Slaying the Patent Troll: Learning to Throw Lightning Bolts
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Slaying the Patent Troll: Learning
to Throw Lightning Bolts
Presented to Association of Corporate
Counsel, South/Central Texas Chapter
Presented By:
William B. Nash
Haynes and Boone, LLC
Phone: 210-978-7477
Email: Bill.Nash@haynesboone.com
© 2014 Haynes and Boone, LLP
Patent Trolls in 2014
(and beyond?)
• Pending legislation
• Impact of America Invents Act
• Recent cases
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© 2014 Haynes and Boone, LLP
What Makes a Troll?
Possible definitions:
1. An entity that doesn’t sell products based on the patent
– University asserting patent that it merely licenses?
2. Same as 1, excluding education entities
– Company asserting patent that it developed for a previous
generation of technology but no longer sells or outside its line of
business?
3. Same as 2, also excluding entities that produced
products based on the patent at some time
– Solo inventor who could not acquire sufficient capital to produce
the products?
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© 2014 Haynes and Boone, LLP
Troll Definition
• Difficult to define a troll based only on
whether or how the entity provides goods
or services
• The other parts of the definition are:
– The litigation tactics
– The substance of the patent infringement
allegations
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© 2014 Haynes and Boone, LLPNPE Defendants by Sector 5 © 2014 Haynes and Boone, LLP
Duration of NPE Cases Ended
in 2012
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© 2014 Haynes and Boone, LLPTop 10 NPEs by Cases Filed
in 2012
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© 2014 Haynes and Boone, LLPTop 10 NPEs by Cases Filed
In Past 5 Years
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© 2014 Haynes and Boone, LLPInnovation Act
• Primarily directed towards litigation tactics
• H.R. 3309, introduced by Cong. Bob
Goodlatte of Virginia
• Passed House on Dec. 5, 2013 by 325-91
vote
• Currently in Senate, expected to face
greater opposition
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© 2014 Haynes and Boone, LLPRep. Goodlatte’s
Patent Reform Primer Video
• http://youtu.be/uSEH7nYTRh4
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© 2014 Haynes and Boone, LLPInnovation Act: Key Provisions
• Heightened Pleading Requirements
– Identify patents and infringing products with
specificity
– Disclose ultimate parent entity
– Only applies to “party alleging infringement”
but includes infringement counterclaims and
cross claims
• Discovery limited until claim construction
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© 2014 Haynes and Boone, LLPInnovation Act: Key Provisions
• Fee Shifting
– Awards prevailing party reasonable fees and
other expenses in responding to patent claims
– Includes infringement claims, invalidity claims,
DJ claims
– Court need not award fees if “position and
conduct of nonprevailing party or parties were
reasonably justified in law and fact” or “special
circumstances . . . make an award unjust”
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© 2014 Haynes and Boone, LLPInnovation Act:
What Will the Senate Do?
• Patent Abuse Reduction Act, S. 1013,
introduced by Sen. John Cornyn.
– Fee Shifting – losing party pay litigation costs
unless losing party’s conduct was
“substantially justified.”
– Raise pleading requirements
– Limit discovery prior to claim construction
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© 2014 Haynes and Boone, LLPInnovation Act:
What Will the Senate Do?
• “A patent reform bill that does not address patent quality
is like treating the symptoms instead of the disease,”
Schumer argued. “If we do not address the fundamental
problem of patent quality, trolls will continue to abuse
poor quality patents and we will be right back here
having this same debate.”
– Sen. Chuck Schumer of New York
– http://www.washingtonpost.com/blogs/the-
switch/wp/2013/12/17/senator-says-house-patent-bill-is-treating-
the-symptoms-instead-of-the-disease/
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© 2014 Haynes and Boone, LLPInnovation Act:
What Will the Senate Do?
• Several other bills introduced.
• Several senators calling for caution of
Patent Troll bills.
• 1/6/2014 -- FTC’s Maureen Ohlhausen
urges caution on taking action against
Patent Trolls.
– FTC preparing to launch 2 year study of the
competitive effects of NPEs on the market
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© 2014 Haynes and Boone, LLPAmerica Invents Act
• Became law in Sept. 2011
– Although some parts did not become effective
until March 2013
• Significant changes to U.S. patent law
– 3 new patent review proceedings at PTAB:
• Inter Partes Review
• Post-Grant Review
• Covered Business Method Review
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© 2014 Haynes and Boone, LLPImpact of AIA
Cases Filed
Defendants per case 2.4 2.6 3.1 2.6 1.5
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© 2014 Haynes and Boone, LLPImpact of AIA
• NPE Cases Filed
Defendants per case 3.9 4.1 5.6 3.6 1.4
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© 2014 Haynes and Boone, LLPImpact of AIA
• NPE Cases as Percentage
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© 2014 Haynes and Boone, LLPAmerica Invents Act (cont.)
• Benefits of PTAB proceedings:
– Less discovery than in district court litigation
– High rate (~60%) of district court litigation
stays being reported
– Much shorter timeframe than district court
litigation (due to statutory deadlines)
• More than PTAB 300 petitions for review
were filed in the first year
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© 2014 Haynes and Boone, LLPWhy IPRs Were Popular in 2013
• Greater Control Over Prior Art
– Allow evidentiary challenges and depositions
– Oral hearing with challenger near end of trial
• Shorter Timelines and More Litigation
Stays
– 18 months from filing requesting petition
• Limited Opportunity to Amend Claims
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© 2014 Haynes and Boone, LLPWhy IPRs Were Popular in 2013
• Limited Discovery
– “Agreed” Mandatory Initial Disclosures, Cross
examination of affidavits, additional discovery
if approved by Board.
• Detailed Claim Construction at Initiate
Stage
• Can Consider Old Arguments and Prior Art
– Not limited to “substantial new question of patentability”
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© 2014 Haynes and Boone, LLPAmerica Invents Act (cont.)
• AIA also required the GAO to release a
study on “NPE” (i.e. troll) patent litigation
• Study results released Aug. 22, 2013:
– From 2007 to 2011, the total number of patent
infringement defendants grew 129%
– By 2011, software patents > 50% of new
patents granted
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© 2014 Haynes and Boone, LLPAmerica Invents Act (cont.)
• More changes to PTAB review
proceedings on the horizon?
– Sen. Schumer introduced the Patent Quality
Improvement Act (S. 866)
– Would expand the eligibility of covered
business method patent review from only
patents related to the financial industry to all
business method patents
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© 2014 Haynes and Boone, LLPSupreme Court Cases
Impacting NPEs in 2014
• Alice Corp. v. CLS Bank, cert. granted
– Patentability under § 101
– The patent claimed a computer-readable medium
(disc, hard drive) containing computer instructions to
perform an escrow method
– A divided Federal Circuit decision found these claims
unpatentable as disembodied, abstract ideas
• No majority opinion
• 7 separate opinions from the 10-member en banc panel
– Supreme Court granted cert. in Dec. 2013
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© 2014 Haynes and Boone, LLPS. Ct. Cases in 2014 (cont.)
• Alice Corp. v. CLS Bank
– What exactly was the invention?
• Method of reducing settlement risk by using a third party
intermediary (a computer) to ensure that both parties can
fulfill their obligations before allowing transaction completion
– Will this hard case lead to bad law?
• Software that implements abstract idea not patentable unless
includes some kind of inventive concept, not patentable
merely by adding computer language.
• Software invention tied to specific way of doing something on
computer should be patentable, even if it involves otherwise
abstract idea.
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© 2014 Haynes and Boone, LLPS. Ct. Cases in 2014 (cont.)
• Highmark v. Allcare Health Mgmt. Sys. / Octane
Fitness v. Icon Health & Fitness, cert granted
– Two cases dealing with award of attorneys’ fees for
exceptional cases under § 285
– Octane Fitness case = Challenges current standard
that infringement claim must be “objectively baseless”
to be exceptional
– Highmark case = Are attorneys’ fees awards pure
questions of law, entitled to no deference, or do
factual questions exist?
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© 2014 Haynes and Boone, LLPOther Important S.Ct. NPE Cases
• Akami Tech. v. Limelight Networks, cert
pending.
– Is defendant liable for direct or induced infringement when it
performed only some steps but induced others to perform
remaining steps?
• Maersk Drilling USA v. Transocean Offshore,
cert pending.
– Extraterritorial jurisdiction of US patent law. Offer, negotiation,
and sale occurred in Scandinavia of oil services which allegedly
infringe. When rig brought into US waters modified to not infringe
claims. But, Fed. Cir. held can be liable “within the US.”
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© 2014 Haynes and Boone, LLPOther Important NPE Cases
• Kilopass Technology v. Sidense Corp.,
Fed. Cir. 2013-1193, Dec. 26, 2013.
– Vacated and remanded denial of attorneys’ fees because district
court “exceptional case” analysis failed to consider all of relevant
circumstances.
– No longer need to produce “smoking gun” evidence that suit was
brought in bad faith.
– Judges can infer bad faith and award fees if they find suit was
“baseless.”
– Downplays importance of bad faith. More lenient standard.
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© 2014 Haynes and Boone, LLPOther Important NPE Cases
• Lighting Ballast v. Phillips, Fed. Cir. 12-
1014. En banc oral arguments in
September.
– Are claim construction rulings by district court judges
entitled to deference on appeal?
– Lighting asserts Fed. Cir. should defer all aspects of
claim construction
– Phillips asserts only factual findings by judge should
be deferred.
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