An Energetic, Engaging and Balanced Symposium on Patent, Copyright and Trademark Trolls PART III

The next panel is entitled, “The Practitioner’s Perspective:The Effect of Patent Non-Practicing Entities on Industry.”  The panelists include Lee Cheng, Chief Legal Officer, SVP-Corporate Development and Corporate Secretary, Newegg Inc.; Robert D. Fish, Founding Partner, Fish & Tsang LLP; Ian D. McClure, Director, Intellectual Property Exchange International, Inc.; Congressman Dana Rohrabacher, U.S. Representative for California’s 48^th Congressional District; and Nathan Shafroth, Partner, Covington & Burling LLP.  The moderator is John B. Sganga, Jr., partner at Knobbe, Martens, Olson & Bear.  The following is a partial description of the excellent panel discussion. 

The moderator, Mr. Sganga, posed several questions for the panelists.  The first question is “has the trend of NPE suits peaked?”  Mr. Shafroth noted that recent Supreme Court cases have “raised the barrier to entry” for new patent suits.  He is surprised that the rate of decline is not greater.  He thinks that one of the main reasons for decline includes: the Supreme Court’s Alice decision and the district courts' and the Federal Circuit’s interpretation of that decision.  He believes that some companies are more selective in patent enforcement.  Mr. Cheng noted that Newegg is not being sued anymore since Alice.  He also noted that “it is the low, low, low hanging fruit that is eliminated.”  He believes we still have problems with “imbalance” in the patent system.  He notes it is less than $10,000 to get a patent, but the cost to eliminate it is huge—perhaps around $300,000.  Mr. McClure notes that there are many patents with “nominal” value, but there is some “rearranging of business models” by nonpracticing entities.  Those entities are attempting to acquire better quality patent portfolios—“aggregation is the game.”  Mr. Shafroth noted there are other reasons for why there is a decline in patent suits.  One includes damages decisions, particularly by Chief Judge Rader, which limit damages for patents covering a part of a component product, such as smart phones.   Mr. Sganga noted that small companies and inventors may be hurt by these new developments.  Mr. Fish notes that we need to distinguish between enforcement and extortion, and Vermont’s legislation moves toward that goal through focusing on “bad faith.”  He believes “having the ability to sue through an NPE is critical” for some inventors and small companies with good patents that cover very good technology.  They do not have the resources to enforce their patents.  For business development, we need nonpracticing entities.  Congressman Rohrabacher noted the purpose of the patent system, but notes that “major multinational corporations are trying to change the discussion” away from the fact that a “property right has been stolen.”  He expressed a lot of concern for small corporations and “crony capitalism.”  Mr. Cheng stated that there are many “myths” surrounding the patent debate, including “that the patent act [helps] the little guy.”  He noted that patent rights are “property rights,” “but that not all property rights are created equally.”  Mr. Fish noted that some of the problem concerns “allocation of risk” and that there is litigation insurance.  These are just costs of doing business.  Mr. McClure noted that 96% of companies are relatively small.  He further noted that ascertaining the value of patents is difficult and expensive.  He thinks that NPEs helpfully create information concerning patents and that more information about patents is helpful.  He thinks that crowdsourcing of prior art is a good idea.  Congressman Rohrabacher states a patent represents “hard work” and is against taking away the chance of “treble of damages.”  Mr. Fish noted that “things have gotten out of hand,” but many developments are moving toward restoring balance, such as Alice and a focus on patent eligibility early and some districts requiring very early claim construction.  Mr. Cheng believes we should examine “abusive behavior” as opposed to status.   No one on the panel thinks that enforcement of quality patents is a problem.  

The full discussion is available via webcast here.