Patent trolls are not all the same. They have different tactics, different areas of expertise, and they can behave in very different ways in litigation. But they all want money. And they all do what they can to get as much of it as possible. But there are certain things that they hope you do not know about them so that they can possibly make even more money.
This list is written from the imagined perspective of an experienced troll, one who does not easily give up his secrets. But, under the persuasion of a persistent billy goat, this troll has spilled the proverbial beans.
1. Sometimes we’ll sue you without knowing for sure whether you’re infringing
The vast majority of patent trolls assert patents that are directed to software, computer systems, and computer based services. This technology does not lend itself well to pre-suit analysis. In contrast, when a patent holder makes claims about a chemical having a certain composition, pre-suit analysis can relatively easily determine whether samples contain the requisite elements. But when a patent holder’s claims are directed to the way in which a computer or computer network processes data, it can be very difficult to know the specifics of how that processing is done. Accordingly, patent trolls may not know how your system works when they bring suit. They may only have a vague idea of the information that is available and the end product produced. They are likely waiting on information from you about your system that they will obtain during discovery to know whether your system actually infringes.
Thus, do not assume that patent trolls are correct when they assert — often in a cease and desist letter — that your technology infringes. This sounds simple. But as you get into litigation, it can be easy to get distracted by the process and the arguments and forget that the patent owner may have no idea how your technology works. You should not dismiss their claims without investigation, but you should ensure that their claims are plausible. It is important to carefully investigate the patent troll’s arguments and determine at an early stage whether they have any merit. This is one of the chief advantages that defendants in a patent litigation have — they have access to the most important information about how their accused system works. You should use it. If you can demonstrate that your system or service could not possibly infringe upon the patent owner’s claims, you may, though not likely, convince the patent owner to dismiss you from the suit without payment. More likely though, even if you are not able to convince the patent troll to drop its suit, by making the patent owner aware of the impossibility of its claims at an early stage, you may be able to set yourself up for an award of attorneys’ fees if the patent owner continues with its suit in the face of strong evidence to the contrary.
2. We may not have thoroughly examined our patents
While patents are entitled to a presumption of validity when they issue, as a defendant, you should not assume that all aspects of the patent’s validity have been examined by the patent holder. Patents grant a powerful, government-sanctioned monopoly. They are, therefore, subject to myriad technical requirements to remain valid. They are required to include the proper inventors. They are susceptible to invalidity arguments based on problems with assignments or if they do not share common inventorship with prior patents in the same family. They require maintenance payment that, when missed or forgotten, may affect the validity of the patent.
Because patent trolls often acquire their patents from third parties, the patent trolls may not know all of the problems with the patent or its history. And because time spent thoroughly investigating the patent is not compensable, the patent trolls may not have sought to thoroughly scrutinize the patent before bringing suit. The patent may have left off a necessary inventor. There may be problems with the chain of title in the patent. Other interested third parties may be necessary in the litigation in order for the patent troll to have standing to sue. The spouse of one of the inventors may have inventorship rights in the patent due to marriage laws. Therefore, if you are sued on a patent (or group of patents), you should ensure that your patent counsel thoroughly investigates the entirety of the patent’s history, its chain of title, and all aspects of the patent’s validity early in the litigation. Problems with these technical aspects of the patent may be your ticket to an early, and cheap, exit from the litigation.
3. We don’t want to go to trial
One may assume that being in the business of litigating would mean that patent trolls look forward to going to trial. This is not the case. Trials are expensive. While patent trolls may have much of the required disclosures, written discovery, and other aspects of pre-trial already prepared or available from prior litigations of the patent, each trial is unique and presents a unique set of issues and problems. Accordingly, each trial’s materials (its evidence and exhibits, its witnesses, its jury instructions) all must be prepared for each trial. This requires a great deal of work, which costs money — money which, in one way or another, eats into the patent troll’s ultimate profits.
Furthermore, trials are unpredictable. Patent trials are even more so. Patents involve complex technology, myriad of technical statutory requirements, and can be confusing for even highly qualified judges. For lay person jurors, they can be a nightmare. Thus, it can be very difficult to predict what may happen in a patent litigation at trial. This unpredictability creates risk to the patent troll’s profits — and especially to its counsel, who may not get paid if they lose. That risk can possibly be exploited to lower settlement demands.
4. If we do less work, we make more money
Most patent trolls enter into contingency agreements with their counsel to handle litigation on their patents. These agreements give counsel a percentage of any damages awarded or license fees paid in exchange for the work done on the litigation. This means that counsel does not receive payment for their day to day work on the case. They only get paid if they win or if defendants take licenses.
This not only puts pressure on patent troll counsel to win the litigation, it also encourages counsel to do as little as possible to keep each case as profitable as possible. The more work the patent owner’s counsel does, the less profitable the case becomes. This fact can be used by defendants to leverage favorable settlements. For instance, if your company’s technology is unique, complicated, or different from other defendants sued by the patent owner, the patent owner is going to have to spend more time (and thus more if its own money) accounting for your technology. You may be able to leverage this added cost to lower the patent owner’s settlement demand (because getting rid of you results in cost savings to the patent owner).
5. When you pay us to go away, we don’t
Make no mistake about it, patent trolls are in the business of litigation. They do nothing else. They know what tactics are used in litigation by defendants. They know the arguments that will be made. They know what a typical patent litigation will cost. And you can expect that they are familiar with those parties whom they have litigated against in the past.
As described above, the less work counsel for a patent troll does, the more money counsel and the patent troll make. Accordingly, defendants who would rather pay to make litigation go away than fight make great targets for litigation. Getting a reputation as a “soft” target for patent suits may result in more and more suits being brought against you or your company. This could turn the short-term economic advantage of paying a small licensing fee into a long-term economic disadvantage of having to face multiple lawsuits brought by patent trolls who smelled blood in the water and went after you.
Note: Jason Schwent will host a free webinar on Tuesday, Oct. 21, 2014: “You've Got Mail: How Your Company Can Better Respond to Cease and Desist Letters.”
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.