Trolls, those supernatural beings from Norse mythology and Scandinavian folklore, have been invading the patent world. While trolls were originally described as dwelling in isolated areas, under rocks or mountains, or in caves, they are now curiously in the forefront of many patent contests brought throughout the United States. Though a patent troll is rarely slow-witted like its mythical ancestor they arguably remain a threat to the conventional commercial entity and thus, can still be described as dangerous from that viewpoint.
In the Harry Potter series and The Lord of the Rings Trilogy, trolls are gigantic creatures at odds with humans and shun the light of day. Well, today’s patent trolls, also known as NPE’s or nonpracticing entities, or more recently PAE’s or patent assertion entities, stand bravely in the daylight. They often grow out of a single or a small handful of patents acquired by the PAE, and become the plaintiff in a huge number of patent infringement cases based upon the single or small handful of patents. The PAE will file suits against scores of defendants and the cases often lead to joint defenses. All the while, the PAE produces no product and provides no service other than engaging in litigation to enforce patent rights.
Critics believe that the larger, more destructive impact of PAE’s is on businesses, innovation and the economy in general. They assert that the PAE stifles the economy and invention. This perspective is of course balanced by the statutory entitlement of any patent owner to assert the exclusionary rights afforded by patents. The PAE understands that 35 U.S.C. § 271 of the Patent Code clearly supports the assertion of patents against “whoever without authority makes, uses, offers to sell or sells any patented invention.” Regardless of the side of the issue one resides, however, it is uncontroverted that PAE’s have become by far the greatest force in patent litigation. It has been reported that PAE’s initiated over 60% of all patent litigation matters in 2012, and constitute 59% of defendants in PAE initiated actions before the International Trade Commission. Amazingly, these percentages are not anomalies, but in fact, represent a continuing and growing trend.
On March 14, 2013, the House Judiciary Committee Subcommittee on Courts, Intellectual Property and the Internet participated in hearings on litigation abuse by PAE’s. Various interventions such as special defenses and fee-shifting are being addressed. In particular, what is known as the Saving High-Tech Innovators from Egregious Legal Disputes Act, or Shield Act, would allow a defendant in a patent suit over computer hardware or software to recover attorney fees and costs if a court rules that the troll plaintiff didn’t have a “reasonable likelihood of succeeding.” This bill, H.R. 845, is different from the version introduced in 2012 which lacked a definition of a patent troll, and defines a troll or PAE as a patent owner who did not do the inventing behind the patent and does not exploit it by making a product. Advocates of the bill hope that the bill will deter patent trolls from taking a shotgun approach where they are uncertain they will likely prevail.
Defendants in cases brought by PAE’s have also recently more often sought sanctions as a way to tip the balance in their favor. In one leading case, Eon-Net LP v. Flagstar Bancorp, the Federal Circuit confirmed the lower court sanction of $600,000 against Eon-Net for filing “an objectively baseless infringement action” and for acting in bad faith and for an improper purpose. Eon-Net’s actions were considered extortion in view of its filing nearly identical patent infringement complaints against a plethora of diverse defendants followed by a demand for a quick settlement at a price far lower than the cost to defend the litigation.
So it appears that the tide may be turning against the patent troll who does not perform the necessary homework. The actions brought by such patent assertion entities will need to be well thought out and based upon sufficient investigation supporting the patent action. Perhaps a more attractive and useful troll will emerge, one that is even more unlike its slow-witted ancestors, and one that critics find less destructive to the economy.