Category Archives: Patent Litigation

Powerful Lesson on Settling a Patent Litigation Case & Avoiding Greed.

[Originally published by Robert Z. Cashman, Patent Litigation Attorney on Oct 1, 2009.]

There is a short and simple lesson in today’s article from, “Federal Judge Tosses Out $388 Million Patent Verdict Against Microsoft” written today by Alison Frankel from the American Lawyer.

Last April, Paul Hayes of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo representing Uniloc in a patent infringement lawsuit won a $388 million dollar patent infringement verdict against Microsoft. Today, Judge William Smith from the Rhode Island federal district court vacated the $388 million jury verdict and ruled as a matter of law that Microsoft did not infringe Uniloc’s patent, stating that the jury did not understand the issues when they gave their ruling in Uniloc’s favor.

The lesson here is that while every patent litigator has his or her day in court, so to speak, “going all the way” [to trial] in a patent litigation suit is not always the most responsible course of action. In trial, many twists and turns can occur where within the dance between the patent litigation attorneys, results may surface with a motion, a hearing, or a ruling which can destroy an otherwise valid case of patent infringement. On top of that, the Federal Rules of Civil Procedure (FRCP) are set up to reward the party that offers to settle and penalize the party who pushes their case to trial after a settlement where their case is found not to have merit. For example, if a defendant in a patent lawsuit offers to settle and the plaintiff refuses the offer, even if the case ends up in the favor of the plaintiff, if the judgment is for an amount that is equal or less than the amount that was offered in the offer to settle, the defendant can ask for sanctions and attorney fees for the time and money spent fighting the case after they offered to settle. (This was actually the source for a defense tactic that I suggested to my peers when interning at Scully, Scott, Murphy and Presser PC, a subject to be discussed in another article.) Returning to the content of this article, the point is that going to trial has its benefits and its risks.

An alternative strategy to consider is settling the claims out of court. Too often in patent litigation (both with regard to plaintiffs who are suing because a company stole their patented idea and the companies being sued for patent infringement), ego takes a more prominent role than a sincere analysis of damages which hinders discussions of settling the claims before they go to trial. Too often a company accused of infringing a patent refuses to discuss licensing the technology from the often-seen-as “little” inventor and delegates any legal matters to their patent litigation attorneys who are instructed to fight this little guy with everything they can both regarding the merits, and via procedural tactics to boost the cost of litigation to a point in which the inventor simply cannot afford to move forward with the litigation and s/he just “goes away.” If the companies ethically sit down with the inventor and review the patents involved and try to resolve the case and to determine damages without involving a billable-by-the-hour patent litigation attorney, they can save often hundreds of thousands of dollars and often millions of dollars in attorney fees and costs.

Case in point, Paul Hayes, a skilled patent litigation attorney went through the whole trial process and won a $388 million dollar patent infringement verdict against Microsoft. As of today he lost the whole case and both his firm and his client still need to account for all the likely thousands of hours of costs and fees spent litigating Uniloc’s case. In some cases, the law firm can “eat” the loss of the billable hours, but depending on the jurisdiction, in some places the client is still on the hook for out-of-pocket expenses which can be expensive when the case goes all the way to trial. Had the two sides agreed to a reasonable settlement which compensated Uniloc for Microsoft’s use of their patented technology, everybody would have been happy. However, I can’t help but to think that somewhere along the line, greed, ego, or both stepped in and forced their case into trial.

If both sides came to an agreeable settlement early on, imagine how much money could have been saved in attorney fees on both sides. …and Uniloc would have some money in the bank whereas now they have nothing except for a gaping hole in their pockets.

— Robert Z. Cashman, owner of Patent Prophet is a contingency fee patent litigation attorney in Houston, TX. He works for a law firm that specializes in contingency fee patent litigation, and in the past, he worked in house for a patent company as both a patent attorney and a patent acquisition specialist, where he interacted daily with inventors looking to sell their patents.

Black hats and white hats in the patent law system (summary)

Pasted below is a summary version of the article posted on JD Supra on “Black hats and white hats in the patent law system” that I wrote on 8/16/09.

Within patent law and the patent litigation system, there are good ways and bad ways to make use of the rules and laws that have been set forth for us to follow. Many patent practitioners and patent litigation attorneys follow these rules to further technology and to protect the rights of inventors via their patented inventions. In the analogy of white hats and black hats (terms used in the information security / hacker communities), people who do good by the law would be considered white hats.

However, within the patent litigation system, there are also black hats, namely venture capital companies, inventors, and attorneys who seek to harm others by writing, enforcing, and suing on patents where the protection does not cover the technologies these often non-practicing entities (NPE’s) hope to target through the patents they assert. This causes havoc by overburdening the court systems with frivolous lawsuits, by devaluing patents already in existence, and by causing inventors to sell their patents to those who wish to profit and do harm with them. Often this results in the inventor making only a fraction of what she is entitled to, and the NPE’s taking the majority of profits by suing or licensing on a technology they did not invent.

If you are interested in a patent litigation attorney or a patent attorney in Houston, TX, I have started an informative website using the name Cashman IP Law Firm which will be a resource for those who wish to obtain a patent or for those who would like to find out how to prevent companies from stealing their inventions. Services include help with entering into IP Agreements & Licensing options, IP Enforcement and Litigation, Strategic Counseling, and much more.

Black hats and white hats in the patent law system.

It took a few seconds to come up with this analogy, but after reading the “Wear a White Hat” article by Scott Gibson, I couldn’t stop thinking about how relevant the concept of black hat, white hat was not only to archetypes, hackers, and network security professionals, but also to patent practice professionals.

In the hacker / network security / cybercrime world, a black hat is a hacker who, among other things, penetrates networks and security systems and often wreaks havoc on the systems s/he has gained access to. Viruses can be installed, information can be exploited and/or manipulated, and general bad things can happen when a hacker penetrates your system.

On the other hand, there is also something called a white hat, which generally refers to an “ethical” hacker. Frequently, this is a programmer or a team of network security professionals who are hired by a company for the purpose of testing the company’s network for security holes, vulnerable entryways, and for weaknesses in the company’s network security system. While they may work with grey hats (best described as those who walk the fine line between violating laws and ethical hacking), these white hats help companies combat black hats who are intent in finding a security hole, penetrating a network, and exploiting the vulnerabilities inherent in that vulnerable network.

I see patents the same way. There are white hats who practice traditional patent practice whether on the side of patent prosecution, patent licensing, or patent litigation. These are the practitioners who write the patents and advance technology by sharing inventions with the public in return for a multi-year monopoly so that the inventor can benefit from their invention. The goal with white hat patent practitioners is that they are looking to help their inventors to find where the inventor’s understanding of the invention is lacking, and to help their inventors secure protection of their inventions by covering as many embodiments of the invention as possible to most completely and to most broadly describe the invention. This is similar to the white hat ethical hacker who finds security holes with the intent of writing a patch to fill those holes and to keep the network secure.

In licensing and in litigation, there are also white hat patent practitioners. These are the attorneys who help the inventor protect their inventions against companies who have knowingly or unknowingly taken the protected invention and have used the invention to make a product or a service which incorporates the protected subject matter of the patent. This white hat patent practitioner will often approach the company or individual using the protected invention of the inventor and will ask the company to properly compensate the inventor for the value of his/her contribution. If and when the company decides not to pay the inventor for the invention that is protected by law as belonging to him through his patent (whether their decision is in bad faith, e.g. denying the inventor compensation based on the company’s greed or whether their decision is based on a good-faith belief that the patent is invalid), the white hat patent practitioner (here a patent litigation attorney) will file suit to enforce the inventor’s patent rights. Throughout the proceedings, the white hat patent litigation attorney will develop evidence and will ethically move through the lawsuit proceedings so that the judge or jury will find that their client was wronged by the company who refused to take a license and pay the inventor his/her fair share of the value their invention contributed to the company’s profits, and in the end, if the inventor is in the right, the court will find for the inventor and will order the company or infringer to pay the damages rightly owed to the inventor.

Interestingly enough, just as there are white hat inventors and patent attorneys, there are also grey hat and black hat inventors and practitioners. Often known as patent trolls, these individual or companies will patent or acquire patents to inventions with the sole purpose of using them as a weapon to harm another company, whether it be to block them from making a product, or more frequently, to carve out a profit for themselves by asserting the newly acquired patent against the company. The stated purpose of patents are to promote and to reward innovation and to further the growth of technology; forcing a company to “pay up or else,” or to stop producing a product under threat of lawsuit blocks and hinders technology.

Black hat patent practitioners and black hat inventors usually fall into the category on non-practicing entities (NPE’s). These individuals generally see a patent as a commodity to be mined and exploited rather than an invention to further technology. You’ll often find black hat practitioners trying to reverse engineer and to invent around existing inventions for the sole purpose of suppressing the next step in the furtherance of technology, or to try to induce the real inventors and companies to “trip” (so to speak) over the patent and infringe it and then WHAM! the lawsuit and threats start pouring out. You’ll also find many venture capital companies acting in a black hat capacity by aggregating patents for the sole purpose of making a pretty penny by enforcing one or more patents against a target company with deep pockets who stand to lose the most by being confronted with one or more patents which may or arguably may cover the technology they are practicing.

Lastly, the distinction between a black hat patent litigator versus a white hat or grey hat litigator is how they conduct themselves in the preparation for and during trial. Black hat litigators will threaten, scream, intimidate, and will use scare tactics and legal maneuvers to intimidate the other side into settling with them WHETHER OR NOT they really are infringing the patents being asserted against them. Sometimes a party facing a lawsuit will settle giving money to a black hat litigator who has no leg to stand on just to save money on the expensive costs that will be incurred if they decide to fight the black hat litigation attorneys.

In the network security world, the job of the good guy belongs to the white hats who write security updates and patches to prevent the hacker black hats from causing damage through their illegal and often immoral activities. However, in the patent world, a white hat is often at a disadvantage when facing a black hat, and their only remedy is to endure the high costs of litigation and attempting to file a declaratory judgment and or summary judgement motion, or defending their client all the way through trial until a judgment is granted in their favor.

However, the real white hats in the patent world belong not to the patent attorneys and the patent litigators who ethically run their practice, but to the congressmen, the senators, and the lawmakers who are able to explore how black hat patent practitioners exploit and abuse the system, and they can pass laws to patch up the vulnerabilities in the law which allow black hats to do their damage. This can only happen through advice and letters from ordinary people like you and me who write them and share their thoughts, their feelings, and their experiences to best empower the real white hats to propose legislation changes to remedy vulnerabilities in the patent system as it is today.

If you are interested in a patent litigation attorney or a patent attorney in Houston, TX, I have started an informative website using the name Patent Prophet which will be a resource for those who wish to obtain a patent or for those who would like to find out how to prevent companies from stealing their inventions. Services include help with entering into IP Agreements & Licensing options, IP Enforcement and Litigation, Strategic Counseling, and much more.

RIMM vs. Visto Venture Capitalists – Little Guys Win.

Today in Barron’s, there was an article “RIMM To Pay $267.5 Million To Settle Visto Patent Suit” by Eric Savitz.

I’m actually not that sad about this settlement. If Visto’s patents genuinely covered the technology used by RIM, then they had a duty to license their technology and not to steal it. Without delving deeper into the facts, I’d give RIM the benefit of the doubt that they just didn’t know about Visto’s patents when they went into that technology area. That happens quite often, and is the reason the patent system is in place. Here, Visto bought patents owned by Motorola and I would expect that RIM should have known about these patents and should have sought a license for the use of the subjects they cover, but I’m guessing that their GC thought, “hey, these patents were just bought by some venture capital (VC) company. What are the chances they’ll sue us?” Silly GC, VC’s are often trolls under a legitimate business structure.

Nevertheless, even if Visto was not some VC, it’s likely the same story — Big companies don’t take little companies / inventors holding patents seriously. They fail to realize that inventors pour out their life’s savings to develop a technology with the hopes of one day achieving some kind of financial remuneration for their inspiration and innovation. It is only fair that an inventor can hold a legal monopoly and can go to court to sue when their patent is infringe (noting that laches is always a good defense for the infringer as a side note because inventors often don’t act fast enough or they trip up while trying to send threat letters to the big companies letting them know of their infringement and then doing nothing when the big companies retort).

That being said, companies as big as RIM often take the little guy not seriously when they come with a valid patent in which they are practicing. They’ll stall, hee and haw, and will cost them thousands just to convince the huge companies to take a license from them.

Any inventor / small company that has to resort to going to court to resolve a patent disagreement deserves a good judgment because if it has come to a lawsuit, the licensing negotiation and stalling tactics by the big company has taken too long.

Obviously patent trolls are a different story. They didn’t invent the technology; they bought it at a fire sale and now they’re trying to assert it EVEN when they don’t have a strong case.

If you are interested in a patent litigation attorney or a patent attorney in Houston, TX, I have started an informative website using the name Patent Prophet which will be a resource for those who wish to obtain a patent or for those who would like to find out how to prevent companies from stealing their inventions. Services include help with entering into IP Agreements & Licensing options, IP Enforcement and Litigation, Strategic Counseling, and much more.

Solicitor General’s patent infringement suit against California.

Solicitor General patent infringement suit against an aggressive State of California hiding behind 11th Amendment.

I was reading this morning’s post on the Patently-O Patent Law Blog about the Biomedical Patent Management Corp. (BPMC) v. California Department of Health Services (on petition for certiorari) brief by the Solicitor General.

In short, I feel that the Court is spending too much time looking for the perfect case to justify the ruling (a.k.a. law) they are looking to implement. However, I believe that injustice is being done because bad law is being formed on the lower courts because the Court is not hearing these poorly-decided cases. I feel this is bad practice, and I implore the courts to stop this practice. Their job at their level is not to “legislate from the bench,” but to resolve issues where the lower courts have made errors. My comments to the Patently-O article is below:

TJ, I think the problem is that the SG is looking to pick and choose the best cases to create the law they’re looking to implement. Metabolite v. Labcorp was a good candidate to take on the “thinking step” patentability issue, but nothing significant happened, thus no material change to the patent law system. Now, we have a case where the Cali gov’t is enforcing their patents, but hiding under 11th Amendment immunities. Again, the SG claimed this was not the right case to create this kind of law, noting that the issue is really a problem. I can think of a few more examples of this off the top of my head.

Pardon the baseball analogy, but it’s unfortunate that the courts are looking for a slow pitch down the middle to assert the law they wish to implement. Perfect cases only come once in a while, and we are racking up issues that need to be addressed, and the courts keep going silent. This is not justice — not for the litigants, not for the patent law system, and not for the country. Stop looking for the perfect cases, and make the wronged litigants whole by hearing cases where there has been an injustice done at the lower courts, because by being SILENT, you are creating precedent and BAD LAW. Just stop it.

The Court needs to put a stop to looking for the “perfect” cases so that they can “legislate from the bench” and must return to adjudicating cases to right a wrong when the lower courts have gone awry.

If you are interested in a patent litigation attorney or a patent attorney in Houston, TX, I have started an informative website using the name Patent Prophet which will be a resource for those who wish to obtain a patent or for those who would like to find out how to prevent companies from stealing their inventions. Services include help with entering into IP Agreements & Licensing options, IP Enforcement and Litigation, Strategic Counseling, and much more.

Aristocrat Technologies v. Int’l Game Technology (IGT) decision.

I just read the US Court of Appeals opinion for the Aristocrat v. International Game Technology (IGT) case, and I want to mention that I am unhappy with the decision and I feel that the judge played semantics with the availability of defenses for patent infringement suits, although I do believe he properly applied the law on its face. My opinion is that the law in its present form is broken and needs a bit of revision.

To summarize the lower court’s decision, in short, when Aristocrat was prosecuting their gaming patent, they paid a fee one day late. While this is a minor oversight, bottom line, according to the rules, this is enough to have the USPTO determine that the patent was abandoned and they did. Now according to the law, the applicants can only revive the abandoned application by stating that the lateness and its resulting abandonment was unavoidable. Yes, there are provisions regarding fees that state the cost of reviving an abandoned patent under the “unintentional” standard, but reading the statute on its face only allows an abandoned patent to be revived under the higher “unavoidable” standard. Whether this should be changed is a moot issue for now. The applicants claimed that the abandonment was “unintentional,” the USPTO said okay and revived the application, which later issued into US 7,056,215. Aristocrat later filed a continuation patent which also issued into US 7,108,603.

The lower court held that because the USPTO revived the abandoned application under the “unintentional” standard, because this type of revival is not supported by the statute on its face, the ‘215 patent is invalid (as is its child, the ‘603 patent).

Here in the US Court of Appeals decision, the judge reversed the lower court opinion stating that regardless of whether the patent is valid or not, “improper revival” of an abandoned patent is NOT a valid defense in an infringement action. What?!? He then goes ahead citing weak proofs as to why certain defenses are defenses and why others are not, and because improper revival was not one of those defenses that were explicitly listed as a defense, the judge precluded its availability completely ignoring the catch-all provision of 35 USC s.282(4) “Any other fact or act made a defense by this title.”

Now here is the pickle. Judge Jenkins appears to be technically correct in that improper revival is not explicitly stated as a defense to an infringement action so it’s not so clear whether section 282(4) applies to improper revivals of abandoned actions. However, the USPTO improperly revived the application and issued a patent which it should not have because it went beyond the powers granted to it.

So what do we do here? The patent should NOT have been issued, so technically, it SHOULD be invalid, as should its child. But, the appellate court interpreted the issue of availability of a certain defense, not the issue of invalidity based on a procedural and/or legal defect in the prosecution.

My opinion is that IGT will likely appeal to the Supreme Court, but regardless of whether they hear the case, their decision will spark some legislative controversy. If the Supreme Court hears the case and determines that 35 USC section 282(4) applies to the defense of improper revival, people will ask “what else constitutes a defense?” In my opinion, this is not a bad thing. I believe that if an examiner makes an error in the prosecution and a patent issues which should not have issued, there is nothing wrong with a patent litigation attorney later “combing the file-wrapper” looking for procedural and/or legal reasons why the patent being asserted is invalid. This is and should continue to be an available method of invalidating a patent. In short, if a patent should not have been issued, it should not have been issued, period! The problem with this alternative is that the Supreme Court by invalidating the patent will loosely interpret section 282(4) and strictly read the provision requiring the higher “unavoidable” standard, and this would be a contradiction.

Alternatively, if the Supreme Court hears the case and determines that the Court of Appeals was correct, it will essentially provide the rule that “notwithstanding certain exceptions which we will deal with on a case-by-case basis, regardless of what error the USPTO examiner committed during prosecution, if a patent issues, it is valid.” In its essence, the Supreme Court would give the USPTO full power to act outside its legislated powers awarding patents which should be invalid and vice versa. This is not an acceptable option. The USPTO is bound by the laws just as any federal agency should be. It has no rights to interpret the laws to mean something that is contra to powers explicitly granted. Thus, if the Supreme Court hears the case and affirms the Court of Appeals’ decision, who will control the USPTO and its examiners who make incorrect decisions?

In sum, this is one more case of where the law should have written something that it didn’t, and like many others, it needs a revision to clarify Congress’ position of 1) whether the unintentional standard is enough to revive an abandoned patent, and 2)whether 35 USC s.282(4) should include other defenses not explicitly stated as being a defense.