Interview With An Inventor, Part IV

When last we left our inventor hero, he had answered all but two of my original 10 questions.  Question nine is really the heart of the matter to me in some ways.  As we all know, there’s not a definitive way to decide if a company is a patent troll, just like there’s no one right way to decide if an inventor is just out to stick it to the big guy or wants his just desserts for a lot of hard work.  This question helps with that.

And finally, I wanted to address all this governmental ballyhoo associated with patent troll legislation.  Not.a.fan.  But let’s see what our inventor says, shall we?

Here are the final two questions:

9.  How much time and effort do you put in to determining if infringement actually has taken place prior to filing suit/sending a demand letter? What resources do you use, meaning do you try and reverse-engineer products or technologies to see if competitors are infringing?  What’s your due diligence process, in other words?

10.  What are your feelings about the recent failure of the Senate to pass a patent reform bill? What would you like to see in a bill?

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9.  How much time and effort do you put in to determining if infringement actually has taken place prior to filing suit/sending a demand letter? What resources do you use, meaning do you try and reverse-engineer products or technologies to see if competitors are infringing?  What’s your due diligence process, in other words?

The standard for sending someone a letter vs starting a lawsuit against them is quite different.  In both instances however I make it a mission to make sure that I am extremely confident that the target is using the patent in question.  I think it kills your credibility when you make accusations that are not substantiated, or your proof looks very thin or unreliable. 

Furthermore I can tell you from extensive interactions that no reputable litigation attorney on the planet is going to help you with a case on contingency unless they are 100% sold in their own mind on the merits.  Patent cases are just too expensive to make mistakes so counsel (that I deal with anyway) tend to be very discriminating.  Again I’m sure there are people out there gaming the system but I think they are outliers and can be dealt with conventional bad faith rules/tools.

The cost of ascertaining may be simple in some cases where my patent covers something that I can readily buy and assess without too much effort. In some instances I cannot get access to a real product because it is only distributed through specific channels, or infringement is impossible to determine without “insider” information because the product is relatively opaque. So we have to rely on indirect information such as user guides, instruction manuals, and similar technical literature from the company.  Generally speaking though we try to directly analyze, test the item in question.  In some instances we have had to resort to an expert to fill in some gap in data that we can’t seem to solve in some other way.

Even when we do this, sometimes innocent mistakes do occur. We find that someone has stopped selling the product for example, or that the literature does not correctly describe their product/service.

IPTT Comments:  Your point about lack of reliable proof is a good one, and that’s one of the problems with demand letters v. actual suits.  Agree completely that the standards are different, and that’s what allows the trolls to troll.  Sending a demand letter, you’re not legally bound (currently) to provide much more than idle threats.  But what so many people don’t realize, and the trolls count on, is that you are not obligated to respond to a demand letter.  Instead, you should go look on That Patent Tool and see if anyone else has received a similar letter on the same or a similar patent and get in touch with them.  Shameless self-promotion, I HAZ IT.

10.  What are your feelings about the recent failure of the Senate to pass a patent reform bill? What would you like to see in a bill?

As you can imagine I am not terribly upset that the bill failed because I think it was overly partisan and biased heavily against small inventors.  What I would like to see is a return to the prior “rational” environment where technical and business persons would exchange information freely about patents, products, licensing demands, etc., over the course of several months without automatically triggering a lawsuit.    The worst decision – in terms of its impact in the the patent world – was the Medimmune decision, which handed a victory to large patent defense firms, because it meant that they were now able to file a lawsuit against the patent owner pretty much anytime the latter sent a letter that requested a serious discussion about taking a license.  This opinion absolutely destroyed all the typical pre-lawsuit discussions that used to occur between parties. Patent lawsuits were rare because the interested parties had all the time in the world to discuss/argue the merits of the patents, and only when that process failed did a lawsuit (sometimes) occur.

Nowadays patent owners know there is no point in sending a letter to a company, because some underemployed large firm attorney looking for another payday will immediately initiate a lawsuit in some remote region against that patent owner to try and gain an advantage.  As a result of course now patent owners simply file their own lawsuits first to preempt the defendants’ filings.  The patent world has become a sue first negotiate later atmosphere.  The Medimmune decision is effectively the patent litigators perpetual employment act.

Imagine what would happen now if they had passed the “patent owner pays” provision!  It would be like throwing gasoline on a fire because defense counsel would know not only can they start their own lawsuits, they are guaranteed payment at the end.

IMO any new bill should include a provision that substantially tightens the requirements for initiating and filing a declaratory judgement against the patent owner and thus eliminates the incentive to engage in lawsuits to settle disputes.  There should be a real and verifiable threat from the patent owner to imminently sue the company on a specific patent, product, etc. – in other words, use the same standard that is being proposed to be imposed on patent owners initiating an infringement lawsuit.  This is why I say the majority of the provisions are one-sided and do not account for protecting patent owner rights.

Court rooms, judges and jurors are inefficient mechanisms for resolving the merits of a dispute. They should literally be the forum of last resort and restoring the prior balance would eliminate 50% or more of all lawsuits.  You can compare the number of patent filings in 2005-2007 and then compare 2008-2010 and see readily what effect the Medimmune decision had on the patent world. It blew up everything.

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The patent world has become a sue first negotiate later atmosphere.  

and

The Medimmune decision is effectively the patent litigators perpetual employment act.

Those are gold quotes, my friend.  And both destined to become blog topics at some point.

Thank you a million times over to my favorite inventor for taking the time to answer these questions and provide insight into “the other side”.  I like getting a different perspective now and then, even if, and especially if, I don’t agree with all of it.   That’s how one grows and learns, by seeking out the opposite of what they think is true.

Man, I better think of something snarky and off-color here, that sentence up there was almost like I’m…human or something.  Blerg.

This concludes this series.  Next up will be Interview With a Patent Attorney, one from both sides.  I had hoped that we’d get a fisticuffs going when Article One Partners did something similar on a webinar a summer ago but alas, it didn’t come to fruition.  Maybe this time?  One can hope…

JustSayin_small_New

IPTT

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One thought on “Interview With An Inventor, Part IV

  1. Regarding the statement:
    “Furthermore I can tell you from extensive interactions that no reputable litigation attorney on the planet is going to help you with a case on contingency unless they are 100% sold in their own mind on the merits. Patent cases are just too expensive to make mistakes so counsel (that I deal with anyway) tend to be very discriminating. Again I’m sure there are people out there gaming the system but I think they are outliers and can be dealt with conventional bad faith rules/tools.”

    and the response to a question in Part III:
    “What I do acknowledge is that like a lot of different businesses, there are a small number of folks who operate on the margins and try to exploit small businesses by confusing them as to their coverage of the patent, don’t do any real due diligence to see if the company is using the technology, make unrealistic royalty demands, etc., with no real intention of ever enforcing the patent because it would be economically unproductive. The only company that I know of that *might* fit that bill is MPHJ, but even there I am not sure what option they have to try and monetize their invention other than mass mailing, because there are so many potential infringers of their system(s).”

    Apparently this inventor has not been on the receiving end of patent lawsuits not just from demand letter folks such as MPHJ, but from some of the largest PAEs who by their own admission focussed on “volume licensing” hiring attorneys on contingency. With virtually no penalties for pursuing cases with little or no merit, why would anyone think that attorneys would not do that? Remember the landscape prior to Eon-Net, Marctec, Highmark, and Raylon? The following was what happened in that timeframe:

    http://sites.google.com/site/271patentblog/Home/DiagnosticSystemsvSymantec.pdf

    where, after nearly a year, the plaintiff could not produce a Preliminary Infringement Chart that identified “how each accused product’s functionality contributes to infringement” and yet sanctions were denied though “it is a close call”. Diagnostic Systems was a subsidiary of Acacia Research. And now you gave a more recent example of NetApp winning against Acacia Media.

    https://iptrolltracker2.wordpress.com/2014/11/03/two-things-about-the-netapp-victory-over-acacia-media/

    Also, if fee shifting or sanctions are applied, they are very, very rarely against the attorneys and if applied to the subsidiary shell companies they are toothless since they have no revenues and the only asset is the patent-in-suit. Any future parties-in-interest legislation will also easily be worked around by setting up foreign subsidiaries owning domestic shells thereby creating a jurisdictional corporate veil.

    Fighting back can be pointless as the following two examples from Kapersky Labs shows:

    http://en.ria.ru/business/20120626/174253507.html

    http://eugene.kaspersky.com/2013/10/02/the-patent-trolls-can-be-defeated-just-never-give-up/

    In the first case, it cost Kapersky Labs 3-1/2 years of distraction and $2.5 million in legal fees being the only one of 35 companies who refused to settle while in the second case it cost them 2-1/2 years of distraction and an undisclosed amount in legal fees (probably at least $2 million) being the only one of 55 companies who refused to settle and in neither case was there any fee shifting nor sanctions — the cases were dropped early before the merits could be proven in court. This is why many companies settle — it’s simply not worth fighting weak cases when it costs so much compared to the price of settlement. Such settlements are almost always private with NDAs preventing anyone (other than the parties to the case) seeing the terms.

    I have personally been involved on the receiving end from lawsuits without merit where in the first case there was not only non-infringement, but prior art to invalidate the patent and where such prior art was in a PCT report for a rejected European filing of the patent yet none of that info was disclosed to the USPTO. In spite of all this, the Plaintiff (a major PAE) refused to drop the case. Plaintiffs attorneys prevented their “expert” from simply telling us how we infringed and the subsequent claim infringement charts were completely ridiculous (out-of-order and repeated clauses of the patent claim). The company settled because it was far cheaper than spending millions to fight. Years later, the same parent PAE sued again on a different patent through a different subsidiary but this time the company fought back and the patent was invalidated (and affirmed when the Plaintiff’s appealed), but there was also non-infringement (not decided in court, but crystal clear) yet the Plaintiff’s attorneys simply did not care. You have no idea what such cases do to utterly destroying public trust and confidence in the legal system.

    Basically the statement by the inventor you interviewed of “Patent cases are just too expensive to make mistakes” doesn’t make sense since there have been (until very recently) virtually NO PENALTIES to the attorneys themselves for pursuing cases with little or no merit.

    The problem of pursuing cases with little or no merit in order to obtain settlements is not limited to patents, though that is the largest are of abuse right now. A 2008 survey of trial lawyers:

    http://www.abajournal.com/files/Survey_Press_Release_Final.pdf

    was summarized by the task force Chairman who stated that “the costs and burdens of discovery are driving litigation away from the court system and forcing settlements based on the costs, as opposed to the merits” and 83% of respondents agreed that “Litigation costs drive some cases to settle that should not settle on the merits”.

    Civil litigation abuse has hit one area after another like the game of Whac-A-Mole®:

    Auto Insurance Fraud – stopped when insurance companies jointly stopped their practice of automatically settling even questionable cases for a fixed amount
    Securities Class Action – reduced some with Private Securities Litigation Reform Act of 1995 (PSLRA), reduced more when William Lerach went too far, but still currently at a rate of roughly 160 or so cases per year
    CA Section 17200 – multiple legislative and court actions somewhat reduced abuse but Proposition 64 reduced abuse the most
    CA Prop 65 – abuse reduced by legislative reform and more is forthcoming
    Federal ADA especially in CA – reduced some with legislation, but more with CA Supreme Court ruling on fee shifting
    Patent Marking – stopped with a Court ruling and with AIA
    Medical Malpractice – significantly reduced with legislation capping pain and suffering awards

    Regarding the latter (medical malpractice to patent litigation in what has been called “From PI to IP”), the Whac-A-Mole® shift has been documented:

    http://www.kaiserhealthnews.org/Daily-Reports/2002/April/09/dr00010523.aspx

    http://mcsmith.blogs.com/eastern_district_of_texas/files/IP.pdf

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1878966

    Do you really believe the interviewed inventor that “no reputable litigation attorney on the planet is going to help you with a case on contingency unless they are 100% sold in their own mind on the merits”? Or are there too many disreputable attorneys? If they are not punished, are they really disreputable in the eyes of the law? How many attorneys can you find that have been punished (reprimand, suspension, disbarment) for violation of Rule 3.1 “Meritorious Claims And Contentions” by itself (i.e. not counting situations where there is also serious litigation misconduct)?

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