New Federal Procedural Rules May Deter Filing of Baseless Patent Lawsuits

Kaminski_Jeffri_LRFeatured Expert Contributor – Intellectual Property (Patents)

Jeffri A. Kaminski, Venable LLP

For years, defendants in patent infringement cases have protested the ease with which patent plaintiffs could file complaints. Since 1938, Form 18—a model form in an appendix of the Federal Rules of Civil Procedure (FRCP)—set the pleading standard that courts in patent cases have applied. Form 18 requires that the complaint merely state that the plaintiff owns the patent(s), that the defendant infringes the patent(s), and that the plaintiff suffered damages. The form is barely over a page long and does not require any information on how the defendant infringes the patent or even what patent claims are allegedly infringed.

This profoundly minimal standard enabled patent trolls to file one complaint listing multiple defendants, with no specification required in the complaint with regards to how each defendant infringes. Defendants thus have had to wait until discovery to learn how they allegedly infringed the patent. Discovery in patent-troll cases is typically more burdensome on the defendant as the plaintiff does not make or sell anything. Additionally, in many cases, the patent troll acquired the patent from another entity, and therefore rarely has much information to produce. In contrast, defendants are required to produce all the relevant information and witnesses on the products or services it provides. This imbalance creates pressure on defendants to settle patent cases early to simply avoid intrusive and expensive discovery.

Beginning in December 2015, changes to the FRCP eliminated Form 18. Under the new rules, patent complaints must comply with the same standard as any other civil complaint filed in federal court. Rule 8 of the FRCP now governs patent complaints, and courts’ application of that rule will be informed by two U.S. Supreme Court opinions that addressed the pleading standard, Bell Atlantic v. Twombly and Ashcroft v. Iqbal. These cases hold that plaintiffs must produce detailed facts in the complaint that establish why they are entitled to relief. Otherwise, as Justice Souter stated in Twombly, the “threat of discovery expense will push cost-conscious defendants to settle even anemic cases” before discovery begins. As noted above, that concern is quite apparent in patent troll cases. The Twombly and Iqbal decisions granted district court judges more discretion to address the adequacy of complaints under Rule 8. Judges in turn began requiring plaintiffs to provide more facts in the complaint or face dismissal.

While trial courts are expected to follow Twombly and Iqbal when determining the adequacy of patent complains, how they interpret and apply those precedents will vary from case to case. One may fairly anticipate, for instance, that the pleading requirements in the Eastern District of Texas may initially be quite different from those in the District of Delaware. Thus, forum shopping by patent plaintiffs may still occur. Eventually, district court decisions will make their way up to the U.S. Court of Appeals for the Federal Circuit, and its decisions will set a more uniform, definitive standard for patent complaints.

The elimination of Form 18 will be welcomed by patent defendants and met with trepidation by some patent plaintiffs. Indicative of that concern was the sharp spike in patent-troll infringement complaints in the days leading up to the elimination of Form 18. Defendants will have more information with which to perform an initial case assessment and determine whether to settle or litigate based on the merits, rather than on avoiding discovery expense. Defendants will, however, still need to endure bare-bones demand letters—communications from patent holders that begin with scant detail on infringement beyond what Form 18 required and end with an ultimatum for a licensing fee as the only way to avoid litigation. Patent litigation defendants will continue to look to Congress for relief from that use of the archaic Form 18.

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