The Prior Art

Blast from the (recent) past — Troll Tracker's take on 2007

In my last post I discussed briefly our 2007 patent litigation survey. In January, Patent Troll Tracker blogger Rick Frenkel reported his own survey of 2007 patent litigation, counting defendants in seven top jurisdictions and extrapolating those numbers to report a dramatic 31.5% increase in the number of defendants sued last year.

I have not checked this data, but I can say most of the lawyers I spoke to for our annual patent litigation survey thought there was a clear increase in multi-defendant lawsuits. (Google experienced an 800 percent increase in patent litigation last year, to take one prominent example.)

I think it's worth getting a variety of views out there about the year that was in patent litigation, and I'd rather let this stand in Frenkel's own voice. This post is from an archived copy I saved in late February.

Patent Litigation Survey 2007

This year’s patent litigation survey is up on IPLB.com (free registration required). Here, I want to include a note about our methodology and the nature of  this survey. The patent litigation survey is an attempt to simply measure which law firms handle the most patent litigation in district courts, and this year (for the first time) at the appellate level.

We’ve refined how we try to measure this over the years; one result of those improvements is that comparing our surveys year to year isn’t an exact apples-to-apples comparison.

This year, there’s one major change worth noting here: we counted only patent cases filed in 2007 that were alive for at least two months. Last year, we counted patent cases filed in 2006 that were still alive in February 2007. Both rules are attempts to discount here-today, gone-tomorrow lawsuits. This year's method is more consistent, but probably resulted in slightly higher counts all around.

Two other things to keep in mind:

• We don’t differentiate between lawsuits. On our chart, a law firm that works a defense case that settles in three months gets the same credit as a case where a firm will see a client through a lawsuit that includes years of no-holds-barred court battles.

• We don’t count defendants. Big multi-defendant lawsuits are counted just once for a plaintiff, and count individually for the defense law firms. (but a defense law firm gets one “point” for the lawsuit, whether it defended 10 clients or just one.)

It’s worth mentioning here a different survey that did count defendants, the only one I am aware of—the data gathered by former Patent Troll Tracker blogger Rick Frenkel. He estimated a dramatic 31.5% increase in the number of defendants sued last year. His numbers are worth re-considering; I will re-publish them in my next post. Tomorrow, I'll put up some extra analysis of my own.

Highlights from the July issue

Some highlights from the IP Law & Business July issue, now available online:

Cover story is The Reexamination Gamble: Once belittled as "poor man's litigation," reexamination is now a hot defense tactic in patent infringement cases.

Should the Music Stop for iTunes? Copyright law raises questions about the license for Apple's popular download service.

Another IP Fight in Congress: Artists's groups rebel against copyright law proposals governing orphan works. (They join Lawrence Lessig, who split with some groups he's usually allied with on this one.)

Never a Dull Moment: Our wrap-up of 2007 in patent litigation. More on this to be posted shortly.

(all IPLB stories free w/ registration)

eBay: punished in Paris, exonerated in Manhattan

The long-awaited Tiffany v. eBay decision came down today—a big defense win for eBay. Judge Richard Sullivan's opinion makes clear that the onus for finding counterfeit goods is on the mark-holder, not the market-maker. His opinion comes just two weeks after a French court made the opposite finding, holding eBay responsible and ordering the company to pay more than $60 million.

In the New York case, the court ruled that eBay's use of the Tiffany marks is "nominative fair use."

An oft-overlooked aspect of both of these cases: they aren't only about fake goods. Both Louis Vuitton and Tiffany exercise tight control over all of their sales; not only do they fight counterfeiters, they also take action to control legitimate markets for new and used goods. The French decision against eBay, which some called a "hometown verdict," wasn't just about fakes; it was about control of the marketplace for the real goods. MarketWatch columnist Therese Poletti notes that eBay was found guilty of "unauthorized sales of certain authentic LVMH perfumes" including Kenzo, Guerlain, Dior and Givenchy, which were sold outside the "approved" channels—and that, she writes, "reeks of protectionism."

In his decision, Judge Sullivan makes it clear that doesn't fly stateside. When it comes to secondary markets, luxury goods makers can't have total control. He writes:

While rights holders such as Tiffany may have obvious economic incentives to curtail the sale of both counterfeit and authentic goods on the Internet — after all, every sale of Tiffany jewelry on eBay potentially represents a lost sales opportunity via Tiffany’s own authorized distribution channels — the law provides protection only from the former, not the latter.  Clearly, eBay and other online market websites may properly promote and facilitate the growth of legitimate secondary markets in brand-name goods.

Selected early responses: Legal Pad quotes Stanford's Mark Lemley, who writes that "the U.S. has a legal system that respects and encourages the development of the Internet, and France, so far, does not.” Santa Clara's cyberlaw expert, Eric Goldman, calls the case "a nice clean win" for online service providers who haven't known what to do about trademark takedown notices; and adds that "the battleground might just shift to the Second Circuit or Congress." More coverage: Law.com, WSJ, NYT, CNET, AP.

Tiffany Inc. v. eBay Inc., 04-cv-04607, S.D. New York, was filed in 2004 and went to a week-long bench trial (no jury) on November 13, 2007. Tiffany was represented by Arnold & Porter; eBay by Weil, Gotshal & Manges. 

Photo: Flickr/liewcf
 

Patent Venue: Is E.D. Texas the "new Delaware?"

Things got busy recently with the close of another print issue and I have committed blog-neglect; but this week TPA is officially back on track.  

Our annual patent litigation survey is up. More on that later this week. I'm not giving anything away if I note that last year was the year E.D. Texas officially became the patent litigation capital of the country, with 371 patent filings in 2007.

In our survey, we measure which law firms are doing the most work; but arguably the most interesting patent data these days is about venue. I recently added a new patent blog to my reading list: the Patent Appeal Tracer, by Cleveland lawyer Kyle Fleming. Kyle has some interesting new data up today about venue in patent cases, measuring each district's patent infringement filings on a per judgeship basis. On that basis, E.D. Texas is again the leader, with 46.375 cases per judgeship, and Delaware is close behind with 41 cases per judgeship.

West Wisconsin rates third, with 25 cases per judgeship. (The Western District of Wisconsin, based in Madison, has only two judges, and pulled 50 patent cases last year.) Some observers thought W.D. Wisconsin might be the "new E.D. Texas," but the recent $3.8 million smack-down of the Plutus IP patent-holding empire might put a chill on that.

C.D. California, New Jersey, and N.D. California are in 4th, 5th, and 6th places, respectively. Take a look at the full table at PA Tracer. To me, this data further shows how extraordinary the E.D. Texas concentration is, and it's interesting that Delaware is right up there with it. Delaware, of course, is home to lots of big corporations, at least on paper, so it's not surprising that some kinds of litigation would concentrate there.

On his now-defunct Patent Troll Tracker blog, Rick Frenkel wrote that patent lawsuits actually shot way up in 2007, when you look at the number of defendants sued. He counted defendants in several popular patent venues and extrapolated to arrive at his estimate. Most of the lawyers I spoke to for our patent litigation survey backed that up (anecdotally), saying that multi-defendant lawsuits seemed way up over the previous year.

Patent-holders' next target: medical device makers?

I reported a few weeks ago that following two big verdicts against Boston Scientific, patent-holding company Acacia Research Corporation filed a lawsuit in the medical-device area. Acacia subsidiary Cardio Access LLC filed a patent infringement lawsuit in East Texas against Boston Scientific, Medtronic, and Johnson & Johnson. Those three companies have fought patent battles in U.S. courts with regularity over cardiac stent technology.

(For more on that read "Keeping Arteries Cleared and the Courts Clogged," NYT Oct. 2007.)

Yesterday, Cardio Access dropped that lawsuit and re-filed in the same district, adding a fourth defendant, California-based Edwards Lifescience Corp. Same technology at issue, U.S. Patent No. 5,254,097, which relates to certain kinds of catheters and cannulae used in heart surgery. 

Cardio Access is represented by Texas-based Nelson Bumgardner Casto PC. Johnson & Johnson was represented by Sidley Austin in the first Cardio Access lawsuit; other defendants have not yet named counsel. I put calls in to both Acacia and Nelson Bumgardner but haven't heard back yet.

Acacia, based in Newport Beach, Calif., mostly acquires patents in the high-tech area, but it has bought in to a few medical areas, purchasing patents related to purifying plasmid DNA products (pdf), heated surgical blades (pdf), and recently some patents alleged they say to read on latharoscopic surgery (pdf). According to another press release, the company appears to have acquired what sounds like the Cardio Access technology (pdf) in January—one month before Boston Scientific started its $750 million losing streak.

For Acacia, that has to look like good timing. But it's worth noting that even after the big losses, BoSci's stock price has held steady. Acacia, meanwhile, has had its stock price tumble by nearly 75 percent since November, when it lost its first jury trial to a team led by Weil, Gotshal litigator Matt Powers.

The Prior Art, email-style.

Last night, I mustered up all of my limited HTML skills to add an email subscription option to the blog and make it look pretty... sort of. I really enjoy blogging. But come to think of it, making things look "sort of pretty" is actually a good description of how I spend a fair amount of my blogging time, unfortunately.

In any case, I may need to write in a time-consuming manner, but there's no need for anyone to read in such a way. I enjoy keeping up on several favorite blogs via email updates, so I'm glad to have the option available here. Button is on your left. The daily email gets sent out between 3:00 and 5:00 a.m. Pacific Standard Time.

Other housekeeping issues: I messed around with the categories, creating a very primitive hierarchy that separates companies, law firms, cases (specific litigation I'm following), and categories that are subject matter-related. I'm erring on the side of more categories rather than less for now, even though lots of categories just have a post or two in them. We'll see how that works out; hopefully it will be useful.

Finally, I'm not going to keep putting the TrackBacks option on future posts; it's just not that popular and seeing a little TrackBack (0) on every post makes me sad. So that's that! Onward and upward. 

Bitten by patent-fish? Try "Catch and Release."

Several large tech companies have teamed up to try to defend themselves against patent lawsuits in a venture called Allied Security Trust, first announced to the Wall Street Journal.

Seven of AST's 11 members have been publicly identified and were confirmed by CEO Brian Hinman (at right) when I spoke to him yesterday; they are Sun Microsystems, Hewlett-Packard, Cisco Systems, Google, Ericsson, Motorola, and Verizon.

The basics: membership costs a bit less than $500,000, and each member has to put up $5 million for patent purchases. The strategy is what Hinman calls a "catch-and-release" model: AST will buy the patents, give nonexclusive licenses to members that want one, and return it to the marketplace. That will recoup some of the members' costs; it will also, of course, keep the litigation environment a few degrees hotter for non-members.

Hinman is quick to point out that the fund is just one part of patent defense strategy, not a panacea. "We are not obtaining all the patents in the universe that are problematic," says Hinman. But AST will negotiate—quietly, through brokers—to buy some of the really problematic ones. "Litigation costs and settlements continue to be on an upward trend," he notes, and a little dent in costs could go a long way.

Are there enough fuzzy-boundary technology patents out there to keep defendants jumping regardless? We'll all find out in due time; meanwhile, a burgeoning class of IP middlemen has cropped up to help clients navigate the economy's ever-costlier patent landscape.

On its website, AST describes its mission as "freedom of operation and cost reduction." No profits for the trust, and no lawsuits against anyone—a promise that Nathan Myhrvold at Intellectual Ventures hasn't quite been willing to make, to the consternation of many.

AST goes public just a few months after PatentFreedom, another patent consultancy with a defense-side business plan, made its debut. Both companies rise against the backdrop of a stalled patent reform bill in Congress and an explosion in patent assertions.

Interestingly, both Hinman and PatentFreedom CEO Dan McCurdy have long work histories at IBM.  McCurdy spent about 12 years at Big Blue in various capacities, leaving in 1996; Hinman worked at the company for 15 years, and left his position as VP of Intellectual Property and Licensing just a few months ago to start up AST.

I'll have more on AST in the August issue of IPLB.

The spicy quote in AST coverage so far is from Acacia Research CEO Paul Ryan, who tells Bloomberg News that the formation of Allied Security Trust "is an acknowledgement" that its members are infringers. "Otherwise they wouldn't have any exposure," he says.

Just the sort of saber-rattling that can be good for the shield business, I imagine.

SAP settles E.D. Texas patent lawsuit for $83.3 million

It's not a jury verdict, but it is eight digits long and comes from East Texas. On Friday, it was announced that German software company SAP agreed to pay $83.3 million to settle patent infringement claims brought against it by supply-chain consultants i2 Technologies Inc.

Dallas-based i2 filed this case in the Eastern District of Texas (Marshall) in September 2006, asserting seven patents were infringed by SAP. In August 2007, SAP hit back, firing off its own patent suit against i2 in Northern California (Oakland). Doesn't look like that case went too far, and it has also been stayed pending this settlement.

i2 Technologies' revenues have steadily declined over the last several years. For 2007, i2 Technologies reported a $17.7 million net profit on $260 million of revenue.  The company has about 1,300 employees. [10-K] The much larger SAP reported a €1.94 billion net profit on €10.25 billion in revenue. [6-K]

The case was i2 Technologies US, Inc. et al v. SAP AG et al., 06-cv-00352, E.D. Texas. It was slated to go to a jury in November of this year, in Judge T. John Ward's court.

i2 Technologies was represented by McKool Smith in this litigation; SAP hired Finnegan Henderson.

This settlement is clearly no fun, but the more worrisome litigation for SAP is surely not a patent lawsuit but competitor Oracle's allegations of "corporate theft on a grand scale." Oracle says its damages in that case are likely to be $1 billion, reports MarketWatch.

 

Trademark disputes and the hometown advantage

Of course, I dutifully prepared a post titled "Monday Morning Trademark Notes" over the weekend, only to have the biggest trademark news of all strike... right after the post publishes. I'm referring, of course, to a French court's decision yesterday that eBay must pay $61 million to LVMH Moet Hennessy Louis Vuitton SA.

We're still waiting for a decision on the Tiffany v. eBay case heard late last year in Manhattan. I have reason to believe a lot of folks are waiting on that verdict; I've noticed quite a few hits on my own blog by people searching for terms like "tiffany ebay verdict," despite the fact that I mentioned the Tiffany v. eBay case only once, quite briefly, in December.

Dan Slater at the WSJ raises an interesting question: could the French ruling could be considered a "hometown verdict?"

That's a question that could be asked in plenty of stateside IP disputes, as well. Viacom sued Google in Manhattan, not California; Tiffany's sued eBay in Manhattan.

We're not talking about venue shopping; in both of those examples, plaintiffs sued in their home base. But still, it's interesting to think about what kind of hometown advantage can be reaped. If I were a big mark-holder, I'd like Manhattan. A Manhattan jury is likelier to have folks who, if they don't work for a big fashion brand themselves, might have a brother or aunt or half-sister's dog walker's buddy who is connected to such a company. Similarly, a Northern California jury is likely to have jurors with connections to technology workers. People in Los Angeles are more likely to sympathize with a movie studio.

Maybe I'm stating the obvious here. But I live in San Francisco and spend a lot of time with family and friends in Los Angeles. Both of those regions have large and diversified economies. Despite that, it's surprising to me how much they can both feel, in a way, like "industry towns."