Posts Tagged: "Patent Trolls"

The United States District Court for the District of Nebraska ordered outgoing Nebraska Attorney General Jon Bruning to pay $325,000 for attorneys fees and costs to ActiveLight, Inc. and to pay another $400,000 in attorneys fees and costs to MPHJ Technology Investments, who had intervened in the matter. Bruning had demanded that the attorneys for ActiveLight and MPHJ stop engaging in patent enforcement activities in the State of Nebraska, a gross overreach of his authority as a State Attorney General and done with little or no investigation that would suggest any violation of State law.

The most recent patent reform bill to pass the House, which is now expected to receive Senate backing as well, is the Goodlatte Innovation Act (H.R. 3309). Included within the various provisions of H.R. 3309 is the presumption of fee shifting for the losing party in a patent case. Put simply, this means the loser in a patent case pays the winning side’s attorney fees. In the context of a patent case, such costs often total in the millions. But as someone who operates at the center of the patent market, and is certainly sympathetic to the dangers of frivolous patent litigation, I can only hope that if additional patent reform does pass, the presumptive fee shifting provisions are nowhere to be seen. Although seen by those unfamiliar with the nuances of patents as a way to curtail abuses in the patent system, a presumptive fee shifting provision is not only unnecessary, but also likely to cause of host of unintended consequences.

It has been several generations since Congress has enacted changes to the patent laws that gave greater rights to innovators, the Supreme Court today is reminiscent of Courts in the past that had never seen a patent that contained valid claims, and the Federal Circuit is infatuated with de novo review and willingness to rubber stamp invalidity decisions parroting the Supreme Court’s intellectually dishonest and logically inconsistent tests. In the wake of all of this uncertainty and outright vilification of inventors and the patent system, there are some in the licensing and monetization industry who are trying to bring meaningful financial innovations to the fore. For the foreseeable future, given the reality of a completely dysfunctional federal government and judges more interested in being legislators, we can hope that thought leaders with new patent monetization models can provide a solution that will keep innovators inventing and society benefitting from the fruits of their labors.

In 2012, Mr. Rust bought five patents from an inventor named Laurence Klein for exactly $1. He then set up 101 separate limited liability companies (LLCs), each with bizarre six letter names like IsaMai, BriPol, and HarNol. No one but Mr. Rust knows what those acronyms mean. But thousands of Mom and Pop small businesses — 16,465 to be exact — soon found out that they translate as “trouble.” Each of these businesses received a “demand letter” from one of Rust’s shell companies accusing them of patent infringement and demanding roughly $1,000 per employee if they wanted to avoid a minimum six-figure (and possibly seven-figure) lawsuit in U.S. federal court. There’s a word for that: “bully.”

This survey shows what those in the industry have long known — patent trolls and the need for patent reform are NOT the biggest problems facing the high tech industry in the United States. In fact, 92% of respondents feel that there are other things that are more concerning and a bigger barrier to innovation. But how can this be? The public has been consistently fed the line that patents stifle innovation. How can something that stifles innovation not be the biggest concern, particularly when so many of the tech giants from Silicon Valley have for years blamed the patent system for all their woes? The simple answer is that patents do NOT stifle innovation, and those who are intimately familiar with the industry know that to be true regardless of the lies promoted to advance patent reform, vilify innovators and lay the blame for everything at the feet of patent trolls.

To a large extent Apple, Microsoft and many other Silicon Valley innovators went along with the anti-patent rhetoric perfected by the Google machine. The Silicon Valley elite who have been bemoaning the patent system and patent trolls succeeded beyond their wildest dreams, convincing everyone of problems that don’t exist. So successful has this misinformation campaign been that now patents owned by everyone in the high-tech sector are at least worth less, if not completely worthless. By taking a short-sighted view of the litigation problems they were facing they took direct aim on the patent system, their own patent portfolios and the essence of their competitive advantage. Institutional shareholders in any company that has lobbied for patent weakening policies and court rulings should be appalled and may well want to seek out attorneys specializing in shareholder lawsuits.

In the post-AIA world, patent litigation has become an expensive and very risky proposition for law firms. The end result is undoubtedly one of the great ironies in patent reform thus far. With reform gradually making it impossible for all but the wealthiest patent holders to enforce their intellectual property rights, many patent holders must instead turn to NPEs.