We’ve all heard the story of the Three Billy Goats Gruff—the one in which three goats need to cross a bridge in order to reach the lush meadow on the other side. But a hungry troll lived under the bridge, waiting to eat all those who dared to pass. The troll wasn’t very smart, though. After being tricked by three goats (you can find the full story here), the bridge troll was never heard from again.
Unfortunately for many US companies, that’s not the case with the modern-day patent troll. Although patent trolls may be smarter than the bridge troll of the children’s story, they are still ill-meaning creatures that prey on companies . . . usually to extract undeserved financial settlements with threats of patent infringement suits.
A patent troll (also referred to as a non-practicing entity in patent law circles) is a person or company that holds patent rights but is not really engaged in the business of producing products or providing services. Instead, after securing the patent, these trolls assert patent infringement claims against legitimate businesses, seeking compensation through licensing fees, settlement, or litigation.
According to PricewaterhouseCoopers’ 2014 Patent Litigation study, about one-half of all new patent infringement cases last year were filed by patent trolls. PwC’s analysis also found that patent trolls are succeeding in about 25% of the cases they bring, with the median award at trial, between 2010 and 2013, being approximately $8.5 million. RPX Corp., a risk management solutions provider, estimates that one-half of the companies targeted by patent trolls have annual revenue of less than $10 million.
(“Re: Patent Infringement Notice” - Congratulations! The patent troll has emerged from under the bridge and arrived, by the USPS, directly on your desk. Rather than wanting to “gobble you up”, this particular troll has invited you to have an amicable discussion regarding the unlicensed use of its patent, maybe even entering a business agreement for the use of the patent. But what do you do?)
How to Proceed
Although you likely want to take the big Billy Goat Gruff approach (like this fed-up CEO)—poking out the eyes of the patent troll and crushing him to bits—that may not always be the best approach. Instead, following a few simple steps will help you avoid the initial emotional response to being trolled and, in its place, make a calm, cool, and collected decision regarding how to move forward.
Proceed With Caution—Consult Your Attorney
Sometimes, making an initial emotional reaction, like that fed-up CEO from before, can turn that feel-good “Dear Piece of [insert your own expletive here]” letter into Exhibit A in a complaint filed in a legitimate court proceeding. Even worse, those types of responses can be used by the troll to claim that you have acted in bad faith. Instead, before making any response to the trolling or infringement letter, confer with a business lawyer who has experience in this field. Failing to do so may increase your liability, your cost of resolving the allegations, or get you and your company on the homepage of legal blogs.
Determine Whether There Is Any Reasonable Factual Basis for the Infringement Claim
Non-infringement is the easiest and most effective way to put down a patent troll. Often, when a small business receives a trolling letter, it has no connection with the alleged patent and it has engaged in no infringing conduct. If your company receives a trolling letter, then carefully compare the claims in the alleged patent with your technology or services—hopefully, you’ll find that there is actually no overlap at all between the two.
Research the People As Well As the Patent
Just as you want to learn as much about the patent, you should also become familiar with the people who are holding the patent. This could be as simple as putting the company or person’s name into a Google search or accessing a public database to see if others have been similarly trolled. Or, for a more formal report, you can enter the information from your demand letter into the Lex Machina Analytics Tool, which will provide a detailed report regarding litigation activity of the company, law firm, and patents contained in the demand letter, as well as other useful information. Finding information about not only the patent but also the people will enable you to best assess the threat level the demand letter might pose.
Look Beyond Your Company
In some cases, the troll may have selected the wrong target. To figure out whether you have been wrongly targeted, consider whether you may have a defense from or recourse against another party (your company’s licensor, vendor, or suppler). This may be the case if, for example, you licensed the technology that is the subject of the trolling letter from another company. In this scenario, the company that licensed the technology to you is the proper target, not you. If you believe another company may be the proper target, consider putting that party on notice of your receipt of the claim.
Institute a Document Retention Policy
As is good practice when you receive any notice that could involve potential litigation, be sure to retain all documents, electronic files, and contacts with third parties that might be relevant to the technology or service at issue. Depending on your analysis of the potential threat, this could range from instituting a formal document retention procedure to simply filing away the correspondence rather than tossing it in the garbage.
Stay Alert for Additional Notices, Letters, and Demands
Once a patent troll has you in its sights, it’s unlikely that it will give up after a single demand letter. That is why it is imperative to continuously monitor the situation, particularly in order to see if the troll increases its hostility—as is often the case. If the troll refuses to back away, doing nothing may still be the best option; however, your lawyer is a great resource and should be consulted to quickly and efficiently assess the options going forward.
Conclusion
Patent trolls have become one of the scourges of the US community. Efforts are afoot at the state and federal levels, though, to deter them with new legislation. Joining about a dozen other states, Missouri has recently passed a new anti-trolling law, and the Illinois Senate recently passed a similar legislative bill over to that state’s lower chamber. Until the goats put away all of the trolls, though, businesses are urged to handle trolling letters with care. Advice from an experienced business lawyer may help your company avoid the expense and uncertainty of the next patent infringement lawsuit.