By Sheila Pursglove
In fairy tales, trolls are ugly, supernatural beings, unfriendly to humans. In the world of intellectual property, patent trolls buy old patents that are broadly worded, and assert them against industries using state-of-the-art technology that have little to nothing to do with what is actually in the patent, says Harness Dickey patent attorney Rudy Telscher.
“It’s all in an effort try to enforce patent rights against accused infringers in an attempt to gouge big bucks in licensing fees out of victims,” he explains.
Telscher and his litigation teams recently triumphed in a closely watched case – Icon v. Octane – that went all the way to the Supreme Court, and may help limit future frivolous or predatory patent suits. At issue was whether a case is “exceptional” and entitles the prevailing accused infringer to an award of attorney fees.
The case revolved around exercise equipment. Icon Health & Fitness sued Octane Health, claiming that linkage used in elliptical machines manufactured by Octane infringed on Icon’s patented invention allowing an exerciser to adjust the stride length.
According to Telscher, e-mails from Icon’s files showed that Icon pulled “an old patent off the shelf” from the 1990s that it had never before commercialized, and contended that Octane’s award-winning machines somehow infringed this old patent.
“Octane’s machines did not look like or operate like the linkage shown in Icon’s patent,” he explains. “Yet, in the complex world of patents, it is very difficult to get rid of even the weakest patent cases until several years into the litigation and after millions in legal fees have been spent.”
The average cost to litigate a patent case, even a weak one, through trial is over $2 million in legal fees in the Midwest and typically over $4 million on the East and West Coasts, he notes. By 2013, when the Supreme Court granted certiorari in the Octane case, the issue of abusive patent cases had garnered national media attention and many bills and key pieces of proposed legislation were before Congress.
Octane prevailed at the district court and appellate level, but its request for attorneys’ fees was denied. Thanks to Telscher and his team, on April 29, the Supreme Court returned a 9-0 decision in Octane’s favor. They justices determined the standard for awarding attorney fees to prevailing defendants in patent litigation is too high and that the appellate court construed the attorney fees statute in an unduly rigid manner. The court ruled an “exceptional” case is simply one that stands out from others because of its frivolous nature relating to the legal arguments or merits of the claim; and that a simple discretionary inquiry would serve to determine whether granting attorney fees is appropriate.
The ruling is expected to have implications for defendants in patent cases throughout the U.S., notes Telscher, an attorney in Harness Dickey’s St. Louis office.
“This is a landmark decision that will help deter baseless patent litigation and balance the playing field for companies that are targeted by frivolous lawsuits,” he says. “The justices were meticulous in their analysis of this case and I’m confident their decision will benefit the U.S. patent system and economy.”
The victory continues Telscher’s winning streak of more than a decade in which he has not lost a trial or arbitration. With 25 years experience of intellectual property disputes in district and appellate courts throughout the United States, this University of Iowa law grad enjoys patent litigation for the opportunities to learn about diverse and interesting technologies, and interesting legal issues that shape the boundaries for technology commerce in this country.
“It was an amazing privilege to handle the patent fee issues before the highest court in the country and arguably the most prestigious court in the world,” he says. “The Supreme Court justices are uncanny in their ability to ask the toughest questions that challenge the implications of the new rule we encouraged the Supreme Court to adopt.”
Octane CEO Dennis Lee is grateful for the Supreme Court ruling in his firm’s favor.
“I believe the decision will make patent trolls and big companies like Icon think twice before filing baseless lawsuits,” he says. “We spent six years defending ourselves and working to recoup our legal bills. Hopefully, this decision will mean others won’t suffer through a similar experience.”
Telscher’s Harness Dickey colleagues in Michigan are extremely pleased by the result.
“We see this decision as a victory over the tactics employed by trolls in extorting settlements,” says George Moustakas, a principal in the firm’s Troy office. “This is particularly important in the current environment where corporations with centralized operations in Michigan, for example, are reacting to economic challenges with increased expenditures for R&D. The allocation of capital to non-income earning matters such as meritless litigation ultimately hampers the ability to compete.”
Although the impact of this decision will play out over the coming months and years, corporations with operations in Michigan will react to the decision favorably by pursuing non-practicing entities to recover the expenditure of resources for meritless litigation that otherwise could be allocated to R & D, he notes.
“These same institutions, however, will need to confirm their own analysis of pending matters so that in proceeding as the aggressor they can ensure that a challenge to recover fees will fail.”
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