Legal shorts for March 24, 2015: How to fight back against patent trolls, and Target's class-action victory against consumers
How to beat a patent troll: Fight back with all you've got
So-called non-practicing entities are companies that own patents solely (or principally) for the purpose of exacting payments from other companies they accuse of infringing on the patents. The standard response to receiving a demand letter from so-called patent trolls is to pay them off to make the problem go away.
As a long-term solution to misuse of patents, this approach is the equivalent of trying to get rid of cockroaches by feeding them to death. Life360 CEO Chris Hulls took a different tack when a company called AGIS accused his firm of patent infringement. As Ars Technica's Joe Mullin explains in a March 23, 2015, post, Hulls took the offensive, calling out the law firm representing the plaintiff, open-sourcing the prior art it found on AGIS's patents, and refusing to settle at all costs.
Not only did Life360 win the case, Hulls has proposed his strategy as a blueprint for other companies facing threats from patent trolls. Step one is to "go nuclear" by using any legal means to discredit the plaintiff's claims. Step two is to share your information in defense of the charges with other potential defendants. Step three is to take a hard line and stick with it to the end.
Mullin notes that while AGIS doesn't fit the textbook definition of a patent troll because it has released a legitimate product, but Hulls points out that AGIS's behavior in the case was straight out of the patent-troll playbook. In particular, AGIS never competed directly with Life360.
Was AGIS a "bully" as Hulls claims, or simply an ordinary business living up to its fiduciary duty to maximize the profitability of its assets? The fact that AGIS lost the case indicates that maybe it didn't have the strongest case to begin with. There's also no indication about the validity of the patent at issue. Still, you can't argue with the positive results of Life360's take-no-prisoners response to AGIS's patent claims.
Target's class-action data-breach settlement is a boon for the defendant
When Target agreed to create a $10 million cash fund to be paid to members of the class of consumers damaged by its massive data breach in late 2013, the company executives likely threw themselves a little celebration. Kevin McGinty explains in a March 23, 2015, post on the JD Supra Business Advisor site that the typical award in a class-action data-breach case not involving medical records is $1 or less per class member.
Why? Because it's difficult for class members to prove monetary damages directly related to the data breach. Considering that there were potentially 110 million class members in the Target suit, per-member awards may fall far short of the average in such cases.
Two other figures jump out of the proposed settlement agreement: $6.7 million (the amount the plaintiffs' lawyers will collect from the settlement), and $252 million (the overall cost to Target in responding to the breach). Not included in the settlement are claims against Target by the class of credit-card issuers, who are on the hook for the bogus charges that resulted from the retailer's massive data loss.
It can be argued that Target's customers don't have a claim against the company because few suffered any direct monetary damage due to the breach. However, no one can state unequivocally that consumers won't ultimately be the ones footing the bill for the multi-million-dollar loss, if only indirectly via higher credit-card and bank charges.
The lawyers did okay, as usual, so it's not all bad news (wink, wink).