posted by David Schwartz
In the last decade or so, patent litigation in the United States has undergone enormous changes. Perhaps most profound is the rise in enforcement of patents held by people and entities who don’t make any products or otherwise participate in the marketplace. Some call these patent holders ‘non-practicing entities’ (NPEs), while others use the term ‘patent assertion entities’ (PAEs), and some pejoratively refer to some or all of these patent holders as ‘trolls.’ These outsiders come in many different flavors: individual inventors, universities, failed startups, and holding companies that own a patent or family of patents.
This post is about a particular type of outsider that is relatively new: the mass patent aggregator. The mass patent aggregator owns or controls a significant number of patents – hundreds or even thousands – which it acquired from different sources, including from companies that manufacture products. These mass aggregators often seek to license their portfolios to large practicing entities for significant amounts of money, sometimes using infringement litigation as the vehicle. Aggregators often focus their portfolios on certain industries such as consumer electronics.
Mass aggregator patent litigation and ordinary patent litigation appear to differ in one important aspect. Mass aggregators sue on a few patents in their portfolio, which serve as proxies for the quality of their entire portfolio. The parties use the court’s views of the litigated patents to determine how to value the full patent portfolio. By litigating only a small subset of their portfolio, the aggregator and potential licensee avoid the expense of litigating all of the patents. But the court adjudicates the dispute completely oblivious to the proxy aspect of the litigation. Instead, the court handles it like every other case – by analyzing the merits of the various claims and defenses.
If the court understood the underlying dispute was litigation-by-proxy, would it (or could it) proceed any differently? I will discuss my thoughts on this question in another blog post. For now, I have a question: does proxy litigation occur in other areas of law?
May 27, 2013 at 11:42 pm Tags: aggregator, Intellectual Property, non-practicing entity, npe, patent, patent litigation, proxy litigation Posted in: Courts, Intellectual Property Print This Post 6 Comments
posted by David Schwartz
This post reflects my initial impressions of an important Federal Circuit development in patent law, which is my primary area of scholarly focus. On Friday, the Federal Circuit, sitting en banc, ruled on a controversial and divisive patent law issue, whether software inventions are patent eligible subject matter. Unfortunately, I find the decision in this case, CLS Bank v. Alice Corp., quite unsatisfying.
The court, sitting with 10 judges, issued 7 separate opinions spanning 135 pages. The court only agreed upon a very brief – 55 words – per curiam opinion affirming the district court ruling that the asserted patents were invalid. The per curiam opinion explained that the “method” and “computer readable media” claims were deemed not patent eligible by the Federal Circuit, while the court was equally divided on the status of the “system” claims. (Basically, there are several different ways that a software invention can be claimed in a patent, including as a process/method of performing steps; as software embedded upon a computer readable medium (i.e., a DVD); and as a system (i.e., software running on a machine/computer).) None of the remaining substantive opinions garnered more than 5 votes – thus, none are binding precedent. Although a majority of the Federal Circuit judges found the method and media claims invalid, a majority could not agree upon the reasoning. Below I will briefly provide a few preliminary observations about the opinions.
posted by Gaia Bernstein
Earlier this week a district court in a dramatic decision invalidated BRCA 1/2 – two breast cancer gene patents held by Myriad Genetics. The Court based its decision on patent subject matter analysis holding that since the isolated DNA covered by Myriad’s patents is not markedly different from the native DNA as it exists in nature, it qualifies as a product of nature, which is not patentable subject matter.
No doubt, as commentators have noted (here and here), this decision if not overturned or limited on appeal could carry broad ramifications for the future gene patents. But, this decision signifies also a change in strategy in the efforts to restrict gene patents – a focus on the patient.
As I have written, most of the debates on gene patents addressed the way that gene patents affect genetic research – the concern that granting patents on the building blocks of genetic science will hinder the development of more complex innovations. Unsurprisingly, most academic proposals and legislative bills address the innovation problem. The effects on the patient until now took a back seat.
This lawsuit against Myriad signifies a change in that it finally places the patient and the administration of genetic testing at the center of the stage. Although the Court’s holding focuses on patent subject matter the court dedicates a significant part of the opinion to access to BRCA1/2 genetic testing. Myriad charges about $3,000 for testing an exorbitant amount compared to other genetic tests. Furthermore, Myriad does not allow other laboratories to conduct the testing – all samples have to be sent to its headquarters in Salt Lake City. The opinion tells the stories of women who were unable to test to find out whether they carry the BRCA1/2 genes because Myriad would not accept their insurance. It recounts the ordeals of women who could not get definitive answers through Myriad’s testing and were precluded from seeking testing elsewhere. It underscores that women were unable to get a second opinion of the test results because tests are conducted only by Myriad. It also discusses the efforts of doctors and laboratories who were willing and able to offer BRCA1/2 testing but were precluded by Myriad from conducting the testing.
posted by Deven Desai
Yesterday I saw an article about a jewelry heist in London where two men in nice suits got away with $65 million of merchandise. The weird part to me was that the store had a similar event in 2003 where 23 million pounds worth of jewels were taken, and more recently in 2007 a branch suffered a robbery again with well-dressed, and this time chauffeured, men stealing 10 million pounds in gems. So that makes me wonder whether the rich really do trust those who seem rich (i.e. Madoff types) and then get ripped off. In addition, who is insuring and/or protecting these stores? Right now neither can be happy. Still that is small compared to the Microsoft news.
Ah, Texas! Or to be more precise the U.S. District Court for the Eastern District of Texas, home to patent fun like no other place in the country (although I recall someone is showing how other district courts are now competing with E.D. Texas for the patent crown). It seems that Mighty MS and its Word program has been found to violate a patent. According to CNET “In Tuesday’s ruling, Microsoft was also ordered to pay an additional $40 million for willful infringement, as well as $37 million in prejudgment interest. The order requires Microsoft to comply with the injunction within 60 days and forbids Microsoft from testing, demonstrating, or marketing Word products containing the contested XML feature.” The order allows MS to take two months to appeal, settle, or work around the patent problem.
I wonder whether the injunction would require deauthorizing the sold versions? In addition, with the Blackberry case I think there was a carve out for the government because it relied on the system so much. Given Word’s dominance, I would hope that any court order that might threaten how people use already purchased software considers the impact that would have on millions of people. I am not saying that such a result is in the works or required by the current injunction. But if an injunction requires cutting off support or features, people may find that lose access to their works. Again whether the technology at issue would require such a result is unclear to me. Then again, as I argue in Property, Persona, and Preservation, as we move into a world where software and technology providers can update or cut-off access to one’s creations, such a result is not as impossible as it sounds. Can you say Kindle?