The Trolls’ Favorite Template Has Been Retired, but Don’t Get Too Excited
It’s easy to file a patent complaint. All a patent owner has to do is say that they own a patent and that the defendant infringed it. The patent holder doesn’t even need to identify which product of the defendant’s they believe infringes the patent, or specify which claims of the patent they’re asserting. It’s an absurdly simple process, and unscrupulous patent tolls routinely take advantage of that fact.
That might have changed this week—the Judicial Conference of the United States has instituted a rule change that includes eliminating the form that’s been used for patent complaints for decades. We hope that the change makes it harder for patent trolls to hit defendants with information-free complaints, but we’re not breaking out the Champagne yet.
One Weird Trick for Forcing Defendants to Settle
This story starts in 2007 with the Supreme Court’s decision in Bell Atlantic Corp. v. Twombly. In that case, the Supreme Court raised the standard for pleading in civil trials, suggesting that fuzzy complaints give the plaintiff an unfair advantage. Justice David Souter wrote, “[T]he threat of discovery expense will push cost-conscious defendants to settle even anemic cases” before litigants get to the discovery process (when litigants turn over evidence to each other). Souter laid out a standard that complaints should carry “enough facts to state a claim to relief that is plausible on its face.”
The ruling sent reverberations around the legal world: judges began requiring more information when plaintiffs filed a suit, and dismissing cases where they thought those details were lacking (more on that in a minute). But the Federal Circuit—the court that hears patent appeals—decided not to apply it at all to allegations of patent infringement.
Here’s where it gets weird. The reason why the Federal Circuit excepted patent cases from Twombly is because of Form 18. It sounds like something out of a Joseph Heller novel, but Form 18 was a template for patent complaints included as part of an appendix to the Federal Rules of Civil Procedure. The form was written in 1938 and hasn’t changed much since. It’s barely over a page long, with a space for the plaintiff to enter the patent or patents that it thinks the defendant has infringed, and another for the type of product the defendant offers that allegedly uses the plaintiff’s invention. That’s the whole form. As Charles Duan put it, “A patent owner can simply name defendants and a few patent numbers on the complaint, and that is enough to get in the courtroom door.”
Thanks in part to Form 18, patent trolls have been able to use bare bones complaints to file cases cheaply and then place expensive discovery burdens on defendants. A company facing a thin complaint has to go through discovery just to find out what it is being sued for. And since patent trolls tend to be shell companies with few documents and witnesses, the discovery process can be far more expensive for defendants than for plaintiffs. That creates intense pressure to settle even frivolous suits.
In K-Tech Telecommunications v. Time Warner (2013), the Federal Circuit ruled that Form 18’s minimal requirements were still adequate after Twombly. It held that “to the extent that any conflict exists between Twombly (and its progeny) and the Forms regarding pleadings requirements, the Forms control.” Only in the baffling world of patent litigation does a Microsoft Word template get precedence over a Supreme Court ruling.
How Much Evidence Is Enough? It Depends Who’s Playing.
Since K-Tech, a notable imbalance has emerged in the way courts consider different kinds of cases. While the higher pleading standards in Twombly have been mostly ignored in patent litigation, they’re arguably overused in civil liberties cases.
Just a few weeks ago, a court threw out a suit that Wikimedia and several other plaintiffs had brought against the NSA. Wikimedia alleged that the NSA had violated the Constitution by intercepting Americans’ international communications. The court cited Twombly, saying that because Wikimedia and co. didn’t have specific evidence that their or their users’ communications had been monitored, they didn’t have the right to bring a lawsuit against the NSA.
Forget that through a combination of leaked documents and the NSA’s own admissions, we know that the NSA scans a substantial portion of upstream Internet traffic, and that Wikimedia et al. represented some of the most traffic-heavy parts of the Internet. It is extremely unlikely, if not impossible, that the NSA’s dragnet didn’t capture some Wikimedia traffic. Nonetheless, because Wikimedia couldn’t identify a specific communication that the NSA intercepted, or state with 100% certainty precisely how the NSA conducts its upstream surveillance, the court refused to hear the case.
The way in which Twombly is interpreted generates imbalance in the justice system. Some plaintiffs, like those in the Wikimedia case, are effectively asked to prove their claims before they’re even allowed into court. Other plaintiffs, like patent owners, don’t even have to name an allegedly infringing product (let alone provide specific allegations about how the product infringes one of the patent claims). It seems that Twombly’s significance varies a lot depending whose rights are at stake.
Life After Form 18
On December 1, the Judicial Conference of the United States made several changes to the FRCP, including completely removing the appendix of forms. Since the Federal Circuit’s refusal to follow Twombly rested entirely on the existence of Form 18, this change should mean that parties that sue for patent infringement will now be held to the same standard that has developed for other types of litigation. In a recent interview, patent litigator Chris Mammen said, “The cookie-cutter, cut-and-paste complaint is on its way out. Patent plaintiffs will have to allege more facts and it marks an end to plaintiffs suing multiple defendants.”
We'll have to wait and see how courts apply the new standards in practice, but here's one interesting sign: there was a huge jump in patent lawsuits filed in November, with many of them filed by non-practicing entities. On Monday, November 30, trolls set a new record for most suits filed in one day. Clearly, a lot of plaintiffs wanted to get in the door ahead of the rule change.
The death of Form 18 might also put more power into the hands of district court judges. As we’ve discussed many times, federal district courts are not all the same. The Eastern District of Texas has used local rules and practices to make itself an attractive venue for patent trolls. It’s not a stretch to think that patent trolls will be looking for the courts that interpret the new rules in a troll-friendly fashion. As long as trolls get to decide where to file a suit, any improvement in the law will only be as strong as the worst court’s interpretation of it.