Back in April, the Supreme Court issued a significant ruling in a case called Octane Fitness that makes it easier for defendants to collect attorney’s fees when they win patent suits. We predicted this decision could be bad news for patent trolls who bring weak cases and use the high cost of defense to extort settlements. Last Friday, Judge Denise Cote of the Southern District of New York awarded attorney’s fees to the startup FindTheBest after it defeated a patent troll. The decision shows that Octane, in the hands of a thoughtful judge alert to patent troll abuse, can provide (at least some) justice.
FindTheBest is a company that provides an online research hub. Its patent troll adventure started in May last year when it was sued by a shell company called Lumen View. The troll asserted a vague patent on “bilateral and multilateral decision-making.” The case was absurd: the patent covered an abstract concept, not an invention. And FindTheBest explained to Lumen View (repeatedly) that it didn’t even engage in the kind of bilateral matchmaking that the patent claimed. Nevertheless, the troll demanded an immediate $50,000 settlement. It also warned that fighting back would mean even bigger settlement demands.
Faced with the prospect of expensive litigation, most small businesses would give in. Yet FindTheBest fought back. It quickly convinced Judge Cote to declare the silly patent invalid. Unfortunately, FindTheBest’s legal fees were at least four times the original settlement amount, making winning more expensive than surrender. Trolls can rely on this dynamic to shake down company after company, which is why fee shifting is so important.
When FindTheBest moved for fees, Judge Cote ordered the parties to brief the issue under the new Octane standard. Her ruling reveals a clear understanding of Lumen View’s abusive tactics. Even though it did not have any basis for claiming infringement, the troll threatened to make litigation as expensive as possible. And when FindTheBest criticized its tactics, Lumen View made a bizarre request for a gag order. The troll’s weak claims, in combination with its abusive methods, easily justified a fee award. As Judge Cote wrote: “The question of whether this cased is exceptional is not close, and fee shifting in this case will ‘serve as an instrument of justice.’”
What’s most significant, is that many of patent trolls’ favorite techniques were found to be a basis for shifting fees. For example, Lumen View had refused to explain to FindTheBest how the accused website involved the kind of "bilateral decision-making" claimed by the patent. This will be familiar to many patent troll victims who reach out to their accuser for an explanation only to be quoted a settlement demand. Similarly, Lumen View’s threats to make discovery as expensive as possible is a common tactic. Judge Cote’s decision should send a chilling warning to all bottom-feeder trolls who go after small businesses and individuals.
Judge Cote’s ruling (indeed, her handling of the entire case) shows that trial courts have tools to crack down on patent troll abuse. Unfortunately, not all judges possess the time or inclination to use these tools. A more flexible standard for fee shifting will only increase the incentive for plaintiffs to file cases in courts that are perceived to patent friendly, like the Eastern District of Texas and the District of Delaware. We still need meaningful reform from Congress and the USPTO to stem the tide of patent troll abuse.