Law.com First in Legal News and Information
 

Top Stories From Law.com

Tech Companies Taking More Patent Fights to Trial

 

Yahoo Inc. headed to trial in Texas on Monday against patent holding company Creative Internet Advertising Corp. -- and if it feels like the very first time, it's because the last time the Internet company rolled the dice in a patent case was four long years ago.

But facing 25 patent infringement lawsuits, up from four in 2007, Yahoo has decided to fight some cases all the way to the courtroom, instead of just settling.

"There has been a shift in the landscape, and companies are being forced to deal with this in a different way," said Jeanine Hayes, who heads Yahoo's intellectual property department.

Other leading tech companies also are more willing to go to trial. Google has been vocal about fighting what it considers "frivolous patent litigation." And last month, Apple Inc. went to trial against patent holding company OPTi Inc. It was the company's first patent trial in at least eight years, according to a search on PACER, and it lost, sustaining $19 million in damages.

"Tech companies are frustrated by what they view as abusive patent litigation, and one of their responses is [to] take them to trial," said Edward Reines, an IP litigator with Weil, Gotshal & Manges.

The risks of going to trial are less than they were in the past. With the threat of injunctions from nonpracticing entities no longer present, thanks to eBay v. MercExchange, and more tools to invalidate patents available from other rulings, companies are more emboldened to fight, say some patent litigators.

"I think defendants are willing to roll the dice more than they were in the past, just because the downside has become more limited," said Theodore Herhold, the head of Townsend and Townsend and Crew's litigation practice.

Tech companies also say that settling sends the wrong message to patent plaintiffs. When Google started to make a concerted effort to fight patent cases two years ago, it was for that reason, said Hilary Ware, managing litigation counsel.

"We really had concerns that settling frivolous patent litigation would encourage more," Ware said.

Spencer Hosie, a San Francisco patent lawyer who does plaintiff work, says that a few companies can spend enough money litigating to create a deterrent, but not many.

"You cannot bully your way out of being sued for patent infringement," Hosie said. "But if you have a reputation for spending money irrationally and litigating everything, you can become the rabid dog in the backyard that no one wants to pet."

Hosie said that most of the tough talk is just that: talk. The Hosie Rice partner said the trend he's seeing is companies settling more quickly than ever because of the rough economic times.

"I am seeing a very different negotiating environment: The size of the licensing deals has shrunk and velocity has increased," he said. "The big tech companies are watching their budgets rigorously in this recession."

Yahoo's Hayes said the recession has actually helped her company go to trial, since law firms are desperate for work and more willing to accept flat-fee or alternative-fee arrangements. Normally, an average patent trial costs around $5 million.

Yahoo has four other trials scheduled for this year, aside from the one against CIA, which is a subsidiary of patent holding company Acacia Research Corp. CIA is accusing Yahoo of infringing on a patent for a "Background Advertising System" with Yahoo mail. AOL settled out of the case last year.

Hayes will be in the Eastern District of Texas this week for the trial. Howrey's Henry Bunsow and Ireland Carroll & Kelley's Otis Carroll will be going for Yahoo. CIA is being represented by a who's who of Texas patent lawyers: Eric Albritton, T. John "Johnny" Ward Jr. and Anthony Simon.