With the House of Representatives passing the Innovation Act in December, and now heading for the Senate, does 2014 hold the answer to the patent troll question?
In 2013, the dockets of courts in jurisdictions as diverse as East Texas, Delaware and South Florida were inundated with patent cases filed by non-practicing entities – or, as they are more commonly known, patent trolls.
The mixed fortunes of those – largely big manufacturers – defending such actions are encapsulated by Apple. Having lost an attempt in October to defend its third-party developers from Texan troll Lodsys, the Californian electronics giant a few weeks later won a case against WiLan, a Canadian NPE.
Robert Gunther, an IP partner at WilmerHale in New York, says the market for law firms’ services in such cases was strong last year. Gunther and his colleagues “continue to see a very significant number” of troll-related disputes, he adds.
The failure of the America Invents Act of 2011 to deter troll activity has led to calls for further legislation to combat frivolous lawsuits, and the introduction to Congress late last year of the Innovation Act.
Kevin Meek of Baker Botts says that in 2013 “the problem of trolls changed from an economic and judicial reality into a front page story”, drawing legislators into an issue far more complicated than they realised.
He explains: “How do you define a non-practicing entity, and what do you do if you have one? And are the new rules going to apply to both sides of the docket?” Meek, who leads the firm’s IP department in Austin, Texas, has reservations about the rush to legislate.
“It really is a zero sum game. If you make it more difficult to enforce a patent, you lessen its value,” he says. “People who hold legitimate patents, who are actually protecting legitimate markets, will also be taxed.”
Legislating for trolls
The Innovation Act’s main proposal requires a seismic shift in the US approach to litigation: requiring the loser to pay legal fees. Meek doubts whether there is an appetite for such a volte face.
“It’s a wholesale societal change, and a completely different philosophy [to the current approach]. You’re making your courts much more difficult to get into.” He believes businesses and lawyers alike will baulk at the prospect.
Gunther, on the other hand, says an introduction of a ‘loser pays’ rule “has the potential for actually changing the dynamic”. He accepts that it will face serious opposition in the Senate, however, saying “it’s [seen as] a very unusual type of provision” in the US.
Still, Gunther believes it would embolden defendants to resist settling. “There is a good chance that it is going to be enacted into law,” he says. Meek remains less sanguine about passing an effective piece of legislation to deal with the patent troll question.
“I don’t know what will survive,” he says. “I know that Congress is desperate to get something done, and I know that as usual they spoke before they knew what they were talking about, which the Presidency did, too. It’s classic Washington, DC.”
Gunther has more faith, given that there is currently no other high-profile legislation on the table to distract legislators. “Right now it feels like the whole thing is on a fast track,” he says. “Within the next year, we’re going to see some additional reforms enacted into law.”
Legislation aside, both men expect a similarly heavy workload in 2014. “The basic non-practicing entity marketplace hasn’t changed; it’s still cruising along,” says Meek. For his part, Gunther noted an increase last year in decisions favouring defendants in East Texas, as well as a shift towards Delaware as the forum of choice for litigants.
He expects the latter trend to continue in 2014. “Delaware is a hard court in which to get summary judgment for the defence, so the likelihood of a trial is fairly high,” he says. “More people are opting for Delaware as they see that results are getting a little less predictable in East Texas.”
He adds: “I think 2014 is going to be a ‘business as usual’ year. But if I’m right, something is going to get enacted into law sometime in the latter part of next year, meaning 2015 could be a little different for us.”
