Patent holders may consider hitting the “pause” button before enforcing their patents, based on a pair of U.S. Supreme Court decisions that relaxed the standard for awarding fees to the prevailing party in patent litigation. While several news outlets are (correctly) reporting that the Supreme Court rulings will make it easier for lower courts to impose financial penalties on so-called “patent trolls,” the facts behind the rulings suggest that the Court’s new standard may have an even broader effect.
The Eastern District of Texas has launched a new case management procedure for patent infringement lawsuits. The new procedures, dubbed “Track B” in the court’s General Order 14-3, are designed to give litigants an option that can help save money and move a case to resolution more quickly.
Key features of the Track B case management procedures are:
- within 14 days after the defendant files an answer or motion, the plaintiff must (i) serve infringement contentions, and (ii) disclose all licenses and settlement agreements involving the patents in suit;
- within 30 days after service of the infringement contentions, all parties must provide initial disclosures, and the defendants must produce summary sales information regarding the sales of accused products and reasonably similar products; and
- within 14 days after the initial disclosures and summary sales information, both parties must file a good faith estimate of damages;
- within 14 days of the good faith estimate, the defendant must serve its invalidity contentions.
After serving invalidity contentions, the case will quickly move to a management conference and discovery plan. Discovery prior to the conference will be limited to 5 interrogatories, 5 requests for production, and 5 requests for admission per side.
The Court’s traditional case management procedures (now called “Track A”) will remain the default. The court will apply Track B if and when the parties request it.
The mere capability of infringement does not necessarily give rise to liability for infringement, according to the Federal Circuit’s opinion in Nazomi Communications v. Nokia Corp. (No. 2013-1165, 1/10/2014).
In the case, non-practicing entity Nazomi held two patents covering hardware-based java virtual machines (JVMs) that can process both programming instructions stored in a stack-based memory and legacy applications that are stored in a register-based memory. The case involved electronic devices sold by Western Digital (specifically, the MyBook) and Sling Media (which sells the SlingBox). Each device contained a processor that was licensed from ARM Continue reading
In what may be the first of several software patent litigation matters that are placed in a holding pattern this year, the District of Delaware has stayed a group of patent infringement cases involving software patents pending the Supreme Court’s decision in CLS Bank Int’l v. Alice Corporation Pty Ltd.
As noted in a previous IP Spotlight post, in Alice the Court will consider the question of whether patent claims covering computer-implemented inventions are directed to patent-eligible subject matter.
In the Delaware cases, collectively captioned The Money Suite Company v. 21st Century Insurance and Financial Services, the plaintiff sued several defendants for infringement of a patent relating to use of a remote computer terminal to search for financial products for quoting. At least one of the defendants argued that the patent was invalid as being directed to ineligible subject matter because using a computer to generate a quote for a financial product was merely an abstract idea.
Noting that the Supreme Court will soon address the question of whether software is patent-eligible, the Delaware court stayed the cases until the Supreme Court issues its decision in Alice.
On June 4, the Executive Office of the President issued a report entitled “Patent Assertion and U.S. Innovation.” The stated purpose of the report is to address challenges posted by “patent assertion entities” (PAEs), which the report defines as entities that”use patents primarily to obtain license fees rather than to support the development or transfer of technology.”
The report estimates that in the past two years, PAEs filed 62% of all patent infringement suits. It also cites to a “range of studies [that] have documented the cost of PAE activity,” but it provides no firm estimates of those costs, and it’s not clear whether those studies include the same definition of “patent assertion entities” that the President’s report uses.
Concurrent with the report, the White House issued a set of legislative recommendations and executive actions to address the costs that PAEs impose on U.S. industry. The legislative recommendations include:
- Legislation to require patent-plaintiffs to disclose the real party in interest in litigation;
- Implementing a “loser pays” program in patent litigation; and
- Expanding the USPTO’s “covered business method patents” program.
As noted in previous IP Spotlight posts, these recommendations are already pending in the SHIELD Act proposal and a bill recently introduced by Senator Charles Schumer.
The report’s executive action proposals include:
- USPTO rulemaking to require patent applicants to keep their ownership information up to date, including the ultimate parent entity of the owner. (As IP Watchdog astutely noted today, this proposal is already underway at the USPTO.)
- Training USPTO examiners to more closely scrutinize “functional claims” in patent applications.
- Expanding informational resources to businesses and patent litigation defendants.
- Reviewing International Trade Commission procedures regarding exclusion orders.
Although the report will get a lot of press, its impact is not at all clear. The legislative recommendations and executive orders descriptions mostly summarize initiatives that are already underway, rather than propose any new actions. In addition, other than the “loser pays” proposal, none of the initiatives propose any changes to actual patent litigation or prosecution practice.
Nonetheless, the report is certainly designed to provoke a conversation. Whether that conversation will lead to any substantive change remains to be seen.
The past few weeks have seen several new ways in which regulators are trying to address patent assertion entities (PAEs) – often referred to in the media as “patent trolls” — through legislation, regulation, and in one case litigation.
In March, Congress began to consider a new bill, know as the SHIELD Act, that proposes to allow defendants who prevail in patent lawsuits to recover costs from the plaintiff in certain situations. As noted in a previous IP Spotlight post, the SHIELD Act has some weaknesses that can hurt both patent holders and defendants, but it may be a first step in broader legislative action.
In April, the U.S. Department of Justice (DOJ) published a set of public comments on a joint DOJ / Federal Trade Commission (FTC) investigation of PAE activities. The comments followed a December 2012 workshop in which the FTC and DOJ explored the impact of PAEs on innovation and competition.
In May, the state of Vermont attacked PAEs on two fronts. First, the state Continue reading
A new “loser pays” bill aimed at reducing “patent troll” litigation is getting a lot of attention since its introduction last week.
The Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act of 2013 proposes to allow defendants who prevail in patent lawsuits to recover costs from the plaintiff if the plaintiff is not: (i) the inventor or the original assignee; (ii) a party who made substantial investment through production or sale of an item covered by the patent; or (iii) a university or research institution.
According to co-sponsor Congressman Jason Chavetz (R-UT): Continue reading