In our last post, we introduced you to the first type of patent troll, or patent assertion entity (PAE) — the threatening letter-writer. This is a troll that targets great swaths of unsuspecting businesses with a series of threatening letters, often prompting lucrative licensing fees without ever stepping into court.
The second breed of PAEs is similar, but slightly more sophisticated. This breed files actual patent litigation suits because they know that patent litigation is expensive. It is not unheard of for a party to spend well over $1 million before even getting to trial in a patent case. PAEs know that almost all of this cost will be borne, however, by the accused infringer, not by the PAE.
The PAE has no business, so its operations are not interrupted by discovery requests, depositions, or trial proceedings. The PAE has no sales to lose and usually no employees to be bothered. It will typically just need to produce a publicly available file and some licensing agreements.
In contrast, the accused infringer will likely have documents, employees, and vast amounts of electronic documents relevant to the case that will need to be searched for, collected, reviewed, and produced to the PAE.
Further, while the accused infringer has to hire specialized patent litigators to handle the litigation and pay their legal fees on an ongoing business, the PAE is likely represented on a contingency basis — it will only have to pay its lawyers if it wins the case. All this means that over the course of the litigation, the accused infringer’s bills go up and up while the PAE has no bills.
Even if the accused infringer tries to fight the PAE, there is no quick way to end the litigation and achieve victory.
The key to patent litigation is determining what the patent covers: If it covers the accused technology, there’s infringement; if not, no infringement. The court is required to decide what the claim terms mean and thus, what is covered by the claims of the patent. But often the court does not determine what the claim terms mean until well into the litigation. Without knowing what the claim terms mean, the court has no way of determining if the PAE’s claims of infringement have merit or not. And so a PAE can make an accusation of infringement, relying on vague, unclear patent language, and the accused infringer can do nothing about it until after almost a year of litigation. All the while, the PAE keeps its case alive and keeps the legal fee meter running for the accused infringer.
The result is a situation where the accused infringer faces so much of a burden of fighting the PAE that it becomes appealing to pay some lesser amount to make the litigation go away.
Jason Schwent is a partner in Thompson Coburn’s Intellectual Property group. He is the editorial director of the Patent Billy Goat. You can find Jason on Google+, Twitter, and reach him at (314) 552-6291 or firstname.lastname@example.org.