Part 3 of 3 – Call to Use Existing Legislation and Conclusion
IV. Courts Already have the Ability to Limit Abusive Litigation
Maybe more directly related to the specific round table discussion, there are NPE’s, whose business is to monetize patents, and then there are companies that are only in the game to exploit others. The round table discussion looks to have included Mr. Peter Braxton’s story about the app “Jump Rope.” While I do think it is unfortunate that his young start-up app company had to go through multiple rounds of litigation right out of the gate, the system generally worked for him. While it took two years, not only did Mr. Braxton prove that his app did not infringe the patent at issue, but Jump Rope won its motions for sanctions under F.R.C.P. Rule 11 against the plaintiff who brought the frivolous lawsuit. The system worked just as it should.
New liabilities are an inherent risk for all new companies when they enter the market. Lawsuits, whether patent or driven by some other action are a realistic part of any business. Mr. Braxton makes reference to returning his investor’s money because they wanted to invest in a business model and not in litigation. This point seems to miss the fact that understanding the legal system designed to protect technical innovation (patent law) needs to be an integral part of the business model when you start a company in the United States today. The patent market and potential for infringing someone else’s idea needs to be considered before starting a company formed around a technical idea. Businesses, many of which are idea driven these days, need to engage and understand their IP portfolios quicker than ever before.
“The first 100 years of our country’s history were about who could build the biggest, most efficient farms. The second 100 years were about the race to build efficient factories. Welcome to the third century: This one is about ideas.” – Seth Godin
Beyond Mr. Braxton’s example in which the system properly awarded him sanctions for the improper behavior of the adversarial side, there is also new case law developing in the context of patent trolls around 35 U.S.C. § 285 which allows the court to grant reasonable attorney’s fees to the prevailing party. While many patent reform supporters push for fee shifting in “ordinary cases” because “extraordinary” case standard did not provide relief to parties in abusive cases, the Supreme Court just this week announced its decision and interpretation of § 285. So why are we so intently focused on making changes instead of letting the courts catch up and see if the development in the interpretation of the law helps curb the influence of trolls?
Writing for a unanimous court, Justice Sotomayor wrote the opinions in both the Octane Fitness, LLC v. ICON Health & Fitness, INC. and Highmark INC. v. Allcare Health Management System, INC. cases which provided insight as to both the interpretation and application of an exceptional case under § 285 and the standard for a reviewing court considering the District Court’s finding of an exceptional case. The Court found that the Federal Circuit’s rigid and mechanical evaluation of § 285 did not properly give discretion to the District Courts to the degree that § 285 was rendered “superfluous.” Instead, the District Courts do have broad discretion in the application of § 285 and “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position … or the unreasonable manner in which the case was litigated.” This appears to pretty clearly support the ability of District Courts to assign fees in cases of abusive litigation, without any additional need for new legislation.
V. New Legislation is Not Required to Stop Abusive Litigation and Only Introduces Potential Harm into the System
It was reported last month that Apple Inc., DuPont, Ford Motor Co., General Electric, IBM Corp, Microsoft Corp, and Pfizer Inc. have formed a “go slow” patent lobby group to try balance the current push for patent reform at the federal level. Hopefully this is a start to better representation on both sides of the issue and upcoming round table discussions involve a balance of interests.
The bottom line is that quick legislation and unbalanced discussion does not appear to be a well-rounded solution that considers all the interests at play. Proposed solutions need to consider the broad range of entities that our system relies on having access to patent protection. Targeted solutions that focus on the specifics of the trolling issue, such as minimizing the number of bad patents put out by the USPTO and letting the court system have an opportunity to use the laws given to it through statutes such as 35 U.S.C. § 285 and F.R.C.P. 11, should be pursued to the fullest extent possible before changing the laws.
As David Kappos (former USPTO Director) said, “There’s a feeling that the negative rhetoric is leading to a very anti-patent environment.” An anti-patent environment is not good for innovation or the US economy.