President Obama's administration is a big friend of trial lawyers as well as a major fan of creative interpretations of existing laws and precedents, whatever the long-term consequences. So when even this administration sounds the alarm bells that an upcoming Supreme Court case could uproot sound precedents and create an explosion of litigation, you know the potential consequences are dire.
That case is Limelight v. Akamai, and it could radically expand the legal definition of what constitutes patent infringement if the justices uphold a lower court's ruling. That would in turn create a boom in what is known as “patent troll” litigation.
Patent trolls are people who work an abusive, but legal, scam where they purchase available patent rights and then use them as pretext to extort money from businesses through bogus infringement claims. For most businesses, the costs of settling are cheaper than fighting in the courts, so settlements are the norm.
This blight has been held somewhat in check by a fairly narrow legal definition of what counts as infringement. Limelight v. Akamai could undo that. The Supreme Court is set to hear oral arguments in the case Wednesday.
Neither party in the case is a troll. The matter involves a legitimate dispute over whether Limelight infringed on Akamai’s Internet service patent. Because Limelight didn’t copy the entire patent, the current legal standard for a violation, it won most of the way through the courts. A 6-5 split on the Federal Circuit Court narrowly sided with Akamai, though. The court argued that a party can still be guilty of infringement if it copies part of a patent and “induces” others to complete the process — even if there was no clear instruction from the copier to do this. That incredibly vague standard opens the door to all sorts of mischief from patent trolls. Many in the high-tech world warn this could be a drag on the entire economy.
“Every dollar spent defending against patent suits is a dollar that could be used to research new products, improve existing products, or simply bring products and services to customers more efficiently and at cheaper prices,” noted a consortium of companies including Google, Oracle, Cisco Systems and others in a friend-of-the-court brief.
The Obama administration agrees. The president's economic policy adviser, Gene Sperling, has estimated that patent trolls are responsible for more than 60 percent of current infringement cases. This cost defendants $29 billion in 2011 alone. In his brief, Solicitor General Donald Verrilli called on the Supreme Court “to avert a significant expansion of the scope of inducement liability … and a corresponding increase in burdensome litigation.”
When this White House is worried that trial lawyers could start running wild, the rest of us should be really, really scared.