DJ Action Dismissed – 1st Post MedImmune

In what appears to to be the first dismissal of a declaratory judgment action post the Supreme Court’s decision in MedImmune, a court in Minneapolis dismissed two counts seeking declaratory judgment of non-infringement and invalidity (Case 08–cv-00816).

According to the ruling:

“However, although MedImmune lowers the bar for declaratory judgment jurisdiction, a substantial controversy is still required. In the post-MedImmune authorities relied on by[Plaintiff], a patentee has either demonstrated a preparedness to litigate against the prospective declaratory judgment plaintiff, accused the prospective declaratory judgment plaintiff of infringement, affirmatively asserted its rights to license fees, or engaged in some combination of all three. For example, in Micron Technology, Inc. v. MOSAID Technologies, Inc., 518 F.3d 897 (Fed. Cir. 2008), …

Under these circumstances, the Federal Circuit found that the record demonstrated a “substantial controversy” between the parties under the MedImmune standard.” (Emphasis added).

The instant case is distinguishable because [Defendant] has not demonstrated an intent to litigate against [Plaintiff], has not accused [Plaintiff] of infringement, and has not demanded licensing fees. There is no evidence that [Defendant] has pursued litigation against [Plaintiff].

Considering all the circumstances, the Court finds there is no substantial controversy regarding the … Patent supporting declaratory judgment jurisdiction. Specifically, [Defendant] has not yet established any position on whether [Plaintiff] infringes the ‘356 Patent. [Defendant]’s letter to Plaintiff was a means of gathering information regarding potential infringement, not an assertion of an already determined legal interest adverse to [Plaintiff]. Therefore, because the parties have not established positions of adverse legal interests, there is no substantial controversy regarding the ‘356 patent. Accordingly, this Court does not have subject matter jurisdiction over Counts II and III of [Plaintiff]’s Complaint.

A copy of the decision in PDF format can be found by clicking the link (Dismissal Order (26 KB)).

Posted by Douglas Sorocco, August 8, 2008 at 10:14 am
Permalink: DJ Action Dismissed – 1st Post MedImmune
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In defense of offense…

A couple of months ago I came across Mike Dillon’s blog – The Legal Thing – covering all things legal from the perspective of General Counsel at Sun. 

As GC for Sun, Mike’s daily routine must entail a significant amount of attention to intellectual property issues and his blog plows a lot of ground concerning this topic.  The posts are informative – albeit they have a “big corporate shine” to them, much to the dismay of a lot of “anonymous commenters”.   If you read many patent blogs, you can probably guess the identities of many of these “anonymous commenters” – but they do make for an interesting peek at the more reactionary component of our niche of the legal world. 

That is a lot of setup for a recent post of Mike’s dealing with how Sun defends against patent “troll” lawsuits – namely, a good offense.

I recently shared dinner with a few other GCs of local technology companies. It was a nice evening in which we were able to relax and share insights (and commiserate) about topics of common interest. During the course of our meal while we were discussing rising legal costs, one of my table mates made a statement that I found somewhat bothersome. He said that when faced with patent “troll” litigation, he knows he is going to pay something to get rid of the lawsuit and so he economizes on the use of defense counsel. After all, the thinking goes, if your intent is to settle a case, why spend money on a strong defense?

His view is completely contrary to how we think about this problem at Sun. It’s also symptomatic of the way many companies view this issue as a quarterly “cost of doing business” without considering the long term consequences of settlement both for individual companies and our industry.

Before going further, let me state that we respect the intellectual rights of third parties. When a third party claim has been clear and the terms reasonable, we have entered into licenses. However, those situations are easily distinguished from the cases that make up almost all of our present docket of patent litigation. These lawsuits have usually been filed with no advance notice, by plaintiffs that don’t commercialize their patents (i.e. create and sell products) and in venues considered favorable to them. It’s also almost always the case that these plaintiffs have done little or no investigation to ascertain whether our products infringe prior to filing their lawsuit.

I think the approach that Mike outlines is a good example of how to frame decisions when confronted with a freedom to operate issue – whether the FTO issue is brought to your attention through an offer to license, or a cease and desist, or a patent search, or even when you have been served with a complaint — i.e., “How do we play offense in this particular case or instance?”

As Mike mentions, oftentimes it makes sense strategically and economically to simply license the patent – especially if the license allows you to preclude other competitors in the marketplace. 

On the other hand, a careful analysis may lead to a determination that a license is unworkable – e.g., that the patent is invalid or because the license fee does not make economic sense.  In such a circumstance, a zealous defense against an accusation of infringement may be in order – including the invalidation of the asserted claims.

In either case – taking a license or defending zealously – the accused infringer is approaching the case in an active/offensive manner and judging each case on its relative merits.  Defaulting into paying to settle every case is no better than defaulting into aggresively defending every case. 

The best defense to a patent infringement lawsuit?

Early analysis of the case and its relative merits (including the type of entity bringing the lawsuit).  As each case and situation is unique, arbitrary “blanket rules” – while being easy to implement – don’t necessarily increase value to the corporation.  Licensing everything or defending against everything is not a strategy – it is simply an invitation for disaster.

In any event, go on over and read Mike’s blog – I can guarantee that you will learn something.

The best offense…is a good defense.: the legal thing… by Mike Dillon.

Posted by Douglas Sorocco, March 17, 2008 at 9:33 pm
Permalink: In defense of offense…
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New Blog to Check Out: Financial Aspects of Intellectual Property

One of my new favorite blogs is the Financial Aspects of Intellectual Property blog by the folks at the Innovation Asset Group.

According to their “about” page:

Innovation Asset is a leading provider of software for intellectual property (IP) and contracts management. Founded in 2002, we set out to design fresh solutions to the challenges today’s companies face in managing their intangible assets. We’ve quickly gained a national reputation for our flagship product, Decipher™.

So far, their blog has really been a fun and informative read – dealing with meta trends in intellectual property acquisition and valuation.  As a sample to whet your appetite:

We are seeing an evolution – perhaps revolution. Not just in terms of the recognition of IP as the fundamentally core asset for businesses today; but also in terms of the way in which that IP is managed (I think “where” remains the same).

Initially, IP is managed out of the legal department. In a non-strategic mindset, IP management equates to docketing in some of these companies.

As companies embrace the strategic importance of IP and understand the need to move beyond simply docketing, there is an evolution of the role of the legal department. Much the way IT departments in corporate America evolved from a cost center and service provider to a strategic enabler of the business in the past couple of decades, legal departments are making a similar evolution today.

If you picture a pyramid similar to Maslow’s hierarchy of needs, and similar to the one described in “Edison in the Boardroom,” the bottom of the pyramid represents the least sophisticated IP companies, and the top of the pyramid the most sophisticated.

Well worth a read for anyone interested in intellectual property and what I would consider a “must read” for those within corporate intellectual property departments who must identify, protect and communicate the importance of intellectual property assets.

Sorry for the disruption in the middle of all the “Rules Mess” – we now return you to your regularly scheduled programming.

Posted by Douglas Sorocco, September 26, 2007 at 7:41 pm
Permalink: New Blog to Check Out: Financial Aspects of Intellectual Property
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Legal Imperatives on Intellectual Property Management

Market Research Reports has released a new title on intellectual property asset management and protection entitled “Legal Imperatives on Intellectual Property Management”. 

It appears to be an interesting read, although not inexpensive (550 Euros).  If any PHOSITA readers have a copy, let me know your thoughts/reactions so other readers can make an informed decision on purchasing.

From the Market Research Website:

Only in recent decades have issues related to the protection of intellectual property rights come to be seen as significant sources of legal and business uncertainty. In part, this uncertainty derives from the fact that intellectual property is importantly different from physical property. Intellectual property can be stolen by an act as simple as broadcasting an idea without the permission of the originator. — Former Federal Reserve Chairman Allan Greenspan in his remarks at a 2004 conference on Economic Policy Research, at Stanford University

The business landscape is littered with intellectual property landmines. Microsoft, Apple Computer, Sun Microsystems, Medtronic, Research in Motion and Nintendo are just a few of the companies that have settled patent infringement disputes for hundreds of millions of dollars. Toshiba paid a $425 million judgment to Lexar for violating trade secrets. Pfizers patents for Viagra were ruled invalid in China and Microsoft faces similar concerns over its Office product in South Korea. In the battle of protecting intellectual property, the IP lawyer is on the front lines. It is the IP lawyer who:

-Drafts the patent applications, knowing that the defensibility of the firms intellectual capital hangs on each word that the IP lawyer crafts.

-Must have the prescience to secure valuable IP rights throughout the world in anticipation of his company later doing business in remote markets.

-Must defend his company against attacks by patent trolls.

-Must have the business savvy to transform fierce litigation into mutually beneficial licensing agreements.

-Must retain patent, trademark, and copyright exclusivity while avoiding anti-trust challenges.

This report includes interviews with many of the nations foremost authorities on the intellectual property law. Intellectual Property Litigation is extremely expensive and becoming increasingly common. From 1984 to 1999, the mean loss absorbed by companies faced with IP litigation was $28.7 million in total losses. Microsoft, Apple Computer, Sun Microsystems, Medtronic, Research in Motion and Nintendo are just a few of the companies that have settled patent infringement disputes for hundreds of millions of dollars. Cisco Systems reports that it is named as a defendant in at least one IP lawsuit each week.

Posted by Douglas Sorocco, July 30, 2007 at 2:13 pm
Permalink: Legal Imperatives on Intellectual Property Management
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universities as patent trolls – part 2

Well, when you are wrong – the best thing to do is to acknowledge the error and applaud the person who pointed it out to you.

Well, kudos to Lawrence Ebert at the IPBiz blog who spent some time talking about patent trolls in a recent blog post.  With respect to my error, Lawrence kindly pointed to previous comments in print that suggested that Universities should/could be considered patent trolls.

The PHOSITA blog suggested that this might be the first time universities were suggested, in print, as possible trolls: Ahh… someone finally put into print what a lot of us patent practitioners have wondered for awhile – when would someone claim that universities are patent trolls?

Not even close…

CIO in an article entitled Has the Enemy of Patent Trolls Become One? published December 5, 2005 talks to Peter Detkin:

[CIO] Some people consider a “patent troll” to be any person or business that doesn’t produce a product or service, but instead makes money from licensing and patent assertion primarily. Has the definition of the term you coined, “patent troll,” changed since you coined it?

[Detkin] At best, I would say it’s become a little bit more refined. My concern is that the term has now been used so broadly as to mean any plaintiff you don’t like. Look at the definition you just used. Under that definition the University of California is a troll, Intel’s a troll—and since I was at Intel at the time, Lord knows I wasn’t trying to call myself a troll. But Intel routinely asserts patents—that it bought, that it’s not practicing—against others, looking for money. IBM would be a troll. Thomas Edison would be a troll.

NAPP wrote in May 2005:

To the extent that the term [troll] is used to derogate inventors who do not develop corporate structures or manufacture products, NAPP believes that inventors who merely invent but do not manufacture products – which, after all, includes most university and government researchers – do not deserve epithets or less patent protection.

Martin Lueck wrote in September 2005:

For example, Eolas and the University of California have been berated as patent trolls since their $521 million victory against Microsoft. Lueck also stated: “I don’t hear anyone saying IBM is a troll — even though they have a bunch of patents and license them. To suggest that the University of California is a patent troll is absurd — they make contributions just like corporate America, and they want to protect their intellectual property.”

Separately, Michael Kanellos wrote:

Moreover, Stanford University made itself into a global powerhouse in part through licensing patents to professors and students who had start-ups. Without an exclusive license of Stanford’s PageRank patents, Google wouldn’t be the behemoth it is today. Though the PageRank technology was invented by Google founders Sergey Brin and Larry Page, they were Stanford students at the time, and the university owns the patents.

Posted by Douglas Sorocco, May 14, 2006 at 10:01 am
Permalink: universities as patent trolls – part 2
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Abe Lincoln was a Patent Troll?

I guess he could be – he didn’t commercially exploit his patented technology, afterall.

That “patent troll” definitional thing is a bit tricky when you actually think about it.

But who is and who isn’t exploiting the system is a grey area. Abe Lincoln obtained a patent, noted Brian Halla, CEO of National Semiconductor. He got it for inventing an inflatable pontoon that helped boats get past sandbars and other obstacles on canals. It’s patent number 6469–see reference here.

via Abe Lincoln: patent troll? | News.blog | CNET News.com.

Posted by Douglas Sorocco, May 11, 2006 at 9:11 pm
Permalink: Abe Lincoln was a Patent Troll?
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universities as patent trolls?

Ahh… someone finally put into print what a lot of us patent practitioners have wondered for awhile – when would someone claim that universities are patent trolls?

The managing director of the Wisconsin Alumni Research Foundation – i.e., WARF – does a nice job battling the inference, but still – it does seem to be a narrow line one must walk to avoid the obvious connection.

Carl Gulbrandsen, managing director of WARF, takes it a step further. Patent trolls “don’t exist. Trolls are imaginary creatures,” Gulbrandsen said. “I think the whole issue is overblown.”

WARF, a middleman organization that owns patents on discoveries made at the UW and licenses them, could be considered a patent troll under some definitions, he said.

“Patents are a piece of property. To say that it’s wrong that a company acquires property and then expects to be paid for use of that property, I think, is a pretty simplistic approach,” Gulbrandsen said.

Once again, those who seek to define the phrase “patent troll” better use carefully crafted language – the company/institution/individual/innovator you love today, just might be the patent troll of tomorrow.

Posted by Douglas Sorocco, May 7, 2006 at 5:00 pm
Permalink: universities as patent trolls?
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Trying to Burst the bubble – Just another troll?

So last week we asked ya’ll to give us your best shot at a litmus-test definition for the term ”patent troll.”  It’s an understatement to say that the response was somewhat underwhelming.  We received a grand total of……zero definitions.

We’ve decided to take that as an indication of the difficulty associated with defining the term and not a statement about the readership of the blog (which, for the record, is reaching all time highs right now).

We do believe that the issue is important enough for a follow-up, though.  How about a real life example?

Check this out – Burst.com recently filed a patent infringement suit against Apple Computer.  The patents at issue relate to technology that speed the delivery of data, including audio and video files, over a network.

We’ve got a question for you.  A simple one.  Is Burst.com a patent troll?

Wait…don’t answer.  Consider a few facts first:

The company has two (count ‘em, 2) employees and a portfolio of ten (count ‘em, 10) U.S. patents.  It routinely asks companies to license its patents, and sues them if they don’t.  It focuses on software and high-technology companies for some reason (must have something to do with the fact that the technology relates to that area).  Just last year, it successfully settled a dispute with Microsoft for a reported $60 million.

Hmmm…smacks of a patent troll by most definitions, right?

Consider this description from the company’s web site:

The company focuses exclusively on licensing activities and strategic relationships.

(emphasis is ours)

Are you serious?  An exclusive focus on licensing and strategic relationships?  Does that mean they don’t actually produce anything?  (based on the web site, it’s hard to tell if any “products” are available from the company at this time)

Surely there must be a bridge running over the Burst.com headquarters in Santa Rosa.

But, don’t answer the question yet…Here’s a few more facts:

According to a recent article in BusinessWeek, the Microsoft settlement reportedly earned the lawyers a fee of about $20 million.  That lawsuit was apparently financed by “an investor.”  Oh, and the company openly states that its goal in the Apple lawsuit is to seek a chunk of the growing revenues for online music distribution. 

A troll for sure, right?  These guys are Pure Evil.  Damn trolls.

Humor me, though.  Don’t answer yet.  As Lee Corso would say, “not so fast, my friend.”

Here are a few more facts that you should consider:

The founder of Bust.com is recognized by many as a true visionary in computer network technology.  He’s an inventor.  His technology apparently wowed the crowd at the Consumer Electronics Show in 1991.  He had invented improved methods for transmitting data over computer networks long before large video and audio files were of concern to the masses.  The company was once viewed as a real tech startup success story, and had even grown to include 110 employees in the late 1990′s.

But when Microsoft upgraded its Media Player software, Burst’s product, Burstware, stopped working.  Strange.  Payroll shrank immediately from 110 to 4.

Ok…now give us your answer (or keep it to yourself, we don’t care…just try to answer the question).  Is Burst.com a patent troll?

Or is it just an angry innovator seeking to protect its property?

Do you see the challenge?

Posted by Douglas Sorocco, April 18, 2006 at 10:40 am
Permalink: Trying to Burst the bubble – Just another troll?
11 Comments

What the heck is a patent troll?

What is a patent troll?

Everyone in the patent community has a general idea of what makes a patent owner a troll, but I can’t find a litmus test definition anywhere.  If you’ve got one, please put it in the comments.  I’m looking for a definition that allows me to decide if a particular patent owner is, or is not, a troll. 

Based on several popular media accounts of NTP (of BlackBerry fame) and other famous trolls, I have the following questions relating to the term:

Must a patent owner eschew commercialization of the claimed invention to qualify as a troll?

Are you a troll before you sue someone who has commercialized the claimed invention?  Or are you magically deemed a troll once you seek to enforce your patent?  Are preliminary licensing negotiations enough to earn the moniker, or must you actually file suit?

Can you be a troll on the day a patent issues only later to earn the right to shed the term, perhaps when you start commercializing the invention?

Can an inventor be a troll?  Or is there some sort of requirement that the patent owner acquired the patent from the inventor or some other previous owner?

Is it enough if that acquisition was part of an ordinary business transaction, or must it have been through some sort of “fire sale” or bankruptcy proceeding, as some have suggested?

There seems to be consensus on a threshold requirement that, to qualify as a troll, the patent owner must not have made use of the invention.  But, even that is vague.  In my mind at least, it raises more questions than answers.  What the heck does ”make use of the invention” mean?  Must the invention have been commercialized?  To what extent?  Do initial commercialization activities qualify as ‘commercialization’, such as market testing, prototyping, and the like, or is actual shipment of product and/or provision of service required?  Could a real troll duck the term if legally advantageous by doing some quick and dirty rapid prototyping?  Market surveys?

Maybe the Supreme Court will fill the gap with its forthcoming decision in eBay v. MercExchange.  A little dicta could go a long way on this issue.  Let’s just hope we don’t see an “obscenity style” definition.

Posted by Douglas Sorocco, April 14, 2006 at 1:07 pm
Permalink: What the heck is a patent troll?
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IP and Music – A Documentary

Steve Cummings at Hodges Partnership was kind enough to send me a link to an interesting documentary (documentary is enttiled “What Do you Think?”) he directed for the IP Institute at the University of Richmond School of Law.

It is a great tutorial and raises some interesting questions relating to intellectual property, file sharing, copyright and the role of each in today’s society.  While geared toward undergrad students, I think it would be a useful tool for any class or academic situation exploring these issues.

Thanks for the link Steve!

Posted by Douglas Sorocco, December 11, 2005 at 12:34 pm
Permalink: IP and Music – A Documentary
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