The Trouble With Trolls

What is a patent troll? It’s a company or person that purchases a patent and then sues another company claiming that the use of one of its products infringes on the purchased patent.

Trolls attempt to enforce patent rights against alleged infringers far beyond the patent’s actual value or contribution to the technology or the industry that the patent represents. Patent trolls typically do not manufacture products or provide services based upon the patents in question. They use patents as “legal weapons,” instead of actually coming up with new ideas to improve business, commerce or society. Trolls are in the business of threatening and creating litigation.

Further, trolls often buy up patents cheaply from companies that are looking to monetize patents that have little or no value, or should not have been granted to begin with, because of Prior Art demonstrating that what the patents teach was obvious prior to the time of application for the patent. These patents are subject to an invalidity contention and termination by the United States Patent & Trademark Office (USPTO) when alleged infringers contest the trolls. They are typically very broad, covering generic or well-known types of applications that should never have been patented to begin with.

In possession of these broad and vague patents, the troll then sends out intimidating letters to those they argue infringe on their patents. It is a scare tactic that preys on innocent companies. These letters threaten legal action unless the alleged infringer agrees to pay a licensing fee, which can cost tens or even hundreds of thousands of dollars.

When exploring attorney assistance in these matters, the companies threatened or sued are learning that attorney fees, often starting at approximately $250,000, can be even greater than the license fees being requested. Hence, they are between a rock and a hard place, and some have paid the trolls out of fear and to avoid lengthy court deliberations.

The sense of many defendants is that if there is valid infringement, it is the original equipment manufacturers (OEMs) that should be held liable, not those to whom the equipment was sold.

Dragging Trolls into the Light

Printing Industries of America (PIA) is bringing the patent troll issue to the forefront so the printing industry understands what it will continue to face unless Congress does something to change the situation.

On its website, PIA has established a Patent Listserv for printers seeking advice. PIA will provide industry firms with current information on infringement accusations and invites those who have been accused to contact the association.

I recently contacted several present defendants and those who were already sued and opted to settle out of fear and intimidation to find out the tactics being used in the litigation campaign. I focused on two highly visible collections of cases involving patents purchased by two shell companies: CTP Innovations (CTP) and High Quality Printing Innovations (HQPI). A shell company is a business entity having no employees or contact information, only a referral to an attorney, but owned by an unnamed parent company.

One company officer said that when informing the OEM about being sued, he was told that the patents in question:

“…could not stand since it’s targeting [a] very broad application of what software and Web technologies can do for [the] print and publication field.” Because they now have to defend themselves, he said, they are dedicating resources that should be used for day-to-day operations and for the advancement of the business.

“This is a waste of resources compromising the ongoing success of the company,” he said. “We are halting all investments that we believe may be included in future litigation until we come up with a plan to protect our interest or are satisfied with [the] resolution of this case and its future impact.

“We believe this patent lawsuit to be frivolous, and the abuse of our legal system by patent trolls hurts consumers. This along with other frivolous suits stifle competition, hurt consumers and bully innovative companies.”

When asked if he had any idea who was behind the shell company and benefiting financially, he identified RR Donnelley as the “affiliate.” However, RR Donnelley claims that the patents in question were previously sold, and the company has no ownership interest in the patents and receives no licensing payments. More on that in a minute.

Sued for a Common Practice

The officer of another company wrote that the alleged patent infringement lawsuit served on them said that they are in violation of numerous patents. The company principal went on to say, “Essentially, we were being sued for a practice most every printer in the industry utilizes.”

His company was asked to pay a license fee in excess of a six-figure amount.

“First, it’s been financially draining and secondly a distraction to running a business on a daily basis. It has affected the morale of the company in an adverse way,” he said.

A letter from another company noted, “If you are a printer then you are highly likely to be sued for $100K to $300K soon.” He referred specifically to RR Donnelley as the accuser working through a patent troll, CTP Innovations. The letter continued, “I have never felt such injustice in my life in going through the process that RR Donnelley has put me through.”

Again, the perception was that RR Donnelley, as the previous owner of the patents, is responsible for the infringement lawsuits.

Donnelley’s Financial Interest

My impression was that RR Donnelley had sold these patents, certainly a right that they had, and had relinquished any financial interests in them. However, in digging deeper into corporate disclosure statements as part of public documents filed with various U.S. District Courts, the RR Donnelley name did appear as a company “…having financial interests in the outcome of [these cases.]”

This was a surprising finding. Recognizing that RR Donnelley is a long-standing, highly respected company within the printing industry, I contacted the company for an explanation. This provided RR Donnelley the opportunity to explain any misunderstandings.

In a response to a letter requesting clarification of the patents sold to CTP and HQPI, RR Donnelley noted that it no longer has any ownership interest in the patents nor in the plaintiffs asserting the patents, so it has no ability to control the assertion of the patents.

“RRD has no financial interest in the HQPI patent,” the statement continued. “We are owed compensation from the purchaser of the CTP patents. We believe this is why RRD has been identified in certain pleadings as having a financial interest.”

This response explains a lot, and particularly why the RR Donnelley name is included under “financial interests” in the court certificates; the purchasers of the patents still owe RR Donnelley money.

Printing companies sued by patent trolls should not settle by paying the fees and should not enter into a single-company litigation. Giving in to patent troll demands will exacerbate the problem.

I propose bringing together all companies for which a lawsuit has been filed to work as a unit to bring alleged patent infringements before the USPTO so the patents in question can be invalidated via Prior Art.