NPE PATENT ENFORCEMENT by suchenfz

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									NPE Patent Enforcement
David Healey
Fish & Richardson
Houston, Texas
713-654-5300
www.fr.com
healey@fr.com
    NPE Cases Arise Most Often in
    Software and Business Method Cases
   Most recent Federal Circuit software cases are most helpful in defending
    NPE lawsuits:
     – Lucent emphasized apportionment in patent damages: small
       software feature cannot support large award.
     – BMC: where different actors or users perform the accused method
       there is no liability for any one unless there is sufficient legal
       relationship among them for joint infringement liability.
     – DSU Medical inducement requires actual intent to infinge the patent.
     – Standing: Often assignment records are incomplete and inaccurate
       or prior owner retained too many rights or had duty to assign
       invention.
     – Written Description and Priority: Anascape v Microsoft set the
       standard in Spring 2010 for how the written description of the
       invention must disclose the invention for priority: And along with
       Ariad, could be important for software and business patents.         2<#>
  2008 BUST
 Number of new patent filings in US is down in 2009
  (also in Europe).
 There is a correlation between the financial markets,
  patent applications filed, patents issued, and patent
  litigation.
 More so than any change in the law, most likely
  investment in patenting and availability of capital for
  both patenting and for litigation will drive future NPE
  litigation.


                                                            3<#>
4500                                            500,000



4000                                            450,000


                                                400,000
3500

         Patent Applications                    350,000
3000
         NASDAQ
                                                300,000
2500

                                                250,000

2000
                                                200,000

1500
                                                150,000


1000
                                                100,000


500                                             50,000


  0                                             0
                                         4<#>
  1970      1980           1990   2000    2007
3500                                          200,000


                                              180,000
3000

         Patents Issued                       160,000


2500     Patent Suits Filed                   140,000


                                              120,000
2000

                                              100,000

1500
                                              80,000


                                              60,000
1000


                                              40,000

500
                                              20,000


  0                                           0
                                       5<#>
  1970   1980            1990   2000    2007
4500



4000



3500
          NASDAQ
3000      Patent Suits Filed
2500



2000



1500



1000



500



  0
                                             6<#>
   1970       1980             1990   2000     2007
  Re-examination
 Inter Partes re-exam is successful way to threaten
  NPE’s licensing program and to void or limit patents,
  but is subject to revision by Congress and PTO’s
  limited resources
 Ex Parte Re-examination is generally much less
  effective to limit or void patents




                                                          7<#>
Reexamination

             Reexam     Average    All claims     All claims         Claims
             Declared   Pendency   confirmed      canceled           changed

 Inter       95%        32.6 months 12%           67%                21%
 partes

 Ex Parte1   92%        24.5 months 28%           13%                59%

                                          1 statistics   for third-party requests
                                          Source USPTO website

 Since 2005, PTO Central Reexamination Unit has
 improved PTO reexamination practice
                                                                        8<#>
   Inter Partes Re-Exam: The Best Weapon?
 Inter Partes Re-examination is typically an effective tool in dealing
  with an NPE because it threatens the entire licensing program:
    – Re-examination gives no deference to prior examination.
    – CRU is elite of patent examination group.
    – Active participation by interested parties leads to better result.
    – Patentee has to be consistent in concurrent litigation and re-
      examination proceedings, often erring toward validity with
      narrower claim scope.
    – Often PTO examiner on continuation applications will
      coordinate with CRU on Inter Partes Re-exam, slowing or
      limiting new claims in continuation applications.
    – Re-exam is 100% recycle-able in litigation (invalidity charts).
    – SNQ can be evidence of no-willfulness and also basis for stay.
    – Priority can also be challenged in context of “prior art” date.9<#>
   Future Trends:Europe as an NPE Venue?
 Current German system of pre-suit seizure, no discovery,
  separate infringement and invalidity cases, is cheap and fast.
    – Civil law system does not permit for equitable defenses as in
      common law system.
    – European patent interpretation is not as strict as U.S. law.
    – Pre-suit seizures are available to patentees under current EU
      practice.
    – Hamburg is second busiest port in EU.
    – Statutory limits on attorneys’ fees minimize risk to
      unsuccessful patentee.




                                                                     10<#>
   Europe as an NPE Venue
 Progress toward unified EU patent and enforcement system is
  substantial.
    – Low damages would be off-set by pan-EU injunction.
    – Compulsory licensing in proposed EU system gives NPE what
      it wants: money for pan-EU license.
    – Politics over EU enforcement system will encourage national
      courts to follow EU standards since patentee picks the forum.




                                                                11<#>
“Ministers back EU Patent Reform Plan”
Financial Times, December 4, 2009

Industry ministers took a significant step towards
reforming Europe’s cumbersome and costly patent
system on Friday, by approving in principle a new
specialised litigation system and the creation of a single
European Union-wide patent….




                                                        12<#>
  Future Trends: Continuation Problems Grow
 Failure of PTO or Congress to limit U.S. continuation
  patent practice will make NPE cases harder to defend.
 More continuation applications means:
   – More claims written after new products come to
     market, making infringement difficult to defend; and,
   – More invalid patents saved by “laundering” key prior
     art through original examiner in continuation.




                                                      13<#>
    Future Trends: Litigation
 Business method and software patents were not limited by In re
  Bilski decision from Supreme Court in 2010.
 But priority, enablement and written description strengthened in
  Anascape and Ariad: 112 is important tool for NPE cases.
 Multi-party cases will become “norm” for NPE lawsuits:
    – Medimmune encourages “sue first” tactics;
    – Multiple defendant tactic is useful to help hold venue by
      joinder of parties from different locations;
    – Multiple defendant cases create confusion, competition, and
      costs for defendants in attempts at coordination, benefitting
      plaintiff: Which incentivizes settlement by individual
      defendants.
    – Lots of smaller settlements are easier to get than one big one.
                                                                  14<#>
   Future Trends: NPE Litigation
 Damages will be more heavily scrutinized under Lucent, but will
  still go up:
    – Inflation will drive up verdicts;
    – High volume of sales for popular products drive up damages;
    – Vague Georgia-Pacific factors can be manipulated;
    – Federal Circuit’s approval of use of entire accused
      instrumentality as a royalty base makes apportionment
      remains subject to manipulation: No need to use “entire
      market rule”, rather allocate a high royalty to the specific
      infringing feature and then transform it to entire system cost
      for “convenience” in calculation.
    – Cornell’s solution of smallest salable unit is helpful only to the
      point of that component’s sales price.
                                                                     15<#>
   Future Trends: Litigation
 Diffusion of patent cases may increase verdicts and costs:
    – Courts unfamiliar with patent law are less likely to limit
      discovery, grant SJ or narrow claims (this could be costly with
      ediscovery/emails).
    – Juries in metro areas grant bigger verdicts in NPE cases: e.g.
      Microsoft verdicts: Eolas-Chicago $600 million, Lucent-San
      Diego $1.5 billion, Uniloc-Providence $388 million; Tyler-z4-
      $134 million; Tyler-i4i-$200 million. (Centocor v Abbott and
      Medtronic v Boston Scientific were competitor cases).
 Whether markets remain stagnant, unstable or go up, investment
  in well-run NPE litigation can be highly profitable in a short period
  of time, which will attract investment.
 Europe will likely see NPE cases emerge in coordination with or
  separate from U.S. suit.
                                                                    16<#>
   Conclusion
 NPE sees patent enforcement only as a business.
 Handle NPE patent cases like a business problem:
      • Set up systems to reduce cost of repetitive tasks (e.g.,
        document vendors) and negotiate preferred vendor pricing.
      • Share costs and counsel with co-defendants insofar as
        possible or practical; avoid confusion and competition.
      • Limit discovery by agreement or Court assistance at CMC.
      • Triage cases immediately; make a plan; tailor budget to
        plan; consider that each case impacts future cases.
      • Consider alternative royalty theories: e.g., Valuation.
      • Consider how to apportion damages to invention.
      • Do not waste money:
          – On discovery fights,
          – On giving or taking unnecessary discovery,
          – On meaningless procedural moves.
                                                             17<#>
Conclusion
  Attack the “asset” in inter partes re-exam in
   USPTO and invalidity proceedings in other
   countries to put the NPE’s business model at risk

  Limit discovery by cooperation or motion

  Consider asking for Court appointed expert to
   testify at trial under Fed. R. Civ. P. 706

  Focus on damages early to minimize exposure


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