Troll With the Punches (Or, What to Do When the "Take a License" Letter Arrives)

June 5, 2008 — 929 views  

You are in your office thinking about your latest case, when your assistant hands you an envelope. You need to sign for it. Uh oh. Is there a summons and complaint inside? No. A letter. A friendly letter suggesting that you take a license to one or more patents. You think, “not interested” and toss it.

Six Months Later
You get another certified letter. This one does have a summons and complaint inside. Congratulations, you’ve been sued for patent infringement.

How Did This Happen?
The name “Patent Troll” was coined to describe a person or entity who buys up related patents and waits patiently, like the fabled troll under the bridge, for someone to unwittingly infringe. It is at that point that the troll appears to exact his toll—or—more precisely—a license fee. The typical troll only exists to hold patents and collect license fees.

The original letter that you received was friendly for a reason. The troll did not want to scare you into thinking a lawsuit was coming for fear that you would beat him to your hometown courthouse with a declaratory judgment action of noninfringement. Also, statistical evidence suggests that potential infringers are more likely to succeed as plaintiffs in a declaratory judgment action than as defendants in an infringement action. So, he took a friendly tone, hoping you would see things his way without any fuss.

Whom Do Trolls Target?
Anyone in any business employing technology, whether a hospital, manufacturer, or retailer, may be apprehended by a troll.

What should I have done when I opened the first letter:

1. Read it carefully. If the troll accused a product of infringement, immediately determine whether you purchase it or make it.

2. If you purchase it, collect all of your agreements with your vendor that may relate to indemnification. Remember, agreements could reside in small print on the back of purchase orders, invoices, and other forms.

3. You or your attorneys should draft an appropriate letter to the vendor demanding that they investigate the claims and that they hold you harmless and indemnify you against all liability and defense costs that may arise. In addition, request that they
respond to the troll and keep you advised as to any resolution.

4. Send a copy of your letter to your vendor to the troll, advise that the vendor is responsible for responding, and request the troll to inform you once the matter has been resolved.

If You Are the Manufacturer of an Accused
Product or Engage In an Accused Method,
Your Strategy is Different.

1. Put a hold on all routine document destruction, whether in paper or electronic format. The saved documents may be helpful to your attorneys in their review of the situation. Also, in the event that the matter does proceed to litigation, in addition to
any other claim, you do not want a claim against you for spoliation of evidence. Inform all key managers, document custodians and your I.T. Department that no destruction may take place until further notice.

2. Send a copy of the troll’s letter to your attorneys. They need to evaluate whether the troll is making a reasonable assessment of the strength of its patent(s) and the characteristics of your accused product or method.

3. Research court-based databases to see if the troll has already initiated any litigation against others on these patents. You can determine a lot from reading the litigation files.

4. Check the troll’s website. They frequently have lists of those who have taken licenses and you or your attorney may wish to speak with those on the list in order to obtain information helpful to your own evaluation.

5. If the troll’s letter specified a date by which to respond, either respond by the date or indicate that you are conducting an investigation and will respond when complete.

6. Consider, with your attorney, whether you have a basis to file a pre-emptive declaratory action against the troll—the best defense can often be a good offense.

Dykema Gossett PLLC