Patent Infringement Letters: Considerations and...

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Patent Infringement Letters: Considerations

and Best Practices for Senders and Recipients Patent Holder Strategies for Leveraging Letters and Avoiding DJ Actions;

Defense and Response Strategies for Alleged Infringers

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

THURSDAY, JUNE 18, 2015

Presenting a live 90-minute webinar with interactive Q&A

Kirupa Pushparaj, Head IP Counsel, Square, San Francisco

Bobbie Wilson, Partner, Perkins Coie, San Francisco

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Perkins Coie LLP

Patent Infringement Letters

Considerations and Strategies

for Sender and Recipient

June 18, 2015

Presented by:

Kirupa Pushparaj

Head IP Counsel, Square, Inc.

Bobbie Wilson

Partner, Perkins Coie LLP

[email protected]

+1.415.344.7000

Perkins Coie LLP | PerkinsCoie.com

Overview

I. Introduction & Background

II. Considerations for Patent Owners

III. Strategies & Best Practices for Patent Owners

IV. Considerations, Strategies & Best Practices

for Recipients of Infringement Letters

V. Q&A?

5

Perkins Coie LLP | PerkinsCoie.com 6

Introduction & Background


Patent Infringement Letters

7

Source: See Colleen V. Chien, Startups and Patent Trolls, 17 Stan. Tech. L. Rev. 461, 472 (2014)

• Important step prior to litigation; implications for

both patent owners and recipients of letters

• Statistics

• 73% of letters consume founder time

• 89% of letters distract from the core business

• 63% of letters cause a financial impact

• 22% of recipients take no action to resolve

the demand


Increasing Policy Scrutiny

8

Sources: See, e.g., Ricoh Americas Corp. et al. v. MPHJ Tech. Invs., LLC, IPR2013-00302 (filed May 23, 2013); Hewlett-Packard, Co. v. MPHJ

Tech. Invs., LLC, IPR2013-00309 (filed May 24, 2013); see In re MPHJ Tech. Invs., LLC et al., FTC File No. 142 3003, Agreement Containing

Consent Order, available at http://www.ftc.gov/system/files/documents/cases/141106mphjagree.pdf ; In re MPHJ Tech. Inv., LLC et al., Docket

No. C-142 3003, FTC Compl., available at http://www.ftc.gov/system/files/documents/cases/141106mphjcmpt.pdf ;

https://www.eff.org/deeplinks/2014/01/mphj-exposed-the-real-dirt-notorious-scanner-troll

• Policy concerns about “trolls” that rely on

patent infringement letter campaigns

• Example: MPHJ Technologies

(notorious “scanner” troll)

• Sent 16,000+ patent infringement letters

• Accused manufacturers successfully used inter partes

review proceedings to challenge underlying patents

• FTC used its Section 5 authority to reach a settlement

with MPHJ for deceptive acts

http://www.ftc.gov/system/files/documents/cases/141106mphjagree.pdf

http://www.ftc.gov/system/files/documents/cases/141106mphjcmpt.pdf

















Pending Legislation Implicating Patent Threat Letters

9

Sources: http://energycommerce.house.gov/hearing/hr-targeting-rogue-and-opaque-letters-act-trol-act;

https://www.publicknowledge.org/press-release/public-knowledge-applauds-demand-letter-transparency-act

• TROL Act (Introduced by Michael Burgess (R-TX))

• Gives FTC enforcement authority for demand letters

• Preempts state laws

• Punishes “bad faith” demand letters

• Demand Letter Transparency Act (Introduced by Jared Polis (D-CO))

• Creates national database of demand letters

• Minimum content requirements for demand letters

http://energycommerce.house.gov/hearing/hr-targeting-rogue-and-opaque-letters-act-trol-act



































Countervailing Policy Considerations – Benefits of Patent Threat Letters

10

Source: http://docs.house.gov/meetings/IF/IF17/20150226/103029/HHRG-114-IF17-Wstate-SelfL-20150226.pdf

• Provide notice to infringer

• Encourage licenses and design-arounds,

which lead to innovation

• Legislative disclosure requirements may

impose undue burden on patent owners

• First Amendment of the Constitution protects

communications regarding patent rights

http://docs.house.gov/meetings/IF/IF17/20150226/103029/HHRG-114-IF17-Wstate-SelfL-20150226.pdf












State Statutes – Vermont Model

11

Sources: VT. STAT. ANN., Tit. 9, § 4197(a); http://docs.house.gov/meetings/IF/IF17/20150226/103029/HHRG-114-IF17-Wstate-

GugliuzzaP-20150226.pdf

• Some states have adopted statutes governing patent

infringement letters (AG & private right of action)

• Few different models

• Vermont model

• Core of the statute is simple: “A person shall not make a bad faith

assertion of patent infringement.”

• Thirteen other states have adopted (Alabama, Georgia,

Idaho, Louisiana, Maine, Maryland, Missouri, New Hampshire,

North Carolina, Oregon, South Dakota, Utah, and Virginia)

• Provides examples of bad faith

• Unreasonable license request

• Deceptive assertion of infringement

• Does not contain patent number or specific factual allegations

http://docs.house.gov/meetings/IF/IF17/20150226/103029/HHRG-114-IF17-Wstate-GugliuzzaP-20150226.pdf












State Statutes – Wisconsin Model

12

Sources: WIS. STAT. § 100.197(2)(a); http://docs.house.gov/meetings/IF/IF17/20150226/103029/HHRG-114-IF17-Wstate-


• Outlines in detail the information that a demand

letter must include

• Identification of each patent claim being asserted

• Identification of allegedly infringing product or service

• Factual allegations and an analysis setting forth in

detail the patent holder’s theory of infringement

• Target may notify sender that letter is

incomplete; 30 days to remedy













State Statutes – Illinois / Oklahoma / Tennessee

13

Sources: OKLA. STAT. tit. 23, § 112(A).; http://docs.house.gov/meetings/IF/IF17/20150226/103029/HHRG-114-IF17-Wstate-


• Different model

• Prohibits specific acts or omissions, rather than

general “bad faith” assertions of patent infringement

• Examples of prohibited acts or omissions

• Falsely stating that litigation has been filed

• Seeking compensation for infringement of a

patent that has been held invalid or has expired

• Failing to include factual allegations concerning

specific areas in which recipient’s product infringe

the patent













Considerations for Patent Owners


Considerations for Patent Owners

15

• Think about letter as a “notice” to preserve enforcement rights

• Per Supreme Court, “[p]atents would be of little value if infringers of them

could not be notified of the consequences of infringement”

• Virtue v. Creamery Package Mfg., Co., 227 U.S. 8, 37-38 (1913)

• Patent Act Section 287(a)

• “In the event of failure [to properly mark patented products], no damages

shall be recovered by the patentee in any action for infringement,

except on proof that the infringer was notified of the infringement

and continued to infringe thereafter, in which event damages may be

recovered only for infringement occurring after such notice. Filing of an

action for infringement shall constitute such notice.”

• Know the state statutory scheme

• Be prepared to defend legitimacy and “good faith” of letter, particularly

if sending a series or campaign.


Strategies & Best Practices for Patent Owners


Strategies & Best Practices for Patent Owners

17

• Keep state statutory scheme and

policy environment in mind

• Ensure letter is specific enough

• Include all required language

• Watch out for signs of “bad faith”

(e.g. expired patents, disproportionate

licensing requests)


Strategies & Best Practices for Patent Owners – Declaratory Judgment Issues

18

Sources: SRI Int’l, Inc. v. Advanced Tech. Labs., Inc., 127 F.3d 1462, 1470 (Fed. Cir. 1997);

http://www.stoel.com/files/PatentInfringement.pdf

• Important: Be careful to avoid creating jurisdiction for

a declaratory judgment!

• Walk the tightrope between “actual notice” and

an “actual controversy”

• An “actual controversy” must exist in order for an accused

infringer to bring a declaratory judgment action seeking a

declaration of non-infringement and/or invalidity of the

patent at issue

• Consider past actions taken, which may inform DJ

• Have you sued in the past?

• Threats against accused infringer’s customers?

• Is it a competitor?




19

Sources: SRI Int’l, Inc. v. Advanced Tech. Labs., Inc., 127 F.3d 1462, 1470 (Fed. Cir. 1997);


• Standard

• To show an actual controversy, a DJ plaintiff

(accused infringer) must prove that it

1. has a “reasonable apprehension” of an infringement

lawsuit, and

2. produces or is prepared to produce the allegedly

infringing device (or practices or is prepared to practice

the allegedly infringing method)

• Note: An explicit threat of litigation may satisfy

the “reasonable apprehension” test per se




20

Sources: Shell Oil Co. v. Amoco Corp., 970 F.2d 885, 887 n.2 (Fed. Cir. 1992); See Blistex Inc. v. Circle Labs., Inc., No. 00 C3084,

2000 U.S. Dist. LEXIS 11749 (N.D. Ill. Aug. 14, 2000)

• Express “concern” instead of definitively

asserting that a product “infringes”

• Say it “may infringe” or “may be covered by” or

“fall within” the patent

• Use conditional language

• If you infringe, we would …

• Consider softening “litigation” language

• Careful with “damages” or “liability” talk,

citing statutes, mentioning past lawsuits,

or mentioning a jury



21

• Offer a license: License negotiations may help establish that

no controversy exists

• Caveat: License offer may compromise ability to obtain a

preliminary injunction

• “When there are proposed or ongoing license negotiations, a litigation

controversy normally does not arise until the negotiations have broken

down.”

• Phillips Plastics Corp. v. Kato Hatsujou Kabushiki Kaisha,

57 F.3d 1051, 1053-54 (Fed. Cir. 1995)

• “[T]he evidence shows that [the patentee] offered a license to [the

accused infringer], so it is clear that [the patentee] is willing to forgo

its patent rights for compensation. That evidence suggests that any

injury suffered by [the patentee] would be compensable in damages

assessed as part of the final judgment in the case.”

• See High Tech Med. Instrumentation, Inc. v. New Image Indus., Inc.,

49 F.3d 1551, 1557 (Fed. Cir. 1995)


Considerations, Strategies & Best Practices for Recipients of Infringement Letters


Considerations for Recipients of Letters

23

• Assess the situation

• Business interruption risks?

• 73% of letters consume founder time

• 89% distract from the core business

• 63% of letters cause a financial impact

• Think about litigation

• Receive opinion of counsel

• Evaluate the threat letter

• Does it meet statutory requirements?


Best Practices for Recipients of Infringement Letters

24

• Ask:

• Who sent it? The patent owner? A competitor?

A licensee? A firm paid on a contingency fee

basis?

• Is the sender interested in a licensing

agreement?

• What is the tone of the notice? Is the sender

threatening you to leave the market?

• Are you infringing?

• Is there any indication that preliminary relief

will follow?


Recipients – Consider Response Strategies

25

• Defenses

• Invalidity

• Non-infringement

• Equitable defenses

• Modify the product;

design-around

• License Agreement

• Litigation

• Seek opinion of counsel


Recipients – Evaluate Claim Value

26

Sources: Letter from Activision TV, Inc., (Mar. 1, 2013), available at https://trollingeffects.org/demand/activision-tv-inc-2013-03-01;

Letter from Treehouse Avatar Technologies, (July 30, 2013), available at https://trollingeffects.org/demand/treehouse-avatar-

technologies-inc-2013-07-30

• Consider outcome scenarios

• Precedent of settlement? Is there a risk of drawing in

other threat letters?

• Are there any policy or principle reasons to respond

more aggressively?

• Recognize bluster (may be the sign of a troll)

• “As background, our firm practices nationally and

specializes solely in patent litigation and licensing.”

• “As you know, a United States patent grants its owner the

right to exclude others from using products that fall within

the scope of the claimed invention and collect damages

not less than a reasonable royalty.”

https://trollingeffects.org/demand/activision-tv-inc-2013-03-01











https://trollingeffects.org/demand/treehouse-avatar-technologies-inc-2013-07-30














Recipients – Declaratory Judgment Jurisdiction

27

• Does the threat letter create an

“actual controversy”?

• Are there aggressive threats of litigation?

• How strident are the infringement accusations?

• Is there a license offer?

• Note: As discussed, leverage a license offer

to combat preliminary injunctions

• What is the history of the entity sending the

threat letter? Aggressive litigant? Competitor?


Recipients – Patent Trial and Appeal Board (PTAB) Options

Source: Colice, Max, and Armon, Orion, Neutralize Threatening Patents Using the U.S. Patent and Trademark Office’s Inter Partes

Review Process, September 30, 2014

• Challenge validity: District Court or PTAB?

• PTAB

• Inter partes review

• Post-grant review

• Covered business method patent review

• Ex parte reexamination

28


Recipients – Consider “Bad Faith” Remedies

29

• Does the threat letter violate a state statute?

• Stay current on policy and federal legislative

changes

• Examples of things to watch out for”

• Vagueness as to patent numbers infringed

• Expired patents

• Disproportionate license fee requests

• Sensationalized language


Recipients – Consider Product Modifications

30

• Is there a business solution?

• Can you design around the patent?

• Can you make an innovation in your product

that is more defensible against a claim?

• Can you invent an alternative product?


Thank you

for your time.

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