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David Donoghue: Revolving Door in Patent Litigation – Alarming Trend or Just Business Reality?

by R. David Donoghue on January 23, 2012

This post originally appeared here on January 23, 2012, and is reposted here with the author’s permission.

This morning the Wall Street Journal cast light on an increasing trend in patent troll defense work: When Lawyers Become ‘Trolls’ (subscription required).  It is written by Ashby Jones, one of the Journal’s top legal reporters and a former author of the WSJ Law Blog.  The article is worth a read by itself, but it is an important story for retailers because it focuses upon the trend of patent defense lawyers switching sides and, in many cases, becoming trolls themselves.  As patent trolling becomes a more mature “business” we are seeing more traditional defense counsel switch sides with serious implications for retailers, and patent defendants generally.

The article focuses upon two well known patent litigators, John Desmarais (formerly of Kirkland & Ellis) and Matt Powers (formerly of Weil Gotshal).  Desmarais and Powers have much in common:

  1. Both are excellent lawyers — I worked at Kirkland with Desmarais, so I speak from some experience;
  2. Both routinely represented high-end corporate clients in bet-the-company cases;
  3. Both almost always did defense work; and
  4. Both gave up seven-figure draws in the last two years to represent patent trolls and even to become the trolls.

Desmarais bottom lines his reason in the article, no doubt speaking for many who turn to trolling.  He is not just making more as a troll than he did as a defense lawyer, he is making “much more.”  Powers focuses on a different aspect of practice, explaining that corporate realities of patent defense have made it “less fun”:

Ten years ago, when a new case came in, a client would say, “Please help us.” Now, along with the case, you get a 100-page preferred-provider application and instructions on how to go through the procurement department.”

Desmarais and Powers are fair representatives of a growing group of patent defense litigators that are either following the money or do not like that patent defense, in particular troll cases, are becoming more cost-sensitive.  A decade ago, every patent case was a major piece of litigation for a company requiring significant resources, often without any hard cap on budgets.  Today, companies have to be far more strategic in their patent litigation because of obvious budget pressures and because patent litigation has ballooned leaving companies with not one or two, but ten or more patent litigations in a given year.  That requires both in-house and outside counsel to prioritize and strategize, focusing on the key defenses and saving money and resources by not making every possible defense.  Some may prefer the old way, but I think it is a better way to litigate and try cases both for the companies and for counsel.

So what does the trend mean for retailers.  First, the downsides:

  1. Trolls continue to multiply.  The AIA did not slow down patent trolls and investors are continuing to fund new trolls.  The cases are going to keep growing.  Expect to see more patent troll demands, not fewer.
  2. Trolls are becoming more sophisticated.  Trolling may be dirty work, but it is increasingly being done by sophisticated business people and sophisticated lawyers, and that is not to say that trolls were unsophisticated prior to now.  Most were quite sophisticated.  And many of the troll-side lawyers are using defense shops as their training ground.  They are learning how to manage and run cases and understanding how defendants think before striking out on their own to represent the trolls.
  3. The patents are becoming more sophisticated.  Trolls are no longer forced to buy up one-off patents or small patent families from solo inventors who could not commercialize their ideas.  Instead, we face entities like Micron selling 4,200 patents to Desmarais’ new troll Round Rock or Broadcomm selling a family of wireless internet patents to Innovatio IP Ventures.

Fortunately, there are also upsides:

  1. Defense counsel are becoming more sophisticated.  Just as the trolls and their counsel improve, so are defense counsel.  We have come to understand a company’s business as well as our own.  Instead of focusing on “winning” the litigation, we are focused on winning for the company, which regularly defined far differently than just a case dispositive opinion or verdict in favor of the company.  Also, some of the lawyers focused purely on personal gain are leaving the defense bar to represent the trolls, leaving more of us striving for cost-effective solutions to patent litigation associated with the value of the case to the company.
  2. Better defense strategy.  Many hear about  tight patent defense budgets and assume that those budgets harm a company’s defense.  While there is a limit, a tight budget and a counsel team (in-house and outside) focused on preparing throughout the entire case to put on the best case at trial can significantly benefit retailers.  The best way to identify and prepare just the key defenses is to  focus on trial from the outset of the case, making all case decisions with an eye toward trial.  That helps focus the team and narrow the budget.  It also removes a stereotype of corporate defense lawyers as file-churners that do not know how to litigate.  You do not want to go to trial with a file-churner against a plaintiff’s lawyer with a lean, jury-ready case distilled down to one or two themes and a handful of arguments.  Instead of throwing up every argument regardless of value and overwhelming the judge or the jury, defense counsel are doing exactly what troll counsel have been doing for years — keying in on the main themes and arguments that should win the case.  That more focused approach makes the judge and eventually the jury more able and willing to focus on the arguments and understand the technology issues.  And that benefits retailers significantly.
  3. Companies are becoming more sophisticated.  As trolls become a more common and pervasive problems, companies are putting the same efforts behind patent troll defense that they put behind controlling other corporate costs and problems.  That means more focused defenses, better access to the relevant business people, e-discovery plans, and creating detailed plans for dealing with trolls assertions before they happen.
  4. Increased industry cooperation.  As companies become more sophisticated, they are realizing that they have to reach out within their industry and cooperate with competitors to fight the patent troll threat.  This increasingly means that the best prior art is being identified and then shared within industries.  It also means that indemnitors who may have been able to avoid one-off indemnification requests, are less able to avoid paying an entire, organized industry segments.

R. David Donoghue, a partner at Holland & Knight, will be a faculty member at the 2012 IP Institute. He blogs regularly at the Chicago IP Litigation Blog and the Retail Patent Litigation Blog.

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