Philip Brooks' Patent Infringement Updates

NPEs in Patent Litigation

Strafford Publications is hosting the above-titled webinar on January 17, 2012:

Patent infringement actions brought by non-practicing entities (NPEs) have dramatically risen in recent years. In such suits, the defendants face the additional challenge of not being able to apply competitive pressures. Recent developments in the legal landscape change how counsel approach NPEs.

The America Invents Act (AIA) limits an NPE’s ability to join unrelated parties. In September, an NPE could file one suit against 200 entities, but the AIA would require as many as 200 separate filings in that case. While those 200 cases could be consolidated for discovery, they could not be consolidated for trial.

Patent counsel must understand recent court decisions and new procedures in some courts, as well as patent reforms under the AIA to combat NPEs in suits.

Our panelists, including R. David Donoghue, Partner at Holland & Knight, will provide guidance to IP counsel on the significant recent developments that impact how companies deal with non-practicing entities. We will also discuss settlement and defense strategies in patent suits with NPEs.

The panel will review these and other key questions:

• What effect will the America Invents Act law have on NPEs?
• What new court procedures and decisions have developed that impact NPE litigation?
• What strategies can be employed to minimize the threat of patent litigation?

Learn more and register here.

Median Patent Damages Awarded Hits 16-year Low

The following is excerpted from a PwC press release published on October 18, 2011 by U.S. Politics Today:

Reflecting upon developments currently underway in patent reform legislation, PwC US today released a new report "2011 Patent Litigation Study: Patent litigation trends as the ‘America Invents Act' becomes law" summarizing trends in the patent infringement litigation landscape.  PwC reports that the annual number of patent actions filed has increased at an overall compound annual growth rate (CAGR) of 4.9% since 1991, while annual median damages awarded ranged from $1.8 million to $15.6 million between 1995 and 2010.

PwC maintains a database of patent damages awards, collecting with specificity information about patent holder success rates, time-to-trial statistics, and practicing versus non-practicing entity (NPE) statistics (all from 1995 through 2010).  This year's study adds industry classification and expanded NPE segmentation analyses.

Notable findings include:

• Damages awards for NPEs averaged more than double those for practicing entities over the last five years
• Almost half of the largest damages awards have gone to NPEs; however, these large awards are frequently reversed on appeal, with final results dramatically reduced or eliminated
• The disparity between jury and bench awards continues to widen and is likely the primary contributing factor in the significant increase in use of juries since 1995
• Reasonable royalties remain the predominant measure of patent damages awards
• NPEs have been successful 23% of the time overall versus 33% for practicing entities, with similar success at trial but a relative lack of success for NPEs at summary judgment
• Technology associated with the consumer products industry represents the largest percentage of identified decisions from 1995 through 2010
• While the median time-to-trial has remained fairly constant in recent years (averaging 2.28 years), there are significant variations among jurisdictions
• Certain federal district courts (particularly Virginia Eastern, Delaware, and Texas Eastern) continue to be more favorable to patent holders, with shorter time-to-trial, higher success rates, and higher median damages awards
• Ten federal district courts (of 94 total, i.e. 11%) accounted for 55% of all identified decisions involving an NPE as the patent holder
• Not all NPEs are created equal: While University/Non-profit NPEs have the highest success rate among NPE litigants, their median damages award is considerably lower than the median award of Company NPEs

Read the full press release and access a link to the full PwC report here.

Patents Defended

The following is excerpted from an article by Michael M. Rosen appearing in the September 12, 2011 issue of The American (The Journal of the American Enterprise Institute):

On September 8, Congress at long last passed the “America Invents Act,” the first overhaul of our patent system in decades. Yet not everyone has cheered the new law, or how it came about.

The U.S. patent regime has always been a careful balancing act between encouraging innovation, enforcing the rights of inventors, and ensuring the public interest. Yet in two recent reports—one on National Public Radio’s “This American Life” and one in the New York Times—critics have argued that that equipoise is in grave danger.

Yet, like all complex issues presented by the mass media—even (especially?) by outlets as sophisticated as NPR and the Times—the ins and outs and what-have-yous of our patent system are far more nuanced, and the players far more difficult to cabin into bad guy and good guy roles, than NPR’s Ira Glass and company would have you believe.

Read here the analysis by Mr. Rosen of these two reports.

Vlingo and Nuance Debate Importance of Patent Infringement Trial Outcome

In its August 9, 2011 press release available at PRNewswire, Vlingo states:

Vlingo Corporation, the maker of the Virtual Assistant that turns your words into actions today announced a jury in Federal District Court in Boston found that Vlingo did not infringe on U.S. Patent No 6,766,295 (the '295 Patent) entitled "Adaptation of a Speech Recognition System across Multiple Remote Sessions with a Speaker" as alleged by Nuance Communications.

Specifically, Nuance alleged that two Vlingo commercial systems infringed the '295 patent: the Vlingo/IBM system and the Vlingo/AT&T Watson system. Vlingo uses speech recognition systems developed by IBM and AT&T to build its products. The jury found neither system infringed. Ironically, the IBM speech recognition system used in the Vlingo solution was acquired by Nuance in 2009, and Vlingo is a customer of Nuance's for the IBM engine. So, in alleging the Vlingo/IBM system infringed, Nuance was claiming a customer of its own technology infringed its patents – even though this use was consistent with the terms of the license.

A Businessweek Bloomberg article recently reported that Nuance has sued eight companies over alleged patent infringements but that is hasn't won any judgments.

Nuance made the following statements in its August 9, 2011 press release available on the company's website:

Nuance Communications, Inc. (NASDAQ: NUAN) today announced that on August 9, 2011 a federal jury in Boston, Massachusetts, returned a verdict in a patent infringement case between Nuance and Vlingo Corp. The jury confirmed the validity of Nuance’s U.S. Patent No. 6,766,295, which Vlingo had claimed was invalid, but found that Vlingo did not implement Nuance’s patented technology. Nuance’s patent relates to methods and systems for automatically adapting speech recognition systems. Nuance filed the lawsuit against Vlingo in 2008.

“We are pleased that the jury rejected Vlingo’s attempt to invalidate our patent, but are disappointed that the jury held that Vlingo does not infringe that patent,” said Jo-Anne Sinclair, Nuance senior vice president and general counsel. “While we respect the jury system, we believe our patent has been infringed by Vlingo. We intend to appeal today’s verdict and believe Nuance has a strong position based on both the facts and the law. Creating new technology and bringing innovations to the market are at the core of Nuance’s business. We cannot and will not remain silent while others take and use our innovations.”

Nuance currently has several other lawsuits pending against Vlingo, both in the United States and abroad. None of these other cases are affected by the jury verdict in this case.

Based on statements by Vlingo's CEO, it appears that he does not believe such an appeal by Nuance will be successful. Dave Grannan, President and CEO of Vlingo, said, “The USPTO has presented a second office action confirming its rejection of all claims 1-54 of U.S Patent No 6,766,295 citing that the inventor has provided insufficient evidence of non-obviousness. Article One has been critical to Vlingo’s success within the legal system. Article One provided detailed evidence which the USPTO analyzed and concluded that substantial questions exist regarding these claims of patentability.

“Rapid innovation and a diversity of suppliers are very important to our industry, and as an industry leader we understand the value of intellectual property and the need to protect innovation. Companies like Nuance Communications abuse the legal system only to clog our courts and stifle innovation. However, Article One’s community of expert researchers has allowed us to remain focused on innovation and to continue to deliver top-notch products to the marketplace without delay.”

Cheryl Milone, CEO of Article One Partners, said, “Article One Partners congratulates Vlingo on its victory in this case, and was pleased to play an important role in Vlingo’s defense strategy. In this case, despite the jury decision that the patent is valid, the U.S. Patent Office has issued two rejections of all of the claims in the patent through a pending reexamination. The evidence the USPTO has relied on is contributed by the Article One community. In the event that the USPTO issues a final determination of invalidity, the patent rights are fully extinguished."

And continuing with the Vlingo press release:

In an absurd allegation, Nuance also asserted that several experiments Vlingo and AT&T conducted in conjunction with AT&T's Watson Speech Engine infringed the '295 patent. These joint experiments were for research purposes only, and never resulted in a commercial product. The jury also ruled that these experiments did not infringe the '295 patent.

"It's a real measure of the desperation of Nuance," said Grannan. "This is clearly an aggressive step by Nuance to attempt to attack AT&T's technology through Vlingo and demonstrates Nuance will go to the ridiculous extreme in its patent troll behavior to try to stifle innovation in our industry."

In other news related to Nuance, on August 10, 2001 it announced a collaboration with UPMC to develop speech and understanding solutions to improve delivery of care:

UPMC and Nuance Communications, Inc., (NASDAQ: NUAN) today announced a multi-year, multi-million-dollar innovation collaboration, in which the two industry leaders will develop Medical Intelligence solutions as a means to transform the way patient information is captured, understood and used by caregivers. The goal is to improve the quality and efficiency of care by creating a more complete and accurate electronic medical record (EMR), first across UPMC and then more broadly across the healthcare industry.

Intellectual Ventures Sues Nine Tech Firms

The following is excerpted from a December 9, 2010 article by Don Clark and Dionne Searcey from The Wall Street Journal:

Technology companies on Wednesday received troubling news that some had feared for years: Intellectual Ventures LLC has started suing.

The secretive firm co-founded by former Microsoft Corp. Chief Technology Officer Nathan Myhrvold has raised $5 billion to amass thousands of patents over the past decade.

Unlike most specialists in the field, Intellectual Ventures has avoided litigation, persuading big tech companies to become investors in his firm—along with payments that sometimes came to hundreds of millions of dollars. But Mr. Myhrvold never ruled out lawsuits if negotiations failed.

But on Wednesday, Mr. Myhrvold's firm, unable to secure payments from nine companies, announced three patent-infringement suits. One suit names the best-known players in security software—Symantec Corp., McAfee Inc., Trend Micro Inc. and Check Point Software Technologies Ltd.

Read more here.

ICAP Ocean Tomo Patent Auction on November 11

The following is excerpted from an October 28, 2010 article by Victoria Slind-Flor at Businessweek:

Yahoo! Inc., AT&T Inc. and the U.S. Energy Department are among the sellers offering patents at the Nov. 11 ICAP Ocean Tomo patent auction.

The auction, which will be held in California’s Napa Valley, presently has 149 lots for sale. The catalog, in a style akin to EBay Inc.’s Internet auction site, lists a “purchase- it-now” price in addition to an estimate of the anticipated auction selling price.

If past Ocean Tomo auctions are any indication of the present, most lots won’t be sold directly during the auction. A number will change hands quietly at the event, with no bidding taking place in the auction room.

Some patents sold at Ocean Tomo actions have been asserted against technology companies by their purchasers. In December 2008 Netflix Inc. and 12 other defendants were sued for infringing patent 5,890,152, which was sold for $1.07 million at an April 2008 auction. The patent was for a “personal feedback browser for obtaining media files,” according to the patent.

Read the full article here.

Taking A Big Bite Of Apple

The following is excerpted from an October 11, 2010 article by Thomas B. Scheffey published by Connecticut Law Tribune:

Old photos of Professor David Gelernter’s lived-in office in the computer science department at Yale depict a sprawling array of the scholar’s scattered papers, and teetering books.

If necessity is the mother of invention, you can see why he would have invented his “lifestream” software. It archives every type of computerized file in chronological order, and can pull together any relevant groups of files as needed. It’s a pack rat’s dream. Nothing needs to be thrown away, just digitized. Then everything’s at your fingertips.

Gelernter, of Woodbridge, and Yale graduate student Eric Freeman, of Branford, explained those ideas in 2001 in three patents they earned that year. These made interesting reading back then. For a brief period, they came to life in a commercially unsuccessful software product called Scopeware Vision that halted production in 2004. According to author James Fallows, writing in The New York Times in 2004, Gelernter’s backers folded, “despairing of staying in the race when Microsoft had so clearly indicated that it would include disc-search functions in Longhorn, its next version of Windows, scheduled for release in 2006.”

But instead of fading into an historical footnote, the patents and inventors of New Haven–born Scopeware are now suddenly making big news and, in all likelihood, big money.

Last week, the patents were the basis for a Tyler, Texas federal court jury awarding Gelernter’s Mirror Worlds LLC a stunning $625.5 million verdict against computer giant Apple Inc. The jury found that Apple intentionally infringed on the patents to create its Cover Flow, Time Machine and Spotlight display tools.

Read the full article here.

Heavily Litigated NPE Patents Don't Hold Up When Tested

The following is excerpted from a September 27, 2010 article by Joe Mullin published at Courporate Counsel:

Stanford University law professor Mark Lemley's studies tend to make waves in the world of intellectual property. One reason: A lot of folks who inhabit that world seem to take offense at studies that scrutinize the value of patents, and especially patent litigation, as an engine of innovation.

Which is why previous Lemley studies, which found that patent defendants almost never copy anything, that engineers routinely ignore patents (so much for public notice), and that universities often behave similarly to "patent trolls" (that is, in ways that aren't likely to benefit the social good), have not been universally well-received by the patent bar.

Via Peter Zura, we learn this week about Lemley's newest study, performed together with Joshua Walker, a former Stanford colleague of Lemley's who heads up IP data-gathering firm Lex Machina, Inc., and John Allison, a business professor at the University of Texas at Austin.

Lemley, Walker, and Allison examined every patent to be litigated eight or more times between 2000 and February 2009—a total of 106 that were asserted 2,987 times in 478 lawsuits.

The results of all that litigation aren't pretty. From an economic standpoint, the researchers posit, the fact that these patents are sued over so often should make them the most valuable ones, the crown jewels of innovation. What's the win rate for the plaintiffs wielding these heavily litigated patents? An incredibly low 10.7 percent, the researchers found.

Read the full article and access the links here.

ITC Rolls Out the Welcome Mat for 'Trolls'

The following is excerpted from a May 17, 2010 Patent Litigation Weekly article at Law.com's Corporate Counsel site:

The International Trade Commission was created in 1916 to protect U.S.-based companies that made and sold goods within the country's borders. In recent years, however, the agency's definition of what qualifies as "domestic industry" has expanded to the point that small patent-holding companies with just a handful of employees...and even individual inventors have been allowed to proceed with ITC litigation.

Congress helped expand the ranks of who could seek remedies at the ITC in 1988 when it amended the "domestic industry" requirement to include "licensing" as qualification.

Over the past two decades, the question of what constitutes a domestic industry has typically been heard by the same ITC administrative law judges who ultimately rule on the patent disputes that come before the agency. It's rare that the full commission considers the issue. On April 14, though, the full commission did weigh in on the subject, issuing a striking ruling that will make it easier than ever for patent-holding companies to enforce patents at the ITC—and put added pressure on the companies getting sued there.

Big companies that are frequent targets of holding company infringement claims have good reasons not to want the ITC to open its doors any wider to NPEs. After all, only a tiny fraction of district court infringement cases go to trial, with the typical defendant paying an estimated average of $5 million per case. By contrast, 40 percent of ITC cases go to trial and the average defendant there can expect to rack up as much as $10 million in litigation costs over a much shorter period of time. And while the ITC can't award damages for patent infringement, it can impose bans on imported goods deemed to be infringing, giving NPEs a powerful lever for extracting cash payments from their targets.

The significance of the commission's April 14 ruling in the case titled Certain Coaxial Cable Connectors and Components Thereof and Products Containing Same, ITC investigation no. 337-TA-650 is the finding that in most circumstances, merely engaging in litigation—and spending money on it—is enough to qualify an ITC complainant as an "industry" worthy of protection. In essence, the Coaxial Cable case represented the first open, public battle over who deserves to be at the ITC, pitting Big Tech on one side against NPEs on the other—and Big Tech came out the big loser.

See the full article here.

SonicWALL Becomes a Patent Troll?

The following is excerpted from an April 16, 2010 post by Alex Eckelberry at the Sunbelt Blog:

SonicWALL, a company I’ve had a lot of respect for in the past, has apparently decided to improve its revenue outlook by going after other software companies for alleged patent infringement.  Disappointing.

The patents are all over the place, and don’t mean much for our products.  We are asking them for more clarity as to how exactly our products allegedly infringe on their patents, as we are a bit confused. 

A link to the demand letter is available in the post here.