Most reports complaining of frivolous patent lawsuits claim that patent owners carelessly assert patents without a viable infringement theory, or, more commonly, baselessly claim that asserted patents are invalid (despite lack of support for such claims). For example, Gene Quinn was considerably distressed last year about a patent lawsuit filed by Microsoft that, according to Gene, amounted to a “ridiculous federal complaint …[the type that] one would normally see being filed by a patent troll that is trying to hold up one of the tech companies for ransom.”
So, I wonder what Gene would think about a patent lawsuit where the plaintiff admits to having done no infringement analysis whatsoever? What if the plaintiff admitted in the complaint itself that it had no knowledge of what (if any) products were believed to be infringing? Moreover, what if the plaintiff admitted to not even knowing what patent is at issue, much less what the asserted claims were? The lawsuit, easily the most reckless in recent memory, admits to not even knowing the identity or location of the defendant!
So who filed a federal lawsuit against this “mystery defendant” involving unknown patents, unknown products and unknown infringement allegations? Courtesy of Kyle Jensen (proprietor of PriorSmart, a fantastic source of patent news) and his daily litigation alerts, I learned of this monstrosity filed by Renaissance Learning, a multi-million dollar provider of computer-based testing methods. But this is no ordinary lawsuit. Rather, this is the “declaratory judgment” variety, with Renaissance claiming an “actual controversy” with respect to unknown patents allegedly owned by an unknown entity that may (or may not) accuse products of Renaissance.
In framing this dispute, Renaissance claims:
Renaissance Learning is not aware, and has no reason to believe, that its STAR assessment programs, or any other of its online testing and evaluation products, are infringing on any claims of any valid patents.
So why file a lawsuit when you’re “not aware” of your products infringing any valid patents?
Renaissance Learning received a letter from IP Nav dated February 22, 2011 and entitled “Proposal to Negotiate Patent License.”
The letter states that IP Nav has been engaged by the Defendant, an unnamed holder of “valuable patents and related intellectual property directed to the fields of online testing and evaluation.”
So why is the patent owner so shy? Well, recall the Webvention lawsuits filed last year. A patent owner knows that:
any company it approaches may take matters into its own hands … imposing costs onto both parties.
As that same post noted, the litigation risk to patent owners imposes potential costs on the licensing process:
Balancing all of these risks, [the patent owner] comes to the realization that litigation is a “default” negotiation platform and comes with specific expenses (primarily in the form of lawyers).
Thus, a licensing agent was employed to contact Renaissance and seek agreement to specifically avoid litigation so that the parties could have constructive discussions. As admitted by Renaissance:
The letter demands that Renaissance Learning enter into discussions with IP Nav regarding a license agreement with the Defendant. As a condition precedent to disclosing the identity of “specific patents,” the “basis for the infringement claims,” and the Defendant’s “basic licensing structure,” the letter states that Renaissance Learning must sign the attached “Confidentiality and Forbearance Agreement” (hereinafter “the Agreement”).
[T]he Agreement requires that the information disclosed during the confidential discussions would not form the basis for legal proceedings …
So what’s so wrong with this arrangement? According to Renaissance:
… there is no provision preventing the Agreement from bringing an action for infringement against Renaissance Learning during the term of the Agreement or otherwise. Nevertheless, the Agreement would purport to require Renaissance Learning to waive its right to bring a declaratory judgment claim against the Defendant and/or IP Nav.
Surprisingly, Renaissance’s complaint doesn’t say whether they called IP Nav to see if a simple change to the agreement would be entertained. I don’t know what the answer would have been, but neither do they … and their the ones who filed a federal lawsuit, not me!
For their part, it seems that the patent owner here was correct to assume that a simple letter would result in it immediately being hauled into court (in what may be a distant jurisdiction). As long as patent owners have to legitimately fear being sued simply for proposing a conversation with another party, the transactional cost for licensing patents will remain high (in some cases artificially increasing license rates), and patent owners will be forced to seek the deep pockets of venture capitalists, contingent fee lawyers and monetization advisors in order to get compensation for use of their inventions.
The full complaint is embedded below, but it is apparent that Renaissance has taken an extremely aggressive approach in responding to a letter from a licensing agent.
- Patent Plaintiffs Should Meet High Expectations In Eastern District Of Texas (gametimeip.com)
- Punishment For Frivolous Patent Lawsuits (gametimeip.com)
- Software Patent “Rant” Misses The Point (gametimeip.com)