Companies fed up with the high cost of fighting lawsuits filed by non-practicing entities (NPEs) are finding new and creative ways to deal with the so-called “patent troll” problem that has become the intellectual property scourge of corporations and general counsel.
Some are working with defensive patent aggregators—companies created to help corporations manage their exposure to patent litigation. Others are joining with co-defendants and forming joint defense arrangements. And still others are turning to joint representation—using the same outside counsel as other companies, even competitors—that are facing similar attacks from NPEs.
“They have to find creative solutions because non-practicing entities won’t be stopped by legislation or by judicial rulings,” said Kevin Barhydt, vice president and head of acquisitions and analysis for RPX Corporation, a patent aggregator. “There’s too much money to be made.”
Barhydt and two attorneys—SNR Denton partner Robert Kramer and Oracle Corporation senior patent counsel George Simion—were on a panel, entitled “Working More Effectively in the U.S. Patent System,” that was part of a two-day event presented by Corporate Counsel this week that focused on ways for in-house counsel to control legal costs.
NPEs, frequently referred to as “patent trolls,” first became a statistically noticeable threat in 2005. At first, the number of suits they filed increased gradually, Barhydt said. But by the end of 2011, about 4,000 separate companies had been slapped with lawsuits filed by NPEs at least once; to date, more than 6,000 unique defendants have been hit by lawsuits filed by NPEs since those numbers were first tracked in 2005. “No one is immune anymore,” he said.
San Francisco-based RPX and other patent aggregators offer one option for companies seeking to lower costs and avert litigation. They purchase patents and license them to their members. RPX, which holds a portfolio of more than 2,000 patents, identifies and buys what it considers high-value patents that could be used offensively against its member-clients. (The company says it never uses these patents offensively.)
Another creative approach becoming increasingly popular with in-house counsel is joint defense groups, Kramer said. Since NPEs tend to file many suits with similar claims against multiple defendants, companies may find it is more efficient to fight such suits by coming together and forming a joint defense agreement. They arrange for their outside counsel to work together to put forth a unified legal argument, and responsibilities are divided up so work is not repeated unnecessarily.
Outside counsel are also trying to provide creative solutions for clients, Kramer said. For example, they are approaching their clients and proposing they jointly defend several companies—even industry competitors—against NPEs. “The companies need to set up clear walls to protect their confidential information, but it can be done,” he said.
Sometimes these approaches can be frightening to in-house counsel, said Oracle’s Simion, because they fear they will make their company vulnerable if they reveal too much. In those situations, attorneys still have alternatives to traditional and expensive litigation.
“The new provisions in the America Invents Act have given us procedures to use within the [U.S. Patent and Trademark Office],” Simion said, referring to the major patent reform legislation that was implemented this year. The reexamination process, for example, can help reduce costs, and using the PTO’s procedures to challenge patent claims and get them invalidated or amended can sometimes lower or defer the cost of litigation.
Finding ways to defend against NPEs will remain a challenge, Simion said, noting that Oracle is probably dealing with 20-to-30 ongoing NPE suits right now. “We get hit with new ones all the time,” he said.
Proposed federal legislation known as the SHIELD Act, which is intended to curb NPE nuisance suits, is unlikely to pass, the panelists said, given that major patent reform legislation has just taken effect. “It took years for that to become law,” Kramer noted.
Besides, NPEs are always changing tactics and getting more sophisticated. “NPE’s know how to adapt,” he said. “There is no silver bullet.”
See also: “Congress Takes Aim at 'Patent Trolls' With SHIELD Act,” CorpCounsel, August 2012.
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