The Patent Wars In Perspective: But Any Solution Probably Will Be In The Hands Of Congress

Wednesday, October 24, 2012 - 09:28

The Editor interviews William F. Abrams, Partner in King & Spalding LLP's Intellectual Property Group resident in the Silicon Valley office.

Editor: Tell us about your background.

Abrams: I have practiced law for 33 years as a trial lawyer, and during the last half of my career, I have focused on advising companies in technology and related areas regarding disputes and transactions. My clients range from large companies such as Google and Hewlett Packard to smaller emerging companies in industries ranging from those involved with the Internet and computer software/hardware to biotech and life sciences companies.  I have also done a lot of appellate work and pro bono work, including several death penalty and public interest cases. I am a consulting professor at Stanford and teach courses on science and the law and policy.

Editor: Give us an update on the so-called patent wars. Is there a palatable resolution on the horizon for high-tech companies that are striving to stay competitive?

Abrams: A newly released study confirms that patent litigation continues to expand and that more cases were filed last year than in previous years. Non-practicing entities (NPEs) continue to file cases and succeed in recovering large damages. In fact, NPEs on average recovered more in damages at jury trials than practicing entities.

Large companies that compete with each other also continue to square off in patent litigation. The same pattern also occurs on other litigation fronts such as trade secrets, unfair competition and antitrust.

Editor: Do you see any solution to the patent wars on the horizon?

Abrams: The term “patent wars” needs to be defined to answer this question.  If we mean competing companies that are asserting patent claims against each other, I think they will continue to seek court enforcement of what they believe are their patent rights against competitors who they believe are infringing on their patents. 

If “patent wars” refers to NPEs asserting groups of patents against myriad targets, I don’t think much will change unless Congress intervenes. It will be useful to see whether Congress in its next term considers solutions on a bipartisan basis. The patent cases brought by NPEs are concentrated in a handful of jurisdictions. Congress needs to consider patent legislation that takes a very hard look at the use of the courts by NPEs, the way that damages are calculated, and the rules by which NPEs should be governed.

Editor: Are the patent wars having a detrimental effect on innovation and the interests of consumers?

Abrams: The surge of litigation may be having a detrimental effect to the extent that companies – both large and small, established and emerging – need to put a lot of resources, including money, personnel and time, into litigation. Those resources may be better used in more productive and creative endeavors, including research, development and marketing. That said, notwithstanding NPEs and their use of litigation, companies are going to continue to compete and innovate. They are going to continue to look for better ways to make their businesses successful and to get an edge in the marketplace, regardless of whether NPEs file cases against them.

Editor: Is the concept of “intellectual property” in flux? Might cases like Mayo v. Prometheus change the way courts define patent-eligible technologies?

Abrams: Yes, I do think it’s in flux. Many commentators have criticized the Mayo case. Congress can help improve things by providing more definitive guidelines as to patentability. The Federal Circuit also seems to be trying hard to come up with solutions regarding the concept of intellectual property.

I believe that the spirit in this country is one of discovery and innovation. Whatever changes occur in our patent laws, people will continue to come up with innovative products and services that make new markets and satisfy consumer needs. It’s our nature as a country and as human beings.

Editor: Mayo raised the issue of the patentability of natural phenomena. How did that case relate to the type of electronic innovation that you see in the smartphone area?

Abrams: Arguments are being made that the Mayo case will make it more difficult to patent business methods. In Mayo, the Supreme Court said, you’re just taking some natural laws with regard to how you’re going to treat somebody with medicine, and that’s not innovative.  Mayo will undoubtedly be cited in the IT, computer and Internet space. 

Editor: Do you see any more recent cases that offer any clues?

Abrams: After Mayo, the Federal Circuit held in CLS Bank v. Alice Corp. that to be invalid under 35 U.S.C. § 101, the most reasonable conclusion must be that the “claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application” for the claim to be invalid for claiming an abstract idea. The court said that it must be “manifestly evident” that a claim is directed to a fundamental truth.

Editor: What are the most common reasons for technology-related patent disputes?

Abrams: There are many reasons. Two companies may be head-to-head competitors, and one company believes the other is using its patented technologies and wants to stop it. Another may be that an NPE has an investment in one or more patents, and it has decided to go out and monetize them. It’s an unemotional, coldhearted decision.

On the other hand, patent litigation may be very emotional when the inventors are directly involved. Founders of a company especially take enormous pride in creating a business and the innovation that they are able to offer to the public. There are many different things that could trigger these cases, and each case has its own story. 

Editor: How important is the role of patent trolls in high-tech disputes?

Abrams: They continue to play a big role. It still may be very profitable to be a troll. They may believe that they’re getting involved in more cutting-edge technology, but I think many of the patents that are asserted by NPEs are not particularly cutting-edge or strong.

What they have going for them in forcing a settlement is the immense litigation cost they can impose on their targets, particularly with e-discovery. It costs huge amounts of money to produce documents electronically. Those costs are primarily borne by the defendants because the trolls don’t have complex companies.

In my opinion, more companies sued by NPEs should stand up and fight them because NPEs don’t want to go to court; they want as quick and easy a settlement as possible. The more that companies resist cost-of-defense settlements where there is no merit to the NPE's claims and invest in fighting the NPE, the more likely that wasteful litigation will be prevented in the long run.  

Editor: Why are smartphone-related patent claims different from patent disputes in other areas such as the life sciences?

Abrams: I think a major difference is that the life sciences, pharma and the medical device fields are heavily regulated by the FDA and other agencies. There is much more money put into R&D and a far longer timeline from conceiving an invention to getting it patented and enforcing it.

In the world of the Internet and smartphones, we don’t have those layers of regulation; it’s faster to put a product on the market and much faster to get something patented – so things just happen more quickly.

Editor: At what point should a company decide enough is enough in pursuing infringement claims?

Abrams: When you are on the defense side, sometimes you don’t have a choice because the plaintiff might not settle with you. You would like to reach a compromise, and you can’t because somebody on the other side won’t settle. Therefore, your company is forced to spend money on litigation that it should be spending on growing the company.

So when is enough, enough? That depends on constraints of the financial reality a company faces. That said, there are companies that believe enforcing their rights or defending against improper claims is an enormous matter of principle, and they are determined to litigate.

Editor: Are there jurisdictions that are preferred by those involved in these complex cases?

Abrams: There are jurisdictions where the courts may be more familiar with principles of patent law and new technologies because they have had more experience with patent cases and perhaps technology companies and their products and services.  However, I believe that judges work very hard regardless of what level of experience they’ve had with patent cases. They take their cases seriously.

Editor: What are the business and legal concepts that underlie the tension between legitimate patent protection, on the one hand, and the benefits of a rich and accessible public domain, on the other?

Abrams: Going back to Thomas Jefferson, our country has recognized it is important to encourage inventors and innovation and reward them by giving them some protection for a period of time over their ideas. On the other hand, we don’t want to give them permanent protection because that could stifle innovation and keep people out of the marketplace.

Please email the interviewee at babrams@kslaw.com with questions about this interview.