A lawsuit filed by the attorney general of Washington State looks to be the first ever in which an alleged patent troll is facing legal action under one of the dozens of state laws that have been passed targeting so-called trolling activities.
In a press release announcing the action, Washington State’s Office of the Attorney General says a lawsuit has been filed under the provisions of the “Patent Troll Protection Act, which prohibits bad faith assertions of patent infringement”.
The state claims that: “Landmark unlawfully sent threatening letters in bad faith to over a thousand small businesses nationwide. In the letters, it demanded $65,000 in patent licensing fees. When five Washington small businesses refused to pay, Landmark sued them. The businesses settled to avoid the expense of a lawsuit.”
The patent asserted by Landmark is US 7,010,508, which covers online loan processing and credit reporting technologies. However, says the press release: “Landmark’s letters demand license fees for ubiquitous business webpages, from customer logins to home pages. Landmark usually targets customer login pages, but has also demanded license fees for webpages containing privacy practices, shopping carts, products for sale and company home pages. This means any business with a web presence is a potential target for Landmark.”
The firm is alleged to be asserting the patent at an average rate of 24 times a week, “knowing that individual businesses lack the resources to combat its demands in court, and are likely to instead choose to pay the fee or settle.”
The state asks for Landmark to be forbidden from enforcing “the ‘508 patent in bad faith, sending demand letters or filing patent infringement lawsuits”. In addition, it requests that the firm “pay civil penalties, attorney’s costs & fees and restitution to businesses”.
Although many states have laws that target the activities of so-called trolls, they have not been deployed up to now largely because the bar for successful enforcement is so high. Under the First Amendment of the US Constitution, citizens have a right to seek redress in court. Under federal case law, this is only limited for a patent owner asserting its rights if it is deemed to be acting in bad faith, the test for which is that its claims are objectively baseless.
Although Landmark will have its own side to the story, what is described in the press release does sound like classic trolling activity: the targeting of small businesses that have no patent knowledge and few spare resources, and forcing them into settlements that are cheaper than fighting a case through the courts (knowing that there is no loser pays in the US, so even if you prevail as a defendant you are still forced to meet your own costs).
Should the suit be accepted, then, what we may end up with is a clearer understanding of exactly what is and is not a patent troll. The term has been thrown around with much abandon in the US and beyond for many years, often being used to mean “any entity whose business model I do not like”.
That has led to the ridiculous situation of NPEs that spend a great deal of money on R&D each year, which have multiple licensing agreements with multiple parties concluded in good faith without litigation, and which are prepared to spend significant sums fighting their cases right through the court system should they be forced to, being shoved into the same category as firms that act in the way described by the Washington State AG in its suit against Landmark.
Notably, the AG’s press release contains a very specific definition of a troll: “Landmark is a “patent-assertion entity” — a company that enforces patent rights against other businesses, rather than producing a product itself. Abusive patent assertion entities — also known as “patent trolls” — target smaller companies that cannot afford long-drawn-out litigation, and demand payment of licensing fees.”
That is a definition that many of the larger, deep-pocket NPEs currently operating may well be relatively comfortable with. On the other hand, it is one that may not sit at all well with many of those in politics, academia and industry who have disingenuously (at best) played fast and loose with the terminology.
Having something that clearly draws a line between bad faith trolls and other NPEs would significantly improve the terms of the debate not only in the US, but also in other parts of the world where the term is increasingly being deployed by lobbyists and interest groups. It would be good to see it happen.