This recent article from the Wall Street Journal brought a chuckle. Seems the Obama Administration just stepped in to veto an ITC ruling, won by Samsung, that barred importation of certain Apple iPads and iPhones. What's interesting is some of the language used to justify the veto:
U.S. Trade Representative Michael Froman made the decision to veto the ban on the Apple devices, citing concerns about patent holders gaining "undue leverage" as well as potential harm to consumers and competitive conditions in the U.S. economy.
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Critics of the ITC order questioned whether companies should be able to block rival products in cases involving patents that have been deemed to be essential to creating products based on key technologies overseen by industry standard-setting groups.
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"We applaud the Administration for standing up for innovation in this landmark case," an Apple spokeswoman said in a statement. "Samsung was wrong to abuse the patent system in this way."
"Undue leverage," huh? Questions "whether companies should be able to block rival products." And, "abuse [of] the patent system." Gee, where have I heard those words before?
I trust Samsung and its lawyers are sitting back in quiet reflection today, wondering how they let their professional and ethical standards slip so far as to let them engage in such underhanded tactics, and vowing never to do it again.
Abusing the patent system, indeed.
It appears my comment regarding a recent New York Times article on "patent trolls" -- and my suggestion that defense lawyers might be the major beneficiaries of the so-called "troll" problem -- has touched a nerve.
For some reason Mr. Guiliano takes me to task for simply accepting the figures provided in the article and doing some back of the envelope, but nevertheless sound, calculations based thereon. (In my comment, I simply read and directly quoted what was reported in the New York Times -- you know, "All The News That's Fit To Print" etc.) It was that article, and not I, that reported: (1) "United States companies — most of them small or medium-sized — spent $29 billion in 2011 on patent assertion cases," (2) "only about $6 billion of that money wound up in the hands of inventors,” and (3) "As for the other $23 billion, most of it goes to legal expenses..." (In the article's defense, it quotes a "study" and its co-author in making those claims.) If those facts and figures are not correct, take it up with the New York Times and its sources, not me.
Mr. Guiliano goes on to say, " So, if Mr. Mann had read the report he linked to, he would have learned that the legal costs totaled $6.67 billion, less than 1/3 of his $20 billion figure." True, I did not read the report, I merely relied on what one of its co-authors had to say about it to a NYT reporter. If he misrepresents the contents of his own report, and does so to a reporter for perhaps the nation's best known paper, why is that my fault?
On a more substantive and serious note, the point here is that glib statements about patent trolls, and popular press articles about unsavoury individuals and their lawyers gaming the system, should not be accepted at face value and should not escape critical review.
Here I simply took a thinly disguised anti-patent-troll article at face value and drew some reasonable conclusions from what was reported. When that article unintentionally leads to some less than flattering conclusions about the defense bar, the backtracking and explaining begin.
Mr. Guiliano is absolutely correct when he says, " Mr. Mann has not made that claim in his blog post...[he] relied on a reporter's account of an interview with James Bessen and then did a quick calculation." Indeed, nowhere does Mr. Guiliano point to any flaw in my calculation. Instead, the bulk of his post is directed toward showing that the cited study does not actually say what its own co-author said it does, and does not actually mean what its own co-author stated to a New York Times reporter.
My rationale for my comment is simple; It is based on face value acceptance of what those in the "anti-troll" camp claim, followed up with some basic arithmetic. What, pray tell, is the rationale for Mr. Guiliano's snide comment at the end of his post?
Last week I asked how it is that large firms somehow manage to bill their clients millions to dispose of frivolous cases based on clearly invalid patents that couldn't possibly be infringed anyway.
Well, maybe the financial realities facing "Big Law" might have something to do with it.
This interesting article in the New York Times regarding a so-called "patent troll," raises the obvious question: If the patents are obviously no good and the claims of infringement clearly frivolous, how is it that supposedly top-notch lawyers must charge millions to show that to a judge?
I found this statistic from the article telling:
"One study found that United States companies — most of them small or medium-sized — spent $29 billion in 2011 on patent assertion cases. 'And only about $6 billion of that money wound up in the hands of inventors,' said James Bessen, a co-author of the study and a professor at the Boston University School of Law. 'As for the other $23 billion, most of it goes to legal expenses...'"
Legal expenses, eh? Incurred by whom?
Assuming a more-or-less standard 33% contingency fee, this means the inventors get $6 billion, their lawyers another $3 billion, meaning about $20 billion goes to defendant's counsel -- you know, those upstanding lawyers who complain about trolls, frivolous suits, abuse of the system, and threats to our American Way of Life, and only reluctantly -- reluctantly, I say-- put that $20 billion in their pockets.
The eyes of the patent world were on Seattle this week as an Order denying injunctive relief was handed down in the ongoing Microsoft v. Motorola heavyweight title bout.
While I will leave it to others to discuss the minutiae and determine the implications for the industry, the main question on my mind is whether this is what Motorola and other large companies had in mind when they welcomed the decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).
Now admittedly, I do not know whether Motorola ever considered itself victimized by "patent trolls" or whether it held the view that patents, and in particular injunctions, should be reserved only for "serious" and "established" businesses. But I have a sneaking suspicion that Motorola, its lawyers, and others in similar situations might well be thinking, "Hey! This isn't how eBay was supposed to work."
For grins, check out the docket sheet for the case as well. More than thirty-four pages just to list the lawyers involved. (As a former big firm mouthpiece myself, I can well understand the pressure to hit your hours, particularly in a soft economy.)
It is always amusing to watch the intellectual gymnastics of clever people trying to defend the intellectually indefensible. Seventh Circuit Appellate Judge Richard Posner'r recent, article, "Patent Trolls Be Gone" (You talkin' to me, Judge?) is entertaining in this regard, as we watch the good judge try to "clarify" the "problems with our patent system, which are profound," before formulating, "feasible solutions."
According to the judge, one of these profound problems is the problem of "patent trolls, as they are called" who "purchase large numbers of patents in the hope of using the threat of a patent-infringement suit to extort a patent-license fee from a company that makes a similar product." (Emphasis mine.)
Extort? Since when is enforcing rights formally recognized by a Federal agency extortion? Strong words to be coming from a supposedly impartial judge.
As noted by the judge, "the alleged infringer may decide to pay the licensee fee, if it is not too large, to avoid the cost of litigation." But this raises the question of why does it take $3 million or more in legal fees to dispose of a case that supposedly has no merit in the first place? Most jurisdictions today have specific local rules for patent cases that call on a patent owner state with specificity in the very early stages of litigation precisely what products are accused of infringement, what claims are alleged to be infringed, and precisely how those claims cover the accused products. In a truly baseless case, the weakness becomes apparent very early on. (And if the case is that weak, no reasonably ethical lawyer would file it in the first place.)
The comments in the linked article are entertaining and instructive as well.
Or, "Those Who Live By The Sword..."
Here's an amusing little class action case filed in Seattle this week. Seems Coach, Inc., well known purveyors of high end handbags and such, in their never-ending zeal to protect innocent consumers from inferior (and, more reasonably priced) "knock off" goods, unleashed their New York lawyers to crack down on one Ms. Gina Kim -- a Seattle woman who had the unmitigated nerve to list a supposed "Coach" handbag for sale on her eBay account.
Showing little mercy and no tolerance for those who scoff at trademarks and the God-given right of consumers not to be deceived, Coach demanded removal of the listing, cancellation of Ms. Kim's eBay account, surrender of the offending bag to Coach, and a monetary payment sufficient to make her think twice about ever trying such a stunt again. Civic-minded eBay, demonstrating its own true mettle, cracked down harshly on Ms. Kim by canceling the listing and terminating her account. It's satisfying outcomes such as these that warm the hearts of the brave corporate warriors who protect us from such outrageous crimes.
Only one slight problem...
Turns out Ms. Kim was listing a genuine Coach bag that she owned legally and had every right (at least for now) to sell on the secondary or used market.
In her action, Ms. Kim is suing Coach for, among other things, defamation, misrepresentation of trademark infringement, violation of Washington's Consumer Protection Act and tortious interference with business expectancy. And she is doing it as a class-action case on behalf of other Washington residents who have been similarly harassed. Apparently there is good reason to think she is not alone.
My reaction? You Go, Girl!! Best of luck, and go get 'em!
Now obviously I am slightly biased and have a bit of an ax to grind. After all, I, along with others in my noble calling, am frequently accused of "misusing" the patent system and IP rights to take advantage of poor, defenseless, multi-billion dollar corporations who would never dream of using another's property for free. So when I see these same companies use their powers to crack down on the savage individuals who threaten civilization by selling their own property to make ends meet, it makes me shake my head in sadness. When I see them try this and screw up royally in the process, it brings a smile to my face.
Anyway, this is one to keep an eye on.
As contingent-fee lawyers and supposed "patent trolls" to boot, my colleagues and I are blamed for many of the ills that plague society. It is we -- who do not get paid unless we are successful -- who file merit-less cases, prolong litigation, waste resources, and cause innocent defendants to pay their lawyers upwards of two million dollars on average to defend themselves. It's a wonder we sleep at night.
These thoughts brought an admittedly self-congratulatory smirk to my face as I received the recent decision of the Federal Circuit affirming the District Court's denial of fees in a case we handled that never should have gone on as long as it did.
Now in fairness, we lost the case on the merits, the District Court held the patent invalid, and we took our lumps as we knew we might when we went in. No complaint there.
Not content with their victory, our opponents moved for fees. Again, no complaint as it is their right to ask.
What I do find amusing is that our opponents chose to reject our early offer of a "walk away" settlement, chose to file a hopeless appeal of the District Court's denial of fees and -- most amusingly -- traveled 3000 miles each way to deliver a futile 15 minute oral argument against an opponent who wasn't even there. (We, being the wastrels we are, elected to waive oral argument and rest on our brief.)
So there you have it. An hourly-based firm will happily spend thousands of dollars of its client's money to travel 3000 miles to argue against an empty chair, but it's the contingent fee guys who are driving up the costs of litigation.
Yeah, somebody really ought to do something about us.
A few years back I wrote about what I saw as a developing "War on Juries" in patent cases. A couple of recent incidents suggest that the war continues.
Last week we lost a hard-fought case on summary judgment. That happens, it's part of the game, and the lawyer who never loses most likely never accepts a real challenge either. But what's humorous about it is that the decision came four days after trial was originally scheduled to have begun. Given that the whole idea of summary judgment is to increase efficiency and resolve one-sided cases early on, the fact that the case could have been tried to a verdict in less time than needed for summary judgment leaves me scratching my head.
This week, the Federal Circuit (surprise, surprise) overturned yet another lower court decision in favor of a patentee. In that case, the judges concluded that the invention was "obvious" based on some sort of "common sense" inventive standard. (Guess that's kind of up there with the "we know it when we see it" standard.)
What strikes me about both developments is all the judicial lip service paid about what "the trier of fact" could and could not reasonably conclude. Rather than simply present the evidence to the actual trier of fact, i.e., a jury, the courts prefer to spend more time, effort and money guessing about what a jury could find rather than simply presenting the evidence and finding out for real.
The elephant in the room is that juries play little, if any, real role in patent litigation today. Courts still seat them (if you get that far) as some sort of quaint hold-over from the past, but as far as their decisions actually carrying any weight, well, given that virtually every important question is now an issue of law, and hence reviewable de novo by the CAFC, the sad truth is that you will win only if the handful of judges there decide to let you win.
Hope I'm wrong about this, but the handwriting is on the wall. And it doesn't look encouraging.
The overwhelming majority of cases settle. What varies is when, how and on what terms they do. Maybe it has to do with a weakening economy, but we're seeing a definite trend for defendants (or more likely their lawyers) to dig in their heels and fight, rather than take the sensible approach of reaching a deal.
I am not really surprised, given that every day I read of another major firm laying off 50 lawyers or, worse yet, shutting its doors. Money spent on lawyers is one of the first things cut when cash is tight, and with fewer big ticket litigation matters available to pay the rent, big firm lawyers have a powerful incentive to turn every case into something major.
How do I know?
I used to be a big firm partner working mostly the defense side and know how it goes.
The standard speech always includes an appeal to "principle" and the need to send a strong message that "we will not be pushed around." As if any plaintiff's lawyer actually takes that into consideration.
There are a lot of questions we consider before taking a case and certainly before filing a complaint. Most important is, does the case have merit? Second, are potential damages sufficient to make it worthwhile? Very important is whether the defendant can actually pay if judgment is obtained? However, one question that NEVER gives us any pause whatsoever is, "will the defendants put up a fight?" Of course they will. That is ALWAYS a possibility, and a company's reputation for defending cases vigorously simply does not enter into the calculation. Facing defense counsel and their defenses is just part of the game.
Having now been on the plaintiff's side for quite some time, I feel somewhat foolish recalling the principled speeches I once gave corporate clients regarding the need to stand up and send a strong message to the plaintiff's bar. In reality, my opponents did not care about reputations, "messages" or the perceived nastiness of defense counsel.
I understand a big firm lawyer's need to hit his numbers and bring in the cash. And fighting cases is what we lawyers do, on both sides. But rational business decisions by clients should be based on more than silly claims about "messages" and "principle" and so forth. You'd think that people smart enough to get rich in the first place would know when their lawyers are blowing smoke.
Again, the overwhelming majority of cases settle, and they usually do so when when clients wake up to where their true interests actually lie.