. Patent Enforcement in the US Speaker: Donald G. Lewis US Patent Attorney California Law Firm IP Enforcement around the World in the Chemical Arts Royal Society of Chemistry, Law Group London 28 October 2013
Patent Troll Wars Judicial / Legislative Developments in the US relating to Patent Enforcement
Make Patent Trolls Pay in Court NY Times, Op Ed, June 4, 2013, Randall R. Rader, Colleen V. Chien, and David Hricik In the US, there is a realization that the cost of U.S. patent litigation has become so expensive that many companies sued for infringement would rather pay something just to make the litigation go away, regardless of the merits. This realization forms the fundamental underpinning of most U.S. patent litigation today.
Credit: RPX Corporation 2013 NEW PAE Suits Filed 2005 2012 PAE = patent assertion entities non PAE = non patent assertion entities
Professor Colleen Chien, Santa Clara University Law School Distribution of 2012 NPE Suits by NPE Type
Credit: RPX Corporation 2013 Total NPE Defendants Added by Sector
Credit: RPX Corporation 2013 NPE Cases Filed in 2012 by District Court
Credit: RPX Corporation 2013 District Courts with Largest Volume of Declaratory Judgment NPE Cases Filed in 2012
Meanwhile Back on the Farm: Judicial / Legislative Developments A Precedent on Precedence: PTAB trumps District Court Separation of Powers Doctrine takes a Hit Fresenius v. Baxter: Expansion of USPTO powers Relief for Injunctive Relief in patent cases ebay v. MercExchange Bosch v. Pylon Evolution toward Specialized Patent Tribunals Patent Trolls and Attorney s fees: Chief Judge Rader (CAFC) writes an op ed, for NY Times.
PTO Tribunal Trumps District Court Fresenius USA v. Baxter Int'l (Fed. Cir.2013) Chronology: Parties file parallel proceedings in District Court and post grant administrative proceeding before the US Patent Office (PTAB). On summary judgment, District Court holds Baxter s patent claims valid and proceeds toward Final Judgment. PTAB subsequently finds Baxter s patent claims invalid in reexamination. District Court subsequently issues final judgment enforcing Baxter s patent claims. Federal Circuit affirms PTAB invalidity finding.
Fresenius v. Baxter: The Federal Circuit held: The District Court summary validity decision did not count as a final decision for res judicata purposes because it did not conclude the case as a whole; and After PTAB invalidated Baxter s patent claims, "Baxter no longer has a cause of action [for patent infringement]."
Judge Newman Dissents The court today authorizes the Patent and Trademark Office, an administrative agency within the Department of Commerce, to override and void the final judgment of a federal Article III Court of Appeals. This holding violates the constitutional plan, for "Judgments, within the powers vested in courts by the Judiciary Article of the Constitution, may not lawfully be revised, overturned or refused faith and credit by another Department of Government." Chi. & S. Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103 (1948).
Injunctive Relief in Patent Cases: ebay Inc. v. MercExchange L.L.C., 547 U.S. 388 (2006) Robert Bosch LLC v. Pylon Mfg. Corp., Fed. Cir. (2011)
ebay v. MercExchange: Overturned "general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances." Reinstated test that a permanent injunction will issue only if a plaintiff demonstrates: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
Bosch v. Pylon: Although ebay abolishes our general rule that an injunction normally will issue when a patent is found to have been valid and infringed,... it does not follow that courts should entirely ignore the fundamental nature of patents as property rights granting the owner the right to exclude. "While the patentee s right to exclude alone cannot justify an injunction, it should not be ignored either.
Status of Specialized Patent Tribunals: 2003: US District Court for the Eastern District of Texas adopts a rocket docket ; 14 patent cases are filed; single judge assigned to all patent cases in district. 2004: 59 patent cases are filed in the Eastern District of Texas. 2006: 236 patent cases are filed in the Eastern District of Texas; it becomes a preferred US forum for patent plaintiffs; select judges of the Eastern District become de facto patent specialty judges. 2006 2013: Other District Courts follow example of the Eastern District of Texas.
Expenses, Attorney s Fees, and Sanctions: American System: The general rule is that a litigant cannot recover attorney s fees. However, the general rule does not apply when the opposing party has acted in bad faith or under various statutory situations. Roadway Express v. Piper, 447 U.S. 752 (1980):... federal courts have statutory or inherent power to tax attorney s fees directly against counsel who have abused the processes of the courts.... a bad faith award of attorney s fees is not restricted to cases where the action is filed in bad faith.
Op Ed piece by C in NY Times by Judge Rader: In an Op Ed piece in the NY Times ( Make Patent Trolls Pay in Court, by Randall R. Rader, Colleen V. Chien, and David Hricik, NY Times, Op Ed, June 4, 2013), Chief Judge Rader (CAFC) stated that District Court Judges have latitude to rein in the truly nefarious conduct in patent cases and make trolls pay for abusive litigation.
Attorney fees 35 USC 285: The court in exceptional cases may award reasonable attorney fees to the prevailing party.
Sanctions Rule 11 (b) of the Federal Rules of Civil Procedure provides that sanctions available against either party if, to the best of the party's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: (1) pleadings are presented to harass, cause unnecessary delay, or needlessly increase the cost of litigation; (2) legal contentions are unwarranted by existing law; or (3) factual contentions lack evidentiary support.
Nature of a Sanctions Rule 11 (c): A sanction imposed under this rule must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.
Personal Award of sanctions against attorney for excess costs, expenses and attorney s fees: 28 USC 1927: Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys fees reasonably incurred because of such conduct.
Legislative Proposals: Various versions of the Shield Act have been proposed by Congress that would automatically provide for an award of attorney fees and costs against troll type patentees who assert their patents and fail to prevail against defenses of noninfringement or invalidity, unless the circumstances were exceptional.
Conclusion: For the moment, the US remains a preferred forum for patent trolls. Foreign entities having an unexploited US patent portfolio should consider monetizing their asset by assertion and enforcement in the US.