Trolling for Patents
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WASHINGTON - Patent infringement claims are easy to make and difficult to disprove.
Just ask Research in Motion (RIM), eBay, Amazon, Dell and a host of other technology companies currently up to their legal eyeballs in patent litigation. (Maybe one less eyeball for RIM, which just settled its patent litigation case with NTP.)
To these tech powerhouses, the patent system simply isn't fair. The tech executives pressing the flesh on Capitol Hill these days simply can't use the term patent trolls enough when buttonholing lawmakers.
"Five years ago, there probably wasn't a tech CEO worrying about patents," Emery Simon, patent counsel to the Business Software Alliance, told reporters Friday. "But, as these people [trolls] acquire portfolios of patents, there's been an explosion of cease and desist letters and actual litigation."
Simon called the lawsuits "opportunistic litigation."
Most threatening to tech is not the amount of the potential settlement claims, stunning those may be, but court-imposed injunctions shutting down a business when some degree of infringement has been proved.
For years, permanent injunctions were a classic remedy for patent infringement. If Company A is infringing on Company B's patents, the courts were likely to shut down A to minimize the damage to B.
In the RIM-NTP case, NTP, after winning an infringement lawsuit, is seeking an injunction to pull the plug on RIM's widely popular Blackberry wireless e-mail service. But NTP, a Virginia patent holding company, does not make a competing product to fill the void. (The two sides settled at the time this column went to press.)
In a case that will be heard by the Supreme Court later this month, eBay is facing much the same dilemma. MercExchange, another Virginia patent holding company, successfully claimed in 2003 that eBay's "Buy It Now" system infringed on patents held by MercExchange.
A Norfolk, Va., jury awarded MercExchange $35 million in damages, but, significantly, the presiding judge decided an injunction against eBay was unnecessary.
As Simons notes, "People can be made whole by money."
MercExchange appealed and a U.S. Court of Appeals agreed with the company: a permanent injunction against eBay using Merc's "Buy It Now" process was in order.
The Appeals Court said the law dictates that a permanent injunction be issued once infringement and invalidity are established, except in cases of public safety.
One small problem: the Patent Act does not require permanent injunctions. It expressly states that courts "may grant injunctions in accordance with the principles of equity."
In other words, judges have the option to impose an injunction, but they do not have the pull the trigger if money can make the litigation winner whole.
"When, as frequently occurs, the claim of infringement is not made until after the new product is released, designing around the claim is no longer a realistic option," The BSA wrote in a brief in support of eBay.
"Because an injunction will issue automatically [if the MercExchange decision stands] upon a finding of infringement - even if the claim relates to only an insignificant part of the product - the target of the claim is forced to pay an extortionate settlement in order to preserve its business."
Tech finds hope in the Supreme Court's decision to hear the case. But it will be narrowly focused on judges' legal obligations to impose permanent injunctions in patent infringement suits.
After all, why would the Supremes agree to hear the case if they didn't think the law might need some tweaking?
Despite the narrowness of the case, the decision will have a powerful impact. A victory for MercExchange is likely to further embolden patent holding firms to pursue ever-escalating litigation in search of mega settlements.
Pay up or go belly up, the patent trolls will demand.
If eBay prevails, those huge settlements may be considerably diluted. Courts would still have the power to impose an injunction, protecting legitimate claims, but only when the equitable situation demands it.
That's a patent worthy idea.
Roy Mark is senior Washington D.C. editor for internetnews.com