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Model Order Would Cut Patent Fights Down to Size
The National Law Journal
Nearly two years after rolling out a model order intended to get a grip on out-of-control electronic-discovery demands, the U.S. Court of Appeals for the Federal Circuit's advisory council is poised to issue new rules that ask patent litigants to make their own sacrifices.
The council's "A Model Order Limiting Excess Patent Claims and Prior Art" would limit plaintiffs' patent claims and defense-side arguments about prior art — that is, references to information about inventions' subject matter published before the patents were issued, and that tend to undermine those patents' legitimacy.
Courts can adopt the council's model as is, tweak it or take no action, but its creators hope the concessions sought from each side would prove a strong selling point. "Very often in these cases you have both sides posturing and playing hardball," said Eastern District of Texas Chief Judge Leonard Davis, who participated in the model-order committee.
Too often, he said, litigants wait until the weekend before the trial to trim a massive number of patent claims and prior-art references. He expects the order to provide a useful benchmark that "gives the parties more solid barometer of where they should begin their negotiations."
The committee brought together judges, professors, in-house counsel, defense and plaintiff-side patent litigators to figure out how to rein in the spiraling costs of patent litigation, U.S. Court of Appeals for the Federal Circuit Chief Judge Randall Rader said.
"You don't need to fix the patent system — it's not broken," he said. "What you need to do is fix the litigation system, because it can be abused." The idea is to "make it clear that the district courts have the authority to narrow these issues earlier.".
Typically in a patent case, if a plaintiff asserts 100 claims the defense matches prior art to each and "all these big charts go back and forth," said Edward Reines, a technology litigation partner in the Redwood Shores, Calif., office of Weil, Gotshal & Manges, another committee member. "It's not pernicious. That's what people do — keep options open. If you have to make choices, it will prevent a lot of wasted energy.
THE NEW RULES
Patent cases are often high-stakes wars with millions of dollars or a company's very right to make and sell a key product at stake, so litigants typically bring their whole arsenal. For plaintiffs, that means including as much of the disputed technology in the case as possible by claiming infringement of multiple patent claims or components of a patent covering a piece of the invention. The defense side responds by attacking the patents, and one way to do so is by claiming the inventions weren't original. That's where prior art comes in — the defense will raise even tangential evidence that a purported invention had been used or written about before.
The model order would limit plaintiffs early on to 10 claims per patent and no more than 32 total claims. That limit would kick in 40 days after the defendant's deadline for producing documents about the inventions under dispute. The defendant, once notified of the chosen claims, would have 14 days to introduce 12 prior-art references against each patent, and could produce no more than 40 overall.
The order calls for additional narrowing after the court issues a claim construction — essentially, defining the patent claims. At that point, the plaintiff has 28 days to pick as many as five claims per patent for up to 16 total claims. The defense then has two weeks to identify up to six prior-art references per patent and no more than 20 overall. The shorter list of claims and prior-art references must come from the original list.
Patent claims and prior-art references vary widely from case to case, but a 2009 University of Pennsylvania law review article — Extreme Value or Trolls on Top? The Characteristics of the Most-Litigated Patents — offers some clues. Researchers examined Stanford Intellectual Property Litigation Clearinghouse data on patents litigated between 2000 and 2007. The authors found that patents litigated just once contained an average of 24 claims and cited 31 prior-art references. Patents litigated at least eight times had an average of 39 claims and 123 prior-art references.
Intel Corp.'s director of intellectual property policy, Tina Chappell, who also helped craft the model order, called it the next step in the effort to reduce patent inefficiencies. "There is a growing recognition that U.S. patent litigation is too expensive and that we must streamline cases to better serve the needs of both plaintiffs and defendants," she said.
In 2011, the Federal Circuit issued a similar complaint in In re Katz Interactive Call Processing Patent Litigation, which upheld a Central District of California judge's ruling cutting patent claims in a multidistrict litigation proceeding from 1,975 to 64.
"The federal courts in general and in California in particular are so overloaded, they need to find a way to handle those limits," said Matthew Poppe, a Menlo Park, Calif., intellectual property partner at Orrick, Herrington & Sutcliffe. Poppe was part of the litigation team for one of the defendant groups in the Katz case.
It's best for litigants if courts let them conduct discovery on a large number of claims before forcing them to narrow the field before the trial, he said. But from a practical standpoint, "courts will from time to time be open to limiting claims near the outset to save the parties some resources."
Since Katz, parties increasingly have been willing to negotiate an appropriate number of patent claims to litigate, said Benjamin Hershkowitz, a New York intellection property partner at Los Angeles-based Gibson, Dunn & Crutcher. Hershkowitz was part of a Gibson Dunn team that represented defendant Cablevision Systems Corp. in the Katz case.
When the parties can't agree, "there is perhaps at least an increased willingness that the defendant bring a motion requesting that the court limit the number of claims," he said.
The council hopes the new model order will influence the practice even in courts that don't adopt it. "Overall, it will help shape the discussion and the scope of litigation, even if it's not outright adopted verbatim," said Northern District of California Judge Lucy Koh, who also sits on the committee. That happened with the council's September 2011 model e-discovery order in Northern California, even though her district hasn't formally adopted that model, she said.
The electronic-discovery model order limits requests for email to specific issues, not general discovery. It also calls for delaying requests until key patent disclosures are made in a case. In addition, searches are limited to five email searches of up to five email custodians.
Two of at least four courts that have adopted variations of the electronic- discovery model are known for patent cases — the Eastern District of Texas and the Southern District of California. "In my court, I would guess millions of dollars have been saved," Davis said.
This article originally appeared in The National Law Journal.