Leverage If You Are Threatened with Patent Infringement (and why you should ignore FOSSpatents)

Gene Quinn over at IP Watchdog has some good information on "What To Do If You Are Sued for Patent Infringement".  Go read the entire article.  Whatever you do, please ignore the advice of non-attorney commentators (such as Florian Muller @ fosspatents) because they can be shortsighted and are not qualified to provide the complex legal analysis and advice you will need.  (e.g. from one of Florian's latest posts about the Lodsys patents, any patent attorney should be able to recognize that Florian does not understand the law regarding patent infringement and numerous other issues.)

For example, some commentators (including Florian Muller @ fosspatents) are advising targets of patent trolls to roll over and pay the license fee; Florian is even advising you that the license agreement that has not been made public is acceptable for you to sign.  I very much question the soundness of this advice, especially considering the above article at IP Watchdog. Contrary to the bad advice and legal analysis put forth by Florian, there are options available to companies threatened by patent trolls and even if the outcome is a license agreement, Florian's legal analysis and advice is not solid. (I could write a white paper explaining why Florian's analysis is messed up, but I don't have the time right now.  If anyone requests me to provide more detailed analysis, I will put it on my to-do list.)


For starters, in my opinion, Lodsys probably LOVES Florian's analysis and opinions.  (I have no connection or contact with anyone at Lodsys, Apple, and no longer any contact with Florian).  He seems to be making all the arguments that support the troll's business plan - you can't afford to fight, don't even try, the trolls arguments are decent, just give in and sign the license.  Florian dismisses prior art searching, dismisses non-infringement arguments when he clearly does not understand the law, ignores invalidity arguments, misinterprets the claims to determine that Lodsys has a case that is possibly good enough to go to trial (remember, he is not an attorney), and makes statements such as "app devs will lose" unless they have blanket coverage from someone else.  (note - of course, Florian includes CYA language in his posts so that he can have wiggle room out of his responsiblity for misleading people.)

Generally, this is why Florian is wrong:  "In order to be a party at the peace talk table, however, you need to have leverage of some kind, otherwise you are not a party to talks as much as you are having terms dictated."  See Gene Quinn's article.  Gene does not provide a list of what that leverage might be, but he alludes to invalidity or reexam arguments.

To expand on that article, here are potential strategies that could add leverage during negotiations for a company threatened by a patent troll:
- have a non-infringement opinion
- have an invalidity opinion
- have a reexam prepared to file or filed
- file a motion for summary judgment
- file a declaratory judgment action
- consider counter claims (tortious interference, antitrust, etc...)
- have IP insurance provisions
- help fund a joint defense agreement
- hold off settling until a Markman opinion

Many of these strategies can be implemented by a small company.  Some companies may even implement more than one of these strategies at the same time.  As I have said before and Gene notes: "The advice you need, and will get if you hire an attorney, will be tailored to your unique circumstances."  There are many variations of these strategies and others that can be implemented that will NOT cost one million dollars.  You need to determine the right strategy for your company based on your circumstances.

Any good negotiator (which IMO excludes Florian) will tell you that you do not negotiate with yourself.  Thus, I have no idea why Florian claims to be supporting application developers when he writes analysis that attempts to shred their potential leverage arguments and advises them to pay what Lodsys is asking.  If someone was truly supporting the application developers, they would be trying to bolster the application developers leverage arguments (as I have been trying to provide on this blog).


Another issue I have with Florian is he seems not to recognize the value of a non-infringement or invalidity opinion, which can reduce a significant amount of risk for a comparatively small cost.  Just another fail in his analysis.  (I think his excuse for will be that none of the accused application developers have the resources available for any strategy other than pay the fee.  Again, I think this shows why Florian is not qualified to advise anyone on strategy or risk concerning patent litigation.)

On a personal note, Florian accused me of being an "anonymous smearer".  While I am doing this anonymously, my response still stands:  "FYI rebutting factually inaccurate statements does not make me a "smearer", it makes you uninformed".

If you are threatened, whatever you do, hire an attorney to advise you for your particular circumstances.  There are many options and strategies available to you whether you fight or negotiate.

Just my opinion, go hire your own attorney for legal advice.
-USPA

Hint of help for app devs? Just speculation...

Yesterday, @chockenberry (Craig Hockenberry creator of Twitterrific) posted on Twitter: "Do the developers affected by Lodsys a favor next week: don't ask questions about what's going on. We can't talk about it. #wwdctips"

Please listen to his request, as I am sure there is a good reason.  While I wish he could talk about it, please respect that there are reasons why he can not.

Though, I am in a mood to speculate this morning, so I asked myself "Why can't they talk about it?" and here are some possible reasons:

1.  Maybe the app devs are in confidential negotiations with Lodsys and agreed not to talk about it publicly.

2.  Maybe Apple's legal team is talking to the app devs and they agreed to confidentiality with Apple.

3.  Maybe the app devs are in a joint defense arrangement with other app devs and they agreed to confidentiality in the joint defense agreement.

4.  Maybe their legal counsel advised them not to talk about it.

5.  Maybe the app devs are just sick of all the bullshit surrounding the issue and don't want to talk about it.

I personally hope that this tweet is an indication that option 2 or 3 might happen, but I have absolutely no inside information and this is pure speculation.  What I do know is that litigation is stressful for most parties involved, especially a small company that may be inexperienced as a defendant in a patent litigation.

Whatever the application developers do, I hope they have retained their own counsel (even if option 2 or option 3 is occurring) to look out for their interests first.

If anyone thinks of anymore reasons (hey, I think I do a good job, but I am not infallible) to add to the list, let me know.

-USPA

More analysis and claims charts of Lodsys patent

Another firm, M-Cam, which is not associated with me in any way, has also done a good analysis, prior art search, and claim charts concerning the Lodsys '078 Patent.  See here.

The prior art focused on for the '078 Patent are:


US 4,634,845 - Portable personal terminal for use in a system for handling transactions

US 5,535,407 - Data processing system for locally updating customer data distributed by a host computer to a remote facility and for returning the updated customer data to the host computer


Their report is detailed and includes even more prior art for people to consider.

UPDATE (6/5): I have spent a little more time reviewing the M-Cam document.  While I am glad to see other organizations out there trying to help invalidate Lodsys's patents, their analysis, in my opinion, ignores some basic issues:


1) They state "Apple maintains that developers are legally covered under their license, citing the legal doctrines of patent exhaustion and first sale".  While I acknowledge that many non-attorney commentators are making similar statements, that is not exactly accurate from a legal standpoint of what Apple's letter stated.  Any good patent attorney should be able to dissect the Apple letter to really get at the heart of what they were saying.  For example:

 "Sewell recognizes that it is Apple, not the developer, that provides most of the claim elements in any reasonable mapping of the claim, and asserts that Apple is licensed to practice the inventions.  He says developers are protected by Apple's license, not that developers are fully licensed."  See igoeIP Apple Patent Blog.

In essence, this is all about divided infringement and non-infringement by the application developers.  The rest of Apple's letter is smoke and mirrors and any good patent attorney can tease out the true legal arguments.  Also see IP Watchdog.  I expect someone trying to produce a document such as M-Cam should understand and explain these legal distinctions.

2) Seems like they used "M∙CAM DOORS™ analytic platform", which I would guess is some sort of automated claim analyzer.  While such systems can be powerful and useful to point a prior art search in the right direction, analysis of claims need to be done by an attorney, which they do not say has occurred.

3) They compare claims of the '078 patent to claims of the prior art references.  This seems very odd to me, because an invalidity argument is not based on the claims of the prior art, but what the prior art teaches as a whole.  Thus, a patent attorney would not likely make such a chart for an invalidity argument using just the claims of a prior art system, they would include analysis from the rest of the reference.

4)  They completely ignore one of the major issues of the claims, what a "user perception of the commodity" is and whether their prior art addresses such.  A patent attorney should never write such a document while omitting any analysis of such an important claim element.

My conclusion: the art M-Cam cited is relevant, but they are far from having a high quality invalidity claim chart.  To be clear, M-Cam never asserted or labeled their claim chart as an invalidity claim chart, they label it as "similarities in innovation in this technology space", though I am not sure what the point is other than trying to establish invalidity.

I have not had a chance to review  their long list of other references, if anyone else does, please let me know.


-USPA

Shortsighted to call App Devs a "mastermind"

Ugh, non-attorney commentators... give lots of bad legal advice.  Even if some conclusions and advice might be similar to that of an attorney, a lot of the analysis I have seen is not correct.  (and it is easy to get some things right, when you post a ton of crap, the percentages are in your favor).  Any person or company involved in highly complex legal issues, like patent infringement, need to receive advice and proper analysis from a qualified attorney.

One particular issue I read just this morning:
At least one non-attorney commentator I have read believes that the application developers could be a "mastermind" when considering divided infringement and thus, the divided infringement theory is skeptical (I refuse to link to his site because he is clearly giving legal advice and he is NOT an attorney).

Of course to come this conclusions, such commentator glosses over many issues and seems to ignore the facts of the case, the elements of the claims, and the law on the matter.

For example, if an attorney had done a similar "mastermind" or "control" analysis, they probably would have discussed this case, Centillion Data Systems, LLC v. Qwest Communications International, Inc. (Fed. Cir. 2011):

The only way that Centillion can establish "use" by Qwest is if Qwest is vicariously liable for the actions of its customers such that "use" by the customers may be attributed to Qwest. Our precedents on vicarious liability, BMC, Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1328-29 (Fed. Cir. 2008), Akamai Technologies, Inc. v. Limelight Networks, Inc., 2009-1372, 2009-1380, 2009-1416, 629 F.3d 1311, 2010 U.S. App. LEXIS 25825, 2009-1417, 2010 WL 5151337 (Fed. Cir. Dec. 20, 2010), and Cross Medical, analyze the circumstances in which the actions of one party ought to be attributed to a second party for purposes of direct infringement — vicarious liability. In BMC, we noted that "[f]or process patent or method patent claims, infringement occurs when a party performs all of the steps of the process." 498 F.3d at 1378-79. However, we noted that in some instances, one party could be liable for infringement of a method claim even if it did not perform all of the steps. This vicarious liability arises when one party controls or directs the actions of another to perform one or more steps of the method. Id. at 1379. We confirmed this approach for method claims in Muniauction, 532 F.3d at 1328-29  [*19]  and recently explained in Akamai Technologies that for infringement to be found when more than one party performs the steps of a method claim, an agency relationship or other contractual obligation to perform the steps must exist. See Akamai Techs., 2010 U.S. App. LEXIS 25825, 2010 WL 5151337, at *6. In Cross Medical, we considered the issue of vicarious liability for making a claimed apparatus or system under § 271(a). The claim related to a medical device and, as properly construed, required contact between the device and human bone. 424 F.3d at 1310-11. In the particular facts of that case, the accused manufacturer created the accused product, but did not perform surgeries to bring the device into contact with bone. We held that the manufacturer did not "make" the claimed apparatus. We held that if anyone made the claimed apparatus, it was the surgeon who implanted the accused device, possibly bringing it into contact with bone. Id. at 1311. We noted that the manufacturer would not be liable for the surgeon's direct infringement unless the surgeon acted as an agent of the manufacturer. Id.

Following our vicarious liability precedents, we conclude, as a matter of law, that Qwest is not vicariously liable for  [*20]  the actions of its customers. Qwest in no way directs its customers to perform nor do its customers act as its agents. While Qwest provides software and technical assistance, it is entirely the decision of the customer whether to install and operate this software on its personal computer data processing means."

With this in mind, I find it very hard for an application developer to be considered the "mastermind" or in "control".

These are very complex legal issues that need a great deal of legal analysis and advice from a QUALIFIED ATTORNEY.

If you are threatened, do not take your advice from non-attorney bloggers.  Hire a qualified attorney to advise your options and legal strategy.

Just my opinion, go hire your own attorney for legal advice.

-USPA

Will Apple support the developers by filing a reexam?

In the past, when dealing with patent trolls, Apple has taken an aggressive stance in filing reexams.  Will Apple file reexams on the Lodsys patents to support the application developers that were sued?

As detailed with my posts earlier (here, here, and here), there is plenty of prior art out there to put together a high-quality reexam, especially if a company like Apple throws their resources behind the prior art searching.  The prior art I posted is the results of myself and a friend searching for only a few hours each;  Apple could easily fund a much more comprehensive search and possibly find even better prior art.  Most of the large companies sued by Lodsys have likely done prior art searches for invalidity opinions; I wish we could see the prior art they found, but I have not received any responses to such requests yet.

There are a lot of considerations that Apple is likely weighing to determine the amount of support or involvement to provide the sued application developers.  For instance, there are issues concerning whether Apple can directly challenge an IV patent (see here), which I do not know the answer to because it depends on the contracts between Apple and IV.

Hopefully Apple jumps in to support the application developers at least with reexam support.

-USPA

Lodsys files suit to bully small app developers

Unfortunately for application developers, Lodsys has decided not to leave them alone.  This is not a surprise considering Lodsys's whole business model is based upon a mound of smelly bullshit.  Their patent infringement assertions are laughable and their patents are questionably valid.  They are in essence highway robbers that hope the threatened will pay them to let them pass unharmed rather than risk the expense of fighting.

Each application developer that is threatened or sued needs to hire an experienced patent attorney ASAP to consider which options will be most suitable for their business.

One option that should be given consideration is filing a motion for summary judgment of non-infringement.  See my arguments earlier considering non-infringement (these arguments will similarly apply to the '565 Patent that has been asserted).  This may be able to be done and allow the app developers to win the fight without sacrificing their whole company.  Though, each app developer still needs to determine if they wish to fight or pay the highway robbers.  I hope the application developers are also considering a joint defense arrangement to help with the costs.

This is a great learning moment for small business and other app developers not yet sued.  It might also be a good time to look into IP infringement insurance if you are in a tech industry.

ALSO SEE: igoeIP deconstructs the highway robbers bullshit offer of $1,000.  I planned to do another post on this exact thought, but igoeIP explained it all.

Best of luck to the application developers.

- USPA

Trolls under the Bridge - Patent Reform Proposal

[UPDATE]  Patent trolls are not a software patent problem, they can affect any industry and commonly do.  I have spent over 10 years fighting patent trolls, mostly for the computer hardware industry (microprocessors, data storage devices, etc.).

While dealing with patent trolls, I have come to the following conclusions:

1) Patent trolls suck and usually need to misconstrue the claims of the patent to have an infringement argument;
2) It is hard to write a patent reform law to get rid of trolls (trust me, I have tried) because you will inevitably include some people who are not trolls who have a good claim against an infringer;
3) Patent trolls exploit loopholes in the patent system to maximum benefit (will explain below);
4) rarely are the claims nearly as broad as the patent troll is trying to assert. (thus, I do not believe a wholesale change to our patent granting system is needed to address this.)

One of the biggest loopholes of the U.S. patent system that patent trolls exploit, and which allows patent trolls to have a good deal of leverage over small business, is the lack of specificity and disclosure in the pleadings required by a plaintiff to file a patent infringement claim.  Here is a great short summary:

"According to the Federal Rules of Civil Procedure all a patent owner has to do is assert the number and title of the patent and then vaguely say that one or more claims are believed to be infringed." See IP Watchdog to read their whole article regarding patent trolls.

I believe patent trolls would lose a lot of their undue leverage in threatening a patent infringement lawsuit if they were required to include much more specificity at the time of filing.  For instance, I would like to see the following required to be shown at the time of filing in order for a plaintiff to file a patent infringement lawsuit:

1) Specific claims that are infringed must be asserted;

2) Claim charts mapping the specific claims asserted to the accused infringing product;

3) Claim interpretation arguments must be supplied explaining the support for such and how the claims apply to the product (i.e. Markman briefs must be submitted at the time of filing). 

My theory is that the leverage of the trolls exploiting these loopholes in the patent system will be reduced greatly if they have to show all the details of their theory of their case from the start, while parties with very legitimate claims for infringement will not have as many reservations about putting forth this specificity.  Also, I believe this serves the public interest by having a greater disclosure of information.

Further, another change in the law that would help would be:

4) The claim interpretations and arguments put forth by the patent owner will have estoppel attach immediately, whether or not the claims have been fully and finally litigated.  That is, the patent owner will be limited to the claim interpretations put forth during the pleading of the infringement claims and will be limited by such in future lawsuits regarding the same claims.

I have seen some discussion about these issues before at CLEs and in some articles, (I only found these articles with a quick search: here and here, paid content though-sorry).

Let me know your thoughts on this.

-USPA