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Friday, October 20, 2017

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Patent trolls no longer find easy payout after Kapersky win


Earlier this year, the U.S. Supreme Court ruled on the interpretation of venue laws concerning patent cases in the federal court system. A venue, in this case, refers to the location where a patent lawsuit should be heard.  

The statute that resulted from the TC Heartland v. Kraft Food Group Brands case was that a lawsuit can only be filed where the defendant “resides,” meaning the state where the company was incorporated. 

Kraft wanted to sue Heartland for patent infringement in Delaware, a state where Heartland was not incorporated or the source of its primary business. Delaware has gotten a reputation for being the most active district for patent cases.

According to a study done by PricewaterhouseCoopers in 2016, the U.S. District Court for the Eastern District of Texas was second on that list, and it was overwhelmingly number one when it came to highest number of case decisions involving non-practicing entities, or “patent trolls.”

In theory, NPE’s are in the business of monetizing intellectual property rights, but in reality, a lot of these entities attempt to profit off the reluctance to go through litigation. Instead of paying the cost to fight a lawsuit in court, larger companies will settle out of court with the plaintiff.

Recently, Kaspersky Lab, an antivirus and internet security protection company, dealt with a patent infringement case from an NPE in the Texas Eastern District Court. Not only did Kaspersky win the lawsuit, but it was awarded some $5,000 in compensation.

The ruling marks a watershed moment in the fight against patent trolls for two reasons. because the lawsuit took place in the Eastern District of Texas, which has almost twice the success rate for NPE’s in the country, and because the defendant was actually awarded compensation. This marks a significant change for a district court that has historically been a revolving door for patent litigation.

Patents are an important measure for protecting innovations and their creators. In 2015, Wetro Lan bought the rights to a patent that expired in 2012 and tried to sue Kaspersky for damages. Legally, Wetro Lan could claim damages against Kaspersky’s products from 2010 to 2012, before the patent expired, even though it was a basic firewall filed in 2000.

Patent trolls make a mockery of the system. Until recently, five district courts heard just under 50 percent of the entirety of patent litigation lawsuits in the U.S. Not only did the Eastern District Court hear a major portion of these cases, but it had an uncanny success rate for NPEs.

The case between Heartland v. Kraft set the stage for curbing favoritism among federal courts regarding these cases’ venues, but the Wetro Lan v. Kaspersky case sent a message. Normally, when a big company was sued, the company had to do a cost-benefit analysis of whether or not to continue the case at hand.

The balancing act would lead to many out-of-court settlements, but now the tables have turned. An NPE must now either strengthen its infringement claims or do a cost-benefit analysis of its own.

Opinion columnist Nicholas Bell is an MBA graduate student and can be reached at [email protected]

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