Quite a bit of controversy has arisen over so-called non-practicing entities, or NPEs. NPEs own patents but do not make any products. These companies buy patents for the sole purpose of extracting money by claiming patent infringement. Another term for NPEs is "patent trolls."
Many Texas lawyers argue that the Eastern District of Texas is a haven for patent trolls. Two recent cases seem to confirm this viewpoint.
A jury in the Eastern District of Texas, Tyler Division, recently awarded Smartflash (an NPE) a $532.9M patent infringement verdict against Apple. The jury found that Apple willfully infringed on patents related to portable data carriers used to validate computer payment information. And a jury in Marshall, Texas, also part of the Eastern District, issued a $15.7M verdict against Samsung for infringing on patents related to Bluetooth technology. In that case, the plaintiff (Rembrandt Wireless Technologies) was also an NPE.
A Call for Patent Reform
The U.S. Supreme Court has issued recent opinions that substantially help in defending against patent trolls, but these verdicts are prime examples of why many companies feel the need for an overhaul of current patent law - especially executives of those companies caught in the crosshairs of a patent troll, and who understandably refuse to pay the patent troll's demanded ransom.
U.S. Supreme Court to the Rescue - Somewhat
The U.S. Supreme Court has issued two opinions that substantially help companies defend against NPEs, despite the ongoing trouble in the Eastern District of Texas that we described above, which may provide defendants with solid authority for a successful defense.
One is Alice Corporation Pty. Ltd. V. CLS Bank International, wherein the Court held that the patents were invalid because the claims were nothing more than abstract ideas and were thus not patent eligible.
The other is Limelight Networks, Inc. v. AKAMAI Technologies, Inc. In the Limelight case, the Court held that a defendant is not liable for inducing infringement when no one has directly infringed under Section 271(a) or any other statutory provision.
How Does One Defend Against Patent Trolls?
There are various ways to defend against patent trolls. First, based on the recent Supreme Court decisions, a defendant can move to dismiss the case when it commences. A motion to dismiss can be based on several grounds. These grounds can include but are not limited to:
(1) the plantiff does not own the patent
(2) the patent covers an abstract idea that is not patentable subject matter
(3) the complaint does not identify the infringing product
(4) the case was brought in an improper jurisdiction
Additional ways of defending against NPEs are moving for summary judgement when appropriate or a challenge at the U.S. Patent and Trademark Office. The U.S. Patent and Trademark Office has procedures for challenging the validity of the patent. Two of these procedures include (1) a covered business methods (CBM) proceeding or (2) an inter partes review proceeding. Each of these are proceedings before the U.S. Patent and Trademark Office to challenge certain patents. These options were made available when the American Inventions Act ("AIA") took effect September 16, 2011.
Contact Hendershot, Cannon & Hisey, P.C.
When a patent troll strikes, an aggressive defense is imperative. The Houston law firm of Hendershot, Cannon & Hisey, P.C., has defended clients in multiple cases involving patent trolls and has obtained positive results on behalf of executives and entrepreneurs who refuse to pay ransom. Call us at (713) 909-7323 to schedule a consultation.