The Retail Litigation Center (RLC) filed an amicus curiae brief asking the U.S. Court of Appeals for the Federal Circuit to put an end to an abusive litigation tactic used by non-practicing entities (NPE’s), also known as “patent trolls.” In UltimatePointer v. Nintendo, an NPE brought suit against the game manufacturer in the U.S. District Court for the Eastern District of Texas, arguing that Nintendo’s Wii product infringed the NPE’s patent. The NPE then joined multiple retailers whose only connection to the alleged infringement had been to sell Wii products that they had purchased from Nintendo. The Eastern District of Texas denied the retailers’ motion to sever them from the lawsuit. The RLC’s brief supports the defendant retailers’ request to the Federal Circuit asking for a writ of mandamus directing the lower court to sever the retailers from the case.
Manipulation of the joinder rules has allowed NPE’s to join retailers to litigation en masse and manipulate venue to their advantage by circumventing the function and intent of standards that Congress recently enacted as part of the America Invents Act precisely to address these practices. In this case, the lower court’s permission to join the retailers further opened the door to allow the NPE to expand the class of products for which the plaintiff is seeking damages to include nearly 2,000 products manufactured by 200 companies other than Nintendo but sold by the retailers for use with the Nintendo product.
This practice, which had previously been outlawed by Congress, was reopened by the District Court’s reinterpretation of and denial of the Petitioners motion to sever; in effect re-opening the loophole Congress had closed with the AIA. These new interpretations by the court have contributed to the growing influx of litigious activity by NPEs against retailers putting them in a position where they must defend suits without possessing the technical and market expertise that the product manufacturers possess.
“The effect of this misinterpretation is far reaching,” said RLC President Deborah White. “Retailers are forced to defend infringement suits for patents they do not own, and technologies they did not develop. The result is that NPEs, through their manipulation of the law, are able to generate settlements that neither reflect the intent of the law nor the actual value of their claims. They are thieves without masks.”
According to RLC’s filing with the court:
“Manipulation of joinder provisions is just one maneuver in a long list of litigation tactics employed by NPEs that undermine the goals of the patent system. These tactics promote settlements unrelated to the market value of the patented technology and, coupled with the exponential growth of NPE litigation, inflict heavy societal costs with little to no benefit.”
“NPE litigation is overwhelming: from 2007 to 2011, patent suits by NPEs went from accounting for about 22% of all patent suits filed to nearly 40%. Sadly, little to no societal benefit results from this litigation. Instead, retailers’ rising direct costs, increased overhead, and loss of market capitalization divert funding away from beneficial business activity and long term investment.”
“Rising litigation costs coupled with the increasing frequency of NPE suits require retailers to exhaust money on peripheral patent litigation instead of profit-generating corporate goals.”
The full brief can be found HERE. The brief was drafted by Akin Gump Strauss Hauer @ Field LLP attorney Sanford W. Warren, Jr.
The Retail Litigation Center is a public policy organization that identifies and engages in legal proceedings which affect the retail industry. The RLC, whose members include some of the country’s largest retailers, was formed to provide courts with retail industry perspectives on significant legal issues, and highlight the potential industry-wide consequences of legal principles that may be determined in pending cases.