During the past several weeks public servants of all stripes have jumped into the fray with ideas on how to solve the problem of abusive patent troll litigation. President Obama has announced several new legislative and executive initiatives. Several pieces of legislation have been proposed in Congress and at least one state, Vermont, has enacted a new law and filed an action designed to curb patent litigation abuse. But what about judges? They preside over the very actions where the abuse takes place. Aren’t they in a position to do something about abuse that takes place in front of them? At least one significant judge thinks so – Judge Randall Rader, Chief Judge of the Federal Circuit, the court that handles all patent case appeals.
In a June 4, 2013 op-ed piece in the New York Times, Judge Rader suggested that judges already have tools at their disposal to curtail abusive troll litigation. Section 285 of the Patent Act allows judges to award fees in “exceptional” cases, and Rule 11 of the Federal Rules of Civil Procedure authorizes sanctions against “frivolous” litigation. Judge Rader suggested that judges should look more closely for signs that the lawsuit was intended to take improper advantage of the defendant, i.e., “using the threat of litigation cost, rather than the merits of a claim, to bully a defendant into settling.” He noted several telltale signs of abuse, such as when the patent holder:
Sues hundreds or thousands of users of the technology, rather than those who make it;
Sues a large number of defendants and seeks a quick cost of defense settlement; or
Distorts a patent claim far beyond its plain meaning for the apparent purpose of raising the costs of defense
Judge Rader argued that the law gives District Court judges the authority to make trolls pay when they abuse the system and he urged them to do so.
One of those District Court judges pushed back against Judge Rader’s suggestion during a panel discussion with Judge Rader last week in Silicon Valley. United States District Court Judge Lucy Koh said that it was “a little bit unfair” to suggest that district court judges can solve the problem with more vigorous fee shifting. According to reports of her comments, Koh said that the problem is not that the district judges are failing to “man up”. It’s that the law sets “a really high bar” for attorneys’ fee claims and she took a shot at Judge Rader, noting that district court judges cannot cite a New York Times op-ed as authority.
Judge Rader took Judge Koh’s comments in good humor, but there is more to be said on all sides of this exchange. When the Chief Judge of the Federal Circuit says that vexatious patent litigation can be addressed with fee awards under existing statutory authority, aggrieved defendants should take some encouragement that their requests for sanctions will have a more receptive audience than they may have in the past, and district court judges can take some comfort that they may be less likely to be reversed if they grant those motions. Judge Koh’s comments, however, are solidly based in law and experience. Motions for sanctions based on allegations of frivolous litigation are commonly denied and are therefore often not even filed for fear that they would merely add to the defendant’s already burdensome legal fees.
Unless and until troll defendants and district court judges see Federal Circuit decisions upholding fee shifting for abusive troll litigation, Judge Rader’s suggestion will likely have little effect. But troll defendants may have good grounds for optimism. In the past two years, the Federal Circuit has upheld sanctions for bad faith patent litigation on at least two occasions. In 2011, the Federal Circuit upheld the imposition of sanctions where the District Court found that the plaintiff filed an objectively baseless infringement action, with “indicia of extortion,” some of which Judge Rader noted in his New York Times op-ed. And in 2012, the Federal Circuit reversed the district court for the Eastern District of Texas for failing to impose sanctions where plaintiff’s claim was objectively unreasonable.
Judge Rader’s approach may remind some of a similar situation involving the abuse of venue provisions by plaintiffs who filed patent litigation in the Eastern District of Texas against defendants who had little or no connection to that district. For years motions to transfer by these defendants were routinely denied and not appealed because such decisions and are generally not appealable until after the conclusion of the litigation. But after a favorable decision in a non-patent case in the 5th Circuit, a patent infringement defendant in the Eastern District of Texas (TS Tech) took the extraordinary step of seeking a writ of mandamus from the Federal Circuit to order the Eastern District of Texas to transfer the action to a more convenient forum and the Federal Circuit did so. This decision was a ‘game-changer”. Soon motions to transfer were commonly filed and appealed to the Federal Circuit, which lead to the development of a body of law that has effectively eliminated the venue abuses that previously existed.
The law on sanctions for abusive troll litigation may be in a similar position. Judge Rader has effectively invited troll defendants who are victims of objectively meritless infringement claims to make motions for sanctions and if they answer the call, the Federal Circuit may respond favorably with opinions that , as Judge Rader suggests, will make patent trolls pay for abusing the system. Perhaps judge judges will be able to do more to deter patent litigation abuse than previously thought.