Tuesday, 8 September 2015

IPRs and collective resistance to frivolous patent suits: changing the game, or just the rules?

Threatened businesses: safety in numbers,
or lambs to the slaughter?
Recently spotted on Inside Counsel is this piece, "Patexia helps collaboratively fight frivolous patent litigation", which writes up the Patexia Coalition Funding Initiative, the latest drive to solve individual businesses' problems through collective action. The idea is that companies facing expensive patent litigation in the United States come together to fund and file an inter partes review (IPR) of the patent they are said to be infringing. The article explains, in relevant part:
"... In the IP industry, bad actors routinely file patent suits simultaneously targeting a large group of companies using the same patent. In many cases, these actors use low quality patents to try to force defendants to settle rather than face a lengthy and expensive litigation process.

According to Patexia, the new coalition funding initiative provides an efficient solution. Patexia monitors new patent litigation across industries and when a frivolous case is filed, Patexia immediately reaches out to the targeted companies to bring them together and form a defense coalition.

Then, using proven crowdsourced patent analysis techniques with a 75 percent success rate based on client feedback, Patexia searches for prior art and partners with experienced legal counsel to take the case to the Patent Trial and Appeal Board for an inter-partes review, in an effort to eliminate the threat. ...

Companies ... contribute as little as $50,000 for a crowdsourced prior art search and the IPR. Going it alone, to fight patent litigation through IPR a company must pay $27,000 in PTAB filing fees alone (not including the attorney and expert fees). Oftentimes, total litigation costs can spike into the millions ..".
Initiatives like this can have the beneficial effect of eliminating low quality patents that lie at the core of frivolous infringement litigation -- but so long as the low quality can be tied to the existence of killer prior art, since IPRs must relate to lack of novelty under s.102 of the US patent law or non-obvious subject matter under s. 103. If however the low quality relates to the lack of precision of the patent's description of the invention or in its claims, a prior art-based attack will not be available.  Bad actors will presumably respond to shifts in the legal and commercial environment in which they operate, so the success of collective initiatives in beating the current threat may end up just shifting it from one variety of frivolous demand to another.
 
Bad players may also take note of the cost to individual businesses of collective resistance: a minimum of $50,000 for what looks like a 75% success rate. How much might they demand from businesses in order to make a licence payment more financially attractive to their victims than doing the honourable thing and clubbing together to fight the foe?
 
No rational company wants to walk away from a legitimate business because it is threatened by an unworthy patent infringement claim, and no rational company wants to pay for the privilege of what it is already permitted to do. However, there is no monopoly in rational analysis, and it must be assumed that the bad players make rational choices too -- and they will be unwilling to abandon a trading model that has hitherto incurred little cost and brought great gain.  It is therefore necessary to consider whether collective IPR challenges are really a game-changer, as most people hope they might be, or if they will only result in the same old game of hunt-the-licensee, played with different rules.

3 comments:

  1. This sort of thing doesn't seem to happen in Europe. I guess that it's too expensive to challenge the validity of a threatening patent in all the EU countries if it isn't actually used as a threat to sue till after the period for central post-grant challenge in the EPO is over.

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  2. The strategies of 'bad players' and prospective victims make a great topic for analysis as a multi-player real time non-zero sum application of game theory https://en.wikipedia.org/wiki/Game_theory

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  3. Is this initiative still live? As of today there doesn't seem to be any news of it since the date of your post.

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