NPE Patent Litigation: Latest Developments Leveraging Alice, - - PowerPoint PPT Presentation

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NPE Patent Litigation: Latest Developments Leveraging Alice, - - PowerPoint PPT Presentation

Jul 24, 2023 179 likes •899 views

Presenting a live 90-minute webinar with interactive Q&A NPE Patent Litigation: Latest Developments Leveraging Alice, Federal Rules Amendments, and Patent Office Proceedings in Defending Infringement Disputes WEDNESDAY, JANUARY 27, 2016

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NPE Patent Litigation: Latest Developments

Leveraging Alice, Federal Rules Amendments, and Patent Office Proceedings in Defending Infringement Disputes

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNESDAY, JANUARY 27, 2016

Presenting a live 90-minute webinar with interactive Q&A

  • R. David Donoghue, Partner, Holland & Knight, Chicago

Dana M. Herberholz, Shareholder, Parsons Behle & Latimer, Boise, Idaho

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NPE Patent Litigation: Latest Developments

  • R. DAVID DONOGHUE

HOLLAND & KNIGHT LLP 131 S. Dearborn Street Chicago, Illinois 60603 Telephone: 312.578.6553 david.donoghue@hklaw.com DANA M. HERBERHOLZ PARSONS BEHLE & LATIMER 800 West Main Street, Suite 1300 Boise, Idaho 83702 Telephone: 208.562.4906 dherberholz@parsonsbehle.com

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Overview

  • 1. Background and Trends
  • 2. Impact of Alice Corp. v. CLS Bank
  • 3. Patent Office Proceedings
  • 4. Amendments to Federal Rules and Impact on NPE

Litigation

  • 5. Strategic Motion Practice
  • 6. NPE-Proofing

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BACKGROUND AND TRENDS

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Terminology

Non-Practicing Entity (“NPE”) – Derives majority of its revenue from patent licensing or enforcement NPEs exist an a variety of forms

  • Patent Assertion Entities (PAEs) / “aggregators” / “trolls”
  • Universities and non-profits
  • Companies
  • Individuals and start-ups

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The NPE Business Model

Incorporate (often in ED Tex) Acquire patents Early Settlement

  • Demand Letter
  • Litigation (often in ED Tex)

Eastern District of Texas, Sam B. Jr. Federal Building and US Courthouse Marshall, Texas

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Common NPE Litigation Tactics

Sue first, negotiate later Assert patents with broad or abstract claims Leverage existing licenses and settlement agreements Build a war chest Leverage disproportionate discovery obligations Play the “shell game”

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NPEs By The Numbers - Median Damages

On average, damage awards to NPEs exceed those to practicing patent owners

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NPEs By The Numbers - Success Rate

Overall Success Rate for NPEs – 26% Success Rate for NPEs at Trial – 65%

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NPEs By The Numbers – All Patent Cases Filed

Source: Docket Navigator

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NPEs By The Numbers – NPE Filings

63%

  • f patent cases

filed in 2014 were filed by NPEs

Source: RPX 2014 NPE Litigation Report

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NPEs By The Numbers – NPE Filings (cont’d)

89%

  • f NPE cases filed by

patent assertion entities in 2014

Source: RPX 2014 NPE Litigation Report

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NPEs By The Numbers – NPE Filings (cont’d)

Source: RPX 2014 NPE Litigation Report

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NPEs By The Numbers – ED Tex Filings

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NPEs By The Numbers - Who Are These People?

Source: RPX 2014 NPE Litigation Report

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NPEs By The Numbers – PTAB Filings

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Impact of Alice Corp. v. CLS Bank

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Alice Motions – Success Rate

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Alice Motions: The Law

35 USC § 101: Defines the scope of patent eligibility to include “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof”

  • Exceptions: laws of nature, physical phenomena and

abstract ideas

  • But what is an abstract idea?
  • “A principle, in the abstract, is a fundamental truth; an
  • riginal cause; a motive; these cannot be patented, as no one

can claim in either of them an exclusive right”

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Alice Motions: The Law

Two-part test:

  • 1. Laws of nature, natural phenomenon or

abstract ideas?

  • 2. An “inventive concept” such that the patent is

“significantly more” than a claim to the ineligible subject matter.

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Alice Motions: The Law

Alice is not a new test.

  • DietGoal Innovations LLC v. Bravo Media LLC,

2014 WL 3582914 (S.D.N.Y. 2014).

  • Led many to say Alice changed nothing.

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Alice Motions: The Law

Alice is not a new test.

  • District courts (for now at least) feel differently
  • See, e.g., AmDocs (Israel) Ltd. V. Openet Telecom, Inc.,

__ F.Supp.3d __, 2014 WL 5430956 (E.D. Va.) (Brinkema, J.) (“Alice represents a change, or a significant clarification . . . .”) (quoting Eclipse IP LLC v. McKinley Equip. Corp., 2014 WL 4407592, at *3 (C.D. Cal.) (Sep. 4, 2014).

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Alice Motions: The Law

General purpose computer is not enough.

  • But what is?
  • Databases – No
  • Fast computing – Probably No, but sometimes.

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Alice Motions: The Statistics

About 65/35 SJ vs. MTD Claim construction generally not required

OVER 50% SUCCESS RATE

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Alice Motions: The Cases

Technologies held unpatentable:

  • Selecting daily meals to meet dietary goals
  • Web-updated database with distribution by email
  • Managing a bingo game and allowing players to

repeatedly play the same number

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Alice Motions: The Cases

Technologies held unpatentable:

  • Conversion of loyalty points from one company’s to

another

  • Monitoring locations, movements, and load status of

shipping containers

  • Claims creating a contractual relationship using

computers

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Alice Motions: The Strategies

The devil is in the details Claim drafting requires specifics

  • Specific computers
  • Volume/speed/timing of calculations
  • Details in the specification

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Alice Motions: The Strategies

Avoiding Alice:

  • Claim construction is critical
  • Show inventiveness with speed/multi-tasking
  • Force summary judgment identify

complexity

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Alice Motions: The Strategies

Leveraging Alice:

  • Rule 12 motions avoid claim construction
  • Throttle back computing/internet power
  • Perform transactions in serial
  • Challenge early & often

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Alice Motions: The Strategies

Balance offensive & defensive strategies Reconsider portfolio valuations

  • Build in cost of Alice challenges
  • Use reissues to amend and narrow claims

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Patent Office Proceedings

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IPR vs. PGR

Ex Parte Reexam. Inter Partes Review Post Grant Review Who The patent owner, The Director of the USPTO Third parties, can be anonymous BUT 3rd party not involved in proceedings Any Party BUT: The patent owner A party who first files a declaratory judgment suit Any Party BUT: The patent owner A party who first files a declaratory judgment suit Timing Within the term of the patent 9 months after the patent issues (if the patent is PGR eligible) until 1 year after the party was first sued for alleged infringement of the patent Within 9 months of the patent issuing

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IPR vs. PGR

Ex Parte Reexam. Inter Partes Review Post Grant Review Basis Novelty and Obviousness using: Other patents Printed publications Anticipation and Obviousness using: Other patents Printed Publications Affidavits Declarations (Broader) Patentability, Anticipation, Obviousness, and Indefiniteness using, not limited to: Other patents Printed Publications Affidavits Declarations (Broadest) Threshold to Determine Whether to Institute Whether “a substantial new question of patentability” affecting any claim of the patent has been raised. Whether there is a “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” Whether it is “more than likely than not that at least 1 of the claims challenged in the petition is unpatentable.”

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IPR vs. PGR

Ex Parte Reexam. Inter Partes Review Post Grant Review Appeal – decision to institute No No No Appeal – Final decision Federal Circuit Federal Circuit Federal Circuit Time to Decision

  • Avg. pendency is 2 years 12-18 months

12-18 months

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Strategy

Impact on litigation?

  • Managing two proceedings at once

Discovery considerations:

  • Multiple depositions

When should proceeding be filed?

  • Sooner: adds pressure to patent owner, may receive a

stay

  • Later: may be able to use patent owner’s statements in

litigation (Markman hearing) against it

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Strategy

Co-Defendants, Join or Stay Out?

  • Parties estopped from raising invalidity issues that “reasonably

could have been raised” in the IPR and PGR (more limited in CBM)

  • A defendant who does not participate in the IPR can raise any invalidity

defense at trial, assuming they are not held to be in “privity.”

  • A defendant who participates in, is a real party in interest or is in privity

with the IPR/PGR petitioner the cannot raise IPR/PGR defenses as trial, as well as those issues that reasonably could have been raised.

  • Participating ensures claims asserted are covered by the IPR

Initiate separate IPR?

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Advantages of IPR

  • No presumption of validity
  • Broadest reasonable claim construction
  • 3-judge panel with patent expertise
  • In almost all cases, a decision must be issued within

18 months from the filing of the initial petition to institute an IPR

  • Appeal directly to the Federal Circuit
  • COST to NPE

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Advantages of IPR

  • Lower cost than district court
  • Fast-paced
  • Stay litigation (maybe)
  • Likelihood of success
  • Settlement leverage

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Disadvantages of IPR

  • Patentee can amend claims (but not broaden)
  • Discovery is limited
  • Dual-tracking
  • Estoppel for what could have been raised
  • Only patents or publications

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Statistics – Success Rates

  • 80% petitions for IPR granted
  • 80% of trials settled/dismissed/unpatentable
  • 70% of motions to stay granted
  • 40% resolve before institution

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Amendments to Federal Rules and Impact on NPE Litigation

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Amendments to Federal Rules

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Overview of Amendments Relevant to NPEs

Clarification of Pleading Standard Acceleration of Early Deadlines Emphasis on Proportionality in Discovery

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FRCP Amendments - Pleadings

Rule 84 and Form 18 eliminated

  • Complaints should be drafted to comply with

Iqbal/Twombly and should identify:

  • asserted claims
  • accused products/functionalities/methods
  • ownership of the asserted patents
  • Expect more 12(b)(6) motions
  • Count the costs before filing 12(b)(6) motions

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FRCP Amendments - Pleadings

Hologram USA, Inc. v. Pulse Evolution Corp., 1-14- cv-00772 (D. NV. Jan 15, 2016) (denying motion to dismiss)

  • “The abrogation of Rule 84 does not alter existing

pleading standards or otherwise change the requirements of Civil Rule 8 …. Thus the Court refers to previously existing standards in ruling upon the instant Motion.”

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FRCP Amendments – Early Deadlines

  • Serve summons & complaint within 90 days of filing

(not 120)

Earlier Service – Rule 4(m)

  • Reduces time for court to enter scheduling order to:
  • 90 days after any defendant is served; or
  • 60 days after any defendant appears

Early Scheduling Orders – Rule 16(b)(2), (3)

  • Can serve RFPs more than 21 days after service of

summons and complaint and before Rule 26(f) conference

Early Document Requests Rule 26(d)(2); 34(b)(2)

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Early Deadlines - Potential Impact

Ability of parties to negotiate and reach early settlement Case administration in multi-defendant cases More upfront work

  • Identification of key custodians
  • Implementation of litigation holds
  • Gathering and producing relevant information

More interaction & cooperation among opposing counsel

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FRCP Amendments – Proportionality & Rule 26(b)(1)

Old Standard: “reasonably calculated to lead to the discovery of admissible evidence” New Standard: proportional to the needs of the case considering

  • importance of the issues at stake in the action
  • amount in controversy
  • parties’ relative access to relevant information
  • parties’ resources
  • importance of the discovery in resolving the issues, and
  • whether the burden or expense of the proposed discovery outweighs its likely

benefit

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Proportionality – Potential Impact

Big Picture

  • Minimize NPEs’ ability to saddle defendants with

discovery costs?

  • More motions and orders for cost-shifting?

In The Trenches

  • Selection of affirmative defenses and counterclaims
  • Scope of written discovery
  • Quantifying proportionality

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Proportionality – Patent Cases Applying Amended Rule 26

Gilead Sciences, Inc. v. Merck & Co, Inc. 5:13-cv-04057- BLF (Order Denying Motion to Compel) (N.D. Cal., Jan 13, 2016) (M.J. Grewal)

  • “No longer is it good enough to hope that the information

sought might lead to the discovery of admissible evidence …. Instead, a party seeking discovery of relevant, non-privileged information must show, before anything else, that the discovery sought is proportional to the needs of the case.”

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Proportionality – Non Non-Patent Cases Applying Amended Rule 26

Carr v. State Farm Mutual Auto Ins. Co., 3:15-cv-1026-M, 2015 WL 9010920 (N.D. Tex. Dec. 7, 2015) (M.J. Horan) Siriano v. Goodman Mfg. Co., L.P., 2:14-cv-1131 (SD. Ohio Dec. 9, 2015) Gowan v. Mid Century Ins. Co., 2016 WL 126746 (D. SD. Jan. 11, 2016) Elliott v. Superior Pool Prod, LLC, 2016 WL 29243 (CD. Ill. Jan 4, 2016) Fosbre v. Legas Vegas Sands Corp., 2016 WL 54202 (D. Nev. Jan 5, 2016)

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Strategic Motion Practice

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Strategic Motion Practice - Toolkit

Parties and jurisdiction Pleadings Case management MSJ Daubert and Motions in Limine Sanctions and attorneys’ fees Injunctive relief

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Strategic Motion Practice – Parties & Jurisdiction

Personal jurisdiction Improper venue or transfer under 28 U.S.C. § 1404

  • Fewer are being filed & success rate is low

Misjoinder

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Strategic Motion Practice – Pleadings

Alice Motions Sufficiency of infringement allegations (direct and indirect) Willful infringement

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Strategic Motion Practice – Case Management

Motion to stay pending reexamination or IPR Bifurcation & severance Accelerated Schedule (ED TEX Track B) Early claim construction and summary judgment motion

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Strategic Motion Practice – MSJ

Alice? Non-Infringement Invalidity No willful infringement Damages

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Strategic Motion Practice – Daubert and Motions in Limine

Daubert

  • Low success rate
  • Preservation of issues for appeal
  • Damages

Motions in Limine

  • Offense
  • Defense

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Strategic Motion Practice – Sanctions & Fees

Rule 11 28 U.S.C. § 1927 Exceptional Case (35 U.S.C. § 285)

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Strategic Motion Practice – Injunctive Relief

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What To Watch

  • Halo Electronics, Inc. v. Pulse Electronics, Inc. (enhanced damages)
  • Stryker Corporation, et al. v. Zimmer (enhanced damages)
  • In Re Cuozzo Speed Tech. v. Lee (IPR: BRI and judicial review of

decisions to institute)

  • Cooper v. Lee (petition for cert. re: constitutionality of IPR)

SCOTUS

  • In re TC Heartland LLC (jurisdiction and venue)

FEDERAL CIRCUIT

  • Cases applying amended Federal Rules
  • Cases applying Alice and Octane Fitness

DISTRICT COURTS

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NPE-PROOFING

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NPE NPE-Proofing

Avoid success and profit Do not win industry awards Do not engage in prominent marketing campaigns No internet-based marketing Avoid products with internet- based offerings

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NPE NPE-Proofing

Develop an NPE Plan Pre-litigation demand strategy Litigation strategy Defense costs

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NPE NPE-Proofing – Responding to Demand Letters

Review and understand allegations Seek clarification if you do not understand Many NPEs will give an early presentation

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NPE NPE-Proofing – Responding to Demand Letters

  • Do we do it? Did we do it before them?
  • Any revenue?
  • The patent(s)
  • Expiration
  • Priority
  • Scope
  • Assignment history
  • Asserted in other proceedings?

Due diligence

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NPE NPE-Proofing – Responding to Demand Letters

Respond courteously (if at all) Get time Do not engage

  • Tell them they are wrong, but only if absolutely clear

Less is more

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NPE NPE-Proofing – Costs

Get a realistic budget

  • Tight leash
  • Regular weekly updates

Partner with counsel – Joint Defense Group? Engage business leaders In-house dedicated resources? Early discovery gathering and production Strategic fights, not all fights Smart, early trial preparation

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Questions

  • R. DAVID DONOGHUE

HOLLAND & KNIGHT LLP 131 S. Dearborn Street Chicago, Illinois 60603 Telephone: 312.578.6553 david.donoghue@hklaw.com DANA M. HERBERHOLZ PARSONS BEHLE & LATIMER 800 West Main Street, Suite 1300 Boise, Idaho 83702 Telephone: 208.562.4906 dherberholz@parsonsbehle.com

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