Call it patent trolls gone wild.
On April 23, trolls embarked on an unprecedented litigation spree in East Texas and elsewhere, suing everyone from Etsy to Estee Lauder. A review of the cases reveals an eye-popping 184 complaints, as trolls rushed to beat new rules that could limit their ability to game the country’s troubled patent system. (Update: Joe Mullin points out the number may be closer to 198).
In case you’re unfamiliar, the U.S. Congress is moving to pass a law called the Innovation Act that would make it harder for trolls — shell companies that acquire old patents in order to demand licensing payments — to conduct their business. The law proposes fee-shifting and a host of other rules that would undercut the economic incentive to patent troll.
For trolls like eDekka LLC, which filed 87 lawsuits in East Texas last week, the new law would mean that it could no longer file complaints like the one below, which consists of 4 pages of boilerplate alleging that Etsy has violated a “shopping cart” patent from 2001, but doesn’t provide any details as to why. Under the current rules, the troll can use such complaints to try and drag companies like Etsy before a jury in East Texas, which has made a cottage industry out of patent cases, and also swamp it with legal discovery costs — all the while facing no risks of its own. This setup is why most troll targets simply pay trolls to go away rather than fight in court.
Under the proposed reforms, trolls like eDekka, which are typically just the corporate alter-ego of law firms, would have to explain exactly how their targets — which in eDekka’s case also include Fab, Harry&David, Dress Barn and the NFL — are infringing the patent. And, under the proposed fee-shifting rules, the trolls could also end up paying their victims’ legal fees if they lose.
So why did the trolls choose April 23 to file nearly 200 lawsuits? The answer, according to sources, is that they were tipped that if the new rules pass, they are slated to take effect retroactive to April 24. This date is also consistent with the original draft of the reform bill (which calls for the law to take effect 6 months from October), and with a report from respected patent professor and blogger Dennis Crouch. The upshot is that the trolls’ one-day spree will let them play by the old rules even if the new law passes.
Despite what seem like commonsense measures proposed by the Innovation Act, there’s no guarantee it will actually pass. The law has already been slowed by a heavy lobbying push by trial lawyers, patent holders like Qualcomm and super-trolls like Intellectual Ventures.
If the Innovation Act founders, it will be the second time patent reform has failed in the last three years. In 2011, President Obama signed a “reform” law called the America Invents Act that did little to halt the trolling epidemic.