Google, NetApp Sidestep Courts to Combat Patent Claims - Bloomberg
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`12/23/13, 7:21 AM
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`Google, NetApp Sidestep Courts to Combat Patent Claims
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`By Susan Decker - Oct 14, 2013
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`Rackspace Hosting Inc. (RAX) lawyer Van Lindberg is fed up with what he considers dubious patent-
`infringement lawsuits -- like when licensing company Rotatable Technologies LLC demanded $75,000 to
`settle a February case.
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`Many companies negotiate to pay the company to go away, since it’s cheaper than what may become a
`lengthy court battle.
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`Using a procedure called inter partes review created by the 2011 America Invents Act, Lindberg instead
`petitioned the U.S. Patent and Trademark Office for a new examination of the computer-image display
`patent. If Rackspace persuades the agency the patent never should have been issued, the suit will be
`dismissed. Rotatable says in court documents its patent is valid. Its lawyer Austin Hansley in Dallas didn’t
`return calls.
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`“We said, ‘No thanks’” to Rotatable’s demand, said Lindberg, head of the intellectual property section of
`the San Antonio-based Web computing services provider. Rackspace, he said, decided “to stand up and
`not be pushed around.”
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`Companies including Google Inc. (GOOG), NetApp Inc. and Oracle Corp. (ORCL) see the new review as a
`way to fend off royalty demands by patent-assertion entities -- sometimes derided as trolls. They like the
`process for the reasons patent-licensing firms don’t: they offer quicker rulings at less cost than litigation
`and shift the burden of proof to patent owners.
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`“We are looking at the most cost-effective way of dealing with dubious suits,” said Doug Luftman, chief
`intellectual property counsel of NetApp (NTAP), a Sunnyvale, California data-storage company.
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`Tech companies say patent lawsuits -- especially targeting end users or one aspect of a business -- drain
`resources and innovation. Patent-licensing companies say litigation protects inventions, though Congress
`is considering curbs on abuse.
`Faster Timetable
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`Google, NetApp Sidestep Courts to Combat Patent Claims - Bloomberg
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`12/23/13, 7:21 AM
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`At least 592 petitions have been filed since reviews began a year ago, exceeding the 520 the agency
`expected. Two cases were decided as of Oct. 3, as the patent office stayed open during the government
`shutdown. Costs run as much as $300,000, less than half of the minimum $650,000 for a court challenge.
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`Patent owners win more than half of trials, while the median damage award for patent-licensing
`companies in 2012 was $11.2 million, a PricewaterhouseCoopers LLP study found.
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`Under the new patent law, the Arlington, Virginia-based patent office set up processes to look at some
`finance-related business methods, such as SAP AG (SAP)’s challenge of Versata Software Inc.’s patent for
`customized pricing, and to streamline the older procedure for anyone challenging a patent’s validity.
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`Decisions on whether a patent is valid or not are required within 12 months. Patent reexaminations under
`the old rules ordinarily can take years. Patent office officials had no comment for this story, said Paul
`Fucito, an agency spokesman.
`‘Bad Patents’
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`Scott Cole of the law firm McKool Smith in Austin, Texas, says the agency’s rules can work against patent
`owners, whom he often represents.
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`Courts presume patents are valid while the patent office doesn’t. Patent holders can’t demand company e-
`mails or depose employees, as they can in court. The focus is technical evidence, such as whether earlier
`inventions invalidate the patent. Examiners have patent backgrounds, unlike most jurors.
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`“The odds of winning a validity challenge are orders of magnitude higher than in other current forums,”
`Cole said. The patent office “wants to be heavily involved in assessing validity of their patents because they
`get political criticism when they issue a bad patent. It takes the heat off.”
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`Nothing prevents multiple review requests for the same patent, so challengers can “come back and try to
`win again on the same arguments or different arguments,” Cole said.
`Google, 3M
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`Michael Fleming, a former chief administrative patent judge who helped set up the new reviews, said the
`patent office can combine related cases and disallow baseless challenges.
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`“When you file your petition, you’re required to show that there’s a reasonable likelihood that indeed there
`is one claim that would be invalid,” said Fleming, now at Miles & Stockbridge in Tysons Corner, Virginia.
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`Google, NetApp Sidestep Courts to Combat Patent Claims - Bloomberg
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`12/23/13, 7:21 AM
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`Google wants Congress to expand the quick review for business methods beyond finance because it allows
`a broader range of arguments, such as whether the idea is an abstract concept ineligible for legal
`protection, said Laura Sheridan, Google’s patent counsel.
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`Some of the nation’s biggest companies, including General Electric Co., 3M Corp. and Johnson & Johnson
`oppose expanding business-method patent reviews. It could risk patents covering data processing for
`cancer therapies and safety systems for cars, they told lawmakers.
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`There’s no guarantee of winning at the patent office and there’s the risk that losing will damage your court
`case, Google’s Sheridan said. “If you’re not successful, the jury will hear about that,” she said.
`41 Settlements
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`Offsetting the risk, the reviews have helped some companies sued for patent infringement convince
`litigants to settle, sometimes for less money than they originally demanded.
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`Forty-one patent challenges have been settled so far. Google settled two lawsuits filed against it after
`asking for reviews. One, against licensing company EMG Technology LLC, was announced last month and
`involved dismissal of legal actions.
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`The reviews also are being used by competitors involved in litigation. Real estate listing company Trulia
`Inc. (TRLA) filed a petition with the patent office after being sued by Zillow Inc., and persuaded a federal
`judge to put the case on hold until the patent-validity review is completed. Zillow said Trulia was
`“employing gamesmanship” after it couldn’t get the case dismissed by the trial judge.
`Patent Pushback
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`Rackspace is planning another 10 challenges, despite the costs of as much as $300,000 each.
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`A federal judge already found that one element of Rototable’s patent is invalid. Rotatable is appealing that
`order, as well as the judge’s interpretation of key terms of the patent. Rackspace seeks the suit to be put on
`hold until that appeal is decided.
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`For small companies that may be unable to finance patent challenges, Google and NetApp started Unified
`Patents Inc. to help them pool resources.
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`“All of these companies are seeing litigation on the same patents across all of their products,” said Kevin
`Jakel, a former Intuit Inc. (INTU) patent counsel who founded Unified Patents.
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`Google, NetApp Sidestep Courts to Combat Patent Claims - Bloomberg
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`12/23/13, 7:21 AM
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`Almost every review filed in the past year involves patents also in litigation, said Scott Daniels, a lawyer
`with Westerman Hattori in Washington who blogs about new requests. An increasing number involve
`drugs and medical devices, though most are for computer-related technology, he said.
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`“If you try to sue a ton of companies and make a mint off each one, you have to expect you’re going to get
`some pushback,” Daniels said.
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`To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net
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`To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net
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