IP Law 101: Patent Trolls and What to do if You Meet One

What Are Patent Trolls?

Patent trolls are a lot like the threatening creatures from fairy tales that guard bridges and demand a high price for access. Rather than trying to develop or market a useful new product or process patent trolls try to earn a profit by accusing others of infringement. Their efforts tie up the U.S. court system with frivolous litigation, stifle innovation and put many small companies and individuals out of business.

A patent provides the owner with the right to prevent others from making, selling or offering for sale the invention described in the patent. Should an individual or company infringe that patent the patent owner has the right to demand that the infringer cease that activity. This can include threatening to file a lawsuit or actually moving forward with filing. Litigation is expensive and risky. Many companies accused of infringement are anxious to settle with the patent holder as long as it keeps them from going to trial. There are various means of settlement. The patent owner may agree to license the patent to the infringer. The infringer may also agree to cease the infringing activity, and may pay an agreed-upon amount to make up for lost sales of the patent holder.

How Patent Trolls Work

Knowing that Texas companies and individuals accused of infringement are typically willing to avoid litigation at all costs, patent trolls make it their business to routinely accuse others of infringement. They pick up patent rights not through innovation and hard work, but by purchasing patent rights from owners who are having difficulty monetizing their invention. The owner agrees to sell the patent to the troll in a last ditch effort to capitalize on their invention. Now that the patent troll owns the patent they are free to aggressively seek out anyone who might be infringing that patent.

It’s never pleasant to receive a threatening letter that suggests patent infringement and the possibility of a lawsuit. In fact, it often leads the recipient to panic. They might consider ignoring the letter or anxiety may push them to immediately capitulate to the patent troll’s demands. The better option is to remain calm and do a little research. An Internet search may reveal that the party behind the lawsuit is an entity known as a patent holding company or patent assertion entity. By looking at public court records and other documents, it should be fairly easy to determine whether or not the letter came from a patent troll.

What to do if confronted by a patent troll

Do Your Research

Start with a basic patent search to get a basic understanding of the patent. There are also resources where you can pull legal dockets surrounding the patent to see if there is a history of litigation surrounding the patent.

Contact a IP Law Attorney

Patent trolls have a couple tactics that have unfortunately worked for them.

  • They will send demand letters can come with a short deadline, this is meant to scare you into answering out of fear.
  • Another tactic is they will mass mail threats to unsuspecting organizations and then focus their attention on the companies that respond.

Just because you received one of these threatening letters it doesn’t mean a lawsuit will even get filed. Let us help you find out what you are dealing with.

Intellectual property attorneys have extensive experience and education that allows them to assess patent infringement claims. They can determine whether or not the infringement claims may have any merit. Moreover, they can engage in correspondence with the patent troll or their legal counsel in which in-depth analysis of the patent claims is conducted. Your patent attorney may be able to prove that your product or process in no way infringes the patent owned by the troll.

Don’t RUSH INTO Settlement

Above all else, don’t agree to a quick settlement, especially if it seems that a patent troll is at work. Like many schemes in the world, patent trolls will likely come back and demand more if you respond too quickly. A much better recommended course is to contact a patent attorney. 

If you suspect that you are being targeted by a patent troll in Texas, contact the Williams IP Law. You don’t have to immediately settle, especially if the claims being made have no merit.

Apple to Close East Texas Stores to Thwart Patent Trolls

Too often in recent memory, patent trolls have forced organizations both large and small to make decisions that run counter to their business plans. This is the case with Apple, which recently took the drastic step of announcing its plans to close two of its stores in the Eastern District of Texas. Though they do not say it in so many words, in-the-know observers understand that the closure of these stores is a bid by Apple to protect itself from patent troll litigation.

What Are Patent Trolls?

Sometimes called a Patent Assertion Entity, or PAE, a patent troll is not an inventor or a creator. They don’t manufacture a product or provide a service. Instead, they exist solely to make a profit through patent infringement litigation.

The troll picks up patents at an extremely low cost, usually from an organization that is going through a difficult time and needs to divest itself of assets. The PAE swoops in to buy the patents, then starts looking around for companies that may infringe on the rights of those patents.

Once a potential infringer is identified, the troll sends a letter informing the rival company. They offer a license to the infringer, which may cost hundreds of thousands or even millions of dollars. The infringer has a choice to either pay up or face litigation.

Do the infringement claims have merit? Sometimes yes, and sometimes no. Nonetheless, companies tend to simply pay the licensing fees because it ultimately is cheaper, less time consuming and less disruptive than having to deal with patent litigation, which could drag on for years.

Patent Trolls and the Eastern District of Texas

If they can, patent trolls love to sue for infringement in the Eastern District of Texas. This is because judges and juries in this district have proven to be unusually sympathetic toward the claims of plaintiffs in patent cases. Just a few years ago, a study concluded that approximately 40 percent of all patent infringement cases were filed in this district, with plaintiffs hoping to take advantage of the favorable atmosphere.

However, recent changes to the law state that patent infringement cases must be brought in places where the defendant has “a regular and established place of business.” This means that if a company isn’t operating in this district, then they cannot be sued there.

The Connection Between Apple, Patent Trolls and The Eastern District of Texas

Apple is always the target of patent trolls, and in recent memory, a court decided that the tech-giant should pay VirnetX $440 million in connection with the company’s patents. The Eastern District of Texas remains a hotbed for patent infringement lawsuits, but Apple is headquartered in California. If they don’t have a permanent place of business within the Eastern District, they cannot be sued there.

Currently, Apple has two stores within the district. These will be closed in mid-April, with employees being shifted to a shopping center in Dallas. In its announcement, Apple mentions upgrading the store and streamlining, but this is a clear maneuver to get out from under the favorable conditions for plaintiffs in the Eastern District.

Apple is a huge and incredibly successful company that can well afford to close a couple of stores without it affecting their bottom line too much. They can even afford to pay out some sizable settlements when patent trolls come knocking. However, paying patent trolls and getting mired down in years of litigation likely are not parts of Apple’s business plan, so this contingency becomes necessary.

Protection Against Patent Trolls

Firms both large and small would be wise to look for ways to protect themselves from patent trolls. One of the best ways to do this is with the assistance of experienced intellectual property and business attorney. Their advice may help to ensure that patent trolls don’t succeed when they try to press a meritless lawsuit on an unsuspecting victim.

Schedule a free consultation with the Law Office of Jeff Williams to get gudiance on your intellectual property needs.

Free Consultation
Author: Jeff Williams

Jeff Williams is an experienced mechanical engineer and lawyer that consults closely with clients in a strait forward and clear manner. He brings a particular set of strengths and unique perspectives to the firm.

Jeff received a B.S. in Mechanical Engineering from Arizona State University in 2005. He was an engineer for a number of years at a number of large corporations before pursuing his law degree. He graduated from Texas A&M University School of Law (formerly Texas Wesleyan University School of Law) with a J.D. in 2010. By combining his education and prior work experience into the field of intellectual property law, Jeff has developed key skills to fully assist clients.

Patent Troll Strikes Apple (Again)

The news recently broke that Thomas Ross from Florida is requesting $10 Billion from Apple due to infringement on a patent application he made in 1992. Ross would also like a 1.5% royalty on all future sales of iOS devices.

The basis of the lawsuit is based on drawings Ross made in 1992 for an “electronic reading device” or ERD.

So what do you think? Does it resemble an iPhone in any way? Does it possibly resemble any early eBook readers or smartphones?

There are several problems with Ross’ claim though. There are the basic drawings that don’t appear Apple device like. And there is the elephant in the room – his patent application was actually abandoned after he failed to pay the patent registration fees.

The lawsuit claims Ross was “the first to file a device so designed and aggregated as to have created a novel combination of media and communication tools… whose identity was, since then, hijacked and exploited by Apple’s iPhones, iPods, iPads and others”.

The lawsuit further claims that Apple’s devices “are substantially the same as his technical drawings of the ERD, and that Apple’s three-dimensional derivative devices (iPhone, iPod, iPad), embody the non-functional aesthetic look and feel”.

This isn’t the first time Apple has been attacked by patent trolls. Judging by the results, it most likely will not be the last time either.

In June the Beijing Intellectual Property Office heard a case originally filed in 2014. Baili Marketing Services Inc. of Shenzhen China claimed that Apple had copied its design of their 100C smartphone for the iPhone 6/6 Plus.

The Beijing Intellectual Property Office sided with Baili and issued an injunction. Apple was ordered to remove iPhone 6 and 6 Plus phones from the shelves. Apple of course appealed the ruling and the product is still on the shelves in Beijing stores, for now.

Apple is anxious to continue penetration of the Chinese market and this is a definite setback that Apple may have to settle.

It also appears that this is just another case of a patent trolling group. The Wall Street Journal investigated and discovered that Baili Marketing is a company that “barely exists” and is owned by Digione. Digione products have been off the market for over a year because their devices are considered “buggy”.

Unfortunately for Apple, this does not matter as the issue is patent infringement, not device quality. This move could be big for Digione however.

Apple is also facing legal woes over FaceTime. Several companies have sued Apple over its voice-over-IP (VoIP) technology due to patent infringements. Straight Path Group claims Apple has violated five different patents dating back to 9/25/1995.

These patents were owned and used in the WebPhone product by NetSpeak. The patents were examined again and validated by PTAB (Patent Trial and Appeals Board). Straight Path patent details using a database and device IP addresses to determine if a device is available or offline. Their claim is that Apple is tracking user IP addresses through Push Network and SIP (Session Initiation Protocol, a VoIP protocol). It also claims that Apple has infringed on technology the WebPhone used to use.

Since WebPhone has not been around for over a decade, this also seems to be a case of patent trolling.

Apple has also been sued by others over FaceTime, including VoIP-Pal and VirtnetX. These companies can also be considered “trolls” since they own patents but show little desire to commercially develop them or create products. In 2012 they were awarded $368 million and a 1% running royalty off all iPhone and iPad revenues. Apple requested a retrial and VirtnetX demanded Apple shut down FaceTime.

In the retrial which ended in February 2016, the $368 million verdict and 1% royalty were overturned; however, the East Texas jury awarded VirnetX a whopping $625.6 million (but no running royalty).

Expect Apple to appeal again, but VirnetX may seek to add a “running royalty” on their products.

Apple’s success will make it a perpetual target for those who seek to gain off their fortune. Though Apple may win most contests, in many more it may have to settle just to keep their products on shelves. There will also be some losses. Due to their size and success, when they lose, they will lose big.

So what are your thoughts? Are patent trolls stifling innovation and progress?
Free Consultation
Author: Jeff Williams

Jeff Williams is an experienced mechanical engineer and lawyer that consults closely with clients in a strait forward and clear manner. He brings a particular set of strengths and unique perspectives to the firm.

Jeff received a B.S. in Mechanical Engineering from Arizona State University in 2005. He was an engineer for a number of years at a number of large corporations before pursuing his law degree. He graduated from Texas A&M University School of Law (formerly Texas Wesleyan University School of Law) with a J.D. in 2010. By combining his education and prior work experience into the field of intellectual property law, Jeff has developed key skills to fully assist clients.

2015: Rise of the Patent Troll

January 20, 2016

Patent Troll Litigation on the Rise Despite Efforts to Curb It

Non-patent entities, commonly referred to as NPEs, are known for buying patents and then suing others for infringement. NPEs don’t make or sell anything. Instead, they turn a profit by winning settlements and judgments. It’s methods such as these that have led people to refer to NPEs as “patent trolls.”

Companies and government entities are well aware of the tactics employed by patent trolls. They are seen as such a problem that legislation has been passed that aims to curb their activity. Despite these efforts, a recent report by RPX Corp. demonstrates that NPEs filed more patent litigation lawsuits in 2015 than they did in 2014. A total of 3,604 lawsuits represents a steep rise over the 2,891 similar complaints that were launched in the previous year. This increase comes despite efforts by the American government to curb such activity.

Efforts to Curb Patent Trolls

The 2011 America Invents Act ostensibly provides the government with the power it needs to persuade NPEs away from suing others for infringement. In particular, the Act is meant to minimize the number of infringement lawsuits that are aimed at computer software. The Patent Trial and Appeal Board was instituted as part of the act. It allows participants to circumvent responding to allegations of infringement by focusing on whether or not a patent should have been granted in the first place. Many critics of the U.S. patent system have contended that a majority of infringement lawsuits are moot because the patent was never valid in the first place.

The Patent Trial and Appeal Board is already making progress. More than 4,000 patent challenges have been filed with the board since its inception. Many of these never turn into full-fledged lawsuits thanks to the ability to challenge the validity of the patent at issue.

The U.S. Supreme Court and other courts are also joining in the effort by striking down patents that are invalid. This maneuver is helpful when it comes to preventing NPEs from trying to profit through infringement claims. Nonetheless, the battle is clearly ongoing since the number of NPE lawsuits continues to rise.

Patent Troll Case Study

Still, cases like Alice Corp. v. CLS Bank International show that the U.S. Supreme Court is doing its part to lessen the number of patent troll lawsuits. The court effectively invalidated the patents that were being asserted by the Alice Corp. against CLS Bank. This put an end to yet another specious lawsuit brought by an NPE.

NPE lawsuits waste a great deal of time and resources. Whether the complaints are lodged against companies large or small, it’s necessary for executives to prioritize their response, and that often means having to shift focus from the organization’s reason for existence. It’s a troubling trend that needs to be met with sturdy resistance.

Patent Troll Resolution

If you or your company are being accused of patent infringement, then it is important to enlist the help of a skilled Texas intellectual property attorney. The Law Office of Jeff Williams has the necessary experience and knowledge that can help you protect your rights. Don’t let an NPE lawsuit distract you from your business or erode your company’s profitability. It may very well be that the patent you are accused of infringing is invalid. Let the Law Offices of Jeff Williams provide you with the guidance and insight you need.