Two Big Patent Trolling Cases End With Whimpers Instead Of Bangs

from the deflating-trolls dept

Here's a follow up on two big patent trolling cases that we've covered a bit in the past. The first involves the world's largest patent trolling operation, Intellectual Ventures in one of its very first patent lawsuits (for years it just threatened and got companies to settle) in which it sued Motorola Mobility, as the company was in the process of being acquired by Google (which recently announced it was selling off the company while keeping the patents). Google had been an early supporters of Intellectual Ventures back when it was being presented as a "defense fund" against trolls, before Nathan Myhrvold pulled a big bait and switch. Since then Google has been a clear target for Intellectual Ventures, since the company was supportive of patent reform that would neuter IV's parasitic business model.

That big case has now ended in a mistrial after a jury couldn't decide who should prevail. A mistrial is hardly the end, as IV is already talking about a retrial (and hyping up that it still has other patent cases against Motorola), but it certainly suggests that the case isn't nearly as open and shut as IV had been suggesting in the past.

Moving on to another high profile patent troll case. For a few years now we've been covering a company called Innovatio which was threatening lots of companies, claiming that anyone who used WiFi infringed on its patents, but that (out of the kindness of its heart) it wasn't targeting individual users "at this stage." Instead, it went after a ton of small businesses, including coffee shops, grocery stores, restaurants and hotels -- exactly the type of businesses which wouldn't be interested in spending money on a costly legal battle.

A bunch of makers of WiFi access points, including Cisco, Netgear and Motorola actually teamed up in an attempt to smack Innovatio down to protect their own customers. They noted that they had all licensed the patent in question in the past, and that should cover the end users. Furthermore, the patent itself was subject to RAND (reasonable and non-discriminatory) terms which Innovatio never mentioned to people it was threatening and suing. In fact, they argued that Innovatio was actually engaged in a form of racketeering. While a judge in the case, unfortunately, didn't allow the racketeering claims to move forward, he did determine that if Innovatio was due a license, the royalty rate was less than 10 cents per device, rather than the much, much, much higher numbers Innovatio had been pushing.

Recognizing its case was going nowhere, it appears that Innovatio has agreed to settle. Innovatio admitted that over 100 million of the devices they had sent threats over were already licensed, but has agreed to "license" the remaining 85 million devices for $2.7 million, or about 3.2 cents per device. This is how lots of patent trolling lawsuits end. Innovatio was looking for a much larger payout, but $2.7 million is still pretty significant money for very questionable activity. Cisco, in reporting this, notes that it spent $13 million on the litigation (not even counting the settlement) and highlights just how ridiculous the whole thing is, and how some basic changes to patent laws might stop trolls like Innovatio from targeting end users.

But that expenditure would not have been necessary if Innovatio had met its obligations to license on reasonable and non-discriminatory terms, and had come to Cisco seeking a reasonable license first rather than targeting our customers and those of other manufacturers. And, if our laws included provisions requiring those who target innocent third party users of products to register their claims at the FTC and make sure users know they can take their claims to manufacturers like Cisco, it seems unlikely Innovatio would have engaged in its letter-writing shakedown against end users. And if they thought they might be on the hook for the $13M we had to spend, they might have thought twice about the way they approached their licensing scheme. Provisions to deal with this problem, and with the problem of lawsuits that target users of products rather than those who develop and sell the products, were included in legislation that overwhelmingly passed the U.S. House of Representatives recently. We hope the Senate will act quickly as well.

In the meantime, we hope the “Innovatio” outcome will cause others who are undertaking similar efforts to step back and rethink their strategy.

Trolling behavior has become so pervasive in the patent arena that anyone denies that it's a problem is either lying or in deep, deep denial. However, it's good to see that a couple of big trolls aren't having quite as easy a time of it as they likely expected.