Innovation Act

New Rules May Alter Patent Litigation

March 31, 2016

On December 1, 2015, new amendment to the Federal Rules of Civil Procedure went into effect. For intellectual property practice, the most significant change may be the elimination of the “Forms” section of the rules and Rule 84. Previously, pleadings similar to Form 18 for direct patent infringement were sufficient to satisfy the pleading standards in federal court. Now, based on previous decisions of the Federal Circuit regarding indirect infringement, commentators suggest that patent complaints will need to provide more specific factual information in order to survive early motion practice. The Federal Circuit has not yet addressed this question, but early district court decisions appear to be applying the amendments inconsistently. Some decisions have ruled that more specific fact-based allegations are required, while others have noted that the Advisory Committee comments state that the amendments were not intended to alter existing pleading standards and therefore continue to use Form 18 as the benchmark.

Although an initial complaint is one of the first steps in a patent lawsuit, it has significant procedural and substantive consequences depending on how it is drafted. Pending bills in the current Congress, the Innovation Act (H.R. 9) and the PATENT Act (S. 1137), would change patent infringement pleading requirements by amending the patent statutes in Title 35 of the United States Code.

Additional changes to the Rules relate to the scope of discovery (Rule 26), timing and objections relating to requests for production or inspection (Rule 34), and sanctions relating to electronically-stored information or “ESI” (Rule 37). Download the presentation from here.

Regarding “Patent Trolling”, Plaintiff Ordered to Pay Attorney’s Fees after First Application of New Standard for Awarding Attorney’s Fees in Patent Cases

June 19, 2014

In the case of Lumen View Tech. LLC v., Inc. , the Southern District of New York has become the first court to hand down an opinion and order following the Supreme Court decision of Octane Fitness, LLC v. Icon Health & Fitness, Inc. In Octane Fitness, the Supreme Court made it easier for defendants in patent infringement proceedings to collect attorney’s fees if the case is deemed baseless and/or was brought in bad faith. In Lumen View Tech. LLC v., Inc., the defendant (Find the Best) operated a search engine. The plaintiff (Lumen) issued a letter to the defendant threatening legal repercussions if a “one time licensing fee” was not paid for violating patent 8,069,073 (“ hereafter the ′073 patent”).

Interestingly, the ‘073 patent deals with a computer implemented matchmaking method between two or more parties. Prior to the litigation, Find the Best informed Lumen that they were not in violation of the ‘073 patent as their search engine only requires preference data from a single user and not between multiple parties, as the patented process requires. After several communications between the parties (including an accusation by Lumen’s attorney that Find the Best had committed a hate crime by using the term “patent troll”), litigation proceeded with Lumen claiming infringement of their ‘073 patent.

The court eventually ruled that the ‘073 patent was invalid for claiming an abstract idea. It further found that the case was exceptional under the totality of the circumstances test articulated in Octane Fitness, stating “[n]o reasonable litigant could have expected success on the merits in Lumen’s patent infringement lawsuit against FTB because the ‘073 Patent claimed a bilateral matchmaking process requiring multiple parties to input preference information, while FTB’s ‘AssistMe’ feature utilizes the preference data of only one party.” The court went on to state that under the motivation prong of the test “Lumen’s motivation in this litigation was to extract a nuisance settlement from FTB on the theory that FTB would rather pay an unjustified license fee than bear the costs of the threatened expensive litigation.” Finally, the court found that under the deterrence prong of the test “Lumen’s motivation in this litigation was to extract a nuisance settlement from FTB on the theory that FTB would rather pay an unjustified license fee than bear the costs of the threatened expensive litigation.” Using this reasoning, the court awarded fees and nontaxable expenses.

In related news, the Innovation Act (a bill providing changes to 35 U.S.C. with the goal of dissuading “patent trolls”) has stalled in congress. Part of this act was designed to make recovering attorney’s fees by a prevailing party easier than it is today by awarding fees “unless the court finds that the position and conduct of the nonprevailing party or parties were reasonably justified in law and fact or that special circumstances make an award unjust.” It is expected that the Innovation Act will return to the floor in a year’s time. In the meantime, Octane Fitness provides the applicable standard for recovering attorney’s fees in patent infringement cases. In light of these changes, patent owners must be more certain of their position prior to initiating litigation against an alleged infringer. Conversely, those accused of patent infringement that is believed to be baseless have one more avenue to pursue for recovery of attorney’s fees.