FALL 2014

48 THE DISTRIBUTOR’S

48 THE DISTRIBUTOR’S LINK Jim Truesdell James Truesdell is president of Brauer Supply Company, a distributor of specialty fasteners, insulation, air filtration, and air conditioning with headquarters in St. Louis. Mr. Truesdell is adjunct professor at Saint Louis University and Webster University. An attorney and frequently published writer, he is the author of “Total Quality Management: Reports From the Front Lines”. EFFORTS CONTINUE TO CURB PATENT TROLLS Every now and then, as a distributor of industrial fasteners and hardware goods, I am the recipient of an email or letter correspondence alerting me that I may have violated the patent of someone who purports to own the rights to some item or tool which we are allegedly selling or which we have secured from some manufacturer who they charge is not the rightful owner of the item in question. Sometimes these claims have been directed at a specific instance. More usually they are broad assertions of usage which lack documentation and appear to be a shotgun style communication to a vast number of companies which the sender seems to be shaking down for a “settlement.” It’s not always just the manufacturer who is targeted by these entities which have become known by the term “patent troll.” Our patent laws exist because we want to encourage creativity and innovation in coming up with new and unique inventions which will serve our society. The idea is to allow those who invest time and effort in research and development a period of time during which they can exclude others from utilizing the new idea unless those others negotiate and pay license fees and royalties to the inventor/developer. It is all logical and for many years has worked reasonably well to stimulate ingenuity and the entrepreneurial spirit in our economy. But like so many things that have good intent, there are people who will look for an “angle” and find a way to twist the law’s application so that they can extract money from someone else. Such is the proliferating problem of “patent trolls.” Evoking the image of the ugly green monster that lurked under bridges in fairy tale stories and who demanded payment of toll fees from those seeking to cross the bridge, there are entities out there who acquire patents through various means and seek out victims who may be using similar devices or processes (however remotely) and then threaten to file lawsuits for which they seek a settlement payment. These patent pirates, more gently referred to as “patent holding companies”, do not actively manufacture product or provide services. They sometimes purchase patents from bankrupt companies and then enforce them against third parties without even the pretense of actually using the patents themselves. Many of the patents the trolls use probably shouldn’t have been granted in the first place. Many of them are vague and overbroad. There have been calls from many in business and government to narrow the criteria on which they are issued. President Obama, in signing the “America Invents Act” in 2013 called on the Patent and Trademark Office to hold patent holders’ “feet to the fire” in considering applications. One area that seems to have been abused is where software is developed to provide new processes to implement already established ideas and products. In fact, the Supreme Court has moved in recent months to limit these suits. In the case of Alice Corp. vs. CLS Bank Justice Clarence Thomas, writing for the majority, said that the patent holders use of software and computers to implement an already established practice (in this case completing financial trades through an intermediary to guard against fraud) did not constitute an actual invention. Another case, Octane Fitness vs. Icon Health & Fitness, made it easier for courts to compel the loser of a lawsuit to pay a defendant’s attorney’s fees if a judge deems a lawsuit frivolous. This is important because unscrupulous plaintiffs often leverage the fact that they are litigating under contingency legal fee agreements which allows them to proceed without risk while defendants are racking up hourly defense bills, giving those defendants a great incentive to throw money into a settlement for even a non-meritorious claim. please turn to page 212