Philip Brooks' Patent Infringement Updates

What's Happening to United States Patents?

The following is excerpted from an article by Alan G. Towner in Pietragallo Gordon Alfano Bosick & Raspanti, LLP's Spring 2009 newsletter:

The strength of U.S. patents has been called into question recently. In the 1980s and 1990s, the value of patents was considered to be very high, due in large part to the establishment in 1982 of the Court of Appeals for the Federal Circuit, which has exclusive jurisdiction over patent appeals from all of the U.S. district courts.

Before the Federal Circuit was established, there was some degree of forum shopping in patent cases – some circuits were considered to be “pro patent,” while one was even known as the graveyard of patents. As it turned out, the Federal Circuit fell into the “pro patent” camp and gained a reputation as upholding the validity of patents.

However, the tide has now begun to turn. In the past few years, certain types of patents and patent owners have come under increased scrutiny. The pejorative name “Patent Troll” was coined to describe patent owners who are not in business themselves, but rather seek only to obtain patents and license their patents to others for money.

High tech companies such as those in the software and electronics industries were particularly hard hit by Patent Trolls. Although the label “Patent Troll” has been largely replaced today with the less inflammatory name “Non-Practicing Entity,” there remains a strong sentiment in many industries that patent rights should be scaled back.

Read here Mr. Towner's discussion of the following cases:

1. eBay v.MercExchange;
2. In re Bilski; and
3. KSR International v. Teleflex.

Trolls II - Realities & Myths in Patent Litigation Today

In 2005, the Intellectual Property Owners Association (IPO) sponsored its wildly successful “Patent Trolls and Patent Property Rights” conference, the first national conference to explore how patent litigation was being affected by “trolls” and other “non-practicing” patent owners. This year IPO is assembling world class speakers to revisit the topic after four years of legislative, judicial, and academic debate. Hence, “TROLLS II.”

Join your colleagues to discuss the types of non-practicing patent owners and developments in patent litigation in U.S. courts, at the ITC, and in Asia. Speakers, to be announced on the IPO website shortly, will provide varying perspectives on who is a “troll,” in the pejorative sense. Experts will address litigation trends and cost containment strategies for in-house counsel. Space is limited.

TOPICS COVERED

• Trends in Patent Litigation
• The Effect of “Trolls” on the Patent Litigation Landscape
• Non-Practicing Entities in the ITC
• Non-Practicing Entities in Asia
• Best Practices for Corporations That are Potential Defendants
• The Patent Owner: Asserting Allegations of Patent Infringement
• Venue: A Friend or Foe?
• Corporate Discovery in the Information Age
• In-House Perspectives on Controlling the Costs of Patent Litigation
• Post eBay Damages and Injunctions
• Tips for Getting the Best IP License and for Using Standing as a Defense to Patent Infringement

Learn more about this May 28-29, 2009 Washington, DC conference here.

Tool Against ‘Trolls’

The following is excerpted from an article by Richard Acello from the March 2009 print issue of the ABA Journal: 

Bothered by “patent trolls,” those pesky creatures who wait for inventions to hit the market and then cry, “I’ve got your patent; now pay me”? John Amster says he has a solution.

Amster, an intellectual property lawyer, is a co-founder of RPX Corp. in San Fran­cisco, which buys up patents. For a fee, subscribers get access to all the patents in its portfolio.

“We provide a patent-defense aggregation service,” he says. “We buy a significant volume of patent rights, either actual or potential threats to companies that will be our members. ... [Members] get a license to everything in our aggregation.”

RPX, open for business since September, boasts IBM, Cisco Systems and Epson as clients.

Read the full article here.

Epson Joins RPX Defensive Patent Aggregation Service

The following RPX press release will issue on Wednesday, January 28, 2009:

Epson Joins RPX Defensive Patent Aggregation Service
Digital Imaging Giant First RPX Member from Japan

TOKYO – January 28, 2008 - RPX Corporation, a defensive patent aggregator, today announced that Epson has joined the RPX Defensive Patent Aggregation service.

“IT companies like Epson have become very common targets for patent assertion from non-practicing entities and RPX addresses the industry’s need for a strong patent defense offering,” said Eran Zur, RPX president. “We expect that the RPX service will help Epson avoid substantial future litigation and licensing costs.”

RPX acquires patent rights and provides them as a defensive patent aggregation for an annual membership fee to reduce technology companies’ patent risks and costs created by non-practicing entities (NPEs).  NPEs acquire patents – as opposed to creating them through research and development – solely for the purpose of offensive licensing against operating companies. And since NPEs do not make or sell products or services, they are not subject to counter-assertions.

“Even with broad patent portfolios, many Japanese companies like Epson are at risk for assertion from NPEs,” said John Amster, RPX co-CEO. “That’s exactly why we created RPX – to help our members lower costs by buying patents and patent rights that would otherwise be threats to their businesses.”

Epson is the sixth member of the RPX Defensive Patent Aggregation service, joining IBM, Cisco and other large and small technology companies. The RPX service was introduced in November 2008.

About RPX Corporation
RPX Corporation is the first defensive patent aggregator. RPX acquires patent rights and provides them as a defensive patent aggregation for an annual membership fee to reduce technology companies’ patent risks and costs created by non-practicing entities (NPEs). The RPX Defensive Patent Aggregation does not require member involvement in acquisitions, and RPX will not enforce the patents it purchases. RPX management has been responsible for more than $2 billion in patent transactions. RPX is financed by Kleiner Perkins Caufield & Byers and Charles River Ventures.

Facebook For Patent Trolls

As a follow-up to my previous post on Article One Partners, take a look at what Asher Hawkins writes for Forbes:

For each Internet social network effort that thrives, there are dozens that fail to generate any interest from the surfing masses.

An early dud was BountyQuest.com, launched in 2000 with financial backing from Amazon's Jeff Bezos. The premise was simple: Posters to the site would highlight a patent they wanted to see blown out of the water, and visitors could receive up to $50,000 for presenting evidence that the patent wasn't, in fact, the first document to describe the invention in question. BountyQuest's problem was that too few got involved in the action. It fizzled within three years.

One former employee, Cheryl Milone, believes the company's business model deserves a second chance, given the rise in popularity of "crowdsourced" online projects like Wikipedia. In November, Milone, a Manhattan patent attorney, launched ArticleOnePartners.com to do more than just provide a means for prior-art mercenaries to peddle their wares. This time, Milone and a team of three intellectual property lawyers are the ones deciding which patents visitors should be harassing. And she's got two strategies for quickly turning a buck if a visitor does submit patent-busting information.

Say a visitor sends ArticleOne evidence (an article in an obscure academic journal, for example) that calls into question the validity of one of Pfizer's Pfizer (nyse: PFE - news - people ) patents for cholesterol reducer Lipitor. Milone would make that information public on the site--and, at the same time, she could short the stock of Pfizer and go long on the stock of competitors eager to sell a generic version of Lipitor. In theory, she'd make a bundle once the industry finds out what she knows.

Within three days of launching, ArticleOne received more than 50 prior-art submissions, some from as far away as India and the Ukraine.

Read the full article here.

Confessions of a Non-Recovering Patent Troll Enabler

As a follow-up to my August 15, 2008 post titled, "Venali Wins Summary Judgment Motion Against Catch Curve Over Alleged AudioFax Patent Infringement," Jackie Hutter of the IP Asset Maximizer Blog writes:

I came across this TechDirt article: Exposing The Patent Troll Playbook... And How To (Almost) Beat It (h/t Ron Carson, VP of Marketing at Innovation Asset Group). This is an insider's account of what it is like to be the victim of a so-called "patent troll". Perhaps better than the article itself are the comments which make it clear how passionate people are about the topic of patent trolls. This is recommended reading, if just for the entertainment value of the comments.

Reading the TechDirt article made me recall my time as a junior litigator at a well-known Atlanta law firm. As a very green (and tired) young attorney, I sent many "licensing offer letters" for the AudioFax Company. In this role, I was an enabler of a very successful patent troll. And, as set out in this post, I have continued to enable patent trolls throughout my more than 13 years as a patent attorney and intellectual property business strategist.

There is no doubt that AudioFax meets the definition of "patent troll". For example, AudioFax never made or sold a product covered by its patents. Its revenue stream resulted only from the licensing fees obtained from its patents. The AudioFax patents have been licensed to over 30 companies including Cisco, AT & T and 3Com. Reportedly, AudioFax made millions from its licensing program, which is likely more than its founder would have made from actually selling fax products.

As used in the press, the term "patent troll" is clearly pejorative: they are lurking to attack the unsuspecting good guys who are trying to get across the bridge to do their business. In this context, the activities of patent trolls must necessarily be bad for business. The argument here is that a company that is actually making a technology or product should win out against a patent holder that does not seek to sell that same product or technology to the public. In this scenario, companies like AudioFax should be punished for having the foresight to protect their good ideas and enforcing their patent rights against companies that came up with those ideas at a later date and seek to commercialize those ideas.

But taking this contention to its logical extension, any person or entity that does not immediately plan to introduce a product or technology into the market should not be able to fully enforce its patent rights against someone who does seek to bring that idea to market. This group (which accurately reflects my client base over the years) would include universities, entrepreneurs with good ideas but limited means and any company that seeks to protect its R & D investment from its competitors through patents. Obviously, this is an absurd result.

Read the full post here.

FTC Commissioner Rosch on Patent Trolls

J. Thomas Rosch, Commissioner of the Federal Trade Commission spoke before the Newport Summit on Antitrust and Economics in Newport, Rhode Island on May 31, 2008.  A reader alerted me to a copy of his remarks which are excerpted, in part, here:

Introduction

The nominal topic for discussion in our panel this morning is the Supreme Court's decision in eBay, Inc. v. MercExchange L.L.C. In that case, the Court held that permanent injunctions should be issued against patent infringers only when the traditional four-part test historically applied by courts of equity is satisfied; otherwise, the plaintiff is entitled only to recover its damages resulting from the infringement. Put differently, in order to obtain a permanent injunction, the plaintiff must show that (1) irreparable injury has been suffered, (2) remedies at law are inadequate to compensate that injury, (3) the injunction is warranted in light of the balance of hardships between the plaintiff and the defendant, and (4) the public interest would not be disserved by a permanent injunction. Although the majority opinion does not come right out and say it, the sub-text is that the public interest is disserved if and to the extent that patent "trolls" can obtain injunctive relief. In the concurring opinion to which Justices Kennedy, Stevens, Breyer and Souter subscribed, this concern is more than sub-text. The opinion articulates the concern, embracing the Commission's Intellectual Property Report and the government's Amicus Brief. The IP Report and Brief warned that in certain situations, injunctions can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. For example, when the patented invention is a small component of the product produced, and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages are often sufficient to compensate for the infringement and an injunction would not serve the public interest. My remarks will focus on this concern, and how else it might be addressed.

Conclusion

At the end of the day, the most significant deterrent against the kind of behavior I’ve discussed may lie in a limitation on the amount of damages the alleged "troll" can collect. It is arguable that in this situation, the lion's share of the proceeds that the product or service can fetch in the market should go to the producer of the product or service rather than to the holder of the patent because the value of the patent is little more than what the firm obtaining, but not practicing, the patent paid to obtain it. If recovery of damages were limited in this fashion, there would be little room for real "exploitation" of the producer.

Read the complete text of Commissioner Rosch's remarks here.

CAT Patent Infringement Suits Could Spread to Others in Prepaid

An April 2008 featured article by Paybefore (an industry resource for prepaid and stored value cards) staff states, in part:

Chicago-based Card Activation Technologies, Inc. (CAT) is suing major retailers, including Barnes & Noble, Aeropostale, OfficeMax, TJX Companies, Sears and Walgreen Co. for infringement of its patent related to gift card activation and processing.

While the company’s focus is squarely on retailers, for now, lead counsel Mark D. Roth, of Orum & Roth LLC, tells Paybefore that there are other potential infringers, such as banks, processors and even terminal manufacturers that CAT could pursue in the future.

The full article is available to subscribers here.

CAT stated the following in an April 23, 2008 press release:

The Card Activation patent relates to a method used by most retailers for processing debit styled cards, which include gift cards and phone cards. Card Activation currently has lawsuits pending against Walgreen Company (NYSE:WAG), Sears Holding Corporation (Nasdaq:SHLD), TJX Companies (NYSE:TJX) and OfficeMax ((NYSE:OMX), as well as Barnes & Noble and Aeropastale. Card Activation has also placed on notice approximately 600 retailers relating to their potential infringement of the patent.

aai Requests FTC Investigation of Rembrandt

A reader alerted me to the "Request for Investigation of Rembrandt, Inc. for Anticompetitive Conduct that Threatens Digital Television Conversion" in a March 26, 2008 Petition to the Federal Trade Commission by the American Antitrust Institute.  Some excerpts include:

The American Antitrust Institute (“AAI”) petitions the Federal Trade Commission to investigate patent holdup conduct by Rembrandt, Inc., a patent licensing company (also known as a non-practicing entity, or “NPE”), under Section 2 of the Sherman Act and Section 5 of the FTC Act with respect to a government-mandated private standard for digital television broadcasting developed by the Advanced Television Systems Committee (ATSC).

In particular, Rembrandt has failed to abide by an obligation established by the ATSC to license on reasonable and nondiscriminatory (RAND) terms certain technology critical to the delivery of digital systems of terrestrial broadcast television. This RAND commitment was central to the Federal Communications Commission’s (“FCC”) adoption of the ATSC standard in establishing the process for the conversion to digital television. Because the entire U.S. television marketplace will convert to digital systems in the next year, the potential consumer harm from this conduct is enormous. Enforcement action is necessary to protect tens of millions of users of digital television devices, device manufacturers and broadcast networks and cable companies from paying excessive equipment prices and licensing fees due to Rembrandt’s exercise or attempted exercise of monopoly power.

Numerous government agencies are acting to assist and subsidize millions of consumers with the conversion to digital television. Yet the success and cost of this conversion is being threatened by Rembrandt, which is engaging in patent holdup by explicitly repudiating its RAND licensing obligation. Rembrandt brought 14 patent infringement suits against the four major television networks, the five major cable systems, and television and equipment manufacturers seeking licensing royalties that will increase the costs of digital television by tens of millions of dollars. Rembrandt is demanding royalties of 0.5% of “all revenues derived from the use of the ATSC standard” – an amount that would dramatically increase the cost of digital television equipment and the cost of digital television generally. All consumers will pay substantially more for digital and terrestrial television services unless this conduct is enjoined.

RELIEF

We request that the Commission commence an investigation of Rembrandt’s conduct and seek an order pursuant to Section 5(b) of the FTC Act requiring that Rembrandt cease and desist from its illegal conduct. In particular, the Commission should prohibit Rembrandt from enforcing the ‘627 patent unless it has first offered to license the ‘627 on terms consistent with the RAND commitment.

A failure to enjoin Rembrandt’s conduct could result in owners (or subsequent owners) of ATSC patents engaging in similar patent-hold-up conduct that could cripple the DTV industry. Private remedies through patchwork litigation in different fora are inadequate substitutes for FTC enforcement in this matter: First, “private litigation may not vindicate the same set of public interests that are addressed by the Sherman Act or Section 5 of the FTC Act.”81 Second, by the time any resolution of such private suits has been achieved – and even assuming Rembrandt’s claims were ultimately defeated – the February 2009 date for the transition to digital television will have long since passed and the mere threat of the harm described above will itself have caused irreparable harm to competition and to consumers alike.

Read the full petition here.

Troll Tracker Outs Himself

Posted by Debra Cassens Weiss today, February 26, 2008, at the ABA Journal:

The anonymous author of the Patent Troll Tracker blog has revealed that he is Richard Frenkel, an intellectual property lawyer who is a director in Cisco Systems' IP group.

Frenkel said he decided to out himself after he received an e-mail threat from someone who threatened to go public with his identity, the Recorder reports. Many patent lawyers told the legal publication they considered the blog to be required reading.

Chicago lawyer Raymond Niro had recently increased his reward offer to $15,000 to anyone who could provide him with the Troll Tracker’s identity. So far, no one has stepped forward to claim the reward. "Whoever did it did it not for the purposes of making money but rather for the purposes of exposing him," he told the Recorder.

Niro had offered the bounty because Troll Tracker had criticized his firm for representing so-call “patent troll” clients that owned patents without making products. Frenkel said in a post revealing his identity that he started his blog because of the lack of information about trolls.

“When I started the blog, I did so mainly out of frustration,” Frankel wrote. “I was shocked to learn that a huge portion of the tech industry's patent disputes were with companies that were shells, with little cash and assets other than patents and a desire to litigate, and did not make and had never made any products. Yet when I would search the Internet for information about these putative licensors, I could find nothing.”

Frenkel is weighing whether to continue the blog. He said only his direct manager at Cisco, which holds more than 5,000 patents, knew of his anonymous blogging.