Patent Troll Lodsys Settles for Nothing to Avoid Trial

https://www.eff.org/deeplinks/2013/10/patent-troll-lodsys-settles-nothing-avoid-trial

by alxndr • 13 years ago

268 73 13 years ago

DanBC• 13 years ago

England has some useful things that the US should consider.

i) loser pays costs.

ii) if Ann is offered £X out of court, but declines it, and the case goes to court and she's awarded £Y then she has to pay costs if £Y is less than £X.

iii) Costs are controlled.

There are considerable problems with the English legal system, and many people are not able to seek justice through the court system. But this kind of thing would probably prevent some of the abuses of the US system.

i) (http://www.legislation.gov.uk/ukdsi/2013/9780111533291/conte...) (http://www.justice.gov.uk/civil-justice-reforms) (http://www.justice.gov.uk/legal-aid/funding) (http://www.justice.gov.uk/legal-aid/areas-of-work/civil/high...)

ii) There was a case some years ago where two women (sisters?) were accused of swapping eggs. They were accused of taking cheap eggs out of the carton and putting expensive eggs in. They were offered a lot of money, but "wanted their day in court", and although the court said they didn't swap eggs the court offered a smaller amount in damages, which got wiped out by the costs they had to pay.

This is the kind of thing that I find tricky to web search for. It seems like it should be easy - ["legal case" "eggs"] and then various supermarket names. I should try limiting the date range to before 2005. But if anyone has any tips about how to better search for it I'd be grateful. (Of course, Usenet news probably has some discussion about it, but Google is sub-optimal for searching their Usenet archive. It's a great shame.)

radley• 13 years ago

Won't matter: a shell company can dissolve and not pay anything if they lose.

loup-vaillant• 13 years ago

What about holding the stakeholders personally responsible? Could it be done without too much side effects?

bcoates2• 13 years ago

Presumably in a loser-pays system you would be required to post a bond to sue if there was some question of your ability/willingness to pay.

Besides, the ability to offload your legal exposure (as opposed to the risk for ordinary debts, where the creditors should have known what they were dealing with) onto shell companies is exaggerated.

consciousness• 13 years ago

Welcome to America. I wish there were a better way this could be handled.

jamespo• 13 years ago

That's where you need a bond paid into court

hfsktr• 13 years ago

About the eggs...it sounded really interesting and I was trying to understand what the reason might be for it. I didn't see anything in my searching.

I tried doing "v United Kingdom" but that wasn't helpful. Maybe knowing the city or region would probably narrow it down.

EDIT: I found this article[1] which I think clears it up for me. [1] http://news.bbc.co.uk/2/hi/uk_news/england/london/3022090.st...

mikro2nd• 13 years ago

Thanks for digging that up. Given that the article is dated June 2003 and ends with "the hearing continues" I'd love to know the eventual outcome.

DannyBee• 13 years ago

"ii) if Ann is offered £X out of court, but declines it, and the case goes to court and she's awarded £Y then she has to pay costs if £Y is less than £X. "

This does actually occurs in some parts of the US legal system. See, for example, California's section 998.

It varies from state to state, and in some cases, claim type to claim type.

hkhanna• 13 years ago

It occurs in the federal court system as well.

  Fed. R. Civ. P. 68(d) Paying Costs After an Unaccepted Offer. 
  If the judgment that the offeree finally obtains 
  is not more favorable than the unaccepted offer, 
  the offeree must pay the costs incurred after the 
  offer was made.

sharkweek• 13 years ago

Honest question about i) loser pays cost --

What happens when Little Citizen Joe legitimately sues a huge company with lots of legal resources resulting in Citizen Joe getting out-lawyered? Is he burdened with the massive cost of that? Surely the company could drop XXXk in legal bills on him

scott_karana• 13 years ago

You're missing the other half of the equation. If Joe has legitimate grounds to win the lawsuit, high-dollar lawyers will flock to him, since their high fees will be fully paid by a huge company when they win.

cobrophy• 13 years ago

It can. Although my understanding is that if one side purposefully generates high costs then they can get in a lot of trouble for doing so.

It's also worth noting that the UK is lowering the amount of fees you can get back. There's an upper limit on the percentage of fees you can get paid by the other side. This is essentially to introduce a higher cost to litigation through the courts and encourage sides to settle or go through an arbitration process.

stormbrew• 13 years ago

I wonder what would happen if parties to a civil suit were required to split their expenses with their opponent. That is, for every dollar you spend you pay a dollar of your opponent's legal expenses (and vice versa).

It would discourage using an army of lawyers against a small opponent (because it would allow them to hire an army as well), and might also help keep legal costs down in general.

I'm sure it's something that'd be a hard sell, and lawyers would probably hate it, but it's an interesting thought experiment.

jessaustin3• 13 years ago

This could work even if the split wasn't dollar for dollar. If the deep-pocket party had to give its opponent $1 for every $3 it spends, it would still prevent 10-to-1 spending on trials. I don't think there would be anything "unconstitutional" about this, as it's just a detail about how courts should function.

AlisdairO• 13 years ago

I'm a big fan of loser pays their own expenses + min(their own expenses, winners expenses). That means that you're at worst on the hook for twice what you put into the legal action, making it harder for large companies to price people out of the legal market with high-priced teams.

coldcode• 13 years ago

Settling for nothing should be held against them in a future case. It's clear the value of their property is zero.

mokus• 13 years ago

It should also be used against them in a criminal case for extortion / protection-racketeering.

clarky072• 13 years ago

What kind of max damages are possible in an IP case like this?

drewcrawford• 13 years ago

If you live in the US, there is a lot of important patent reform legislation being drafted in committee right now, and reform has a lot of support (including from traditional archenemies like the MPAA). Somebody motivated me earlier today to write my congressman about it, and so should you. Remember, constituents who don't complain, don't exist.

The letter I'm drafting is sort of Texas-specific, but you are welcome to adapt it to your state. If so please post a link so others on HN can benefit.

https://www.dropbox.com/s/xkeb6qlnpnkjntn/patent_letter.pdf

hrasyid• 13 years ago

who is "Trenz Pruca"?

Hontano• 13 years ago

The fictitious placeholder in Pages templates: https://www.apple.com/iwork/pages/images/overlay_template_07...

OrwellianChild2• 13 years ago

I'd like to see a settlement negotiation swing the other way. Someone like Kaspersky Lab with solid footing insists that Lodsys pay them to avoid trial. How much is Lodsys willing to pay to prevent the public exposure and invalidation of their patents?

foxylad• 13 years ago

Yeah, but by definition you'd never hear about it - Lodsys would have to insist on complete secrecy.

OrwellianChild2• 13 years ago

Often, that is the case, though there is a lot of scrutiny on the patent trolls these days. We're also seeing great shifts in transparency on the part of the people held up by these IP bandits. Witness The Oatmeal vs. FunnyJunk: http://en.wikipedia.org/wiki/The_Oatmeal_and_FunnyJunk_legal...

Some companies are crusading not just to defend their IP position, but to actively attempt to change the law so that these things can't happen again. Newegg is a prime example: http://arstechnica.com/tech-policy/2013/05/newegg-nukes-corp...

"There are strategies I think would be really neat and effective that I literally can't execute. I can't make good law because I don't have any appellate cases left. They [the trolls] are dismissing cases against us before any dispositive motions." -Lee Cheng, Newegg's chief legal officer

bradly• 13 years ago

I wonder if at some point it makes sense for someone like Kaspersky to ask the judge to deny the motion to dismiss by Lodsys and force a trial on them. IANAL but I don't think a judge has to dismiss even if the prosecution asks for a motion to dismiss.

throwawaykf2• 13 years ago

I doubt this really say as much about the merits of Lodsys' case as the EFF proclaims. This is simply an economic decision. As I'll explain below, I think they have a relatively strong case. But going to trial is expensive for both sides, and I think Lodsys simply sees insufficient margins in seeing it through. The problem, as the article says, is that even getting to the stage where you can call their bluff like this is extremely expensive, and statistically very few defendants will take it this far. So for the few folks who do stick it out this far, Lodsys can simply drop out and still stay way ahead of the game.

As to why I think their case is somewhat stronger than the usual troll: Firstly, it's patents partially survived Google's supposedly "devastating" re-examination request. Although the process is still ongoing, the claims that survived are golden. Those now have an "enhanced presumption of validity", which means if asserted at trial, the defendants would be wise to seek stronger alternate defenses besides invalidity.

Secondly, and speaking of alternate defenses: patent exhaustion. Exhaustion is triggered on first authorized sale [1]. I really cannot (and neither can the EFF) comment on this since all the relevant terms on which Apple, Google etc. have a license are secret. Further, since Apple was not allowed to intervene, it seems even less likely a defense.

Thirdly, the claims are "vague" only if you decide not to put much effort into understanding how they work. Much like non-lispers complaining about parentheses. I have seen vague claims, and these are downright straightforward in comparison, despite what the EFF's out of context snippets may imply. Also, mentioning fax machines is a non sequitur. If the main function of fax machines in this patent was to act as network components, by the Doctrine of Equivalents [2] they are functionally equivalent to the Internet of today. Heck, it could be carrier pigeons and still be valid. This is not an abuse of the system, and if you want to make it so, you'd need a lot more reform than is likely to happen.

I cannot comment on the quality (novelty, non-obviousness, etc.) of the claims since I have difficulty evaluating them in context of the state of the art in ~1992, to which these patents claim priority.

(IANAL. Which may also be why I think one solution to this problem is a drastic lowering of attorney fees :-P)

[1] http://en.wikipedia.org/wiki/Exhaustion_doctrine

[2] http://en.wikipedia.org/wiki/Doctrine_of_equivalents

mbreese• 13 years ago

This is simply an economic decision

Right. Lodsys thought that it was too risky for them, so they chose to drop the case. The amount that Lodsys would have gotten from licensing fees would have been more than the amount that it cost to bring the case to trial. So the only reason they would have to dismiss the case would be that they were worried that their patents were at risk. (Note: the risk could have been small, but still enough to worry them.)

They have no incentive to drop a case this far into it. Future targets now know that they just have to keep the case going and eventually Lodsys could just drop it.

throwawaykf2• 13 years ago

They have no incentive to drop a case this far into it.

If you think of their model as an exercise in gambling, they do have an incentive. Jury trials for patent cases are notoriously hard to predict, and they risked a very real, non-zero chance of reaching a decision that, even if it didn't kill their patents, could cripple their campaign, say, something like "Patents are valid, but iOS apps don't infringe."

(Note that jury verdicts in patent cases seldom seem to have much to do with the technical merits of the case.)

So their potential outcomes were:

A. Drop case: continue settling with small entities for Y revenue going forward with estimated revenue R.

B. Favorable decision with X in damages: nice bonus to go along with contiuing revenue R.

C. Unfavorable decision: 0 damages as well as very likely loss of continuing revenue R.

Say the outcome has probabilities P(A), P(B) and P(C). They likely just assumed some values for these probabilities (actually, lots of empirical data out there these days, and P(B) is quite low)and X and R, and ran the numbers, and they got an expected result that wasn't too favorable. So they chose to minimize their risks, along with the associated rewards.

Future targets now know that they just have to keep the case going and eventually Lodsys could just drop it.

Right, but the catch is that for most defendants it's too expensive to even just keep going on. And that's why they'll keep suing left and right and dismissing if anybody gets too close to trial. I don't know if there's any way to stop this campaign unless they slip up.

(PS, I was mistaken about the Apple situation. Apple could not intervene because Lodsys settled the cases it was trying to intervene on -- essentially a tactical retreat like this one -- so it doesn't really speak to the exhaustion defense as such.)

linuxhansl• 13 years ago

Isn't it nice to be patent troll in the US.

You can threaten 1000's of entities with legal action to extort money, since just defending against the allegation is very expensive. Then when a few of those threats don't stick, all you have to do is "settle for nothing" to avoid an actual trial. Nice.

The patent trolls are just a symptom, the legal system is the problem.

You leave a legal loophole and you'll find some parasitic scum that will exploit it. Personally I find it hard to believe that the people running these companies can sleep at night... But that is a different story.

jeremiep2• 13 years ago

Simple, these people don't care about the rest of the world. You can't lose sleep over something you don't give a shit about.

Garbage• 13 years ago

It's one of those rare times, when I feel great that I am living in India. ;)

pm90• 13 years ago

Instead of Patent Trolls, you have an apathetic business environment, crumbling infrastructure and no copyright protection at all. You just traded one set of problems for another one

mathattack• 13 years ago

Is the answer being able to sue them to pay the legal fees, even if doesn't go to trial?

abcd_f• 13 years ago

  *Joint* motion to settle (with) attorney fees are 
  to be borne by the party that incurred them.

Good for Kaspersky, but effectively Lodsys collected payments on this particular patent from 54 out of 55 companies and then Kaspersky let them keep the patent in exchange for leaving them alone. Not sure if this is worthy of celebration at all.

rurounijones• 13 years ago

Quite, celebration would have been Kapersky forcing it to trial and leaving lodsys a smoking hole in the ground.

jeremiep2• 13 years ago

Even then, the shell company would just dissolve leaving the parent company unaffected.

kokey• 13 years ago

It sounds like if it's a matter of spending about $1mil to fight a troll in court and get the patent invalidated, the victims might do better by pooling the money they would have spent on settlement together on the first case to go to court and get the claims invalidated.

kamjam3• 13 years ago

Linked from the original article is a case of a judge ruling patent exhaustion[1]:

Helferich's patents cover the delivery of content (alerts with a hyperlink) to a cell phone.

The issue is not with cases like this, the issue is with bullshit patent being granted in the first place. They need to get rid of software patents, and wishy washy crap about how X could do Y if only we had money to build it rather than just dream it up. Invent something, build it and then let it be patentable.

[1] https://www.eff.org/deeplinks/2013/08/judge-sticks-end-users...

ajb• 13 years ago

So, the problem is that when you settle you give away your right to get your money back if the patent it later invalidated. This makes for a perverse incentive.

I wonder if there is some way of credibly signalling that you won't settle, even if you don't have the money for a lawsuit. Can you give away your right to settle? IE, could we set up some organisation whereby you give them the right to veto any settlement you make to a patent troll? And that organisation then insists on a clause whereby any settlement can be undone if the patent is later invalidated.

Of course, the troll would probably insist on getting more money, but even if they do, if the patent is invalid you stand a good chance of get it back.

There's probably a flaw in the above scheme somewhere, but surely there's some way of doing this...

ethanazir2• 13 years ago

Evidence the patent system is functioning properly.

Patent Troll Lodsys Settles for Nothing to Avoid Trial

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