Paying Ransom to Patent Trolls Is a Mistake

I have absolutely no problem with enforcing patent rights, and frankly I don’t think it should matter how the patents were acquired, but there is something exceptionally seedy about the use of shell companies going after competitors, or large tech companies selling to known patent trolls. They complain about the troll problem in the halls of Congress on the one hand, but use them to their advantage on the other hand.

The question should be whether there is infringement of a solid patent. If there is a solid patent and there is infringement, then there should be recourse, period. Having said that, it would be naive to pretend that there is not real evil lurking in the patent infringement realm. Stories of $500 to $1,000 offers to settle and avoid patent infringement litigation that would cost millions of dollars to defend abound. False and misleading demand letters prey on unsophisticated businesses.

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Talking Patent Litigation with Ray Niro

Ray Niro is one of the most well-known patent litigators in the country, and the attorney who was famously dubbed “a patent troll” some 14 years ago, marking the first time the term was used. See The Man They Call the Patent Troll. The label “patent troll” doesn’t really fit Niro, if you ask me, because he hs been extraordinarily successful at proving that large corporations have infringed valid patents, sometimes on fundamentally important innovations. In fact, Niro has been a champion for independent inventors and small businesses who have created some of the most revolutionary inventions. WiFi is an example.

Over the past few years, I have gotten to know Ray…he has written several op-ed articles for IPWatchdog.com…and about once a year we catch up in an ‘on the record’ interview. I spoke with Niro at length on June 25, 2014. The complete transcript of my interview with him is available at A Conversation with Patent Defense Litigator Ray Niro.

What prompted this interview was seeing an announcement that he and his firm are now offering flat fee defense representation in patent litigation matters. Ray Niro defending a patent infringement case? I have to admit I didn’t realize he did defense work, so I wanted to talk to him about this new business model. We discuss this at length during the first segment of our conversation.

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Breaking the Cycle – Stand Up and Fight Patent Trolls

The term “patent troll” conjures up all kinds of images and ideas, but there is no universally accepted definition of who is a patent troll. This has led many to recognize that, by and large, if you are being sued for patent infringement, it will likely be your belief that you are being sued by a patent troll. But obviously not everyone who sues for patent infringement is a patent troll, and neither is every plaintiff who loses a patent infringement lawsuit. There will be reasonable assertions that ultimately result in a defendant prevailing for a variety of reasons. Thus, a patent troll really should be identified by litigation tactics. A patent troll is one who is abusing the judicial process and leveraging judicial inefficiencies to obtain unwarranted settlement payments.

In determining whether one is a patent troll, I don’t think it should matter how the patents were acquired. If there is infringement of substantial patents, then there should be recourse. Having said that, it would be naive to pretend that there is not real evil lurking in the patent infringement realm. Stories of $500 to $1,000 offers to settle and avoid patent infringement litigation that would cost millions of dollars to defend abound. Some courts have openly acknowledged what feels like “extortion-like” activity. See Indicia of Extortion and Troll Turning Point? 

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Contempt Proceeding Fails on Colorable Difference Prong

Last week, the United States Court of Appeals for the Federal Circuit issued a decision in ncCUBE Corporation v. SeaChange International, dealing with the failure of the district court to find SeaChange in contempt for violating a permanent injunction.

ARRIS (formerly nCUBE) commenced the present litigation on January 8, 2001, alleging the infringement of certain claims of U.S. Patent No. 5,805,804 (“’804 patent”), which discloses and claims a media server capable of transmitting multimedia information over any network configuration in real time to a client that has requested the information. The patented technology allows a user to purchase videos that are then streamed to a device such as a television.

On May 28, 2002, the jury returned a verdict in ARRIS’s favor, finding that SeaChange willfully infringed the asserted claims in the ’804 patent. The Federal Circuit later affirmed the jury verdict and the district court’s subsequent decision to enhance the damages award. Subsequent to the Federal Circuit affirmance, the district court entered a permanent injunction enjoining SeaChange from “making, using, selling, or offering to sell… the SeaChange Interactive Television System… as well as any devices not more than colorably different therefrom that clearly infringe the Adjudicated Claims of the ’804 patent.”

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Patent Litigation Settlement Suggests Both Parties Just Gave Up

On July 18, 2013, Complete Genomics, Inc., which is a wholly-owned subsidiary of BGI-Shenzhen (“BGI”), announced that it entered into a settlement agreement with Illumina, Inc. under which Illumina will dismiss with prejudice both lawsuits it had brought against Complete:  Illumina, Inc. and Solexa, Inc. v. Complete Genomics, Inc., Case No. 10-cv-05542 EDL (N.D. Cal.); and Illumina, Inc. and Illumina Cambridge Ltd. v. Complete Genomics, Inc., Case No. 12-cv-01465 BEN BGS (S.D. Cal).  The agreement is reciprocal, so Complete will likewise dismiss with prejudice all counterclaims against Illumina.

No payment is being made by either party to the other, which is not particularly unusual. What makes this story interesting is that the parties also announced that no licenses are being granted by either party to the other. Typically, in patent litigation, you will see either a payment going in one direction or some kind of cross-license.  Thus, it would seem that the parties simply decided that they would each be better off simply giving up on the case and moving in separate directions.

It is a bit unusual to see both parties walk away empty-handed, but with the cost of patent litigation and the reality that patent litigation stalls forward movement with respect to research and development, perhaps it is not shocking.

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