Last month, I wrote about how a patent-holding company that has launched wide-ranging litigation against cell phone manufacturers, Saxon Innovations LLC, made an unexpected entrance at the ITC. Today I learned from Oblon, Spivak's new ITC blog that the ITC has accepted Saxon's complaint and will proceed with a Section 337 investigation. (The ITC deals with a number of fair trade issues; intellectual property disputes are referred to as Section 337 investigations.)
The ITC saw about 50 such investigations last year—a record number—but companies like Saxon, sometimes denounced as "patent trolls" since their only business is licensing and enforcing patents, have been conspicuously absent from the ITC. One presumed obstacle for such companies has been the "domestic industry" requirement; another is the sheer expense of litigating at the ITC.
The fact that the ITC is moving ahead with the investigation is not surprising. It's very unusual for the ITC to shut down a case at this stage. But lawyers I've spoken to have generally agreed that the Saxon case is pushing the envelope in terms of what constitutes a "domestic industry." There's a lot more detail on that in my story linked above, but it will be interesting to see how much of an issue this becomes going forward. In part, it depends on whether the respondents (what defendants are called at the ITC) choose to go after Saxon on that point, or focus their energies on other defenses.
The Saxon ITC case has five respondents: Nokia, HTC Corp., Research in Motion, Palm, and Panasonic. Saxon filed a companion lawsuit in an East Texas district court the same day it filed at the ITC, asserting the same patents against the same companies, asking for damages and an injunction. That case has been stayed until the ITC trial is complete.
High-end patent disputes in district court average about $5 million from filing through trial, and it typically takes 2-3 years to get through a patent trial. Compare that to the International Trade Commission, where trials are completed and decisions issued 12-15 months from filing, and legal fees during that period can get up to $10 million, or even more.
Most non-practicing patent-holders rely on contingency fee arrangements to pay for their litigation, meaning their lawyers have some "skin in the game." But if your legal bills are pushing towards the $1 million a month mark in an ITC case... well, that's a whole lot of skin in the game.
Neither Saxon Innovations nor their attorneys at Pepper Hamilton returned my calls when I reported on their ITC complaint in December, so I'm not expecting a press release detailing the fee arrangements for this case anytime soon. It's worth noting that Saxon is backed by Altitude Capital, an investment bank with $250 million to invest in the patent lawsuit business.
In any case, Saxon's mere presence at the ITC, backed by a major law firm like Pepper Hamilton, seems like a sign that the business of pure patent enforcement is toughening up, not fading away. Even if the patent-licensing shops lose their ITC battles, they're going to leave a lot of scorched earth.
Saxon Innovation's ITC case is Investigation No. 337-TA-667. The corresponding district court lawsuit is Saxon Innovations, LLC v. Nokia Corp. et al, 08-cv-00494-LED, E.D. Texas (Tyler).
Image via Wikimedia: Charlemagne at war with the Saxons.