Presented to ACC AmericaSeptember 19, 2014By: Jason M. Schwent

Taming the Trolls:Litigation Strategies

for Dealing with Patent Assertion Entities

PAEs/NPEs/Patent Trolls

Various Names• Patent Trolls• Non-Practicing Entities (NPEs)• Patent Assertion Entities (PAEs)

Percentage of Patent Troll Cases Filed in U.S. (2010 – 2012)

Why are they a problem?

2010 2011 2012

29%40%

56%

PAE Litigation

What Do They Want? Who Are They? Litigation Strategies Legislative Responses

PAE Litigation

What do they want?• Always, without exception…

• MONEY!!!

What do they give you?• Nonexclusive license• Covenant not to sue

• Not likely to keep $$$ confidential (especially ED Tex)

• Under current law, no injunction likely

PAE Litigation

Who are they? Acacia, GeoTag, EMG, Helferich, Lodsys, etc.• Usually familiar plaintiff’s counsel

• Contingency fee relationship

• Wealth of information• Prior suits• Prior rulings• Prior settlements• Prior art• Prior work by others

PAE Litigation

Litigation Strategies• If you’re sued….• Fight or Flight?• Safety in Numbers• Merits• Think creatively• Third-Parties

PAE Litigation

Fight or Flight• Early settlement

• Spend is low• Early discount• Poorly developed info

• Fight then Flight• Maximize leverage

– Timing-based leverage– Evidence-based leverage– Patent Office challenges

• Leverage cost savings

PAE Litigation

Safety in Numbers• Co-defendants• Pool resources• Prior art searching• Experts

• Ride later wave• Preserve individual defenses

PAE Litigation

Merits• Infringement

• Do you practice it?• Is it important?• Is part of it done outside US?• Is it already licensed?

• Invalidity• Is the patent valid?• Prior art searching• Patent Office re-review

– Possible stay of litigation

PAE Litigation

Patent Office Challenges• Ex parte reexamination• Challenger starts—no further role

• Post-grant review• w/in 9 mos. of issuance

• Inter partes review• at least 9 mos. post-issuance

• Covered business method patent review

PAE Litigation

Think creatively • Early motions• Narrow scope of case• Attack patent assets – on multiple fronts• Any dirt on PAE?

PAE Litigation

Third Parties• Indemnification• Vendor/Supplier• Possible stay?

• License Broker• Interested Parties• Bounties

PAE Litigation

Washington perception of the size and scope of the problem • Small businesses and inventors being harmed• Innocent end users and customers

– Coffee shop WiFi– Scanners– Local retailers

• Innovation and employment• PAE litigation increase• Prior fixes weren’t enough

State Attorney General actions

PAE Litigation

Patent reform legislation?• Current Status = Dead• Compromise could not be found• What was the problem?

PAE Litigation

Two problems:• Defining wrong doers• Unintended consequences

PAE Litigation

Who to target? Target entities who don’t make, sell, or develop anything

• Patent holding companies• Trusts• Universities

Target entities whose only income is from patent enforcement• Patent holding companies/trusts• Universities• Small Inventors

PAE Litigation

Unintended consequences…• Fee shifting?• Plaintiff litigation bonds?• Punishing meritless arguments?• Early claim construction/discovery stay?• Administrative alternatives?

PAE Litigation

So now what?• Congress wants to try again• Court based reform• Octane Fitness, LLC v. ICON Health & Fitness, Inc.• Highmark, Inc. v. Allcare Health Management System,

Inc.

Questions

Contact Information

jschwent@thompsoncoburn.com

Author of “The Patent Billy Goat” blog—a guide to learning about and dealing with patent assertion entities and their tactics

(314) 552-6291