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Scary Monsters and Super Creeps? Non-Practicing
Entities, Patent Assertion Entities, and ‘Patent Trolls’
Anthony J. Fitzpatrick, Esq.
MassMEDIC MedTech IP Issues Round-Up
September 13, 2013
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“Scary monsters, super creeps
Keep me running, running scared”
“Scary Monsters (and Super Creeps)”
David Bowie, 1980
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Who are we talking about?
• Universities and research institutions
• Start-ups and small companies that have not
succeeded in the market
• Individual inventors
• Patent assertion entities
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Different Types of Patent Assertion Entities
(PAEs):
• One-off companies, often with opaque
ownership
• Larger, well-funded entities
– Intellectual Ventures
– Rembrandt IP
• Public Companies
– Acacia Research
– Tessera
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The PAE business model:
• Outright acquisition of patents
• Often: small upfront payment, and sharing of
recovery with the inventor/previous owner
• Some develop their own patents in-house
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Different enforcement strategies:
• Some send letters offering licenses, before
filing suit
• Others file suit first, offer license later
• They may threaten customers/end-users
• If they do file suit, they want multiple
defendants
• They want to assert the “threat” of a jury trial
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Different outcomes sought:
• Some seek to settle quickly for a small amount
(five figures) or a larger amount (low/mid six
figures)
• Others seek a big recovery (seven or eight
figures) through settlement or jury award
• Generally, a PAE will want a lump-sum
settlement
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Why should the MedTech industry care?
• Increasing litigation by PAEs, and other non-
practicing entities, against MedTech
companies
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Some recent examples:
• Orthophoenix:
– Patents relating to instruments and methods for
orthopedic surgery
– Acquired patent portfolio from Medtronic, which in
turn had acquired the patents when it acquired
Kyphon
– Some of the asserted patents have a curious
litigation history
– Orthophoenix is affiliated with IP Navigation and
Erich Spangenberg
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Some recent examples:
• Bonutti Skeletal:
– Patents relating to instruments and methods for
joint replacement
– Acquired patent portfolio from Dr. Peter Bonutti, an
orthopedic surgeon in Illinois
– Litigation pending against eight defendants in five
different district courts
– Bonutti Skeletal is affiliated with Acacia Research
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Some recent examples:
• Rembrandt IP:
– Patent portfolio relating to extended-wear contact
lenses
– Acquired from a husband and wife inventor team
– $47M judgment in 2009
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Some recent examples:
• Gary K. Michelson, M.D.:
– Patents relating to spinal surgery
– 2004: $559M jury award vs. Medtronic
– 2005: Medtronic paid $1.35B to acquire his patents
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What if you get sued?
• Hire experienced counsel
• Know your venue:
– Eastern District of Texas
– District of Delaware
– Others: Boston, Chicago, California, New Jersey,
etc.
– Potential motion to transfer venue?
• Know your judge
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What if you get sued?
• Know your opponent:
– How sophisticated are they?
– What are they looking for?
– Early settlement presentation?
• Leverage Joint Defense Group
– Save on attorneys’ fees and expenses
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What if you get sued?
• Leverage complications for the plaintiff
– E.g. indirect infringement or joint infringement -
how will the plaintiff prove infringement?
– Scope of the patent claims – will the plaintiff be
forced to interpret the claims broadly, and thereby
run into the prior art?
• Consider challenging the patent(s) before the
Patent Office
– Potential stay of the litigation
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What if you get sued?
• Be strategic:
– Be aggressive – e.g. Rule 11 motion?
– Or let other defendants take the lead?
– Show your cards early?
– Or force the plaintiff to show its cards first?
– The most important factor: cost-benefit analysis at
every stage
Budgeting
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Are there remedies to help defendants?
• Federal Rule of Civil Procedure 11
– Requires pre-suit investigation by the plaintiff
– May permit defendant to recover attorneys’ fees
• Title 35 of the United States Code, section 285
– “The court in exceptional cases may award
reasonable attorney fees to the prevailing party.”
– Specifically for patent cases
– Potential remedy for a frivolous claim, or for
litigation misconduct
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Chief Judge Randall Rader’s NYT Op-ed:
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Chief Judge Randall Rader’s NYT Op-ed:
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Will anything change?
• President Obama’s proposals:
– Legislation:
Require disclosure of “real party in interest”
More discretion for the courts in awarding attorneys’
fees
Protect consumers/end-users against litigation
– Patent Office action:
Tightening scope of software patent claims
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Will anything change?
• There are at least six bills pending in Congress
-- for example:
– SHIELD Act:
Loser pays cost of litigation
– Patent Litigation and Innovation Act of 2013:
Higher pleading standards for patent complaints
Stay of litigation against “secondary parties”
Stay of discovery until after claim construction
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Will anything change?
• Action at the state level:
– The attorneys general of Minnesota, Nebraska and
