What is frivolous litigation? According to Cornell Law School, a frivolous lawsuit is one that lacks any arguable basis either in law or in fact and may be intended to harass, delay, or embarrass the opposition. This definition seems pretty black and white, but attorneys often disagree on what is an arguable basis in law or fact. So, there is some subjectivity as to whether a case is frivolous or not. One top attorney did a survey of litigators years ago to see if there was any agreement on what frivolous litigation was. He reported that the only agreement from the survey was that “it is what the opposing attorney is doing to my client.”
Those focused on reducing patent rights claimed that excessive frivolous patent litigation harmed “good” companies. They used the “patent troll” narrative in an effort to sell our lawmakers and the public. This effort was amazingly effective, and we ended up with the passage of The America Invents Act of 2011 and resistance thereafter to restoring effective patent rights.
Was there ever an excessive amount of frivolous patent litigation? Those sued for infringement usually have a different opinion than those whose patent rights are infringed. But, an objective observer could argue that several aspects of our system in 2011 could have allowed for some frivolous litigation. Interestingly, the AIA didn’t address these issues. Rather than a rifle shot to address specific issues, the AIA was more like a sawed-off shotgun, creating what Chief Judge Randall Rader called “death squads killing property rights.” (the Patent Trial and Appeal Board or PTAB).
Issues in the Few Years After 2011
Generally, if you face a frivolous lawsuit, you can argue that the suit was frivolous and, if successful, receive from the opposing party and party’s attorney reasonable expenses and attorney’s fees incurred (called a fee reversal). However, in patent litigation, the case had to be “exceptional” to go for a fee reversal, and this was a high bar that few situations could overcome. The result was that the party being sued for patent infringement might know they could win the case but wouldn’t be able to recoup any of the cost, and therefore, the decision might be to settle for some amount that would be less than the cost of the defense. This was referred to as a nuisance lawsuit.
The US Supreme Court’s 2014 Octane Fitness decision eliminated this anomaly. This decision defined “exceptional” in patent litigation as any case that “stands out from other cases” in one or more of several areas. It just has to stand out. This is a low bar, and for this reason, it is now financially dangerous to the entity that brings a frivolous case. Many patent holders feel that the bar is now too low, and the risk to patent holders with legitimate cases is too high. It is not unusual for the attorneys of the alleged infringer to threaten the patent holder with the prospect of a fee reversal to create doubt about continuing with a case. Certainly, the argument that bringing a nuisance patent suit doesn’t now entail financial risk post-Octane Fitness is uninformed.
Another issue that existed in the past was the ability to sue for infringement without indicating exactly what the infringement consisted of. The entity being sued would have to lawyer up and start spending money before knowing the lawsuit’s details. The alleged infringer might have to go through the process of discovery, consuming time, and money, before even knowing what the actual infringement allegation was. To a patent holder, this discovery could have been a legitimate way to determine how the alleged infringer was infringing. To the alleged infringer, this process could have been seen as an expensive “fishing expedition.” This situation no longer exists due to what is referred to as the “abrogation of Form 18,” which occurred in 2016. Now, when you bring a patent infringement lawsuit, you have to state how the alleged infringer is infringing. If you don’t provide the information in enough detail, the opposing party can get the case thrown out. So, again, something that could be used in the past to put undue pressure on an alleged patent infringer doesn’t exist in the present.
The third change regards demand letters. As a patent holder, how do you let an alleged infringer know that they are likely infringing and start a dialogue that could lead to a resolution? You send a demand letter. In the past, it was argued that some attorneys used demand letters that were too vague and threatening and sent to large numbers of individuals, some of whom should not have been targeted. Those trying to weaken the system used the narrative that abusive demand letters were common. A colleague of mine used to ask anyone who brought up the demand letter issue to show him an example of an abusive demand letter. Nobody ever could. As mentioned above, this was another situation exaggerated to help pass the AIA and stop the restoration of effective patent rights. Regardless, a majority of states now have laws against the use of abusive demand letters. These laws have greatly reduced any incentive to use abusive demand letters. Still, many patent holders feel that it is now much harder to start a legitimate dialogue with alleged infringers.
The AIA didn’t address any of these issues, but they were addressed. Now, there are significant incentives against bringing frivolous patent lawsuits. Are there any frivolous patent lawsuits happening now? Well, this is America, and there will often be an example of an attorney somewhere doing something objectionable. If the present is like the past, the adversaries of restoring effective patent rights will try to make it look like these rare examples are common.
