Proxy Patent Litigation II

Previously I posted on the issue of proxy patent litigation. Basically, mass patent aggregators (entities which own or control a large number of patents that they have acquired from elsewhere) litigate only a few of the patents in their portfolio against a large accused infringer. The litigated patents serve as proxies for the quality of their entire portfolio. If the aggregator is successful on the merits (or at least in preliminary rulings, such as defeating the accused infringer’s motions for summary judgment on invalidity and non-infringement), it strengthens their hand considerably in negotiations for a license for the entire portfolio. The proxy litigation is also only one part of a broader dynamic from the aggregator’s perspective:  the aggregator’s success in court against one practicing entity not only puts it in a stronger bargaining position against that entity, it may also do so with the rest of industry as well (i.e., other firms may be willing to pay more for a portfolio license).

I now attempt to answer a question I posed in my previous post. Specifically, if the court understood the underlying dispute was litigation-by-proxy, would it (or could it) proceed any differently?

I think it is useful to consider this question through the prism of the classic project management triangle. According to theory, a project has three core attributes: speed, quality, and cost. There is tension among the three attributes, and consequently, one can never maximize more than two of them. For instance, if one wants a project of the highest quality in the fastest time, then it can’t be cheap. Alternatively, if one wants a project fast and cheap, then it can’t be of the highest quality.

Now let’s translate the project management triangle into the judicial process. Several core attributes of a case are speed of resolution, depth and thoroughness of the analysis, and accuracy or correctness of the decision. If the project management triangle is correct and applies to the courts, then all three of these can’t be maximized at once. While the court and litigants want speedy, thorough, and accurate justice, not all are possible in a case.

Now turn back to the proxy litigation by patent aggregators. I submit that the optimal level of speed, thoroughness, and accuracy may be different in proxy litigation than run-of-the-mill litigation. The depth and thoroughness of the opinions may be of less importance in proxy litigation because the adjudicated dispute is not the entire dispute between the parties. Accuracy may be more important since the results of the single dispute will be used to determine the value of a larger portfolio.

Thoughts on the analysis?

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3 Responses

  1. jon a. says:

    What if the patents aren’t necessarily representative of the entire portfolio? I.e., a plaintiff isn’t going to pick a random sample of patents to bring to trial, but will select the strongest ones. The court could reason that the remaining patents in the portfolio are of lower quality or have a weaker case for infringement, and ignore them in favor of a more thorough analysis of the core dispute (i.e., the only dispute likely to come before the court). And from the point of view of a defendant, even if you lose a validity ruling on one patent, the rest of the portfolio, being weaker, makes it riskier for the plaintiff to assert.

    This also seems to resemble the bundling of mortgages into securities with pooling agreements–what people thought was representative of the pool turned out not to be, and the pooling agreements were complicated in ways that only the servicers knew about. Relying too much on proxies to maximize speed and cost-effectiveness can end up destroying quality. In this context, it would be important to understand what sort of internal factors drive a mass patent aggregator’s decision to assert a patent. If it’s as simple as “we go after anyone against whom the patent laws give us a cause of action” then the patent would be an accurate proxy for the whole portfolio. But there are other things that a plaintiff could be testing, for example: quality of counsel, favorability of jurisdiction, etc.

  2. AF says:

    I’m not sure that accuracy and thoroughness are separate points of a triangle. In complex cases, thoroughness and accuracy would seem to go together.

    More broadly, I question whether it is appropriate to view courts as project managers for patent aggregators.

  3. parerna says:

    Awesome blog…thanks…