Industry Responds on How to Proceed When Faced with a Patent Infringement Claim
By Harvey R. Levenson, Ph. D.
This is an update to my previous two articles (Update on CTP, HQPI Patent Troll Cases; RRD Responds to Accusations It’s Involved and The Patent Trolls Lose and the 'Good Guys' Win One – The HQPI Cases Dismissed) on the growing issue of patent trolls attempting to extort funds from print service providers and OEMs by claiming patent infringement, mostly on bad patents that can easily be invalidated through Prior Art.
Unfortunately, companies threatened by patent trolls are often inexperienced in dealing with lawsuits, are intimidated by being served legal warrants, cannot afford to retain attorneys, and some give in to the demands of trolls. I am urging those in the printing and related industries to not give in to the demands of patent trolls, but to contact attorneys and other experts working diligently to protect businesses and individuals from troll extortion.
Such extortion typically comes in the way of demands for license fees for using some very basic office or production equipment needed to conduct day-to-day business. Examples are scanners, copy machines, Web-to-print technology, and the likes.
The licensing fees being asked could be in the six-figure range and, hence, very scary to the small-business person working hard to eke out a living to support a family and to support jobs for employees. The claim typically made by trolls is that the accused is using equipment that has one or more parts described in an obscure patent that was sold to a troll in an attempt to monetize it. The assignee to the patent at some point may have come to realize that the patent is of questionable value and sought a troll to intimidate people and businesses using technology or applications that are even remotely taught by the patent. The troll then claims infringement and a lawsuit if a license fee is not paid by a certain time.
In my first article, I provided some background to the patent troll issue and its impact on the printing industry by citing two series of cases, the CTP and HQPI cases. In my previous article I shared an anecdote demonstrating that trolls represent more of a threat than action on a threat, and that alleged infringers should not give in to troll demands. The anecdote related to the dismissal of all of the HQPI lawsuits.
In this article, I am providing some of the responses received to the first two articles along with advice on how to proceed should a print service provider or OEM be faced with a patent infringement claim.
The Printing Industry Speaks Out
It is obvious from the following responses received that the patent troll matter in the printing industry has elicited some highly emotional reactions and major concerns.
Excellent article in summarizing a complex, challenging, and to many a very frustrating topic. With our industry being a large and fragmented one, we have a target-rich environment for these firms.
As you have stated in numerous instances, a joint effort may be the best approach, but it's also not as simple and/or inexpensive as some might desire.
Regardless, you have raised the issue, and more importantly clarified the RR Donnelley questions that had many in the industry concerned.
As to the question posted [above] — if one finds themselves in the targeting sights of a "Troll," contact an attorney who is KNOWLEDGEABLE regarding intellectual property. Each case is different and requires an attorney to assist. Harvey is a great resource, but no offense to him, an attorney is the place to start.
I just finished reading your article on the patent troll issue. It is very well written and comprehensive.
RR Donnelley’s explanation does not quite wash. HQPI disclosed in filings that both their hired law firm and RR Donnelley retain a financial interest in the litigation. In the case of the law firm, that certainly means a contingency fee. I believe it means the same for RR Donnelley, which is why they had to be listed as retaining a financial interest in the litigation. If they were merely owed a fixed amount for licensing the patents, they would not have a financial interest in the litigation, because they would be owed that amount regardless of outcomes.
We were approached by a troll a few years ago about one of our patents, which broadly covers e-commerce sales of commercial printing. We got it for defensive purposes, and would never assert it against a fellow printer. Nonetheless, we asked them to provide their draft agreement. Under the agreement, we would have assigned ownership to them, retained a license to use ourselves, and it gave them the right to assert the patents. They would have paid us nothing up front, but we would have received a cut of any settlements they extracted or were awarded at trial. It is likely this is exactly what RR Donnelley signed, which is why they retain a financial interest that had to be disclosed in court filings. And really, do you think RR Donnelley would assign a patent to a brand new shell company without receiving a cash payment, if the sale price were fixed? Patents are like domain names, the money goes into escrow, the transfer occurs, and then the funds are released from escrow to the seller. Once the USPTO has recorded a new owner of a patent, ownership can only be transferred by the listed owner.
RR Donnelley’s careful wording, 'We are owed compensation from the purchaser of the CTP patents,' leaves wiggle room. Try asking them what is the amount of compensation owed, is it fixed, and why would they transfer a valuable IP asset to a brand new shell company with no credit history, and not get cash payment up front?
I think they are being deceitful. Ask them to prove that they have no financial interest by showing you the contract between them and the troll. Thank you for your work exposing this issue.
You say to contact a lawyer, but the article says that fees often start at $250K, which is beyond the range many print shops can afford.
Below, as an example, is a redacted and edited for brevity troll extortion letter. Note the vagueness (‘likely reason to believe,’ etc.). — IMHO there's a lot of fishing going on that uses intimidating words to get the info they don't actually have. They're getting you to self incriminate by providing them the information they don't have. In fact, the way it's worded seems to allow you to ignore the letter if you don't think you're infringing! (You have to answer yes to ALL the questions in any one of the four choices presented. If you can't answer YES to ALL the questions in any one of the choices then you can probably safely ignore the letter.
April 19, 2013 FOR IMMEDIATE ATTENTION
Re: Notice of Likely Infringement of U.S. Patent Nos. 6,611,349 and 6,738,155 Our Reference No: ……..
To Whom It May Concern:
Our firm represents CTP Innovations LLC ("CTP"). You are receiving this letter because CTP has reason to believe that you are using its patented technology without a license to do so. The purpose of this letter is open a conversation with you regarding your obtaining a license and avoiding the necessity of CTP's filing a lawsuit in federal court for patent infringement against ...
This letter describes (1) the subject matter of the two patents-at-issue; (2) how you likely have an infringing system; (3) why you need a license; and (4) the terms of a proposed license to resolve this matter in a non-adversarial manner as soon as possible. Please note that this is not an advertisement or other material that should be discarded. We ask that you read this letter in its entirety.
We have directed this letter to you specifically because publicly available information suggests that you are the correct person at your company with whom to open the conversation. If this is incorrect, we would greatly appreciate your directing this letter to the appropriate person within your organization and/or providing that person's name and contact information to us.
The two relevant patents are as follows, and you can review these patents at www.google.com/patents by entering the numbers: (a) U.S. Patent No. 6,611,349 ("System and Method of Generating a Printing Plate File in Real Time Using a Communication Network") and (b) U.S. Patent No. 6,738,155 ("System and Method of Providing Publishing and Printing Services Via a Communications Network").
One aspect that these patents relate to is networked computer-to-plate ("CTP") workflow technology. Our initial investigation indicates that your company generates and uses CTP files in a networked environment. To help you confirm that you come within the scope of the aforementioned patents, below are a brief set of fact checklists. If you answer "YES" to all of the boxes in any one of Choice A through D, it is highly likely that you infringe one or both of the patents and you should promptly contact us.
- Have you stored via a network high resolution documents or files?
- Have you generated lower resolution files corresponding to the high-resolution files?
- Have you provided the lower resolution files over a network for designing a page layout?
- Have you generated a plate-ready file from the page layout?
- Have you provided the plate-ready file to a networked printer?
- Have you provided access (e.g., send or make available over a network) to images over a network and those images are used to design a page layout?
- Have you linked the images in creating a thin Postscript file from the page layout?
- Have you replaced the low resolution images with high resolution images in the Postscript file?
- Have you created a PDP file from the Postscript file?
- Have you converted the PDP file to a plate-ready format?
- Have you stored high-resolution files on a computer server?
- Have you generated low-resolution files that correspond to the high-resolution files?
- Have you provided (e.g., send or make available via access over a network) the low- resolution files for designing a page layout?
- Have you generated PDF files from the page layout?
- Have you provided (e.g., send or make available via access over a network) the PDF file?
- Have you provided a plate-ready file to a networked printer?
- Have you stored files such as images, text, or data on a computer server?
- Have you provided (e.g., send or make available via access over a network) these files over a network for designing a page layout?
- Have you generated PDF files from the page layout?
- Have you generated a plate-ready file from the PDF file?
- Have you provided the plate-ready file to a networked printer?
Please note that Choices A through D above do not comprise an exhaustive list of infringing workflows, and it may be determined that you nevertheless require a license even if your workflow does not exactly fit within Choices A through D.
Most businesses, upon learning that they are infringing another's patent rights, desire to operate lawfully and enter into a license promptly. We anticipate that you will respond likewise. As such, we are willing to offer a fully paid-up, one-time license for a cost of a total of $75,000 for both patents if we are able to reach an agreement in the next two weeks and a license of $95,000 if we are able to reach an agreement in the next three weeks. This license would include past, present, and future uses of the technology.
Recipients of a letter of this nature commonly ask why we are not contacting the manufacturers involved in the CTP process. The answer is that CTP Innovations' patent rights most directly address a printer's workflows. In this particular context, we expect if you review your agreements with a manufacturer, you will find that the manufacturer does not owe you any indemnification duty. Even if it does exist, the indemnification obligation does not shift any case against you; instead, it creates a separate matter between you and the manufacturer to resolve. It will not stay any legal action against you.
We invite you to consult with a patent attorney regarding this matter. There can be serious consequences for patent infringement. Infringers who continue to infringe despite having an objectively high risk of infringement of a valid patent can be liable for triple the actual damages and the patent owner's litigation costs, including all attorney fees and expenses.
Please contact us within two weeks of this letter's date, so we can agree upon a license, if one is necessary. Please feel free to contact by email at ... or by telephone at to discuss further.
We look forward to resolving this matter promptly with you.
Following up on the extortion letter I posted. The letter refers to two patents:
US patent 6611349 B1 Filing date 30 Jul 1999 published 26 Aug 2003 System and method of generating a printing plate file in real time using a communication network
US patent 6738155 B1 Filing date 30 Jul 1999 published 18 May 2004 System and method of providing publishing and printing services via a communications network
Note the filing dates. IMHO CtP/workflow vendors were doing the things covered by those patents years before those patents were filed let alone published. I doubt those patents have any validity — but I'm not a patent lawyer.
I think an organization, like the PIA, could afford to hire the lawyers needed to invalidate those two patents.
There is plenty of Prior Art to quell this problem. Years ago I wrote a series of articles for High Volume Printing — a very public domain publication at the time -- that describe a workflow that we were developing for a customer. Directly going to plate via a network from a data store was clearly defined in that article series. Indeed, imposing a form on the fly with metadata from a data store via network was clearly defined.
I have copies of the articles somewhere and would be glad to supply them if anyone needs them.
Patent law is not for the weak of heart. It's technical as all get out, and is a massively effective sleeping aid. PrintCo folks should not go it alone here. I hire patent firms for my clients’ patent need; it is simply not my bailiwick. Having said that, I have told Dr. Levenson privately that I am aware of a patent filed in 1997 that certainly constitutes Prior Art. I will reach out to Harvey and Nate St. Clair with the particulars.
If RR Donnelley merely sold the patent in question, why would they have a financial interest in the outcome of the lawsuit unless they are also collecting a cut of any money awarded through litigation. In this, they not only collect money from the so called patent trolls but also allows them to keep their name from getting dragged through the mud.
I sincerely appreciate the work you've put into bringing more of this story to a wider audience.
But I think you let RR Donnelley off the hook too lightly. Here's why...
From the RRD letter:
We are owed compensation from the purchaser ...
So RR Donnelley DOES have a financial interest here. If the trolls don't bleed enough cash out of enough printers, fast enough, they won't be able to pay RR Donnelley. Aside from extortion, there IS no other source of revenue with which they can pay RR Donnelley.
Also from the RRD letter:
RR Donnelley retained a license to use all of these Patents ...
This ensures that RR Donnelley has an unfair competitive advantage against every other printer in the USA, but only as long as the trolls persist in their extortion scheme.
Finally, the fact that RR Donnelley sold the VDP patent with less than two years of protection remaining in the patent term, points to intent on behalf of RR Donnelley to profit quickly at the direct expense (emotional and financial) of ALL of it's domestic competitors.
The VDP patent expires on November 15, 2016.
The question is not really whether these "trolls" are the epitome of greed, thoughtlessness, and unethical behavior. That is irrelevant. Almost everyone has been viewed this way once in his life.
The problem is that our "intellectual property" concept in law is horribly malleable and was designed as an academic exercise. It is a legal theory let out of the laboratory.
Bear in mind that the phrase "intellectual property" was not in common use in the legal field before 1975.
Prior to that time, issuance of patents was viewed as a CONCESSION to private interests to encourage development, a public good.
From the 1700's to the 1900's there was an erosion in practice, but the fundamental principle was clear.
The legal principle was clearly that monkey-see, monkey-do was legal and permissible unless government had seen an exceptional situation.
As a printing company CEO that is in litigation right now with CTP Innovations, I want to applaud your continuing reporting on this unfortunate practice that is adversely impacting our industry.
Congrats, I think you’re the only one that is openly taking RR Donnelley to task on their ongoing involvement at this point. RRD’s claim that they “are not getting license fees” is an interesting choice of words. That is, the money they receive is not the total money paid by defendants, so, it is not technically a “license fee.” They also note that they are “still owed” money from CTP. In other words, the sales of these patents (years ago) were structured so that the price paid by CTP would be a percentage of the litigation recovery. Why else would they be “owed” money on a sale from years ago? What a racket.
Anyway, I do look forward your future articles and am available if you should need the perspective of someone on the front lines.
I just read an update in PIworld that you wrote.
The article was about your research regarding patent trolls and thought I would share with you one that came to my attention last summer. One of our customers is a very large direct mail and Internet company that sells shipping supplies. Their attorney contacted me a few months ago because they received a letter from a law firm representing a company that claimed to have a patent on “creating background colors on thermal transfer printing materials.” In other words, a patent on flexographic floodcoating of labels used in thermal transfer printers.
This was an obvious patent troll seeking to extract money from this large corporation in the form of a licensing agreement. The packaging company attorney and I discussed the “patent” and our process of flexographic printing. During our call, he determined that he was going to ignore the letter. I thought you might find this interesting as it relates to your thesis.
That’s wonderful news Harvey! And THANK YOU!
Your investigation and reporting were certainly a huge factor in getting this Amazing result, faster and cleaner than most ever imagined possible. You’re a Rock Star to me and many, many other Printers around the USA!
It is clear from the responses that the patent troll matter facing the printing industry has evoked major concerns not previously articulated. It further points to the need to mobilize and work together, print service providers and OEM’s alike, to confront these trolls head-on and to also keep the Courts, the USPTO, and our legislators aware of this growing issue impacting businesses, jobs, and the economic wellbeing and growth of an entire industry.
What to Do and Not to Do If Faced with an Allegation of Patent Infringement?
There is Power in Numbers
First, What Not to Do
I’ve received a number of requests asking what to do if a company is sued or threatened by a patent troll. My first advice is, do not settle or pay anything. You are likely not alone. Also, do not enter into a single party litigation. This would be quite expensive. Recall the anecdote about the dismissal of the HQPI cases in my second article. If all or most companies that are threatened by patent trolls refuse to pay anything, it becomes an expensive burden for the troll to continue filing lawsuits. There is power in numbers!
What to Do
In a Wall Street Journal article by Colleen Chien, associate professor at Santa Clara University School of Law, and former White House senior advisor, intellectual property and innovation, at the Office of Science and Technology Policy, professor Chien suggests doing nothing. She suggests taking any letters claiming infringement and simply filing them. See: www.techpolicy.com/Blog/December-2015/Colleen-Chien-on-the-Best-Way-to-Fight-a-Patent-De.aspx
I agree. However, I further recommend that anyone being impacted by this matter contact an Intellectual Property attorney for advice only. One law firm to consider is Jackson Walker LLP, in Dallas, and specifically attorney Nate St. Clair, a Partner in Jackson Walker’s patent litigation practice group. Mr. St. Clair and the Jackson Walker firm have represented and are continuing to work with a large number of impacted companies in our industry to pursue the matter as a team, thereby greatly reducing the cost for any one company. Mr. St. Clair is highly knowledgeable about the matter and can be reached at firstname.lastname@example.org or (214) 953-5948.
Exploring Prior Art
As noted in my first article, the ideal situation would be to pursue invalidation of the patents that trolls attempt to monetize. Such invalidation can be achieved through the discovery of existing Prior Art not previously submitted to the USPTO, but should have been, at the time of patent application.
Start developing a collection of Prior Art demonstrating that the technology “taught” in the patent(s) in question is not new but obvious to a person of ordinary skill in the field. One source of Prior Art discovery is the recently installed Raymond J. Prince Graphic Arts Collection (RJPGAC) at California Polytechnic State University in San Luis Obispo, Calif. This is the largest graphic arts library of its kind in the world featuring over 30,000 publications focused on printing technology, including software, hardware, and related areas. The documents contained within the library range from over 200 years ago to the present. Contact the Graphic Communication Institute at Cal Poly — GrCI for information on how to access the collection for Prior Art searches.
About the Author
Dr. Harvey R. Levenson is Professor Emeritus and former Department Head of Graphic Communication at Cal Poly State University in San Luis Obispo, California. He is a frequent Expert Witness specializing in communication, intellectual property, media, printing, and technology.
Author's note: This article was not sanctioned or funded by any university, or any private or public company. It is meant to educate and inform on a matter that is negatively impacting the growth, development, and survival of companies in the printing and related industries, Original Equipment Manufacturers (OEMs), and equipment distributors.