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Policy: Technology

Supreme Court keeps patent trolls under the bridge

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Opinion,Columnists,Sean Higgins,Supreme Court,Law,Technology,Patent Law

In a Supreme Court increasingly defined by narrow 5-4 decisions, it's notable when the justices decide a case both unanimously and with dizzying speed.

They did that Monday, slapping down a lower court ruling would have made the practice known as "patent trolling" vastly easier.

In Limelight Networks v. Akamai Technologies, all nine justices agreed that the federal courts had made a serious mistake by expanding the definition of patent infringement. The decision came just one month after oral arguments, a clear sign the justices saw no merit in the lower court's decision.

Had the justices let the earlier ruling stand, we would have likely seen an explosion of patent infringement cases. The resulting legal morass would have had a smothering effect on technological advancement and, inevitably, the broader economy.

Intellectual property laws are important to promoting entrepreneurship. Take away the ability to profit from one’s innovation, and you lose the main reason why most people do it. So we want the courts to recognize it when a patent is ripped off.

But these cases aren’t always simple. Patent trolls are companies that work a scam where they purchase available patent rights and then use them as pretext to extort money from other businesses through bogus infringement claims. Most corporations opt to settle since fighting in court is usually more expensive than it is worth.

The legal definition of a patent violation is pretty narrow and specific, though, and this has served to keep trolling from getting completely out of hand. A key provision is that the patent has to be completely copied, not just part of it.

Limelight v. Akamai could have upset this balance. The case involved a dispute over whether technology company Limelight had infringed on Akamai's Internet service patent even though it only copied part of it.

Akamai argued this was still infringement because Limelight had "induced" its customers to complete the process.

Limelight won the early rounds, but in 2012 the U.S. Court of Appeals for the Federal Circuit found for Akamai. In doing so, the court said that infringement can happen even when no one entity had copied the patent.

That got the attention of the tech community. Bringing out new products and innovations would be accompanied by endless possibilities for litigation under the new standard, they warned.

The White House was worried too. Economic policy adviser Gene Sperling has argued that patent trolls now account for more than 60 percent of infringement cases, costing defendants $29 billion in 2011 alone.

Justice Samuel Alito, writing for the majority, was quite blunt in reversing the federal court, stating that it "fundamentally misunderstands" what infringement means.

The lower court’s ruling replaced a simple, clear standard with a vague, subjective one, Alito noted. That opened a Pandora’s box of potential intended consequences.

"If a defendant can be held liable … for inducing conduct that does not constitute infringement, then how can a court assess when a patent holder’s rights have been invaded?" Alito said.

He added: "What if a defendant pays another to perform just one step of a 12-step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process?"

Alito conceded that two or more entities could evade liability by dividing the patent process between them, but said this did not justify "fundamentally altering the rules."

Liberal justices Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor agreed with Alito’s reasoning. That, coupled with the speed of the decision — oral arguments were held on April 30 — suggests the court thought this one was a no-brainer.

The ruling won’t itself end the practice of patent trolling. All the court did was preserve the status quo. But sometimes just keeping things from getting worse is victory enough.

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Sean Higgins

Senior Writer
The Washington Examiner