The Prior Art

Patent Litigation Weekly: A Closer Look at a New Patent Study

Two years after Richard Frenkel—at the time an in-house Cisco Systems, Inc., lawyer and now of counsel at Wilson Sonsini Goodrich & Rosati—outed himself as the until-then-anonymous author of the controversial patent litigation blog, the Patent Troll Tracker saga appears to be over.

In January, a libel suit filed by East Texas lawyer T. John “Johnny” Ward, Jr. against Cisco over the contents of an October 2007 Troll Tracker post was settled under confidential terms. Frenkel—dismissed as a defendant in the case last August at Ward's request—has declined to comment on either Ward's suit or a second, related defamation claim filed against him and Cisco by East Texas lawyer Eric Albritton. (That suit settled in September after a week-long trial; see earlier coverage on The Prior Art here, here, and here.)

While it’s clear now that at least a few high-level Cisco employees knew the Troll Tracker’s identity, company lawyers say no one there besides Frenkel contributed to the blog. Still, because Cisco is helping to lead the lobbying charge in favor of reforming the nation's patent laws—with a particular focus on lowering litigation payouts to non-practicing entities (a.k.a. NPEs, or "patent trolls")—those who advocate for small patent holders sensed a Frenkel-Cisco conspiracy.

Putting aside the conspiracy theories aside and drama—two lawyers with a high profile in the Eastern District of Texas's lucrative patent litigation scene suing Cisco and one of its in-house lawyers for libel and defamation—it seems like an opportune time to take a broad look at the big issue at the heart of the Troll Tracker tale: that the huge piles of money at stake in patent litigation has created an independent class of IP professionals? As it happens, a PricewaterhouseCoopers study released in January on just that topic has some answers.

"Patent trolling" has its rewards.

Tech-sector executives and lawyers say privately—and an informed review of court dockets confirms—that so-called trolls aren't just surviving, they're thriving. The essential NPE tactic—suing a broad swath of companies for patent infringement, then settling with each defendant for less than the cost of fighting such a suit—is now an established business model. It's so solid, in fact, that patent-holders are starting to delve into previously untouched economic sectors, suing small retailers and even photographers.

Patent Litigation Weekly: Shutter Closing on Massive Photo-Sharing Patent Suit

FotoMedia is a patent-holding company that claims just about every photo-sharing website you can imagine infringes its three patents. Its lawsuits, covered by TPA last May and June, are notable not just for the audacity of the claims they make, but also because they target dozens of small- and medium-sized software companies that provide various types of photo-sharing services over the Internet.

In previous stories about the FotoMedia suits, TPA detailed the litigation’s effect on San Francisco-based Fotki.com, which has about 25 employees, and the three-man, Texas-based software company FotoTime.

As the new year starts, some of the FotoMedia defendants are breathing a sigh of relief—and the rest may be doing the same soon. That's because reexamination requests filed with the United States Patent and Trademark Office by Yahoo Inc. appear to have knocked out nearly all the patent claims at issue. FotoMedia's lawyers at McKool Smith have reacted to that development by offering to either stay the suits or have them dismissed without prejudice (leaving FotoMedia able refile the claims at a later date.)

Patent Litigation Weekly: So What Do E.D. Texas Jurors Really Think?

This week: The Prior Art returns after its winter blogging break. As Microsoft gets set to scrap software found to infringe a Canadian company's software, The Prior Art discusses the case with three of the eight jurors whose verdict helped put the software giant in this predicament.

As of Monday—thanks to a permanent injunction issued in August by Judge Leonard Davis of the Eastern District of Texas and upheld last month by the Federal Circuit Court of Appeals—Microsoft Inc. must stop selling any version of Microsoft Word 2007 or Microsoft Office 2007 that includes a custom XML editor found to infringe a patent held by a small Canadian software company called i4i, Inc.

It’s not every day that such a well-known product has to be modified—or possibly removed from store shelves—because of a patent dispute. Indeed, the U.S. Supreme Court made getting such an injunction in a patent case extremely difficult with its landmark eBay v. MercExchange ruling in 2006.

Microsoft isn’t giving up the court fight over the patent at issue just yet. On Friday, the company’s legal team, led by Matthew Powers of Weil, Gotshal & Manges, filed a petition with the Federal Circuit asking for a rehearing en banc. Powers didn't return calls for this story. Earlier coverage on i4i's trial win, post-trial action, and Federal Circuit win is available from the AmLaw Litigation Daily.

Bilski v. Kappos Oral Arguments: Supreme Skepticism Toward Method Patents

For the first time in almost 30 years, the U.S. Supreme Court on Monday considered the issue of what types of technology should be eligible for patent protection when it heard oral arguments in Bilski v. Kappos.

Across the board, the justices indicated a deep skepticism toward the invention described in the patent application at issue, which was rejected by the U.S. Patent and Trademark Office and describes a method for trading commodities. Some of the justices went even further—expressing both a fair amount of disdain for the idea of granting broad "method" patents and a concern that ruling in favor of the petitioners would lead to patent grants on fundamental ways of conducting business or organizing human behavior.  (Click here for a related story by sibling publication The National Law Journal Supreme Court correspondent Tony Mauro.)

Based on the justices' attitude during the arguments, it not only seems extremely unlikely that Bernard Bilski will ever get the patent at issue, it also seems clear that the court is poised to establish a new, and most likely stricter, test of what is patent eligible.

Patent Litigation Weekly: How to win $25 million in a patent suit—and end up with a whole lot less

This week: DeepNines collected $25 million when it won an infringement suit against anti-virus software giant McAfee Inc. in the Eastern District of Texas two years ago. But after paying off its Fish & Richardson lawyers and outside investors at Altitude Capital Partners, the small network-security company wound up with less than $800,000 of the $25 million. And now DeepNines is being sued by Altitude, which wants millions more than it's already gotten. A revealing look at how a leading player in the lawsuit-investment trade does business.

Third-party financing of lawsuits—often described as a new and growing phenomenon—has been much in the news lately. But outside investors have been making multimillion dollar bets on patent lawsuits for years. One of the field's leading players is Altitude Capital Partners, founded by investment bankers Robert Kramer and Warren Hurwitz. Altitude, which has been investing in patent lawsuits since at least 2006, boasts of having more than $250 million to spend on such litigation.

Last week, The Prior Art reported on one patent-holding company Altitude has invested in. This week, we offer the story of another Altitude investment—one that resulted in an acrimonious lawsuit between parties that used to be on the same side.