Years hence we may look back to Tuesday, January 14, 2014 as the turning point in the battle against abusive patent litigation. On January 14, New York Attorney General Eric Schneiderman announced the settlement with one of the more notorious patent trolls. See NY Attorney General Settles Investigation into Patent Troll. This operator, MPHJ Technologies, is the owner of patents dealing with scanning technology and has claimed that thousands of small businesses infringe its patents. MPHJ has been one of the entities used by those in the anti-patent community as an example of a patent system run amok. At the end of the day, at least for those who carefully pay attention and look at the facts, this is not a story about the patent system in any way, shape or form. It is a story about a bully that engaged in reprehensible pre-litigation scare tactics.
Unfortunately, in his announcement of the settlement, Attorney General Schneiderman went too far in condemning legal patent activities in the name of defining what is a patent troll. Schneiderman said:
Patent trolls – sometimes referred to as “patent assertion entities” – are not innovators. They buy patents owned by others and then try to turn a profit by aggressively pursuing businesses they claim infringe the acquired patents. In virtually all cases, the businesses targeted by patent trolls did not copy other companies’ technology. Instead, patent trolls argue that that independently developed technology or business processes used by the target – and in some cases, everyday business activities – require a license linked to the troll’s patents.
The problem with this definition is that there is nothing illegal or immoral about acquiring patents, there is nothing illegal or immoral about enforcing patents and seeking out licensing agreements, and independent creation has never been a defense to patent infringement. Thus, it is unfortunate that legitimate patent activities that are clearly legal were at least to some extent compared with the deceitful activities of MPHJ.
But this all begs the question: How do you recognize a patent troll? An issue that PLI programs have and will address, for example in the upcoming programs Intellectual Property Rights Enforcement 2014 and Non-Practicing Entity Patent Litigation 2014, as well as recently in Non-Practicing Entity Patent Litigation 2013.
Recently, in an article on IPWatchdog.com, I asked whether NTP, the company that forced RIM into a $600+ million patent settlement, was a patent troll. See Who is a Patent Troll? To many people, NTP is the quintessential patent troll because they acquired a patent and then enforced the rights acquired. Acquiring patents and enforcing them, for many, makes the entity in question a patent troll, as is evidenced by Schneiderman’s statements above. But what if the entity doing the acquiring and enforcing is a major Silicon Valley giant?
It seems rather clear to me that the term patent troll has evolved to mean nothing more than this: You are a patent owner who is suing me. But that really can’t be the definition. There has to be more. So how do we distinguish NTP, Google and MPHJ? The only logical approach is to look past the patent rights acquired, and how and why they were acquired, and look to whether abusive litigation activities are employed. If you do that, something surprising happens.
NTP
One interesting aspect of this case was that it presented a truly novel legal question, and that being the case, is it appropriate to suggest that the act of suing RIM was abusive? Initially, it seemed that RIM had a strong infringement defense because the process covered by the NTP patents did not occur completely within the United States. RIM had argued both at trial and on appeal that because the BlackBerry relay was located in Canada, as a matter of law, RIM could not be held liable for infringement under 35 U.S.C. § 271. The trouble for RIM was that the main patent appeals court in the United States disagreed. Further complicating matters, the United States Supreme Court refused to hear RIM’s appeal. Throughout the case, RIM thought they would ultimately prevail and, therefore, never really seriously engaged in settlement discussions until the final hour.
It seems hard to argue that NTP was engaging in abusive litigation tactics by bringing this claim, since they actually won on the novel legal issue. Thus, it seems hard to call NTP a patent troll.
MPHJ
In the greater scheme of things, there is no comparison between that behavior and what MPHJ did. In the letters sent by MPHJ, hundreds of New York businesses were told that it was “likely” that they were infringing MPHJ patents and, therefore, needed to take a patent license. By saying that they were “likely” infringing, an impression was created that MPHJ had conducted at least some kind of individualized analysis of the targeted company’s business. But MPHJ did no investigation, choosing merely to send out form letters in bulk to companies of a certain size and industry classification. There was no way MPHJ could have legitimately made the assertion that the businesses receiving the letters were “likely” infringing. Furthermore, MPHJ lied about the amount paid by companies that did license and they lied about how many companies actually licensed.
Conclusion
While your mileage may vary, it seems to me that MPHJ is clearly a patent troll. I would prefer to focus on those that are clearly engaged in reprehensible behavior and stop that activity. Then we can take a look back after some time and decide what, if anything, else needs to be done. The enforcement activities of Schneiderman are an important step and offer a blueprint. It is just unfortunate that he also used this opportunity to call into question wholly legitimate patent activities engaged in by virtually everyone in the industry.
Tags: Eric Schneiderman, Google, MPHJ, ntp, patent, patent troll, patent trolls, patents
I don’t understand what distinguishes a troll from a legitimate patentee exercising the right to prevent others from making, using, selling or offering an invention for sale. To the extent the Federal Circuit has made such a distinction, I believe they are simply wrong. I understand their reasoning that non-practicing entities are not automatically entitled to injunctive relief, but how does this lead to a different treatment for non-inventor entities who have obtained the patent legally? The proposed anti-troll legislation is premature at the very least, according to former PTO Director Todd Dickinson, whose judgment is worthy of note.