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David Beats Goliath In Patent Troll Lawsuit

Is there any hope for small start-up companies involved in patent troll litigation? Underdog company Newegg seems to think so. With a recent win against mega-giant Alcatel-Lucent, Newegg gives hope to the little guy facing large legal power in patent disputes.

“It is truly, truly tragic how the mighty have fallen,” says Chief Legal Officer Lee Cheng about the Alcatel-Lucent corporate trolling activity to ars technica.

In 2011, Alcatel-Lucent looked like it was dominating the e-commerce market. Not in market share, but in market power—the kind of muscle that beats its way to the top. After suing eight major retailers, as well as Intuit, Alcatel-Lucent had settled each suit, one by one.

Even though Kmart, QVC, Lands’ End, Zappos, Sears, and Amazon all eventually folded, Newegg (and Overstock.com) held out.

“It’s an operating company that happens to hold a patent,” said Cheng to ars. “But it does nothing at all to bring the benefit of that patent to society.”

On principle, Newegg pursued the case, and won. First at trial in Texas, then last Friday in Federal Circuit court appeal via summary affirmance. It took the judges just three days to uphold the Texas trial ruling.

Apparently Alcatel-Lucent was not earning $12 million from Newegg for nothing.

“These are the Bell Labs patents,” Cheng explains. “This company was once the pride of American innovation, a company that has roots going back to Alexander Graham Bell. And it ended up selling off its patents for a few bucks. What Alcatel-Lucent did was really offensive.”

Offensive in the strategy sense, as well as the moral stance.

Cheng refuses to let Alcatel-Lucent off the hook. He continues (via ars):

“They systematically sent thousands of letters out saying, ‘Hey, we own 27,000 patents, and here are some patents we think you infringe.’ They had a whole licensing group whose job was to monetize these patents, by threatening litigation and in some cases litigating. It didn’t actually matter if you did your own analysis and got back to them and said, ‘Hey guys, we actually think we don’t infringe.’ The response was something to the effect of, well, we have 27,000 patents—and you probably infringe something, so give us a licensing fee.”

It’s not just a message to patent trolls that companies are prepared to fight for their intellectual property; it’s also a message to attorneys that firms are capable of combatting these suits successfully. With just three days for summary judgment, patent troll suits can even be defeated within a reasonable timeframe.

For companies looking to legitimately protect their patents, Newegg’s experience is also a good lesson in boilerplate legal jargon. Sometimes it’s necessary to pay your lawyers to investigate individual patent disputes and customize letters to infringers. From small to large, companies are no longer afraid of legal threats to sue. In fact, many are looking for you to do just that.

Law firms and their corporate clients should work together on an IP strategy, where an offensive policy doesn’t have to be an offensive one.

Sometimes IP litigation seems more like slinging gunfights in the Wild West, as opposed to educated businessmen deliberating on the bench. For now, Newegg’s president in patent protection should keep bandits at bay.

-WB

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Patent Lawyers Happier Than Most?

Lawyers are happy in the Springtime. The months approaching April mean higher billable hours as tax season approaches. The smell of green abounds as lawyers help balance the books of their corporate clients.

What else makes attorneys happy? Going home early on a Friday or—surprisingly—staying late on Friday to work, if it’s for a rewarding case.

Lawyers, like other employees, are happier and more productive in their jobs when they’re intellectually engaged. A 2010 study by James K. Harter and colleagues showed that lower job satisfaction led to poorer performance in companies, according to the New York Times article, “Do Happier People Work Harder?”

Gallup estimates that the cost disgruntled American workers is a staggering $300 billion in lost productivity each year (via NYT).

We’ve already discussed that law firms can combat the too-unhappy-to-work blues by offering a legal issue roundtable.

A forum for discussion and learning surrounding legal issues or news will increase firm-wide happiness. A quick conversation in the morning can lead to higher levels of productivity all afternoon.

Even the U.S. government realizes the economic value of happiness. They’ve proposed incorporating an official Happiness Index alongside more traditional economic measures, like GDP.

But, if your firm is not ready to adopt more innovative approaches to workplace happiness levels, you’re in luck. This month, your firm should be busy with more than just double-checking tax returns.

This month, patent lawyers are especially happy.

On March 15, 2013, the new First-To-File patent system takes effect. For your clients, this could have important consequences and require immediate action.

Based on their patent strategies, your clients may want to get in that provisional application before the new system rolls out. In fact, some firms strongly believe the changeover will have detrimental impacts on inventors—which could be the end of your key engineering client.

Morrison & Foerster LLP recommends the following to inventors for the first-to-file changeover:

  1. Work with your scientists, engineers, or other inventors now to determine if they have new inventions that are ready or will soon be ready to file patent applications upon so that you can file any patent applications on March 15, 2013 or earlier.
  2. Accelerate research and development on commercially important inventions so you can file patent applications on them by March 15, 2013.
  3. Ensure that any new U.S. provisional patent applications that you file between now and March 15, 2013 are as complete and well drafted as any non-provisional patent application that you would expect a patent examiner to examine. If you add any new material when converting to a non-provisional application after March 15, 2013, you risk your invention being subject to the first-to-file system.
  4. File a second U.S. provisional application or foreign priority application or file a non-provisional conversion application on March 15, 2013, if you have additional material to add when converting to any U.S. provisional applications or foreign priority applications you filed on March 16, 2012 or later.

Read more about the downsides to the First-To-File system here.

Whatever your beliefs about the new patent system, however, one fact remains. Law firms should prepare notes on the regulatory changes and circulate them to clients.

The clock is ticking, and the litigation strategies of your law firm should be marching in time with it.

If you don’t want a happiness and productivity-boosting roundtable, why not a strategy session for your litigation department regarding patent cases. Now is definitely the moment to seize.

“I decided it would be fun to do patent trials,” said Richard Posner, former judge on the U.S. Court of Appeals for the Seventh Circuit, to the NY Times. Surely, with all the new changes in patent law, the fun has only begun.

Never fear, patent lawyers—you’re happiness levels (and billables) have never been higher!

-WB

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Change In U.S. Patent Requirements: Bane or Benefit To Law Firm Business?

Although the law doesn’t change until 2013, firms should consider rewriting their business strategy now.

In March, the U.S. will reconcile its previous patent system with the first-to-file system practiced by the rest of the world. Entrepreneurs can say goodbye to the first-to-invent method of protecting their intellectual property, and hello to the Leahy-Smith America Invents Act.

As a result, this Spring, American businessmen will be racing to the U.S. Patent and Trademark Office instead of the nearest law office to file their claims.

The race is seemingly to the benefit of corporations and the detriment of individuals. But, what does it mean for lawyers.

“In a race of established, well-funded businesses with defined intellectual property protection strategies (and patent attorneys in-house or working closely with the business) versus entrepreneurs that may not have any experience with the patent system and the funds to pursue robust patent strategies, the advantage clearly goes to the businesses,” claims Patrick Richards of Richards Patent Law PC in a recent article for Forbes.

Larger law firms or in-house counsel should be kept busy with new filings under this law for their ambitious corporate clients. This doesn’t preclude, however, attracting new business by offering affordable rates to navigate the new patent law for small businesses or individuals.

But, with this new streamlined and fast-tracked system, complicated and costly patent litigation is likely to decline.

In fact, some veteran entrepreneurs believe that the new law liberates individuals from seeking professional services. Because, for example, individuals will find the system easier to understand, they might also be motivated to file a patent on their own.

“In addition to aligning with international patent offices that are all on a first-to-file system, it is materially easier to operate. First-to-invent is just too hard to measure.  It is practically impossible to know if a prior invention is lurking that hasn’t yet been filed; as a result, a first-to-invent system inhibits investment in new technology areas,” says Chris Gladwin, founder and CEO of Cleversafe, also author to over 300 issued and pending patents relating to dispersed storage technology, according to Forbes.

With less cumbersome requirements for prior art searches, patent seekers may stop searching for intellectual property legal services, as well.

Despite these potentially ominous consequences within patent law, certain firms remain undeterred. Cisco Systems Inc., for one, is taking their strategy on the offensive.

The networking-equipment maker has drummed up new litigation by writing strongly worded legal claims against two patent troll companies.

Cisco’s current suit is against Chicago-based Innovatio IP Ventures LLC, which—unlike typical patent trolls—is targeting the customers of alleged patent infringers.

Cisco, based in San Jose, Calif., and co-plaintiffs Netgear Inc. and Motorola Solutions Inc., claim that Innovatio has sent 8,000 “threatening” letters to coffee chains, hotels, and other retailers using Wi-Fi equipment that includes the three companies’ technologies. The plaintiffs argue that the letters are “misleading, fraudulent and unlawful,” reports The Wall Street Journal.

Cisco’s lawsuit claims Innovatio’s actions amount to an extortion scheme and are therefore in violation of federal antiracketeering laws, reports The Wall Street Journal.

It turns out, when the going gets tough, the tough get going.

So, where does your law firm stand when it comes to the changes in patent filing requirements? And, how will your firm position its business strategy to attract (not dispel) new clientele?

-WB

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Double Agent: Hiring The Right Lawyer For Patent Disputes

Remember when your firm conference called your biggest client on Skype? No? Well, law firms may not always be on the cutting edge of technology, but their corporate clients are.

In fact, 27 percent of women business owners said in 2006 that they would invest in new technology such as computers and software over the next six months, according to OPEN from American Express via Entrepreneur.

And, by 2007, 300,000 entrepreneurs claimed Skype would become their primary means of business communication, according to Albert Lin at American Technology Research via Entrepreneur.

In addition to computer technology, mobile technology over the years has been on the rise. In 2010, business use of mobile IM led to a $2 billion-plus market in Western Europe and North America, according to Strategy Analytics via Entrepreneur.

In the U.S. alone, 31 percent of mobile-phone owners had a smartphone as of December 2010, according to a Nielsen report. The same report expects smartphones to become the majority of all American-owned phones by the end of 2011.

With technology playing such a vital role in the engineering and products of so many companies, patents to protect these business interests have become equally important. Therefore, it comes as no surprise that the demand for patent lawyers is on the rise.

According to a Bloomberg Businessweek article today, patent attorneys may account for more than 15 percent of law firm job openings while representing only 3 percent of all U.S. lawyers.

“There is a boom in Intellectual Property (IP) with many openings in what is usually a niche practice,” T.J. Duane, a principal at legal recruitment firm Lateral Link, said in a phone interview to Bloomberg.

In the event qualified candidates are unavailable, Duane believes “some firms may end up closing their positions or repurposing the general practice attorneys to focus on the nontechnical sides of these complex cases.”

Thus, aspiring or current lawyers should consider adding the Patent Bar Exam to their pedigree. Patent Agents are specialized in the preparation, filing, and prosecution of patent applications. Patent attorneys are then uniquely qualified to discuss issues with their clients regarding patent validity, infringement, and IP litigation, to name a few.

A combination of these two expertise—especially for recent law school grads—is just what industry recruiters are looking for. It adds to the level of diversity crucial for stand-out attorneys and interesting legal job candidates.

Hiring patent lawyers is not always a defensive strategy. With so much IP conflict these days, some law firms have gone on the offensive when it comes to gathering new work.

Take, for example, media-dubbed patent troll Innovatio IP Ventures, a new company making news for its attempts to profit from monetary settlements with hotels, coffee shops, and restaurant chains advertising WiFi.

Recent suits filed by Matthew McAndrews, a partner at Chicago-based law firm Niro, Haller & Niro, essentially claim if your business offers Wi-Fi to its customers, you owe Innovatio a one-time lump sum licensing payment of $2,300 to $5,000, according to an article Steven J. Vaughan-Nichols in ZDNet.

“Why are they doing this? To make money of course. No, they won’t see the millions and billions that big patent lawsuit can bring in, but those cases can take years. By suing small businesses for using a technology, they’re picking on companies without the first clue on how to deal with a patent lawsuit,” writes Steven J. Vaughan-Nichols in ZDNet.

More surprising than the fact that Innovatio IP Ventures has yet to face a class-action lawsuit is the idea that even small-business owners are not immune to high-cost, high-profile IP claims. Everybody must lawyer-up—a trend that further confirms the rising need for specialized patent attorneys.

With or without increased IP litigation, law firms should already be keeping clients apprised of business applications and impacts of the new patent law passed by Congress.

Firms (and both large and small corporate clients) across the nation can’t help but ask themselves, are we prepared?

So no matter what field of law your firm currently practices, a staff patent attorney should be in your future.

And, despite lawsuits suggesting the contrary, there has never been a better time for electrical engineering, computer science, and computer engineering students to attend law school.

-WB

For more information, attend C4CM’s course, “Writing Accurate and Defensible Job Descriptions that Comply with the ADA and FLSA.

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What Changes In Patent Legislation Means For Your Firm and Its Clients

Patent law has not seen changes for over 60 years. Today, however, the U.S. House of Representatives joined the Senate in voting on a complete overhaul of patent legislation by passing the America Invents Act in a 304 to 117 vote.

This means patents will now be awarded based on a “first to file” rather than “first to invent” basis.

Proponents of the America Invents Act argue that the bill will reconcile the U.S. patent system with patent legislation of other nations in Europe, as well as Japan. This would streamline the patent process for companies aiming to file patents in multiple countries.

The vote on this bill in the House comes just three months after a similar bill passed in the Senate in March. Before the legislation can be officially signed and passed by President Obama, both the House and the Senate must agree on a single draft.

Although the bill looks promising, it’s not easy to quell the fears and objections voice by the opposition. Those against the “first to file” system claim the law disadvantages individuals in favor of large corporations and multinationals with the money and means to pay patent fees.

“When Canada shifted to a first-to-file system in 1989, researchers noted that it ‘skewed the ownership structure of patented inventions toward large corporations and away from small businesses.’”[1]

Innovation and royalties awarded for them are ultimately what’s at stake. So, if passed, what does this law mean for your firm?

First, the bill is a win for your banking clients.

“The banking industry scored a victory when lawmakers included a provision in the bill which would make it easier for banks to get re-examination of patents on financial business processes such as check-scanning, in an effort to avoid paying patent-infringement fees. The U.S. Chamber of Commerce and the National Retail Federation joined the banking industry to push for the provision, which was opposed by some small inventors.”[2]

Second, the bill is a loss for your small tech and biotech companies—especially any that belong to the lobbying group Innovation Alliance. In at least the House version of the patent bill, fees paid to the U.S. Patent and Trademark Office (USPTO) will be—in part—diverted to Congress.

“The office runs on the fees it collects, however in the past two decades Congress has diverted upwards of $800 million in patent fees for other programs.”[3]

Some believe this “fee diversion provision” will lead to the continued backlog of patent approvals. If the USPTO maintains a fixed budget and does not retain all of its fees, the office will lack funds necessary to expedite the patent application process.

Currently there is a backlog of 700,000 unprocessed patent applications, not to mention the various challenges to applications for patents and trademarks.

Innovation Alliance issued the following statement regarding the bill:   

“The Innovation Alliance is disappointed that the House of Representatives has approved legislation that will not end permanently the diversion of user fees from the U.S. Patent and Trademark Office…  Reducing the patent backlog and strengthening the USPTO is essential for driving innovation, job creation, and economic growth. We will continue to work with lawmakers and other stakeholders to ensure that any patent bill that becomes law ends fee diversion permanently.”[4]

Unfortunately, if Congress’ joint bill does include a provision to ceiling the USPTO’s budget and divert the rest of its collected fees, the office’s backlog and the general sluggishness of the IP process will continue to affect your clients’ pending applications and suits.

Ideally, the “first to file” system will make litigation regarding intellectual property (IP) disputes easier to resolve. At the same time, it’s likely lawfirms’ larger, multinational and corporate clients will benefit most.

To conclude, it’s last call for writing your local Congressman with opinions about the “first to file” system. And, while your letter’s in the mail, best file that trademark and patent application you’ve been sitting on.

One thing that hasn’t changed about IP cases, timing is everything.

-WB

[1] http://thehill.com/blogs/congress-blog/economy-a-budget/146149-first-to-file-is-threat-to-job-creation

[2] http://online.wsj.com/article/SB10001424052702303339904576404202339206490.html

[3] Ibid.

[4] http://www.innovationalliance.net/news-and-resources/statement-innovation-alliance-passage-hr-1249-america-invents-act

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