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How to Take Action Against Patent Trolls

Author: Katie Truesdell Date: February 26, 2014

These three steps help small business owners defend their intellectual property from frivolous threats.

If you're a small business owner who has faced a frivolous patent dispute recently, you’re not alone. Thanks to patent assertion entities—or “patent trolls,” whose sole business is bringing patent infringement lawsuits to extract settlements—abusive patent litigation has skyrocketed since 2010.

In June 2013, the White House released a study that found the number of patent troll lawsuits tripled between 2010 and 2012, accounting for 62 percent of all patent lawsuits in the United States. The Senate is now considering a patent reform bill, which the House passed in December 2013.

But small business owners can’t wait on the government to take action. Instead, take these steps when you receive a letter from a patent troll.

Ignore the first contact.

Often, patent trolls begin with a threatening letter. Ignore it. Generally speaking, there is no harm in ignoring the first demand letter a small business gets from a patent troll, says Phoenix-based intellectual property attorney Donna Catalfio at Gallagher & Kennedy law firm. She has worked with small businesses and startups and has successfully defended clients against patent infringement claims. “In some cases, a patent troll is sending out hundreds of letters and trying to negotiate a settlement payment from multiple companies at the same time. By staying off the troll’s radar screen, you could get lucky and never hear from them again,” she says.

Find support from associations.

Catalfio also suggests reaching out to your industry association to see if other businesses have reported being targeted. If they have, you can potentially form joint defense groups, which are routine in patent troll cases, to share information and defense costs.

However, Catalfio cautions, the trouble begins to escalate when patent trolls follow up with additional communication that set forth the small business owner’s alleged infringement with specificity.

Look out for a letter naming the actual product accused of infringement and a description of how that product mirrors the patent claims, Catalfio says. These specifics often come in the form of a chart that maps the patent claims to the elements of a company’s product or service.

That’s when it’s time to seek legal advice.

Weigh your legal options.

Taking the issue to court—even if you’re not at fault—is not necessarily your next step. Litigation is expensive, and the settlement cost will typically be much lower than the defense cost.

Instead, your attorney may advise you to go on a different offense, which could be filing a review before the Patent Trial and Appeal Board (PTAB), which was established under the America Invents Act in 2012 to improve the process by which a third party can challenge an issued patent.

Mike Turner, an intellectual property attorney at Neal, Gerber & Eisenberg in Chicago who has successfully helped small businesses with patent troll issues, says this will generally stay litigation, is significantly cheaper than obtaining a judgment through litigation, and doesn’t involve patent infringement questions but limits the issue to patent validity. Turner explains that this is especially beneficial because, under open patent litigation, the question of infringement requires discovery of confidential information about the defendant—for example, operations, product design, manufacturing techniques and financial information.

And trolls won’t be keen for you to take this avenue. “The patent troll game is all about putting pressure on the defendant to settle,” says Turner. “If PTAB review is granted, the pressure shifts to the patent troll and hopes of a quick settlement are off the table.”

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