DLA Piper attorney Jeremy Elman (J. Albert Diaz)
As a perpetually gridlocked Congress wrestles with passing meaningful patent litigation reform, the U.S. Supreme Court stepped up in recent months with a spate of opinions that look to rein in so-called patent trolls.
The decisions could affect the Southern District of Florida, which has become a favorite venue for nonpracticing entities, or NPEs, to file their claims due to a rocket docket and a pilot program dedicated to patent cases.
Many NPEs swept up patents during the tech boom with plans to sue for future infringement. They don’t make any products. The so-called trolls, critics such as President Barack Obama claim, are stifling innovation and exist only to extort a pretrial settlement from companies looking to avoid expensive litigation.
The U.S. Court of Appeals for the Federal Circuit in Washington is where all patent appeals are heard. It has defined patent law for decades, but the Supreme Court has in recent months slapped down the circuit.
When it comes to the controlling patent law turf, the Supreme Court and the Federal Circuit might as well be the Sharks and the Jets in recent months.
Patent attorney Jeremy Elman, a DLA Piper partner in Miami, said the Supreme Court has taken a big interest in recent circuit decisions. “The Supreme Court only gets involved when it wants to change things,” he said.
Attorney John Vetter, an intellectual property litigation partner in Foley & Lardner’s Miami office, agreed.
“This seems to be a step in the direction to curb it somewhat, but there’s a lot of money and momentum on behalf of the NPEs. They are a pretty creative group,” he said.
Vetter said business clients are obsessed about the patent troll threat. Some NPEs have even gone public because the strategy of suing over patent infringements has been so lucrative.
“The issue has come to dominate the landscape,” he said. “It’s on every corporate in-house counsel’s mind.”
Two of the four Supreme Court decisions involved patent fights between exercise equipment manufacturers.
On April 28, the justices handed down a unanimous ruling in a patent fight over elliptical machines on attorney fees that lowered the standard for winners to request payments.
Attorney Kenneth Hartmann, a senior partner at Kozyak, Tropin & Throckmorton in Coral Gables who represents inventors as well as companies accused of patent infringement, said the ruling will make any plaintiff—troll or not—blanch before filing a patent suit.
In the case before the high court, Minneapolis-based Octane Fitness LLC asked to be reimbursed for $1.3 million it spent successfully defending a lawsuit filed by a competitor, Utah-based ICON Health & Fitness. The district court and the Federal Circuit declined to award fees, finding the case did not fall under its “exceptional” standard, but the Supreme Court reversed.
“The Federal Circuit’s formulation is overly rigid,” Justice Sonia Sotomayor wrote.
She wrote a similar opinion issued the same day in Highmark v. Allcare Health Management System, another patent case where a party was seeking attorney fees.
All four opinions reversed circuit decisions, including an en banc ruling.
Attorney Gregory Nelson, a partner at Novak Druce Connollly Bove & Quigg in West Palm Beach, said for years the Supreme Court would allow the Federal Circuit to be the final word on patent cases.
“What’s interesting here is not only the Supreme Court taking these cases, it’s very actively disagreeing with the Federal Circuit,” he said.
The Supreme Court once again overturned two Federal Circuit decisions in complicated patent cases June 2.
The foremost was in a fight between two exercise machine makers—Vancouver, Wash.-based Nautilus Inc. versus Canada’s Biosig Instruments Inc.—over a patent for heart rate monitors on stair climbers.
The case centered on the legal test to determine whether a patent is ambiguous. The Supreme Court replaced the current test with a more rigorous standard on whether a patent claim is clearly written and defined.
Patent lawyers say this goes to the heart of the troll problem. During the high-tech boom, the overwhelmed U.S. Patent and Trademark Office issued a lot of patents for ambiguous claims. NPEs then bought them, waited until a company used the technology and sued.
One attorney called the Patent Office the troll’s best friend.
The Nautius ruling was the first since 1942 when the Supreme Court addressed the issue of how unclear a patent could be before it would be deemed invalid.
“The Supreme Court has made it easier for the court to throw out vague patents,” Elman said.
Hartmann said NPEs have been generalized as predators when some are inventors who seek to protect their legitimate interests.
“There is such a political momentum against the enforcement patents because patent trolls are seen as counter-innovation,” he said.
In the other opinion issued June 2, the court made it harder to hold a company liable for inducing a patent infringement by a consumer, business or other entity.
Patent trolls have flocked to certain jurisdictions for various reasons, such as high jury awards or rocket dockets.
The Eastern District of Texas and Delaware became notorious for a high volume of patent cases. Half of Delaware’s civil cases filed in 2013 were patent based, Elman said.
The Southern District of Florida in 2013 was the seventh busiest jurisdiction for patent litigation. It has three federal jurists dedicated to hearing patent cases in a pilot program: U.S. District Judges Donald Middlebrooks, K. Michael Moore and Patricia Seitz.
How will these new Supreme Court decisions alter the feeding frenzy in patent law? Patent lawyers say only time will tell.
Elman said it might not dampen enthusiasm at all, especially in South Florida where the rocket docket for patent cases means defendants can get their cases disposed of quickly.
Under local rules, only one year of discovery is allowed. As a result, Elman said the average patent case is scheduled for trial within 16 months of filing compared to a national average of 30 months.
He also said companies may be attracted to set up shop in cities with venues that are attracting patent cases, feeling they can get a home court advantage.
“If you are a growing company with new products, you want to be in a jurisdiction where you can enforce your rights,” Elman said.