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IP, Patent, Risk Mangement

Patent Litigation Role Reversal — Aren’t Bullies Normally The Bigger Ones?

Quarles & Brady‘s Michael Wokasch has written an intriguing piece for Techdirt: Settling Lawsuits Sometimes Makes Sense. Period.  In it, Wokasch makes the case that settling patent lawsuits, as opposed to fighting over “principle,” is often the better strategy, even when you believe you have good, valid arguments.

This is an extension of the whole discretion-is-the-better-part-of-valor principle, and generally most companies take this pragmatic approach.  I take absolutely no issue with Wokasch’s analysis. For the most part, he’s right on. In fact, one side benefit of the settlement strategy is the fact that the patent owner lives to fight future battles, hopefully  keeping your competitors busy.  On the other hand, if you invalidate the patent, everyone lower on the target list than you now gets a free ride courtesy of your lawyers.

However, what I did find particularly interesting about Wokasch’s article is his analogy about bullies:

Of course, there is some schoolyard movie-magic reasoning to this never-settle mentality. It’s the old movie trope that the geeky kid just needs to fight the bully and, when he wins, no bully will ever pick on him again.

So, in this scenario, the “geeky kid” is the operating company being sued for patent infringement, and the “bully” is the patent owner.  Despite the common rhetoric, however, most patent owners are not opportunistic rent-seekers.  According to an empircal study by Mark Lemley, the overwhelming majority of serial patent litigation is brought by companies created by the inventor.  (See Extreme Value or Trolls on Top?).

I’ve repeatedly made the case that patent owners desperately want to license their patents without resorting to litigation.  The reaction from operating companies, more often than not, is the cold shoulder. Jon Ellenthal described Walker Digital‘s experience:

We have reached out to a wide range of companies that are engaging in commercial activities that clearly depend on inventions created and owned by Walker Digital. Unfortunately, many of these companies have refused to engage in meaningful negotiations …

Of course, now that Walker Digital has sued hundreds of these same companies, and sold other parts of its portfolio to third parties, I would imagine that the tone of these conversations has changed slightly.

If you asked Ron Epstein what he did as Director of Licensing when patent owners tried to open a dialogue with Intel, I have a good idea of what he would tell you.  Most likely, he’ll explain that those efforts would be ignored unless the patent owner appeared both willing and capable of filing a lawsuit against Intel.  Looking back at the “schoolyard bully” analogy, this is a bit like a bully’s favorite retort when the “geeky kid” tries to protest the bully’s actions (say it with me): “Oh yeah, what are you going to do about it?”

What operating companies seem to be complaining about, in essence, is the fact that patent owners are learning lessons straight from the school of hard knocks about how to deal with these bullies.  When inventors partner with someone who actually knows a thing or two about being aggressive, the bullies resort to name-calling.  If these partners pocket most of the cash (because they’re taking most of the risk), the bullies protest (as if they really care about inventors) that the person reaping the reward did not “develop” the invention.

Operating companies thought the patent owners would pick up their backpacks, and go home … but instead, patent owners have learned to be aggressive after decades of indifference, delay and hostility.  They’re not going away, and every tactic employed to make life more difficult will only make them more aggressive.  Respect, civility and fairness are the only way to restore rational behavior to the licensing process.

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Discussion

3 thoughts on “Patent Litigation Role Reversal — Aren’t Bullies Normally The Bigger Ones?

  1. Those who vehemently oppose settlement in patent litigation on ideological grounds have obviously never spent much time either in court or in a boardroom … and have never spent much money on lawyers. Anything can happen in the courtroom, particularly if a jury becomes involved. And patent litigation can be so expensive (both financially and psychologically) as to crush a once-thriving business. You have to choose your battles, in patent litigation as in the rest of life, and sometimes a fight is not worth fighting.

    Posted by patent litigation | May 16, 2011, 7:23 pm
  2. A patent is referred to a set of rights granted to an individual or business by the state that gives them public disclosure of a new invention for a specific amount of time. This grant does not actually give the holder the exclusive right to practice the invention, but simply the right to preclude other outside parties from using or imitating it. Patent Litigation is a controversy or disagreement between two independent parties regarding a dispute of intellectual or physical property.

    Posted by Jared | May 17, 2011, 12:16 pm

Trackbacks/Pingbacks

  1. Pingback: Top 3 IP ‘Bullies’ And How To Handle Them « Gametime IP - May 18, 2011

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