Probably the most important takeaway from the second installment of Porter Wright’s Technology Seminar Series was this: No single thing defines a so-called patent troll — and if (or when) you get a letter accusing infringement, there’s no uniform way to respond. Instead, stop and take a breath. Then, be tenacious about collecting information about the accuser and assessing those compiled details. Use this assessment to develop a plan that allows you to handle the situation in a way that meets your comfort level regarding risk, cost and desired outcome.
Speakers Jim Liles and Rick Mescher walked attendees through several crucial aspects of analysis and action steps during the June 17 seminar titled “Proactive strategies for combating ‘patent trolls.’ ” Here’s an excerpt:
Common actions of a patent troll
Not all allegations by non-practicing entities (NPEs) or patent assertion entities (PAEs) are meritless. But allegations from entities that participate in any the following common practices are likely suspect.
- Making demands directly to consumers: For example, a company claimed its patent covered anyone using equipment to scan a document and send that scan to a computer. This company sent letters to thousands of small to mid-size companies demanding payment of $900 to $1,200 per employee.
- Asserting large patent portfolios without specific allegations: For example, a company purchased more than 10,000 telecom-related patents in one fell swoop, then proceeded to send demand letters to all major telecommunication providers that essentially said “we own a lot of patents and you’re surely infringing at least one, so pay our licensing fee.”
- Making assertions even though infringement is extremely unlikely: For example, a company alleged that anyone using a QR code with an indirect link in an advertising campaign infringed its patents and filed complaints against numerous large retailers. However, any infringement of the patents in question required joint participation by several parties, which had not occurred.
- Making infringement assertions even though patent is most likely invalid: For example, a company held a patent, but known prior art had since been identified, making the patent invalid. Still, the company filed complaints against numerous broadcast media companies.
In some of these situations, the threats or lawsuits might be meritless. But the cost of the settlement or licensing fee might be, and is intended by the patent holder to be, lower than litigating the dispute. Decisions about whether to defend against the allegations or capitulate to demands are often complex, and involve policy and practical considerations other than merely determining the least expensive way out of the dispute.
What do you do when you get a letter accusing you of patent infringement?
First, make sure you know who you’re dealing with. Research a few essential facts about the accuser, then assess and respond in a way that makes most sense for you. Collect as much information about the accuser as possible, such as:
- Business type including any parent or sister companies
- Records about the patent and its history of ownership
- Litigation history of the accusing company as well as any related companies
- Street reputation of the company and/or family of companies
In addition, collect details from your supplier:
- Whether other companies are receiving letters
- If the supplier is considering litigation or licensing
- Whether you can receive indemnification
Take a close look at all this information to determine how — or whether — to respond. Determining which is the better path depends on several factors including cost, resource drain, future impact and potential for reputation damage to you or your company. During the entire process, remember to stay calm, approach the matter thoughtfully and ensure you’re taking the right steps to protect yourself and your business against invalid claims.
Liles and Mescher also discussed the more complicated issue of what to do when patent infringement assertions lead to lawsuits. Again, collecting information and thoroughly assessing claims, as well as leveraging existing business law and troll-specific case law, are critical components of a strong defense that can yield a beneficial outcome.
In the past two years, 23 states have enacted anti-troll legislation focusing on bad faith assertions and demand letters. Ohio has considered but not passed similar legislation, designed to reduce or eliminate common troll activities. The U.S. Congress, meanwhile, introduced 14 anti-troll bills during its 113th session. Though the future of Ohio and federal anti-troll legislation remains uncertain, it’s clear that this issue remains a key concern for consumers and businesses.