Legal Trickery – Eric A. Parzianello

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Patent Trolls Driving Florida Litigation Should Avoid Michigan

Posted by Eric Parzianello on September 2, 2009

A recent aritcle in Florida Trend Magazine highlights the importance of forum selection in litigation. The article notes the increase in litigation brought by investors seeking to make a quick return on their investment. These “investors”, known by the less flattering moniker of “patent trolls”, seek to purchase patents but typically don’t intend to use them. Rather, they take ownership of the patents and then sue companies that already use similar technology.

The article cites a 2008 PricewaterhouseCoopers Patent Litigation Study. That study analyzed patent awards from 1995-2007 and concludes that the United States District Court for the Middle District of Florida in Tampa has the highest overall national success rate for plaintiffs in patent infringement cases – a staggering 75% success rate at trial and a 66.7% overall rate of success compared to national averages of 57% at trial and 32.7% overall. Conversely, the United States District Court for the Eastern District of Michigan based in Detroit has the second lowest overall success rate in the country – a mere 18.5%.

In these “patent troll” cases, the company being sued sometimes settles with the patent holder rather than incurring the cost and uncertainty of litigation. Unfortunately for Hyundai Motor America, it followed a different route and elected to litigate its case to trial in the United States District Court for the Eastern District of Texas – the second most plaintiff-friendly district in the country for patent litigation according to the PricewaterhouseCoopers study.

Hyundai was alleged to have infringed on website patents which described a computerized system that assists a salesperson in training and with sales of parts corresponding to particularized products. In 2007, a jury awarded the plaintiff $34 million in damages for Hyundai’s infringement of one of the patents at issue. After trial, Hyundai appealed but redesigned the infringing websites and contended that they no longer infringed with plaintiff’s patents. The appeal remains pending.

A recent update to this case falls into the category of “Now Have You Had Enough?” After redesigning the websites at issue, Hyundai filed a new case against the plaintiff seeking a court determination that its redesigned websites no longer infringe on the plaintiff’s patents. Of course, the plaintiff filed a counterclaim for additional damages alleging continued infringement. On August 24, 2009, Judge Leonard Davis of the United States District Court for the Eastern District of Texas ruled that the websites have not materially changed since the 2007 trial and that they still infringe on the plaintiff’s patent. The issue of additional damages has not yet been addressed by the Court.

The location of litigation cannot always be controlled. However, in some cases, there are two or more forums where a case can be tried and being the first one to file puts you in control of the forum. In other settings, negotiated forum selection clauses in agreements are a good way to control the forum. In any case, however, knowing the most advantageous forum is critical for both plaintiffs – for filing purposes – and defendants – for purposes of settlement.

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