Before I sat down to write this column, I thought I knew what trolls were. Answer: they are the men who I dated in law school. Apparently, that is only partially true. Trolls are also a potential revenue source for small firms.
The term “patent trolls” is a controversial term with multiple meanings. According to Wikipedia, the definition includes a party that does one or more of the following:
• Purchases a patent, often from a bankrupt firm, and then sues another company by claiming that one of its products infringes on the purchased patent;
• Enforces patents against purported infringers without itself intending to manufacture the patented product or supply the patented service;
• Enforces patents but has no manufacturing or research base;
• Focuses its efforts solely on enforcing patent rights; or
• Asserts patent infringement claims against non-copiers or against a large industry that is composed of non-copiers.
The controversy can be seen by comparing the views of those considered the trolls (the non-practicing entities with patent rights) to those who are sued by the trolls (often big companies). For instance, compare this to this. The former considers the notion of a patent troll to be a myth, while the latter describes patent trolls as “reprehensible.” For those of you looking for a side gig, you may consider talking to the silk-screeners of the Team Aniston and Team Jolie t-shirts during the Brangolina saga.
Regardless of where you fall on the Team Trolls versus Team Troll-Haters debate, a recent article suggests that patent trolls can mean big money for small firms….
Cases brought by patent trolls are “flourishing.”
Last year [patent trolls] filed more than 600 patent infringement suits — up 21 percent from 2009 — against more than 4,000 defendants, according to an analysis done by RPX Corp. And they sued an average of 6.7 defendants per case last year, up from 4.7 defendants per case in 2009, according to RPX. This means there is a growing market for IP boutiques with opportunities on both the plaintiff and defense side.
Small Firms Defending Against Patent Trolls
Small firms are well-positioned to represent some of the smaller companies targeted in suits brought by patent trolls. For instance, IP boutique Turner Boyd has found a niche in representing the smaller companies. With less of a stake in the case, the smaller companies let the bigger companies (usually represented by Biglaw) take the lead in the litigation. A small firm is appealing to those small companies for many reasons:
• they “can move quickly, offer more personal service, and are relatively free of client conflicts”;
• they are cheaper; and
• they can drive down settlement costs.
When an NPE calculates a settlement demand, one of the things it will take into account is how much the defendant is likely to spend on defense costs. If the NPE figures a defendant will need to spend $4 million on its defense — and more if it loses — it might ask for $3 million.
“But if it’s going to cost $1.5M to litigate,” Boyd said, “the calculus changes for the defendant, and the plaintiff knows it.”
Another boutique, Durie Tangri, has developed a niche defending “pre-public companies in suits brought both by NPEs and others because they’re willing to come up with creative fee arrangements for cash-strapped startups facing bet-the-company patent claims.”
Small Firms Representing Patent Trolls
Small firms, including Biglaw spin-offs Agility Law and Freitas, Tseng, Baik & Kaufman, have found a niche in representing the patent trolls (likely on contingency). Small firms are ideal for patent trolls because they do not face the conflict issues that many Biglaw firms do and they are cheaper.
Small Firms Playing The Field
There are some small firms who have opted against choosing sides in the troll debate. These firms, including DLA spin-off Feinberg Day Alberti & Thompson, are representing both plaintiffs and defendants in patent litigation involving patent trolls.
So, if you are a small IP firm, consider getting into the fray with the trolls. And, if I can suggest a marketing strategy, you should brand a troll doll with your firm logo.
Please email me if you find yourself involved in these cases or if you have any strong views on the Patent Troll Debate. And, of course, please email me if you have found a different and unique niche practice for your small firm.
When not writing about small law firms for Above the Law, Valerie Katz (not her real name) works at a small firm in Chicago. You can reach her by email at [email protected] and follow her on Twitter at @ValerieLKatz.