A House panel approves a bill aimed at patent demand letters that are in bad faith or based on invalid patents [Reuters]
Newegg fights a patent assertion entity:
Most companies choose not to recover their legal fees in patent suits because prevailing defendants are required to demonstrate that a plaintiff acted in bad faith. This is extremely difficult to prove and it’s usually easier to just walk away and count your losses – unless your name is [Newegg chief legal officer] Lee Cheng…
Thanks to the efforts of Lee Cheng and his legal team, the Federal Circuit Court of Appeals ordered a trial court to reconsider its earlier denial of Newegg’s request for attorneys’ fees and costs in the patent infringement lawsuit brought on by SUS. Newegg pursued justice in the matter because it is consistent with our corporate mission of bringing the benefits of technology and technology products to our valued customers. And, when defendants settle these frivolous claims, it’s always the customer that ends up paying. We care too much about our loyal customers to subject them to paying these trolls.
Sen. Harry Reid seems to have been central:
“We felt really good the last couple of days,” said the tech lobbyist. “It was a good deal—one we could live with. Then the trial lawyers and pharma went to Senator Reid late this morning and said that’s it. Enough with the children playing in the playground—go kill it.”…
Trial lawyers are heavy donors to Democratic politicians, including Reid. … The long history of the divide over other kinds of legal tort reform loomed over the bill, which was dubbed the Innovation Act in the House. The fact that it was the trial lawyers’ lobby that reportedly delivered the death blow suggests that the rift only got wider as debate dragged on.
Key Litigation Lobby allies like Sen. Dick Durbin (D-Ill.) and Sen. Sheldon Whitehouse (D-R.I.) spoke out against the legislation on the Senate floor. [Joe Mullin, ArsTechnica]
“Hundreds of home builders in the Pacific Northwest have been put on notice that if they use a dehumidifier to dry rain-damaged projects, they are infringing on a patent recently issued to a father and son who claim they invented the process.” [Legal NewsLine] (& Coyote)
New 96-page paperback available from the Independent Institute. I wrote a blurb:
In clear and non-lawyerly language, Patent Trolls spells out why patent trollery is so loathed and so lucrative: its rapid rise (with lawsuits quintupling in the past three years), the havoc it’s wreaking from Silicon Valley down to your local restaurant and hotel; and the reasons it can be so hard to distinguish trolls from legitimate patent claimants. He lays out remedies worth considering.
— Walter K. Olson, Senior Fellow, Cato Institute; author, The Litigation Explosion and The Rule of Lawyers; editor, Overlawyered.com
Speaking of restaurants, the latest business to speak out about its bad experience with patent trolls is the venerable hamburger chain White Castle.
Is this patent asserter seriously overestimating the persuasive validity of its claims to own the process of scanning a document to email? Or is there a rash of inappropriate resistance by small businesses nationwide? “MPHJ has sent letters to approximately 16,465 small businesses nationwide. … it only received 17 (yes, 17!) licenses. Yet the price of these 17 licenses was thousands of small businesses going through the stress and expense of facing a threat of patent litigation.” MPHJ is said to believe that if a business has more than twenty employees and operates in various fields such as “professional services,” it very likely infringes on its patent and owes a royalty of $1,000-$1,200 per employee. [Julie Samuels, Electronic Frontier Foundation; Joe Mullin, ArsTechnica, more and related last year on patent asserters in the office scanning field]
The vote was 325 to 91, with Reps. John Conyers (D-Mich.) and Mel Watt (D-N.C.) leading the opposition. Timothy Lee discusses in the Washington Post. While I haven’t tried to get into the details, the general drift looks quite good to me. One major provision requires those filing suits to plead with some specificity what the infringement is; another provides for losing parties to compensate prevailing parties toward the cost of the litigation in more cases; yet another attempts to forestall expensive discovery in cases destined to fail on other grounds. Readers who recall my first book, The Litigation Explosion, will recall that I recommended procedural reform as the most promising way to address the incentives to overlitigiousness in our legal system and in particular identified lack of fee shifting, anything-goes pleadings, and wide-open discovery as among the system’s key deficits. So, yes, developments like this make me feel I was on the right track.
Equal time dept.: Richard Epstein takes a different view.
So how exactly did it wind up in the hands of a patent troll? [Mike Masnick, TechDirt]
Prevailing parties in patent suits can win attorneys’ fees from losing opponents in cases deemed “exceptional.” “Under the test used to identify exceptional cases, cases must be objectively baseless and brought in bad faith.” That is already a painfully narrow exception, allowing for large volumes of poorly founded litigation, but two cases before the Supreme Court this term may provide clarity on when courts can deem cases “exceptional” and suitable for a fee shift. Broader use of fee shifts — presumably by way of deeming at least some swath of losing cases “exceptional” — would be one way of addressing the patent troll problem that would not call for new legislation. [ABA Journal, related, Corporate Counsel (arguments that judiciary can deal with trolls on its own]
In other developments, the Federal Trade Commission has voted to proceed with an inquiry into the patent troll problem [New York Times] and the Government Accountability Office has released a long-awaited report on the issue [Mike Hogan and Gregory Hillyer, Legal Intelligencer]
A buzzed-about scheme for state AGs (of all people) to wade into the patent troll controversy might have hit a snag in Nebraska. [John Steele/Legal Ethics Forum, earlier]
– against patent trolls. But Kevin O’Connor, CEO of a startup named FindTheBest, went ahead and did so [Joe Mullin, Ars Technica] Exploding and escalating-on-response demands, threats of criminal prosecution, demands for “sequestration” (removal from service) of his company’s computers to prevent evidence spoliation, and promises of burdensome discovery are all part of the story.