How to kill the patent trolls - first, kill all [their] lawyers

For those convinced that the so-called patent-trolls are here to stay and that an Act of Congress is required to make them go away, I encourage you to take a “hmmmm…that’s interesting” look at Eon-Net v. Flagstar Bancorp.

In that case, the Federal Circuit recently refused to stay a sanctions judgment entered against a patentee and its counsel for various “troll-like” practices that occurred during the underlying patent litigation (which resulted in summary judgment of noninfringement). The district court entered a sanctions judgment against the attorney and his firm in the amount of $141,984.70 for failure to conduct an adequate prefiling investigation and for filing a baseless claim (F.R.C.P. 11).

While the Federal Circuit was only considering the stay and not the merits of the sanctions judgment (that will come later), the motions panel cleverly detailed various findings made by the district court regarding the troll-like practices of the patentee while it omitted any significant discussion of the movant’s arguments in favor of the stay. The non-precedential order reads like an instruction booklet for patent troll litigation strategies:

“Eon-Net’s complaint was virtually identical to numerous other complaints filed against parties with greatly disparate business operations;”

“Eon-Net followed service of the complaint with a cheap offer of settlement;”

“After Flagstar showed Eon-Net that its software was from a licensee to Eon-Net’s patent, and after Flagstar moved for summary judgment of noninfringement, Eon-Net identified other allegedly infringing software that was not identified in its complaint;”

“Eon-Net based its infringement allegation on an investigation of Flagstar’s website but that counsel did not obtain copies of the allegedly infringing software, was unable to determine how the web page worked, and did not evaluate the code;”

“Eon-Net presented no evidence or argument to support its [new infringement] position;”

“not only did Eon-Net fail to obtain or inspect copies of the software, it failed to even identify the software;”

“Eon-Net did not explain how it concluded that the ‘697 Patent could be construed to cover web-based forms;”

“indicia of extortion are present in this case;”

“Eon-Net offers a nuisance settlement at the outset to avoid a hard look at the merits of its infringement claims.”

(internal quotations omitted)

Why is this non-precedential opinion so significant? Simple….it will likely have significant impact on the willingness of law firms to engage in these common ‘troll-like litigation practices’. The true trolls, if there are such beasts, might just find themselves without representation.

It’s also important to note that the Court seemed to assign little, if any, weight to counsel’s argument that “his relatively small law firm will endure significant financial hardships if the imposition of monetary sanctions is not stayed pending appeal.” Why is this important? Anecdotally, most infringement suits that follow the ’strategies’ employed in this case are brought by smaller law firms that, presumably, don’t have deep pockets.

Stay tuned…the Court’s consideration of the merits of the sanctions judgment might be even more interesting.

For a detailed review, read the FedCirc.us analysis of the Eon-Net v. Flagstar Bancorp opinion.

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Title: “How to kill the patent trolls - first, kill all [their] lawyers”

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Published:
04.11.07 / 2pm
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Category:
CAFC, Caselaw, Patent reform, United States, patent troll
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