Waiting for the Anger to Subside.

I’ve been waiting for the anger to subside.

For much of my career, I’ve witnessed the waste and distraction to American business caused by patent trolls and the burden they place on our judiciary. Despite my sometimes cynical attorney exterior, this year I had genuine hope that the U.S. Senate would finally make the legislative changes necessary to remedy this situation. After all, in an era when U.S. politicians can agree on very little, both the House and President came out strongly in favor of patent litigation reform. All that was left was Senate approval. Evidently the patent trolls were anticipating legislative reform as well. This graph (courtesy of Lex Machina)  shows the number of patent cases filed in Federal Court this calendar year. See that spike? Those are patent lawsuits filed immediately before the cutoff date for retroactive application of the fee shifting provision contained in the proposed Senate legislation.

2nd graph

But, in the end, the Senate, after extensive hearings and fact finding, chose not to take action. By doing nothing, the Senate decided that it values jobs for trial attorneys over jobs in STEAM (science, technology, engineering, arts and mathematics) and other areas of innovation.

Senate lobbying by trial attorneys against any type of legislative patent reform was expected.  But, I think many underestimated their influence, especially given the large number of American retail and tech companies that supported the legislation – the signatories to this letter, for example. Also of surprise was the opposition from colleges and universities, many of them public institutions who presumably want to see patent trolls continue to grow as a source for universities to monetize their patentable innovations.

Think about that last nugget for a moment.  Whether through tuition or taxes, we are all funding colleges and universities to educate our citizenry and create employment opportunities. Yet at the same time, many  of these same institutions are selling patents to patent trolls and actively opposing patent reform, and, as a consequence, supporting a system that diverts company resources from funding job creation to litigation defense.  Anyone see a conflict here?

But all is not gloom – far from it. In April, the Supreme Court, unlike Congress, chose to take action. In its decision in Octane Fitness v. Icon Health, the court expanded the circumstances under which a winning litigant can recover attorneys’ fees, helping to end the asymmetry on which patent trolls thrive. Since then a number of courts have taken this decision to heart and begun awarding fees. For my fellow in-house practitioners, make sure to read Judge Cote’s Opinion and Order in Lumen v. Findthebest.com. I’ve never met Judge Cote, but she has become my new judicial superhero.

And, at Adobe, we continue to channel our inner-Churchill (“…we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender…”) with great success. This year we have had four cases in which patent trolls requested a dismissal before trial – and Adobe paid nothing. In one case, we were successful in disqualifying a law firm representing a patent troll because the firm had previously represented Adobe. Then we took it a step further and sued the firm for recovery of our attorneys’ fees – and prevailed. In this battle, law firms need to decide whether they are going support patent trolls or companies. (For similar reasons, we have a policy at Adobe of not employing law firms who also represent patent trolls.)

Last week, I sat through extensive reviews in preparation for two patent troll cases that are scheduled for trial in late summer. In one case, Adobe is alleged as the patent infringer;  in the other, we are indemnifying one of our customers. In both, we are well represented, prepared and looking for our day in court.  If Congress won’t act, it is up to all of us to defend ourselves against these abuses. Patent litigation defense is expensive, time-consuming, and wasteful of resources. It can be tempting to just shell out a few dollars to make the current case go away.  But, for those that can afford it, standing up to the trolls is the right thing to do, and the only path forward.

 

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Letter to Jens

Jensie:

It’s almost too much to ask. At 42 years old, you are twice the age of some of your opponents in one of the most grueling of sports – professional cycling. Yet, each year you astonish us. In 2013, it was your surprise Stage 5 Amgen victory against some of the greatest sprinters in the world. Before that it was your stage wins in the Tour de France. Too frequently, it is your almost inhuman ability to recover from crashes.

You’re living proof of what Mark Twain said: “Age is a matter of mind. If you don’t mind, it doesn’t matter.”

You never seem to mind.

photo 3But, as with many of your other fans, I find myself wondering if you can do it again this year. After riding up Mt. Hamilton over this last weekend, I’ve decided that tomorrow’s Amgen Stage 3 is your best chance. Leaving San Jose, the route winds over Mt. “Ham” and ends atop Mt. Diablo, 108 miles later.

You are renowned for being one of the more loquacious riders in professional cycling. It’s not just that you’re talkative, but it’s also your German accent and, above all, your infectious energy that fans and fellow riders find so entertaining. Use this to your advantage!  Mt. Ham is putting on its springtime spectacle. Wildflowers are exploding across the hills. Take some time this evening to learn about a few of them. Then, as the peleton is making the climb tomorrow morning, begin giving everyone a lesson about the flora of Santa Clara Cophoto 6unty.

Wiggo, that purple flower is a penstemon. Did you know that Native Americans used it for the treatment of sexually transmitted diseases?  Ja, it’s true. Maybe you want to stop to pick some?”

Phinney, that plant with the red flowers is called ‘Castilleja’, but many refer to it by its common name – ‘Wooly Indian Paintbrush’.  Those flowers are edible. Some people dry them and use them as a condiment. You should stop and try some! You can catch up with me later.”

photo 4Carter, those are Golden Poppies, they match your Optum team colors  very nicely, don’t you think? You should  pick a few for your team masseuse – she will love them.” (Don’t tell Carter that this is the California state flower and picking them is illegal – with luck he will be arrested before the climb up Mt. Diablo.)

Can you imagine how the younger riders will respond when you begin providing this tutorial as you climb toward the summit?! They will think not only does the old guy have the lungs and energy to keep up with them, but he proves to be an expert in native wildflowers as well!photo

If by any chance the other riders aren’t sufficiently distracted and are still with you, take their line and force them to brush against the leaves of this plant. It won’t have any immediate effect, but by Stage 6 the itching should make for a long and challenging day in the saddle.

When you see this sign – make your move! Five quick miles and then a smooth descent toward Mt. Diablo. All you need to do is channel your mantra of “Schließen Sie Beine.”

photo

Lastly, if you feel your energy flagging before the summit, I left a small bottle of Berentzen for you at the observatory.

Glück!

Your pal,

 

mike

 

 

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If it Quacks like a Duck…

As I discussed recently, the modus operandi for patent trolls is to blanket an industry or market with threats of litigation (or actual lawsuits), while doing little research to determine if the cases have merit. Patent trolls know that some portion of companies will pay quickly to get rid of a case rather than go through the distraction and expense of fighting a lawsuit.  A couple of recent successful cases where Adobe did not settle, are illustrative of how patent trolls operate.

The first case involved a patent troll known as TQP.  TQP is headquartered in Texas and appears to have two employees. One is the inventor of U.S. Patent 5,412,730 (granted in 1995), which TQP claims to apply to certain encryption algorithms used by most current internet browsers. The other employee is an attorney.

Quick question – does anyone else think that something’s amiss when 50% of a company’s employees are attorneys?

Since 2008, TQP has filed patent lawsuits against more than 200 hundred companies ranging from financial institutions to airlines, mobile phone companies, insurance companies, drug stores, grocery stores, energy companies and tech companies asserting that these companies infringe Patent No. 5,412,730.

Given the number of companies that TQP has sued, it wasn’t a surprise to Adobe when we were also named as a defendant. What was surprising, however, was that the law firm representing TQP was Russ, August & Kabat.

Let me see, where have I heard that name before? Oh, yeah, now I remember. This is the same firm that has represented Adobe in a variety of patent related work since 2006. This work included  reviewing Adobe’s technology and providing opinions that Adobe did not infringe various patents in cases brought by patent trolls.

In the legal world that’s what we refer to as a “conflict of interest”. A big one.

As a result, we asked the court to disqualify Russ, August & Kabat from representing TQP in the case against Adobe.  The court agreed and given that, among other factors, TQP did not want to bear the cost or complexity of hiring another firm to represent them, especially against someone willing to fight, they dismissed Adobe from the case.  The right outcome for Adobe, but not without cost. We spent $300,000 in legal fees to defend the case. We have since instituted a state court action against the law firm asking for the return of some of those fees.

It’s worth noting that the first time we learned that they weren’t our counsel anymore was when the law firm sued us on behalf of TQP. That’s not how law firms are supposed to behave. But as Glenn Frey would say, “the lure of easy money, it’s got a very strong appeal.”

In another case, a different strategy achieved a similar result for Adobe.

Ingeniador is a company with its principal place of business in San Juan, Puerto Rico. I can find nothing that indicates that Ingeniador actually makes any products.  Instead on its website it claims to be “a worldwide team of scientists, engineers and entrepreneurs pioneering leading-edge research in mobile, e-commerce and healthcare technologies.  Ingeniador is proof positive of the globalization of innovation.”

Ducks

Perhaps some of that is true, but if it walks like a duck, and quacks like a duck…

In 2011, Ingeniador filed lawsuits in Puerto Rico against 16 companies  including Oracle, Microsoft and HP alleging that they infringed on U.S. Patent No. 6,990,629 through use of LDAP, a widely used industry standard protocol for maintaining and accessing directory information over the internet. These cases were all settled or dismissed.

In December, 2012, Ingeniador filed another round of lawsuits against nine companies, including GE Healthcare, Nuance Communications, McKesson Corp. and Adobe based on the same patent. These lawsuits were filed in Texas.  Within 6 months of filing all the defendants, except Adobe, had either settled or been dismissed from the lawsuit.

Adobe chose to keep fighting the case (rejecting several offers to settle) and filed a request to change venue so that a trial would take place in Northern California. We thought this made more sense. After all, if Ingeniador is headquartered in Puerto Rico and Adobe is headquartered in California, doesn’t it make more sense to have a trial in one of those two locations rather than Texas?

The Texas trial judge agreed with us and granted our request.  And, no surprise, within 2 months of the judge’s ruling, Ingeniador decided it had lost interest in pursuing Adobe and agreed to dismiss the case against us.

Again, a good result for Adobe, but this time one which cost the company $700,000 in legal fees.

Two Supreme Court decisions last week may help to reduce the asymmetry that creates an incentive for patent trolls to threaten or sue whomever they wish wherever they wish, regardless of the merit of the case. But, in the end Congressional action is what is needed.

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Five Things from: April

1. “Joy (joi) n. 1. a. Intense and especially ecstatic or exultant happiness.” Visually it looks like this.

2.  I thought Amelie  was fiction?

3. For all my golfing friends who are ready to make the change.

4. For all my cycling friends.

5. Your Meme o’ the Month.

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A Favor to Ask.

Saddle

A few years ago, while between jobs and after a particularly stressful period in my life, I decided to do something to replenish myself. On some level, I think I aspired to find my inner Alexander de Tocqueville, Everett Ruess and Jack Kerouac. (Or, perhaps, it was just an excuse to relax, get in shape and enjoy a few cold beers.) The result was that I bought a touring bicycle and some panniers, loaded them with camping gear and spend a few months pedaling across America by myself.

Given my lack of preparation and training, it should be no surprise that for much of the ride, I was in pain. Whether it was due to sore muscles, a chaffed butt, miserable weather or just plain loneliness, on many evenings I would crawl into my sleeping bag and think that the following day I would call it quits.

Yet, without fail, when the sun rose the next day I would awake to a message from a friend (who proudly goes by the pseudonym “Polish Super Hero” – or “PSH” for short) that would motivate me to get back on the saddle and keep pedaling. These messages ranged from supportive entreaties to drill sergeant-like derisive insults – with occasional prescriptions for “medicinal agave juice” (i.e. tequila) for my various aches. But they were just the push I need to keep going.

And, it turned out to be one of the most wonderful experiences of my life.

Since finishing this bit of mid-life wanderlust and returning home, I’ve enjoyed many long rides in the Santa Cruz mountains with PSH and listened to him describe his role as president of the Aldar Academy, a non-profit school for students with severe learning, emotional and behavioral problems. Aldar is one of those schools where teachers work tirelessly to help the most troubled children – children that public schools are ill-equipped to support. If you have a friend or family member who has these challenges you know how valuable it is to have a place like Aldar as part of your community.

Unfortunately, as a result of the recession, Aldar has faced funding challenges due to the reduction of available public and private funding during the last few years. On many of our rides, I listened  as PSH shared the difficulties of raising money and the positive impact that “just a few more dollars” would make.

After one of the rides, I thought of an idea to help, something which would tap into our mutual love of cycling and in small part repay him for his support during my journey across the country. When I did that ride I had a surprisingly large number of people who urged me to write a book about my travels. So, with their encouragement, I did.

Changing Cadence recounts the story of my travels through the farming and fishing communities of the South; the ranch lands and Bible Belt of Texas; the lonely deserts of New Mexico and Arizona; and finally up the coast of California. It also describes the wonderful diversity of people I met along the way – the brokenhearted woman from London exploring the West alone on a motorcycle; the pair of college students walking across the country in support of the Tea Party; the woman hiking the circumference of the country on a prosthetic leg (along with her three-legged dog); and fellow cyclists like Don, a middle-aged, yarn spinning, former Marine with a grey ponytail and a penchant for McDonald’s Egg McMuffins.

So, for all you IPA drinking, Clydesdale bodied cyclists; weekend warriors; or those of you who sit at your desks and wonder what it’s like to unplug and venture into the unknown, I have a favor to ask. Please purchase a copy of Changing Cadence. I think you’ll enjoy the story, but more importantly you will be helping a wonderful non-profit organization, because all proceeds from the sale of the book will be donated to the Aldar Academy.

Changing Cadence is now available on Amazon.

Thanks for your support.

mike

 

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Five Things from: March

1. So cool working for a company that enables digital creativity like this.

2. His best performance ever.

3. Spring is here, which means it’s time for guac!

4. Mowing the lawn at midnight is right around the corner.

5. Tragic that, because of its complexity, one of the most important documents of the last decade will go unread in the face of sound bites from media pundits. Start at page 27.

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Troll Wars (a story in three parts) – Part 3

Part 3 – The Problem Can Only be Solved by Congress

When it comes to claims by patent trolls, the short answer as to why more companies don’t fight back is – cost. A company can expect to incur several million dollars for outside counsel, expert witness, and jury consultant fees to defend  a case involving a single patent.  If multiple patents are asserted the costs are significantly higher. In addition, there is time required of a company’s finance, legal and engineering teams to support the company’s defense – time better spent on the company’s business. In the Select Retrieval case, discussed in my last post, we spent more than $200,000 defending our customer even though that case was resolved very early in the litigation process. For a small retailer or a start-up this amount could be prohibitive.

The lawyer representing the patent troll who told me it was about “economics” was correct, of course. It is about economics – asymmetrical economics. A lawsuit by a patent troll potentially puts at risk a company’s products (in the remote case where a jury finds infringement), but more importantly requires a company to incur the costs described above.  On the other hand, the cost to a patent troll is almost negligible. While there is some risk that a patent might be found to be invalid during the course of litigation, this happens infrequently. Also, lawyers for patent trolls are usually paid on a contingency basis. Consequently, the patent troll has little out of pocket expense – but tremendous upside opportunity.

If the root of the problem is asymmetrical economics, why don’t we change things to level the playing field?  For example, what if we allowed the prevailing party in a patent troll litigation to recover its legal fees from the other party?  Risk and expense are then part of the equation for BOTH parties.

Surprisingly, current law already provides for this. Under 35 U.S.C. Section 285 a court “in exceptional cases may award attorney fees to the prevailing party.”  Many commentators, including Judge Rader, chief judge for the U.S. Court of Appeals for the Federal Circuit, have advocated that judges apply this law more often. Yet courts rarely do because of confusion over what constitutes an “exceptional” case. Does this mean that the lawsuit was brought in bad faith? That it was objectively baseless? It’s unclear. Currently, there are two cases before the U.S. Supreme Court that may provide clarity.  However, given the reports of how the hearings went, it doesn’t look like the Supreme Court will be able to rationalize the standard to a level that will actually solve the problem.

The uncertainty in the application of Section 285 also goes to the question posed in my last blog: “Why did Select Retrieval settle for nothing?”

The answer could be that Select Retrieval had settled or dismissed most of the other defendants in the California case and didn’t want to litigate against just a single defendant in one court. Or, it could be that Select Retrieval knew that it had a weak case and didn’t want to risk losing at trial and having attorney fees awarded against it under Section 285.

After Adobe settled the case with Select Retrieval, we asked the court to award us attorney fees under Section 285. In our view, the fact that Select Retrieval dismissed the case with no payment indicated that they filed the lawsuit in bad faith, with no real belief that they would prevail on the merits.  The court, however, rejected our request finding that Select Retrieval’s conduct did not meet the “exceptional” standard because the case was dismissed and, consequently, the merits of the lawsuit were never tested. In other words, in this court’s view, absent some type of clearly egregious conduct by a patent troll, the court will not award attorney fees unless there is a trial. Because most patent troll cases never go to trial this means that Section 285 won’t change the asymmetrical economics.

The real answer lies with Congress. There are currently a number of proposed bills in the Senate directed at patent reform and the patent troll problem. These contain different proposals that help address the issue; for example, requiring that patent troll lawsuits against customers be stayed, until the case against the company producing the allegedly infringing product is resolved. While helpful, however, most of these measures do not get at the root of the problem – the asymmetrical economics.  The solution is to change the standard articulated in Section 285 to one in which the presumption is that legal fees and expenses will be awarded to the prevailing party.

Last December, the House passed what is referred to as the “Innovation Act” (H.R. 3309) that provides just this. It  states: “The court shall award, to a prevailing party, reasonable fees and other expenses incurred by that party in connection with a civil action, unless the court finds that the position of the non-prevailing party was reasonably justified or that special circumstances make the award unjust.” Under this standard, Select Retrieval would have been required to reimburse Adobe the $200,000 we spent in defending our client unless it could show that the lawsuit was reasonably justified or that special circumstances existed that would have made this unjust. We doubt that it  could have met this standard.

The Innovation Act is one of those rare pieces of proposed legislation these days that has true bipartisan backing in the House and from the President. Currently, Senator Leahy is considering incorporation of much of the Innovation Act  – including a fee-shifting provision – in a proposed Senate bill. Let him know that you support this and passage of a Senate bill.

Once this happens American companies can get back to focusing on innovation and job creation.

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