Gaming Patent Litigation on Both Sides of the ‘v’ | IPWatchdog Unleashed

This week on IPWatchdog Unleashed, we enter the patent litigation world for a conversation about gaming patent litigation. For too long, popular sentiment has been that patent owners are bad actors simply because they are patent owners. A more nuanced but still grossly overbroad view is that patent owners are not per se bad actors, but if you are a patent owner who has the audacity to enforce a patent against an alleged infringer, then you are most definitely a bad actor.

Obviously, just being a patent owner does not make one a bad actor, and neither does enforcing a patent against an alleged infringer. But this patent troll narrative has been quite successful and has turned everyone who owns and enforces patents into an evil archvillain. Having said that, it would be naïve to assume that all patent owners act in only good faith and with the purest of intentions. So, as much as the patent troll narrative has been grossly exaggerated, there are patent owners who rightfully deserve vilification and scorn for, among other things, bringing patent infringement lawsuits to extract nothing more than nuisance value, which has been characterized by some as engaging in extortion-like behavior.

Meanwhile, alleged infringers love to portray themselves as victims of unscrupulous patent trolls. But the truth is over the last generation patents have gotten so weak in the United States that they are not a property right, with even the U.S. Supreme Court calling a patent nothing more than a government franchise and no property right at all. So ineffectual is patent protection in the United States that the largest implementers who take products and services to market do not license patents, they simply engage in efficient infringement. They get a free pass because, as the narrative goes, those who implement and take innovation to market can’t possibly be bad actors. Right. If you believe that I have a bridge to sell you.

Efficient infringement is a business decision based on a cold-hearted calculus. Efficient infringement occurs because it can. The efficient infringer makes a business calculation that it will be cheaper to take and use patented technology without permission than to license and pay a fair royalty to the innovator. It is cheaper to take rather than to design or invent around, to disrupt, or to compete on the merits. It is also cheaper to simply use patented technology than to pay for it because when faced with claims of infringement it has become virtually impossible for patent owners to fight to victory against the much deeper pocketed infringer.

The efficient infringement model works exceptionally well. These black hat entities realize there are a certain number of patent owners that are simply not going to assert their patents for one reason or another, typically because they don’t have the money to do so. Then there is another group of those that will assert their patents but will not win. The calculation progresses to realize that there is only a very small group of those who are likely to assert their patent(s) and prevail, thanks in no small part due to all the hurdles put in place by the Patent Trial and Appeal Board, and as a result of the massive uncertainty surrounding patent eligibility. The calculation further recognizes that even if a patent owner prevails a permanent injunction is virtually impossible to obtain in the United States, which means, from the infringer’s perspective, they at worst gain a compulsory license. Still further, even a victorious patent owner cannot expect to ever receive the full damages awarded by a jury because damages are virtually certain to be reduced on appeal to a Federal Circuit that has become hostile toward patent owners, and particularly toward large infringement verdicts.

While all this accurately describes what is happening on both sides of a patent infringement dispute, the problem is it is only a generalized description without any specifics. To break through the generalities and get to the heart of the matter I hosted a discussion on June 3 between Katie O’Sullivan, who is Senior Corporate Counsel for U.S. Litigation at Renesas Electronics, Ben Herbert, who is a partner and co-lead of the Intellectual Property Practice at Miller Barondess, and Ben Weed, who is General Counsel for Ridge, the wallet company that sells primarily on Amazon and through other online platforms. The titled of our conversation was Gaming the Patent System on Both Sides of the “v”, which was an effort to put some facts behind the generalized rhetoric and start to define unacceptable behavior from both patent owners and infringers. My hope in having this conversation and others like it is to identify the behavioral problems that need to be addressed so specific solutions can be identified and championed. Because, whether you like it or not, the truth is that overwhelmingly patent owners are not patent trolls, but just like there are defendants who manipulate the system in vile ways, there are also unscrupulous patent owners who have institutionalized the monetization of judicial inefficiency. So, what are these bad actions and who are these bad actors?

We begin our conversation about patent litigation in America by asking each of our guests for their initial, big picture, preliminary views on gaming patent litigation.

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