INTELLECTUALINTELLECTUAL PROPERTYPROPERTY A ModernM 'Billy Goats Gruf': TheT Patent Troll UnderU the Bridge BY BELINDA JONES ILLUSTRATIONS BY RACHEL MOYER o matter how many trademark or copyright matters a lawyer has handled, having a client Nwho is confronted with the threat of patent liti- gation will make even the most seasoned coun- selsel fret.fret Some of these claims may be presented by competi- torstors inin the marketplace, but increasingly clients are being confrontedconfro with demand letters from non-practicing enti- tiesties (NPEs)(N or patent assertion entities (PAEs), commonly knownknown as patent trolls. TisTis article will serve as a guide for lawyers in accessing suchsuch demandsd and formulating an appropriate response by defningdefnin the term “patent troll” and painting the current landscapelandsc of patent litigation and reform, describing the ef- fectfect patentpa trolls can have on clients and counsel, and de- scribingscribin what responses are warranted when clients are faced withwith demandd letters from patent trolls. SPRINGSPRING 20152015 tt 2727 TeTe Problem:Problem: PatentPatent TrollsTrolls 101101 prevailingprevailing party,party, unlessunless thethe non-prevailingnon-prevailing partyparty waswas “sub-“sub- stantiallystantially justifed”justifed” oror anan awardaward wouldwould bebe “unjust.”“unjust.”4 TeTe TeTe vocabulary of many lawyers and lawmakers now in- Innovation Act passed the House in December 2013, but cludescludes the term “patent troll.” A patent troll is an entity, stalled in the U.S. Senate.5 It remains to be seen what, if distinctdistinc from the inventor, that acquires a patent or many any, patent reform will take place during the 114th Con- patentspatent in order to locate potential infringers and extract gress. moneymoney from them either in royalty payments through Last session, lawmakers in the Commonwealth also threatenedthreat litigation or through the litigation process itself. were focused on patent reform, specifcally combating PresidentPresid Obama noted that patent trolls “don’t actually patent trolls. In May 2014, the Virginia General Assembly produceprodu anything themselves. Tey’re just trying to essen- passed S.B. 150 and H.B. 375 aimed at bad-faith asser- tiallytially leveragel and hijack somebody else’s idea and see if they tions of patent infringement. Te law, codifed at Virginia cancan extortex some money out of them. …”1 Suits brought by Code § 59.1-215.1 through 59.1-215.4, establishes what patentpatent trolls tripled in 2011 and 2012, representing 62 per- “indicia” are present in a bad-faith assertion of patent centcent ofo all infringement suits.2 Te majority target small, infringement and provides for remedies by the Attorney inventor-driveninvent companies that many lawyers in the Com- General or any attorney for the Commonwealth.6 While monwealthmonw represent.3 the newly enacted law specifes those instances in which TeTe impact of patent trolls’ practices in litigation have led bad faith is apparent, it provides no mechanism for tar- toto a callc for legislative reform both nationally and here at geted entities to directly protect themselves from frivolous home.home. Nationally, Rep. Bob Goodlatte (R-Va.) of Roanoke infringement suits. introducedintrod the Innovation Act (H.R. 3309) in October When the legislation was introduced, it included two 2013.2013. While incorporating elements from previously intro- such tools for targeted alleged infringers.7 Te frst per- ducedduced legislation, this bill would mandate a more onerous mitted a target of a bad-faith assertion to bring an action pleadingpleadi standard in patent infringement suits, akin to in- to recover actual damages, fees and costs. Upon a fnd- fringementfringe contentions typically encountered at later stages ing of willful violation, the legislation as proposed pro- inin thethe litigation process (i.e., a description on an element- vided courts the discretion to award treble damages up to by-elementby-ele basis of why a product infringes the patent). $50,000. Te second permitted an alleged infringer, upon Additionally,Additi in an efort to minimize costs on the alleged a showing of a reasonable likelihood of bad faith, to move infringer,infring the bill limited discovery until the conclusion of the circuit court to order the posting of a bond in the claimclaim construction and made attorney’s fees available to the amount of a good-faith estimate of the defendant’s litiga- 28 28 • • VBAVBA JOURNAL JOURNAL tiontion cost,cost, inin additionaddition toto thethe damagesdamages recoverable.recoverable. AsAs passed,passed, WhatWhat DoesDoes PatentPatent LawLaw HaveHave toto DoDo WithWith Me?Me? however,however, thethe lawlaw contemplatescontemplates thatthat whenwhen VirginiaVirginia businessesbusinesses receive a demand letter issued in bad faith, the Attorney Gen- In this current environment, chances are high that youyou oror eral’s ofce will be contacted to investigate.8 Te General As- your frm will have a client who receives a demand letter.r. Of-Of- sembly budgeted $143,179 annually over the next two years ten, these letters do not provide the patent number att issueissue to enforce the law.9 or identify the owners/assignees. Te letters often simplyply de-de- Certain members of the judiciary believe that patent reform scribe the patent, but do not compare the claims in thee pat-pat- should be left to the courts, not the legislators. In a speech ent to your client’s products. Tese letters typically providerovide delivered to the Bench Bar Conference in the Eastern District a requested response date, and perhaps reference a licensingensing of Texas, a patent hotbed, Judge Randall Rader, chief judge fee, closing with a not-so-subtle threat of litigation. In somesome of the federal circuit, stated, “[N]ow the main purpose of my cases, the patent assignee attempts a comparison of thee pat-pat- address today is to suggest that our patent law confdence cri- ent’s claims with the accused product. In this case, the send-send- sis and litigation abuse are related in another way, they share er may enclose a claim chart purporting to support its claimsclaims the same preferred remedy, namely JUDICIAL CORREC- analysis compiled with information concerning the accusedccused TION.”10 Generally speaking, courts have been responsive product from publicly available sources. When letters arrivearrive to litigation abuse by patent trolls by enforcing the one thing with this type of detail, before calling upon the patent gurus,gurus, they can statutorily control: the award of attorneys’ fees and print the patent at issue, roll up your sleeves and strap onn youryour costs.11 Te U.S. Supreme Court last year in Octane Fitness, thinking cap. LLC v. ICON Health & Fitness, Inc., clarifed that the fee shift- ing in “exceptional cases” in patent litigation was not subject How to Advise Your Clients on an Appropriate Responseponse to a “rigid and mechanical formulation” and did not require to Demand Letters a fnding by clear and convincing evidence of misconduct or baselessness.12 Instead, using a preponderance of evidence Te manner of response depends largely on the detaildetail standard, “an exceptional case [is] simply one that stands out provided in the demand. If the demand letter containsns nono from the others with respect to the substantive strength of the information on the patent at issue, the best practice isis notnot party’s litigating position (considering both the governing law to ignore the letter, but to research the sender’s identity.entity. and the facts of the case) or the unreasonable manner in which General Google and LEXIS searches will provide an initialinitial the case was litigated.”13 Courts are more likely to shift fees or impression of corporate and litigation history. If informa-orma- award costs where there is evidence of a patent troll plaintif.14 tion concerning the sender is widely available and therethere SPRINGSPRING 20152015 tt 2929 isis a litigationlitigation historyhistory toto speakspeak of,of, a deep-pocketeddeep-pocketed patentpatent characteristics,characteristics, a non-infringementnon-infringement defensedefense exists.exists. InIn addi-addi- trolltroll whowho isis notnot likelylikely toto gogo awayaway quietlyquietly maymay bebe runningrunning tiontion toto directingdirecting allall contactcontact toto counselcounsel andand requestingrequesting anyany thethe show.sh Tis is particularly true if the sender has success- additional information required, a response letter shouldhould fullyfully litigatedli patent suits. If, however, there is no informa- concisely set forth available defenses and expressly declinedecline tiontion availableav on the sender, consider a response that serves the ofer of a licensing arrangement. If confdent that litiga-litiga- twotwo purposes:p frst, to direct all future correspondence to tion is imminent and defenses are solid, other optionsns in-in- counsel;counse and, second, to request identifcation of the patent clude fling a declaratory action in a venue of your choiceoice oror atat issueissu and a claims analysis of the alleged infringement. bringing a proceeding challenging validity before thee U.S.U.S. Further,Furthe consider contacting the Attorney General’s Ofce Patent and Trademark Ofce. While such ofensive actionaction whenwhen dealing with a demand letter that lacks identifcation may be a good time to place a “true” patent attorneyney onon ofof thethe patent or any attempt to conduct a claims analysis. speed dial, that is a subject for