Judge Throws The Book At Patent Troll

What kind of shenanigans do you have to be up to for every single member of your in-house legal department and outside law firm to be disqualified from a case?

I find myself of two minds when it comes to patent trolls — err patent assertion entities — see, on the one hand, their entire business model is dedicated to litigation in all its vagaries. That keeps a lot of litigators litigating and a lot of doc reviewers gainfully employed. In an industry still in recovery mode, this feels like a win to me.

But you know they aren’t referred to as “trolls” by accident… and everything John Oliver says about the subject. There is a distinct bottom feeder vibe to the entire endeavor and it is one of the few things that both Republicans and Democrats can agree is terrible.

As it turns out, one patent troll is also really awful at ethics.

Seriously, what kind of shenanigans do you have to be up to for every single member of your in-house legal department and outside law firm to be disqualified from a case?

Apparently violating a firewall and being less than forthcoming about it under oath, according to a report from The American Lawyer.

It all started when patent troll Acacia Research Corp. decided to enter the oilfield industry. Patent trolls don’t just buy up patents willy nilly, there is generally some strategy involved in purchasing patents and targeting industries. Apparently, and this was news to me, one of the strategies frequently employed when entering a new market is to woo over in-house attorneys from companies they intend to sue. And that, my friends, is exactly where the problem lies.

In 2013, they hired Charlotte Rutherford, who’d worked in the oil industry for years, including, most relevantly for this story, at Schlumberger Limited, the world’s largest oilfield services company. Amongst Acadia’s acquired patents was the ‘319 patent which relates to Schlumberger’s 3-D oil drilling software, Petrel.

Sponsored

When Schlumberger got hit with a patent infringement case they fired back with a counter suit. While that case was eventually dismissed, Schlumberger, represented by Latham & Watkins, was able to depose their former employee, Rutherford, where she denied discussing the Petrel software with Acadia and claimed she hadn’t seen the complaint against Schlumberger before it was filed.

Then battles over privilege logs in the primary infringement matter yielded… some different information.

In contrast to Rutherford’s testimony, internal emails indicated she’d approved an analysis of Petrel’s value after joining Acacia. Other emails suggested that far from not having seen the Schlumberger complaint, Rutherford had reviewed it before it was filed—and even congratulated Acacia’s outside counsel on their work. (Rutherford has denied that she worked closely with Petrel, and Acacia says that she merely “concurred” with the decisions of others to pursue the ‘319 patent and to sue Schlumberger.)

Rut-roh. So that’s how you get U.S. District Judge Lee Yeakel to disqualify all the attorneys involved with the case, and get the case dismissed. It’s a move Acadis has called “extraordinary and unprecedented.”

And if you’re a fan of schadenfreude there’s even more good news. This decision doesn’t bode well for the long-term viability of the strategy of hiring industry insiders to go after their former employers in patent infringement cases.

Sponsored

Last year it faced a similar fight in California, when Sony Corp. challenged an Acacia patent lawsuit by pointing out Acacia had recently hired a Sony in-house lawyer. Acacia voluntarily dismissed its case before a judge ruled on Sony’s disqualification motion, but Yeakel’s decision may embolden other defendants that find a former colleague on the other side.

Perhaps this development will slow down the patent asserters’ steady creep into new industries.