If you follow business news at all, odds are that you’ve of “patent trolls” companies that exist only to enforce portfolios of overly broad patents that they’ve bought up over the years. Patent trolls don’t produce products or add anything new to the world. Instead, their goal is to pricey extract settlements from companies large and small which they contend have sold products infringing on their patents.
Patent trolls target all industries, but the vast majority prey upon tech companies, due to the many overly broad and vague patents that have been granted over the years, particularly in the early days of the communications explosion and the Internet. Some major examples of patent trolling include:
- VirnetX winning a suit against Apple for $302m, for violations of patents covering “virtual private networks.”
- Smartflash LLC winning a verdict against Apple for $533 million, for violations of patents covering handheld multimedia devices and the ability to pay for and download content. Smartflash is notable for not having had any employees since 2002.
- NTP won a $612m settlement from BlackBerry manufacturer RIM, due to the phone’s wireless email system infringing on a 1991 patent for being able to receive email wirelessly without a computer.
A small Eastern Texas District Court is to blame for today’s challenging patent litigation environment.
Due to a quirk in the laws governing intellectual property enforcement, patent owners can choose to file lawsuits at any district court in the United States, regardless of whether the litigating and defending companies or individuals are located. Not all courts are created equal—some judges and court systems are friendlier to certain types of cases than others.
As documented in an article by the site Motherboard, back in the 1990s, the company Texas Instruments was having difficulty getting its patent cases heard in its busy local Dallas courts. Their cases would get bumped in favor of criminal cases, which understandably frustrated the company. T.I. started looking for quieter nearby districts, and happened across an Eastern District courthouse in Marshall, Texas. As it turned out, the Eastern District of Texas turned out to be a ‘rocket docket’ that would turn cases over at breakneck speed. More importantly, it over time it adopted rules that strongly favored patent holders.
This attracted the attention of small commercial entities looking to translate their vast swaths of old tech patents into piles of cash. And thus, the patent troll industry was born. In 2015, 2,540 new patent cases were filed in the Eastern District of Texas—44% of all such cases filed in the U.S. that year—dwarfing the second highest caseload of 545 new cases filed in the District of Delaware.
This has created a serious headache for the tech industry, and consumer advocates have lamented the issue as well, as inevitably the cost of patent settlements are passed on in the form of higher prices.
A recent Supreme Court ruling affecting patent trolls has changed the litigation landscape.
As we noted, until now patent holders could go to any district court in the country and file a suit against an alleged patent infringer. This was what led to a sleepy Texas town with less than 25,000 inhabitants deciding cases for hundreds of millions of dollars.
But on May 22nd, in the case TC Heartland LLC v. Kraft Foods Group, the Supreme Court unanimously ruled that defending companies only have to face patent cases within the state in which they’re incorporated. For instance, because Apple Inc. was incorporated in California in 1977, any patent cases filed against the company would have to be heard in a California court. Meanwhile, because the vast majority of companies are incorporated in Delaware due to the state’s business-friendly laws, the state will likely see a massive surge in patent cases.
Patent litigation has always been a difficult process, and has been made still more difficult by patent trolls. This SCOTUS ruling has muddied the waters for patent holders who are trying to understand what their legal options are for protecting and enforcing their patents. In order to safely navigate the changing legal grounding for patent protection, it’s wise to engage the services of an experienced patent attorney early in the patent application process. This will allow you to secure strong patents that have a better chance of standing up in any patent court.
To learn how the Law Office of Michael O’Brien can help protect your inventions and defend against the attacks of patent trolls, call us at 916-760-8265, or send us a message with our contact form.