January 12, 2016 | By Vera Ranieri

In Patent Litigation, Justice Delayed Ensures the Entire Public Can Be Denied

When courts fail to quickly address serious defects in a patent litigation complaint, it can harm not only the parties to the case, but also the public at large. Yesterday, EFF and Public Knowledge filed a friend-of-the-court brief with the Court of Appeals for the Federal Circuit in a case where the Eastern District of Texas is allowing expensive litigation to drag on even though the defendant has already fully briefed validity issues that almost surely will dispose of the case, and stop the patent owner from suing on them in the future.

Eclipse IP, the patent owner in this case, is a repeat patent assertor. It’s brought over 160 cases in recent years. (Eclipse IP recently changed its name to Electronic Communication Technologies, LLC, but the named party in this case is still Eclipse IP.) The defendant in this case, Marten Transport, is a trucking company based in Wisconsin.

Last April, Eclipse IP sued Marten Transport in the Eastern District of Texas for allegedly infringing two of its patents: U.S. Patent No. 7,876,239 and U.S. Patent No. 7,479,899. This wasn’t the first time Eclipse IP has sued on one or both of these patents. Lex Machina (a patent litigation data reporting service) reports that the former patent has been involved in 109 lawsuits and the latter in 91.

Despite the remarkable number of cases involving these patents, Lex Machina also reports that there has never been any substantive ruling as to these patents or the validity of Eclipse IP’s claims of infringement. Cases seem to have a general pattern of quickly settling after the lawsuit has been filed. Unfortunately, because settlement information is usually not public, we don’t know whether or exactly how much money changed hands. (We do know that in one case, Eclipse IP asked for $95,000 from the defendant and that it has sent letters demanding payment of $45,000, amounts well below the cost of litigation.)

Recently, however, many defendants have been filing “Alice” motions when faced with particularly bad patents like Eclipse IP’s. These motions ask the court to find that the patents are facially invalid because they claim “abstract ideas,” which aren’t patentable under the Supreme Court’s 2014 decision in Alice v. CLS Bank. Generally, these motions have been pretty successful across the country in getting courts to more quickly and efficiently weed out bad patents.

In this particular case, a dozen defendants had been consolidated into one case and nine of these defendants each filed an Alice motion. This was not surprising. As we noted in a previous post, Eclipse IP had claims from three related patents invalidated by a court in California. The court in California did this on the pleadings, meaning it avoided expensive discovery and limited the costs imposed on the defendants (the judge in those cases explained that he was concerned that Eclipse IP was “leveraging the cost of litigation, rather than the strength of its patents” to get settlements). If there was ever a case that the court could and should rule early and quickly, Eclipse’s case against Marten Transport was it. (One of the patents, U.S. Patent No. 7,119,716, has now-invalidated claims that are strikingly similar in scope to the patents being used against Marten Transport.)

Unfortunately, that is not what happened. Despite nine defendants filing Alice motions, the Eastern District of Texas has not ruled on a single one. In fact, while the motions were pending, all of the defendants except Marten Transport settled. It has now been over six months since Marten filed its original Alice motion (Marten Transport had to refile it a month after originally filing in virtually the same form when Eclipse IP filed a new complaint). Since that time, Marten Transport has had to bear significant litigation costs. Marten Transport has repeatedly asked the court to rule on its Alice motion (as well as a motion to transfer) but the court has not acted.

Last Friday, Marten Transport asked the Federal Circuit to order the Eastern District of Texas to rule on its Alice motion and its motion to transfer. In a “petition for writ of mandamus,” Marten Transport highlights that the case should not be in the Eastern District of Texas in the first place (Eclipse IP is based in Florida, Marten Transport is based in Wisconsin, making it clear the case should not be in Texas); and that the Court should rule on its Alice motion.

We agree. In our friend-of-the-court brief, we note how failing to rule allows a case to continue that almost surely should not. The defendant has to spend time and money on issues that are unnecessary to fully resolve the case. What’s more, there’s evidence that improper patent assertion harms innovation by making the defendant and others less likely to innovate for fear of more patent assertion.   

But more importantly, failing to rule allows Eclipse IP to continue asserting its patent against countless others. So long as a court never actually looks at Eclipse IP’s patent to determine its validity, Eclipse IP can keep suing and demanding quick settlements. Thus not only is Marten Transport harmed by litigating a case it should never have been dragged into, so is the public at large.

The Supreme Court has repeatedly emphasized the public policy of having patent validity determined by the courts when it is raised. Otherwise, it increases “the opportunities for holders of invalid patents to exact licensing agreements or other settlements from alleged infringers.”

We think it is especially important in cases brought by entities like Eclipse IP.  While we understand courts are busy and it may not be possible to quickly rule on motions, a better course of action would be to stay expensive discovery until that motion is decided (one way or the other). Patent owners should not be allowed to exploit a court’s failure to rule on a motion to bring hundreds of lawsuits where they use the cost of litigation to extract settlements.

 


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