Keeping Trolls Out of Courts and Out of Pocket: Expanding the Inequitable Conduct Doctrine

Loyola University Chicago Law Journal Volume 45 Issue 4 2014 Summer Article 7 2014 Keeping Trolls Out of Courts and Out of Pocket: Expanding the Inequitable Conduct Doctrine Giordana Mahn Loyola University Chicago, School of Law Follow this and additional works at: http://lawecommons.luc.edu/luclj Part of the Intellectual Property Law Commons Recommended Citation Giordana Mahn, Keeping Trolls Out of Courts and Out of Pocket: Expanding the Inequitable Conduct Doctrine, 45 Loy. U. Chi. L. J. 1245 (2014). Available at: http://lawecommons.luc.edu/luclj/vol45/iss4/7 This Comment is brought to you for free and open access by LAW eCommons. It has been accepted for inclusion in Loyola University Chicago Law Journal by an authorized administrator of LAW eCommons. For more information, please contact . MAHN.DOC (DO NOT DELETE) 4/30/2014 9:53 AM Keeping Trolls Out of Courts and Out of Pocket: Expanding the Inequitable Conduct Doctrine Giordana Mahn* Patent Asserting Entities (“PAEs”), often compared with the mythological troll who lurks under a bridge it did not build, demanding payment from anybody who wants to pass, are criticized for their business model as a type of “holdup” on innovation. They wait until a practicing entity infringes, then demand payment for technology that they did not create. Their critics charge PAEs with stifling innovation, crippling research and development, and chilling healthy competition. And although the courts, Congress, and government agencies identified PAEs as an issue since their recent emergence, current patent laws are ill-suited to limit PAE litigation and combat trolling tactics. Taking advantage of the weaknesses in the United States patent system, PAEs command the attention of alleged infringers as a serious threat to product companies and startups. This Comment distinguishes PAEs from Non-Practicing Entities (“NPEs”), focuses on PAEs and their effect on innovation and the public, explains that PAEs are more harmful to public interest and rightly deserve their “troll” moniker, and suggests a solution to limiting their influence. With public interest as the underlying factor, this Comment proposes an affirmative defense—a combination of ideas and themes inherent in patent law with existing doctrines—to extinguish exclusive rights of PAEs by expanding the current definition of inequitable conduct. * Loyola University Chicago School of Law, J.D. expected May 2014; the University of Michigan, Ann Arbor, B.S.M.E., 2009. I want to dedicate this Comment to my dad, Terry Mahn, my inspiring force to pursue engineering and the law as he has done. Go Blue. I especially want to thank my mom, Gayle Novig, my dad, and my partner, Justin Petersen for their endless supply of love, support, wisdom, and encouragement in this, and all my other pursuits. This publication could not have been possible without your help. Also thanks to my siblings and friends for support, to Professor Cynthia Ho for advice and ideas, and to the Junior Members and the Editorial Board of the Loyola University Chicago Law Journal for their valuable perspectives and hard work. 1245 MAHN.DOC (DO NOT DELETE) 1246 4/30/2014 9:53 AM Loyola University Chicago Law Journal [Vol. 45 TABLE OF CONTENTS INTRODUCTION ................................................................................... 1246 I. BACKGROUND .............................................................................. 1250 A. Origin and Policy of Patent Law in the United States .......... 1251 1. Patent Basics ................................................................... 1252 2. Patent Misuse Doctrine ................................................... 1255 3. Inequitable Conduct Doctrine ......................................... 1256 B. Emergence of PAEs and Controversy ................................... 1257 II. DISCUSSION .................................................................................. 1266 A. PAE Effects on Innovation and Public .................................. 1267 B. Call for Reform and Efforts to Eliminate PAEs .................... 1274 III. ANALYSIS ..................................................................................... 1281 A. PAEs Run Afoul of the Purpose of the Patent System, Yet Enjoy Exclusive Rights .................................................... 1281 B. PAE Detrimental Effects on Innovation ................................ 1285 C. Legislative Efforts to Limit PAE Litigation ........................... 1287 D. Courts’ Efforts to Approach PAEs Equitably ....................... 1290 E. ITC Efforts to Limit PAEs from Obtaining Exclusion Orders ................................................................................... 1290 F. Other Proposals to Keep Patent Trolls Out of Pocket .......... 1292 IV. PROPOSAL..................................................................................... 1297 A. Expanding the Inequitable Conduct Doctrine to Protect Public Interest .......................................................... 1297 1. Procedural Standard and Preliminary Hearing................ 1299 2. Progress Factors to Consider Patent Assertion with Clean Hands .................................................................... 1300 i. Promote Progress of Science, Transfer Technology, or Encourage Innovation...................... 1301 ii. Good Faith ................................................................ 1302 iii. Fair Competitor......................................................... 1303 B. Advantages and Disadvantages to the Proposal ................... 1304 CONCLUSION....................................................................................... 1306 INTRODUCTION The United States patent system is premised on a utilitarian theory MAHN.DOC (DO NOT DELETE) 2014] Keeping Trolls Out of Court and Out of Pocket 4/30/2014 9:53 AM 1247 that the public will benefit in a society that fosters innovation and rewards ingenuity.1 This theory, implemented by the Framers of the Constitution, has reverberated throughout patent legislative and judicial history since the 1790s as the foundational purpose in the creation of a patent system.2 Abraham Lincoln stressed the importance of “add[ing] the fuel of interest to the fire of genius” with a reward of exclusive rights to induce investment and innovation.3 This fundamental principle of constitutional patent protection is sound, but the way the system has evolved—particularly in recent years with defensive patent hoarding and patent trolls—is not what the Framers would have envisioned.4 Over time, Congress adopted equitable doctrines—inequitable conduct and patent misuse—to prevent unintended fraudulent and abusive conduct by patent holders.5 More recently, among the most discussed 1. See Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 151 (1989) (“[T]he ultimate goal of the patent system is to bring new designs and technologies into the public domain through (...truncated)