Monday, September 26, 2005

Minneapolis Star Tribune has article on patent trolls

The article gives background on the litigation between Solaia, the purported troll, and nine defendants in the District of Minnesota, concerning US 5,038,318 (cited by 25 US patents and claiming no priority).

Some relevant text follows.

Of the demand letter:

Pay up in 30 days or face an expensive court battle, the letter not so subtly warned, adding that Clorox, Kellogg, Kodak, Gillette, BMW, Eli Lilly and other firms had all paid Solaia's licensing fees. The letter noted that Solaia's attorneys were experienced patent enforcers, having won 22 verdicts in eight years worth more than $400 million.

Of a recipient of the demand letter, Andy Ubel of Valspar:
"I knew this was very, very serious. This was not anything about engaging in a negotiation. This was about, 'Pay up or we'll sue you and it'll cost you more to defend yourself ...' This was a mess. It was so messy that if you are all by yourself you just get creamed."

Of the troll issue:
Valspar was face to face with what some industry lawyers call a "patent troll." The term, said to be coined at Intel after it was hit by patent cases, is typically applied to a company that makes money solely by buying and enforcing patents or demanding licensing fees.

Troll firms "have no assets. They don't innovate. They have no R&D. They have no activity to speak of other than writing letters and demanding large checks," said Paul McDowall of the Minnesota Intellectual Property Lawyers Association.

The amounts claimed by such suits are often small enough to induce the defendants to decide that a quick payment is the cheapest solution. That's because it can cost more than $2 million to defend a patent infringement accusation in court.

"It can cost seven figures just to get through a ... hearing before a judge," McDowall said.

David Peyton, the National Association of Manufacturers' director of technology policy, said plaintiffs in such cases "are not practicing the technology. They just bought the patent and so it's just a financial instrument. It's a common practice."

One of Solaia's attorneys rejects the troll talk, particularly in reference to his client.

"It really blows my hot buttons to hear all this troll nonsense. Those who talk about trolls are know-nothings. They have no background dealing or enforcing patents," said Ray Niro, the Solaia attorney at Niro, Scovone, Haller & Niro who sent the letter to Valspar. He said his style of patent litigation helps cash-poor inventors protect their intellectual property, adding that big companies are not the only ones entitled to patent protection.

Of defendants joining forces:
General Mills and Toro got the letter. So did Spam creator Hormel, and glue maker H.B. Fuller. As did Bemis Co. the packaging materials firm, Imation Corp., which makes CDs, and Donaldson Co,. the giant maker of truck mufflers and filtration systems.

Initially, each of the nine companies hired an independent counsel, sought software specialists and met with plant managers to verify that the patent in question -- No. 5,038,318 -- was not employed in their automated manufacturing processes. The patent, which Solaia purchased in 2001, was related to a spreadsheet software device for communicating real-time data between automated machines.

Of the litigation:

In June 2003, seven of the Minnesota manufacturers sued Solaia in U.S. District Court in Minnesota. Donaldson and Imation joined the lawsuit that summer.

Solaia's law firm, Niro, Scavone, Haller & Niro, is well known and has sued several companies mostly in Illinois, winning favorable rulings from judges there.

By sticking together, the firms made a strategy of "divide and conquer" impossible, said Peyton of the National Association of Manufacturers .

After two years of court battles, a Chicago judge dealing with another Solaia lawsuit interpreted Solaia's definition of its interface spreadsheet technology in such a way as to make it difficult for the company to claim infringement in the Minnesota case.

Eleven days after the March 28, 2005, decision, Solaia and the nine Minnesota firms settled, with Solaia giving the Minnesota firms the right to use the patent and released them from any claims.

The cost:

The total defense costs were divided by a factor of nine. So it was $67,500 for each of the defendants.


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