Judge Alsup of the ND California clearly embraces the concept that "judges already have the authority to curtail [non-practicing entity patent litigation] practices: they can make trolls pay for abusive litigation." Randall R. Rader, Colleen V. Chien & David Hricik, Make Trolls Pay in Court, NY Times, June 5, 2013.
In his order leading up to trial later this month of the patent infringement claims brought by non-practicing entity ("NPE" or "patent troll") Network Protection Services, LLC ("NPS"), Judge Alsup suggested he’d allow the jury to hear evidence of how:
NPS manufactured venue in Texas via a sham. [NPS founders] Ramde and Lam rented a windlowless file-cabinet room with no employees in Texas and held it out as an ongoing business concern to the Texas judge. They also held out [alleged employee] Cuke as its ‘director of business development’ but this too was a sham, a contrivance to manufacture venue in the Eastern District of Texas.
Order dated Aug. 20, 2013, NPS v. Fortinet [PDF].
The story of how the Judge came to threaten to admit evidence of sham offices and employees is best understood as Judge Alsup seizing an opening on an otherwise innocuous standing issue to "curtail" abusive NPE litigation. Any doubt in this regard is dispelled by Judge Alsup’s lengthy citation to Make Trolls Pay in Court at the outset of his order.
Defendant moved to dismiss because assignment of the patent to NPS did not occur until after NPS filed suit, such that NPS lacked standing to bring the lawsuit. Judge Alsup denied the motion, finding that there was a disputed factual issue whether NPS’s conduct in filing the lawsuit was a sufficient substitute under Texas law for the tardy signature of the assignment.
Key exercise of judicial discretion point #1 – although there is no right to jury trial on the issue of standing, Judge Alsup ruled that the underlying factual dispute whether NPS by its conduct accepted the assignment could be given to the jury for "advisory finding of fact." In practical terms, NPS, in the middle of its case in chief, will have to spend time and evidence proving up that it is the true owner of the patent. The practical significance of the NPS spending limited in-court time on an issue that is both distracting from core patent infringement issues and also reflects poorly on NPS ("You filed suit as the alleged owner of the patent but did not sign anything until later? Can you do that? And why would you do that?" – well, you get the idea).
But it gets worse for the NPE. Much worse . . .
Continue Reading Patent Troll Required to Explain “Sham Venue” and “Sham Employees” to the Jury