi-defendant suit
Trade Protection Not Troll Protection Act (H.R. 4763)
– Limited patent assertions at ITC to entities with “a vested interest in the patent, including development of the product described.”
– Allowed ITC to consider the public interest when it decides on exclusion orders
– Allowed the "public interest determination" to take place at the beginning of the review process
Pending bills:
TROL (Targeting Rogue & Opaque Letters) Act of 2014 (passed by Subcommittee, 7/10/14)
– Makes the act of sending a patent demand letter "in bad faith" punishable as an "unfair or deceptive act" under the FTC Act.
– Requires greater identifying information from parties alleging infringement.
– May preempt some state initiatives on patent demand letters but excludes state laws concerning “state consumer protection,” “fraud or deception,“ and “trespass, contract, or tort[s].” §4(a).
– Gives state AG authority to bring civil actions in U.S. District Courts, but FTC may intervene. §4(b).
In May 2013, Vermont became the first state to take action against Trolls when 9 V.S.A. 4195-99 were signed by the governor • These laws, effective July 1, 2013 made it a state action
to send demand letters alleging patent infringement in “bad faith”
• Potential remedies for violation: (1) equitable relief, (2) damages, (3) costs and fees (including attorney’s fees), and (4) exemplary damages up to $50k OR three times the total damages, costs, and fees, whichever is greater
The VT Attorney General filed a complaint against MPHJ Technology Investments under this clause.
PREEMPTION: Vermont v. MPHJ Tech. Invs., LLC, No. 2:13-cv-00170-wks (D. Vt. Apr. 14, 2014)
– FACTS: • State alleged that MPHJ sent numerous “unfair and deceptive” letters, in violation of
the Vermont Consumer Protection Act to Vermont businesses, claiming patent infringement and threatening to sue if the businesses did not pay licensing fees.
• MPHJ removed to federal court and argued that “federal jurisdiction is established because the State seeks remedies that could be preempted by federal patent law.”
– HOLDING: Remand to State Court • Distinguishes state’s anti-troll legislation from federal patent law: “[T]he State is
targeting bad faith conduct irrespective of whether the letter recipients were patent infringers . . . .”
• Federal preemption is a defense and cannot alone merit removal to a federal court.
– TAKE-AWAY: • Federal preemption might not be a great concern for now because many state anti-
troll laws go after “bad faith conduct,” which the courts may distinguish from federal patent law.
In Nebraska, Attorney General Bruning ordered Farney Daniels PC not to file any patent suits or send demand letters while he investigated the firm’s representation of patent trolls • Activision TV sued Bruning claiming the ban violated its
right to select representation • The District Court sided with Activision TV and granted a
preliminary injunction preventing enforcement of cease-and-desist letter
• Ruling based on constitutional right to hire counsel, because the federal government has preempted the area of patent law, and because no showing of bad faith
On Jan. 14, 2014, a federal judge ruled that Bruning cannot prevent Farney Daniels PC from representing a company Bruning is investigating as a patent troll • The judge granted MPHJ Technology Investments LLC a
preliminary injunction that prevents Bruning from enforcing a cease-and-desist letter issued in July using same reasoning applied in Activision TV
On Jan. 8, 2014, the Nebraska Patent Abuse Prevention Act was proposed in the state Legislature - would make it a crime to allege patent infringement in bad faith
Illinois amended its Consumer Fraud & Deceptive Business Practices Act, effective in 2015, prohibiting patent demand letters that: – (1) falsely threaten litigation; – (2) falsely claim litigation has been filed; – (3) make assertions that lack a reasonable basis in fact or law
because the asserting party does not have the right to license or enforce the patent, or the patent has been held invalid or has expired;
– (4) fail to include sufficient information regarding the patent owner, the patent purportedly infringed, and the accused products’ features covered by the claims in the patent.
New York’s AG investigated MPHJ’s infringement communication tactics. A settlement was reached in January 2014, requiring MPHJ to repay licensing fees.
Settlement requirements for MPHJ also provide “guidelines” for NPE behavior: – Diligence and good faith when contacting potential
infringers. – Providing material information for an accused infringer
can evaluate the claim. – No misleading statements about a license fee. – Transparency of the true identity of the patent holder.
• Funding for staff in the Office of Attorney General to handle allegations of patent trolling • The Attorney General may bring a civil action against “Patent Trolls” in certain instances,
regardless of whether damages can be proved or the NPE is located in Virginia.
– Establish criteria to identify when an infringement claim is being made in bad faith • 1. No identification of the patent infringed or patent owner • 2. No statement of how the patent claims have been infringed • 3. Failure to identify how the products, services, and technology have infringed • 4. Unreasonable license offers • 5. Asserting party would know or reasonably should know that such assertion is baseless • 6. Deceptive assertion, or the legal action threatened cannot or is not intended to be
taken. • 7. A court found the assertion to be objectively baseless or imposed sanctions for the
assertion. • 8. The patent was not in force or previously had been held invalid.
• Mandatory settlement discussions e.g., S.D. Cal. requires an Early Neutral Evaluation conference to
discuss settlement before a magistrate judge within 60 days of a defendant’s first appearance; W.D. Tenn. requires that a person with settlement authority attend the scheduling conference.
• Requiring patent plaintiffs to produce all documents indicating ownership of the asserted patents. N.D. Cal., D. Idaho, N.D. Ill., Nevada, D.N.H., D.N.J., N.D.N.Y., E.D.N.C.,
Local patent rule provisions (cont’d): • Limiting the number of claims
e.g., E.D. Tex. recently adopted a model order with two phases aimed at reducing the costs of patent litigation o Phase 1- No more than 10 claims per patent and not more
than a total of 32 o Phase 2 –No more than 5 claims per patent and not more
than a total of 16 claims
• Limiting the number of prior art references e.g., E.D. Tex. model order also limits the number of prior art references
o Phase 1 - No more than 12 references per patent and not more than a total of 40 references
o Phase 2 –No more than 6 references per patent and not more than a total of 20 references
Fourteen federal district courts selected to participate in a 10-year pilot project designed to enhance expertise in patent cases among U.S. district judges.
Courts had to be among the 15 district courts in which the largest number of patent and plant variety protections cases were filed in 2010, or be courts that adopted/certified to the Director of the Admin. Office of the U.S. Courts (AOUSC) the intention to adopt local rules for patent and plant variety protection cases.
Patent cases filed in participating district courts are initially randomly assigned to all district judges, regardless of whether they have been designated to hear such cases. A judge who is randomly assigned a patent case and is not among the designated judges may decline to accept the case. That case is then randomly assigned to one of the district judges designated to hear patent cases.
NPEs have recently attempted to use past licensing to satisfy the ITC’s domestic industry requirement • Domestic industry is typically evaluated toward the end of the
investigation • In order to avoid unnecessary cost and time, the ITC launched a pilot
program where investigations “likely to present a potentially dispositive issue” like domestic industry are identified and such issues are determined early
• Certain Computer & Computer Peripheral Devices & Components Thereof & Products Containing the Same (1/9/14) • Held that to use licensing activities to satisfy the domestic industry
requirement for suing at the ITC, NPE must prove that there are products that practice the patent.
• Previously held that licensing alone could satisfy the requirement.
Federal Trade Commission • In 2013, FTC voted to seek public comments on a proposal to gather
information from ~25 companies in the business of buying and asserting patents known as Patent Assertion Entities (PAEs). FTC received over 70 comments, most expressing support for the study. In May 2014, FTC sought OMBC clearance and solicited additional public comments, for which it has received over 30 responses so far, including such groups as Microsoft, Intellectual Ventures, and American University.
• FTC has the ability to collect nonpublic information such as licensing agreements, patent acquisition information, and cost and revenue data.
• In May 2014, FTC testified before Congress stating it believes that the agency’s authority under Section 5 of the FTC Act can and should be brought to bear with respect to PAE demand letters. FTC is seeking legislation that would grant it civil penalty authority in this area.
• In November 2014, FTC settled its first consumer-protection lawsuit against a PAE, MPHJ Technology Investments, for using deceptive sales claims and phony legal threats. The 2014 settlement provided for a $16,000 fine per letter that MPHJ or its attorneys would send.
In response to the 2013 Executive Actions, the USPTO: – Proposed rules to require that the attributable owner, including the
ultimate parent entity, be identified during the pendency of a patent application and at specified times during the life of a patent (i.e., at the time of issue fee payments, maintenance fee payments, supplemental examination, ex parte reexamination, or PTAB proceeding). 79 Fed. Reg. 4105-4121 (Jan. 24, 2014).
– Created a website to guide recipients of a demand letter, http://www.uspto.gov/patents/litigation/
– Better patents = Less frivolous litigation? • Initiated a “Glossary Pilot” for use by examiners to improve functional
claim clarity. • Formally engaged key stakeholders in private sector and academia (i.e.
Thomas Alva Edison Visiting Scholars Program) for policy input.
“In this well organized, readily accessible and highly readable treatise, Michael Kiklis analyzes the serial interventions by the Supreme Court that keep altering the purely statutory patent law as interpreted by the Federal Circuit and understood by patent practitioners. Because these alterations are continuing and even accelerating, practitioners need to anticipate where the Court is headed next if they are to serve their clients well. By stressing trends and explaining dicta for what it may portend, Kiklis provides an invaluable chart for navigating shifting seas." – Paul Michel, former Chief Judge, United States Court of Appeals for the Federal Circuit “In this one volume, Michael Kiklis has filled in a critical gap in our understanding of modern American patent law. Every person interested in the field must study the current Supreme Court’s take on patents, and there is no better source than this treatise.” – Tom Goldstein, Publisher, Scotusblog.com