It can be rare to get good news of small companies overcoming suits brought by non-practicing entities (NPEs) in the Eastern District of Texas. So when our firm recently helped Geotab, a telematics company of less than 200 employees, achieve not one but two victories over NPEs, we thought it might be useful to take a step back and share what we learned from these wins.
First, it can pay off in the long run to take a principled stand, even at short-term expense. The business model of most NPEs is to settle cases quickly by demanding less than the cost of early-stage defense. This NPE strategy is designed so that defending one suit will not pay from a pure dollars perspective. However, refusing to play their game can save money in the long run. Looking at NPE litigation on a holistic level—the way you might assess your patent portfolio—it often makes sense to go to bat now as a warning to would-be attackers down the road. Winning decisively against one NPE signals to others that you are not a worthwhile target.
Second, do not fear a patentee’s “claim construction” defense to a section 101 motion. In applicable cases (as many NPE cases are) the fastest path to victory is to file a Section 101 motion to dismiss (sometimes called an “Alice” motion based on the recent Supreme Court case). Many courts will now consider such a motion before the defendant even needs to answer the complaint. This early motion saves money because it will typically be decided before other discovery costs occur. Despite this advantage, many practitioners are timid about bringing such a motion for fear it will be delayed until after claim construction, or that an early statement about what the claim term means may be used against the client in claim construction later. But bringing a 101 motion early forces the plaintiff to go on the defensive and identify a claim term that actually changes the patent-eligibility of the patent. It is only the rare case where such validity will turn on claim construction, and winning these motions can nip cases in the bud.