fee shifting – Techdirt (original) (raw)

Stories filed under: "fee shifting"

Judge O’Connor Says It’s Crazy To Think Tesla Is Connected To ExTwitter; Forces Media Matters To Pay Elon’s Fees

from the insult-to-injury dept

Apparently, Judge Reed O’Connor doesn’t think that owning a massive amount of Tesla stock constitutes a conflict of interest when it comes to judging Elon Musk’s legal battles.

Last week, we were briefly surprised when infamously partisan Judge Reed O’Connor recused himself from Elon’s nonsense SLAPP suit against GARM and some advertisers.

As we had reported back in June, Media Matters had raised the issue that Judge O’Connor owns a ton of Tesla stock, which arguably is a conflict of interest in ExTwitter’s lawsuit against Media Matters (which Judge O’Connor had refused to dismiss despite its obvious problems). That matter had still been pending last week when O’Connor surprised lots of people (almost certainly including Elon’s lawyers) by recusing himself from the GARM suit.

We had wondered if it was a sign that Judge O’Connor realized how bad it looked for him to hold Tesla stock while repeatedly ruling on behalf of Elon. But, no, it quickly came out that the issue was almost certainly that O’Connor also owned stock in Unilever, one of the firms that Elon was suing in the case.

And then, just days later, it was made clear that Judge O’Connor sees no conflict in owning Tesla stock. He not only rejected Media Matters’ request that Elon be forced to list Tesla as an interested party, but he also made Media Matters pay Elon’s legal fees over this matter.

Judge O’Connor insists it’s just crazy to suggest that Tesla is somehow an interested party:

First, there is no evidence that shows Tesla has a direct financial interest in the outcome of this case. Tesla neither directly nor indirectly holds equity in X, Tesla is not a director or advisor, and it does not participate in the affairs of X. In other words, there is no indication that Tesla has any control over X or any financial ties to X, and Defendants do not claim as much. The question for disclosure is whether Tesla has a “legal or equitable interest” in X. Defendants merely point to news articles that report some blurred lines between Tesla and X that do not rise to the level of financial interest. These articles do not amount to evidence of a financial interest. Tesla is a publicly traded company, with tens of thousands of stockholders, its own board of directors, and external auditors. X is a privately owned company. The mere assertions that Musk owns a constellation of companies, some former Tesla employees now work at X, and that Tesla leased workspace from X do not support a finding that Tesla and X are not separate legal entities or that they share a financial interest.

Later, in response to points about Tesla stock fluctuating in direct connection to Elon doing stupid shit on ExTwitter, O’Connor notes in a footnote: “Musk, who is neither a plaintiff nor defendant in this suit.”

C’mon. None of us were born yesterday.

Elon is totally driving this lawsuit. He was the one who announced that this lawsuit would be coming based on a tweet that he saw. And, obviously, Tesla’s stock is tied to nonsense going on at ExTwitter. He sold a ton of Tesla stock to do the deal, and there are constant reports that he’s almost certainly going to need sell more to keep ExTwitter afloat.

None of this is that big of a surprise, though. Talking to lawyers, I didn’t find one who thought that O’Connor would buy this argument (which is partly why his recusal in the GARM case took me by surprise, before it was revealed that that was due to the Unilever stock).

But just to add absolute insult to injury, O’Connor said that Media Matters, a small non-profit, has to cover ExTwitter’s legal fees over this motion, despite it being owned by the world’s richest man:

Defendants’ Motion to Compel does not have a basis in law. It lacks a reasonable basis in law because the motion is motivated by an effort to force recusal, as opposed to disclosure of unknown information. Compelling disclosure is proper only when a party lacks necessary information. Carr, 2024 WL 1675185, at *1 (compelling disclosure of unknown LLC members); Steel Erectors, 312 F.R.D. at 677 (compelling disclosure of an unknown parent corporation). The information Defendants seek to compel was not unknown to them.

A Motion to Compel Corrected Certificate of Interested Persons when that information was known appears to be unprecedented. Indeed, Defendants did not cite a single case in which a motion to compel a corrected certificate of interested person was brought under this posture, much less one in which the effort was successful under the Local Rule 3.1 “financially interested” standard. Additionally, Defendants’ motion has no basis in fact. Local Rule 3.1’s clear incorporation of “financial interest” requires “legal or equitable interest.” 28 U.S.C. § 455(d)(4). Defendants failed to show facts that X’s alleged connection to Tesla meets this standard. Instead, it appears Defendants seek to force a backdoor recusal through their Motion to Compel. Gamesmanship of this sort is inappropriate and contrary to the rules of the Northern District of Texas.10 Accordingly, Defendants’ Motion is not substantially justified and attorney’s fees are appropriate.

Already, Judge O’Connor’s ridiculous decision to order discovery in this case, rather than properly dismissing it for lack of jurisdiction (among many other reasons), has resulted in layoffs at the non-profit. The impact of this ruling and the fee shifting is likely to do even more damage.

From the beginning, it has been clear that this was a SLAPP suit by Elon, angry that Media Matters (accurately) called out how ads on ExTwitter were appearing next to literal neo-Nazi content. The complaint from ExTwitter admitted that Media Matters accurately reported what it found. The only purpose of this lawsuit is to try to bleed Media Matters dry and to warn away other critics from doing similar reporting.

There’s a reason that most anti-SLAPP laws include fee shifting going the other way (making the wealthy vexatious plaintiffs pay the legal fees of the weaker defendants). Seeing O’Connor basically flip the script here is yet another reason why anti-SLAPP laws are so important.

Having Judge O’Connor let the case move forward to discovery in the first place was already a travesty. Now awarding fee shifting over Media Matters for calling out the potential conflict regarding Tesla’s connection to the case just feels like O’Connor, somewhat gleefully, twisting the knife that Elon plunged into the non-profit.

Filed Under: conflict of interest, elon musk, fee shifting, reed o'connor, slapp suit
Companies: media matters, tesla, twitter, x

New DeSantis-Endorsed Florida Bill An Outright Attack On The 1st Amendment And Free Speech

from the the-anti-1st-amendment-party dept

Florida governor Ron DeSantis likes to proclaim himself a defender of free speech, but time and time again he’s looked to stifle, suppress, and silence speech. He’s done it with his social media bill that limits the 1st Amendment rights of social media sites, with his Stop WOKE Act which literally bars speech, and with his various retaliation bills against Disney for daring to criticize him. And a few weeks ago he made it clear that he wanted to undermine a core bedrock 1st Amendment Supreme Court case, arguing that the finding in NY Times v. Sullivan should be done away with. We’ve already explained why that ruling is so important, because without it, powerful politicians like DeSantis would be able to constantly tie up critics in court with SLAPP suits.

Of course, a state can’t ignore the Supreme Court, but this is Florida, where anything goes. So, a DeSantis loyalist in the Florida legislature, Alex Andrade, introduced a bill to undermine decades of free speech-protecting defamation law last week (directly in response to DeSantis’ requests for such a bill). Apparently, someone pulled him aside and told him his initial bill wasn’t censorial enough, as he withdrew it the next day and introduced an even dumber, more censorial bill, HB 991.

This bill is a full frontal attack on the 1st Amendment. It specifically calls out “professional journalists” and “media entities” saying that they no longer get journalist’s privilege (which is what protects journalists from having to reveal their sources — so basically an attack on whistleblowers who go to the press), it has a sort of reverse anti-SLAPP in that plaintiffs can recover attorney’s fees from defendants, limits who can be considered a public figure (which would take them away from the Sullivan standard, towards a much lower standard), and then has some confused nonsense about “defamation per se” complete with statutory damages. It also includes an out-and-out attack on the 1st Amendment’s protection of anonymous speech by saying that anything from an anonymous source “is presumptively false.” And, finally, it simply tries to say that NY Times v. Sullivan no longer applies to public figures, in that they do “not need to show actual malice to prevail in defamation” claims.

Much of this is… pretty blatantly unconstitutional. It literally is the state of Florida saying that the 1st Amendment standards set out by the Supreme Court shouldn’t apply in Florida. Even if you disagree with the the Supreme Court’s ruling in NYT v. Sullivan (and you shouldn’t, because it’s been a huge boon to freedom of expression and the ability to hold the powerful accountable), you should recognize that a state can’t just ignore it.

There’s a lot of other nonsense in the bill as well, much of it seems explicitly designed as attacks on the media and free expression. For example, another part of the bill would remove the fee shifting aspects of Florida’s “offer of judgment” provision only in cases of defamation or privacy torts. The existing provision allows a defendant to make a settlement offer to the plaintiff, and if the plaintiff turns it down, and the final judgment is lower than the offer, the plaintiff then has to pay the legal fees of the defendant. This is a very useful provision in pressuring SLAPP filers to settle early. But, of course, it was that provision that put Laura Loomer on the hook for CAIR’s legal fees after her SLAPP suit against CAIR.

Basically, everything about this bill is (1) an attack on free speech, (2) an attack on the press, and (3) grievance politics from a bunch of nonsense peddlers who want to file SLAPP suits. Honestly, this bill should be described as a Pro-SLAPP law, as everything about it seems designed to encourage the filing of more frivolous lawsuits against the media, and in doing so, acts as a tool to harass and intimidate the media into silence.

Anyone who believes in free speech and the 1st Amendment should see this as an attack on both. Ron DeSantis and Alex Andrade are both going against their oaths to defend and uphold the Constitution, and are directly seeking to undermine it with this bill.

Filed Under: 1st amendment, actual malice, alex andrade, anti-slapp, defamation, fee shifting, florida, free speech, hb 991, nyt v. sullivan, pro-slapp, public figure, ron desantis, slapp

from the thank-you-anti-slapp-laws dept

Project Veritas, the faux conservative group of pranksters pretending to be journalists likes to pretend that they’re “free speech” supporters. But they’re not. They appear to really only support their own free speech, and have a much more flexible view of free speech when it includes speech critical of themselves. Over the past few years, Project Veritas (PV) has gotten fairly aggressive in suing organizations that are critical of PV. That’s… not very free speechy. PV has tried to silence the NY Times, has sued CNN, and last year it sued Stanford and the University of Washington over a blog post debunking some of the usual nonsense from PV.

A few months back, we reported that CNN won its case against PV. But, also, back in May we missed that a judge also dismissed PV’s case against Stanford. Basically, saying mean things about PV is not defamation, because opinions aren’t defamation tough guys:

Viewing the totality of the circumstances, the Court concludes that the phrases in the Blog Post that Project Veritas challenges as defamatory are nonactionable opinions. In considering the medium and context, “statements of opinion are expected to be found more often in certain contexts, such as editorial pages or political debates.” Dunlap v. Wayne, 105 Wn.2d 529, 539, 716 P.2d 842 (1986). Here, the statements regard whether claims of election fraud were based on misleading or inaccurate information. Throughout the 2020 presidential election, statements regarding election fraud often resulted in heated and emotional discussions. See Camer, 45 Wn. App. at 41 (determining that an article about issues resulting in heated and often emotional discussions constituted nonactionable opinion). This context suggests that the Blog Post is providing opinions.

Additionally, “[t]he court should consider the entire communication and note whether the speaker qualified the defamatory statement with cautionary ‘terms of apparency.’” Life Designs Ranch, 191 Wn. App. at 331 (quoting Dunlap, 105 Wn.2d at 539). Project Veritas challenges only a couple phrases of the Blog Post as defamatory and agrees that the majority of the Blog Post “purported to be a technical study of whether and how prominent conservatives had worked to promote and ‘aggressively spread’ the [Video Report].” Compl. at ¶ 82. Indeed, the Blog Post focuses on describing when posts about the Video Report were made on social media, who made them, and how influencers strategically worked to gain visibility for the Video Report. See EIP Blog Post. Thus, not only were the allegedly defamatory portions of the Blog Post an exceedingly small piece of the Blog Post, they also did not relate to the main subject of the Blog Post. That Project Veritas fails to take issue with the Blog Post as a whole, and instead cherry picks just a couple phrases as defamatory, does not weigh in its favor. Furthermore, EIP qualified one of the challenged statements by saying that it had determined that the Video Report was part of a disinformation campaign. This language constituted a “term of apparency” and signaled to the reader that the statement was one of opinion rather than fact….

The specific words used in the Blog Post were also indicative of them being opinions because they are incapable of defamatory meaning. Words that have imprecise meaning are incapable of being defamatory because they are not provably false. Paterson, 502 F. Supp. 2d at 1134–35. Courts have found phrases like “rip-off,” “fraud,” and “unethical” are nonactionable because of their imprecise meaning and because they are susceptible to many interpretations. See id. at 1135 & n.2. In this case, one cannot determine the truth or falsity for the phrases that Project Veritas alleges to be defamatory. For example, the statement that the Video Report is “misleading” or constitutes “disinformation” is capable of many interpretations and thus cannot be proven true or false. See Phantom Touring, Inc v. Affiliated Publ’ns, 953 F.2d 724, 728 n.7 (1st Cir. 1992) (“Even the less figurative assertion that appellants are ‘blatantly misleading the public,” . . . is subjective and imprecise, and therefore not capable of verification or refutation by means of objective proof.”). The statement that the Video Report had been “debunked” is similarly incapable of being proven true or false.

Anyway, that ruling actually came down in May, but we get to revisit it now, because last week, the judge took the next step. Because it was determined that the original lawsuit by PV was a SLAPP under Washington’s anti-SLAPP law, that meant that PV could be on the hook for Stanford’s legal fees… and that portion of the case has concluded with… PV being told to pay up to the tune of $149,596.90.

For what it’s worth, PV tried to get around having to pay by arguing that Washington’s anti-SLAPP’s fee shifting provisions can’t be applied in federal court. The court dismisses this argument in a footnote, and says that the fees requested by Stanford are reasonable under the law, and makes no adjustment on Stanford’s requested about.

Anyway, it’s pretty incredible that an organization that holds itself out as supporting free speech would ever try to argue that an anti-SLAPP law can’t apply in federal court. That’s just an undeniably anti-free speech position to take. Again, this is just a reminder that PV, for all its lofty talk about free speech, seems to be the same kind of anti-speech, pro-censorial organization like so many others when the speech is about itself.

Of course, this story is yet another reminder that strong anti-SLAPP laws are one of this country’s best protections for free speech, and against censorial thuggery. This is also why we need better state anti-SLAPP laws in every state AND a strong federal anti-SLAPP laws. If PV were an actual free speech organization it would be supporting such laws — not trying to tear them down and filing SLAPP suits.

Filed Under: anti-slapp, attorneys fees, defamation, fee shifting, slapp
Companies: project veritas, stanford

from the rule-68 dept

In the last couple of years, lawyer Richard Liebowitz has really made a name for himself in copyright trolling circles. He’s quite aggressive, and even got a huge profile written about him at Slate, in which it notes that, unlike many trolls who focus purely on shakedown settlement letters, Liebowitz runs straight to court to leverage the power of an expensive court case to push for insane settlements. “Sue first and negotiate later.” The Hollywood Reporter has done its own profile on Liebowitz as well.

It appears that many of his cases have ended up before federal judge Denise Cote, who clearly sees through his scam. Last year, we noted her scolding him for his practices, including not following court rules. Cote even referred to him as a “copyright troll” — something that offended him so much he requested that it be redacted. That request not only failed, but Cote reiterated:

“His litigation strategy in this district fits squarely within the definition of a copyright troll.”

Liebowitz is back before Judge Cote yet again in one of his many cases, and it’s not going well. As pointed out by the copyright troll fighters at Booth Sweet, Liebowitz is busy setting precedents that are bad for copyright plaintiffs. In this particular case, the issue has to do with Rule 68 of the Federal Rules of Civil Procedure. Under Rule 68, when sued, a defendant may make a settlement offer that includes some specific terms.

In this particular case, Liebowitz, representing photographer Gregory Mango, sued Democracy Now!. Democracy Now! looked up how much Mango was licensing his photos for (a maximum of $220) and made a Rule 68 offer to settle for 5 times that amount. Liebowitz quickly turned the offer down, as he was seeking much more. But here’s the fun part of Rule 68. It’s part (d):

Paying Costs After an Unaccepted Offer. If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.

Translated: If Mango/Liebowitz’s final judgment is less favorable than the ~$1,000 Democracy Now! offered under Rule 68, then Mango is on the hook for all of Democracy Now’s legal fees incurred after that offer was made. That is likely to be many thousands of dollars. As Booth Sweet notes, many courts have said that Rule 68 doesn’t apply to copyright cases, but in Cote’s latest ruling she says it does, and tells Liebowitz to post a bond for $50,000.

In other words, even if Mango “wins” the case, but gets less than $1,000, he may be on the hook for tens of thousands of dollars in legal fees.

Cote relies heavily on the fact that the Supreme Court has made it clear that fee shifting is proper in copyright cases. And she makes it clear that Mango/Liebowitz’s decision not to take the offer was unwise:

The allegations of infringement set forth in the complaint involve a single photograph used in one article. In such copyright infringement cases, awards rarely exceed three to five times the license fee for a work. See Rice, 2019 WL 2865210, at *2 (collecting cases). The highest licensing fee that Mango charges on photo licensing websites appears to be 220forasinglephotograph.MangodoesnotdisputethatDemocracyNow?sRule68offerisfivetimesgreaterthanthetypicallicensingfeeforeditorialuseofimagessimilartothePhotograph.Intheonlyoneofhislawsuitsinthisdistrictthatproceededtotrial,Mangorecoveredlessthan220 for a single photograph. Mango does not dispute that Democracy Now?s Rule 68 offer is five times greater than the typical licensing fee for editorial use of images similar to the Photograph. In the only one of his lawsuits in this district that proceeded to trial, Mango recovered less than 220forasinglephotograph.MangodoesnotdisputethatDemocracyNow?sRule68offerisfivetimesgreaterthanthetypicallicensingfeeforeditorialuseofimagessimilartothePhotograph.Intheonlyoneofhislawsuitsinthisdistrictthatproceededtotrial,Mangorecoveredlessthan4,000 in statutory damages on his claim for copyright infringement.

Democracy Now, a non-profit entity, is not alleged to have profited from the use of the Photograph and removed the Photograph from its website promptly upon receiving notice of this lawsuit. It had not received any prior notice, demand, or request from Mango. Democracy Now may very well have complete defenses, including a fair use defense. In light of these facts, Mango is unlikely to recover an amount greater than the Rule 68 offer and moreover may be liable for Mango?s post-offer costs including attorney?s fees.

She also notes the requirement of the bond since there’s evidence Mango wouldn’t be able to actually afford Democracy Now’s legal fees:

Democracy Now has also shown that it is likely that Mango will be unable to pay the costs it will seek in this litigation, another factor to be considered in deciding whether a bond should be awarded. Mango sought bankruptcy in 2004, and records from his bankruptcy filing show that his liabilities greatly exceeded his listed assets. Mango has offered no evidence to suggest that his financial resources remain anything but modest.

The judge also notes that Liebowitz’s over aggressive actions in this case suggest it will run up Democracy Now’s legal bills… which now may fall back on Mango:

Mango?s interrogatories and document demands already suggest that he intends to pursue expensive litigation. He has made fifty-three document requests, many of which appear to have little relevance to the single asserted infringement in this case. He has also served 29 interrogatories, many of which exceed the scope of permissible interrogatories at this stage of the litigation per this district?s Local Civil Rule 33.3. Based on this and other evidence, the defendant predicts that its pursuit of its defenses in this action will result in defense costs that exceed $110,000. That is not an unreasonable prediction.

Finally, Cote highlights Liebowtiz’s growing history of trollish behavior before this same court, including “failing to comply” with court orders, as another reason why a bond should be posted:

Finally, compliance with past court orders must be weighed. Mango?s counsel, Liebowitz, has filed over 700 cases in this district since 2016 asserting claims of copyright infringement. At least 500 of these lawsuits have been voluntarily dismissed, settled, or otherwise disposed of before any merits-based litigation has occurred. In the course of litigating these cases, Liebowitz regularly fails to comply with court orders. See McDermott v. Monday Monday, LLC, No. 17CV9230 (DLC), 2018 WL 5312903, at *2 (S.D.N.Y. Oct. 26, 2018) (collecting cases). Recently, Liebowitz was described as ?earn[ing] the dubious distinction of being a regular target of sanctions-related motions and orders.? Rice, v. NBCUniversal Media, LLC, No. 19-CV-447 (JMF), 2019 WL 3000808, at *1 (S.D.N.Y. July 10, 2019) (imposing sanctions for Liebowitz?s failure to comply with court orders).

The history of Liebowitz?s failure to comply with court orders counsels in favor of the imposition of an additional bond. Mango has chosen Liebowitz as his counsel, and it is not unreasonable to weigh his counsel?s failure to follow this district?s local rules and to comply with court orders in assessing this final Cruz factor.

Ouch.

As we’ve seen with similar trollish operation, Mathew Higbee, it’s unclear whether these trolling operations are fully informing their clients that this kind of litigation could leave the clients on the hook for paying the other side’s legal fees. Both Liebowitz and Higbee promote their services on their respective pages as nearly risk free. Liebowitz’s says: “We work on a contingency fee basis, meaning we don?t get paid unless and until you get paid.” Higbee’s reads: “We are results oriented, so most of the cases we handle even have a money back guarantee or are done on contingency.”

That’s probably why so many photographers are willing to jump on board — as it seems like a “free” way to get extra cash while doing nothing. But not realizing that you may be opening yourself up to quite a bit of liability for filing bogus copyright lawsuits seems like a problem. Actually, it seems like a risk that a good lawyer would explain to his or her clients before signing them up. One wonders whether or not Liebowitz actually warns his clients of such a risk.

Either way, the ruling in this case suggests that, at least in certain courts, there may be a much cheaper and quicker way out of these lawsuits, by utilizing rule 68 to make a much more reasonable offer than a typical troll demands.

Filed Under: copyright, copyright troll, denise cote, fee shifting, gregory mango, richard liebowitz, rule 68, settlements
Companies: democracy now

from the a-little-bit dept

You may recall the Kirtsaeng case that we covered a few years back, in which a student, Sudap Kirtsaeng, had been sued for copyright infringement by publishing giant John Wiley for buying English-language textbooks in Thailand (that were cheap) and then reselling them to students in the US. It was a classic arbitrage situation. Wiley insisted that this was infringing, while Kirtsaeng pointed to the First Sale doctrine, allowing people to resell physical products they’ve legally purchased, even if they include copyright-covered content. Wiley’s argument against first sale is that it only applied to content that was “legally made under this title.” Thus, since the textbooks were made in Thailand and not under US copyright law, First Sale didn’t apply. The Supreme Court, thankfully, rejected that argument 6 to 3, and said that first sale does apply. That was good.

The case then went back to the lower courts where Kirtsaeng sought to have Wiley pay his legal fees. The lower court and the appeals court both rejected this request, arguing that the standard for assigning attorneys’ fees in copyright cases was whether or not the plaintiff bringing the case had an “objectively reasonable” argument — and noting that with 3 of the 9 Justices eventually siding with Wiley, the case was likely “objectively reasonable,” even if it failed in the end. This argument also reached the Supreme Court and on Thursday, the Justices decided to tweak the standard.

Very similar to the case it decided earlier in the week concerning patent damages (and, in fact, it cites that case in this ruling), the Supreme Court rejects the purely “objectively reasonable” standard test as being too “rigid.” It’s pretty clear that the court thinks that lower courts should have some leeway in determining the appropriate remedies, rather than sticking to a set of strict guidelines.

All of that said, objective reasonableness can be only an important factor in assessing fee applications?not the controlling one. As we recognized in Fogerty, §505 confers broad discretion on district courts and, in deciding whether to fee-shift, they must take into account a range of considerations beyond the reasonableness of litigating positions…. That means in any given case a court may award fees even though the losing party offered reasonable arguments (or, conversely, deny fees even though the losing party made unreasonable ones). For example, a court may order fee-shifting because of a party?s litigation misconduct, whatever the reasonableness of his claims or defenses…. Or a court may do so to deter repeated instances of copyright infringement or overaggressive assertions of copyright claims, again even if the losing position was reasonable in a particular case. See, e.g., Bridgeport Music, Inc. v. WB Music Corp., 520 F. 3d 588, 593?595 (CA6 2008) (awarding fees against a copyright holder who filed hundreds of suits on an over-broad legal theory, including in a subset of cases in which it was objectively reasonable). Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act?s essential goals.

Based on this, the court sent the case back down to the lower court to reconsider, since it originally rejected the request for fees by saying the original claims were “objectively reasonable.” So now the court has to consider “other stuff” not clearly laid out by the Supreme Court to see if it could award attorneys’ fees for other reasons — such as the fact that the case was useful in settling an important, but until then, unsettled bit of law: whether or not first sale applied to foreign made goods.

This is probably, mostly, a good thing. Rigid tests can fail in unique circumstances, so granting flexibility is good. But of course, there’s also a downside to flexibility, in that it leads to greater uncertainty, and that may scare off certain worthwhile activities. Either way, the court seems to have made the right decision here, and now Kirtsaeng gets another shot at getting attorneys’ fees from Wiley.

Filed Under: copyright, fee shifting, fees, sudap kirtsaeng, supreme court
Companies: john wiley

Guy Who Inspired The Term 'Patent Troll' May Be Leaving The Patent Trolling Business

from the but-watch-out-for-those-trade-secrets dept

Anyone remember Ray Niro? He’s the lawyer who so perfected patent trolling that the term “patent trolling” was first used (by future patent troll Peter Detkin) back in the 1990s to describe… Ray Niro for his lawsuits. Niro was the original uber patent troll, demanding settlements and suing all sorts of people. Perhaps his most famous move was that he had control over a patent that he argued covered any use of a JPEG image — and would use it to go after basically anyone who displeased him (if they had any JPEGs on their websites). This included the Green Bay Packers and a resort in Florida. When noted patent system critic Greg Aharonian described that patent as “crap,” Niro sued him for infringing on it as well. Niro also put a bounty on the identify of an (at the time) anonymous blogger who called himself the “Patent Troll Tracker.”

Either way, Niro apparently claims that he’s getting out of the patent trolling business. He’s blaming the Supreme Court’s ruling in the Octane Fitness case that made it easier for the victims of patent trolls to seek fees. While many people point to last year’s ruling in the Alice case, which has been used to kill a bunch of software patents, as shifting the balance against patent trolling, the Octane Fitness ruling may be having an even bigger impact, because it can directly hit patent trolls in their wallets. And that’s what’s happening with Niro:

Niro and his firm have been ordered to pay fees in a patent suit he brought against HTC on behalf of Intellect Wireless and an inventor. The parties are still litigating over the amount, but HTC is seeking $4.1 million.

The fee order was “a wake-up call,” Niro told Crain’s. “I can take it once, twice, but am I going to take it three or four times? No. Why should I?”

The Ars Technica article linked above notes that another prominent patent troll, Erich Spangenberg, has been pointing to the Octane Fitness ruling for why he’s moving out of the business as well:

“You invested up front to buy the patent, did the research and found infringement,” Spangenberg explained to Ars in an interview last year, shortly after he made the decision to move on from IPNav. “Over and above that, you go through an IPR and spend another million there, and then you get hit with a 2millionto2 million to 2millionto3 million fee award. I don’t want to be working on cases where that’s what I’m worried about.”

But, fear not for Niro. He’s moving on to other lucrative trolling areas. The Crain’s article where he initially claimed to be moving out of the patent trolling business notes that he’s moving more aggressively into trade secrets:

Changes in patent law in the past year have gutted the business model that made it possible for law firms to represent ?little guy? clients whose patents were being infringed, says Raymond Niro, founder of Niro Haller & Niro, one of the country’s highest-profile plaintiff-side intellectual property boutiques. The firm, which has shrunk to 18 lawyers from 30, is considering taking more cases involving alleged breach of contract, nondisclosure agreements and misappropriation of trade secrets.

I’ve been meaning to write more about this (and I promise I will get to it eventually)… but over the last few years, there’s been a big move to ratchet up laws around “protected trade secrets” with a big push coming from the US. Because of this, there is some evidence that we’re already starting to see some “trade secret trolling” going on — and given Niro’s nose for early trolling opportunities, it’s little surprise that he’s exploring that as a new area for business.

Filed Under: fee shifting, jpeg patent, patent troll, patent trolling, ray niro, trade secrets
Companies: octane fitness

Patent Reform Bill A Good Step, But Still Falls Way Short Of Fixing A Broken System

from the it's-a-start dept

As was widely expected, earlier this week, a bunch of high-profile Senators introduced a big patent reform bill, known as the Protecting American Talent and Entrepreneurship (PATENT) Act. It’s backed by Senators Chuck Grassley, Patrick Leahy, Chuck Schumer and John Cornyn, and has a decent chance of becoming law. From a quick look at the bill itself, it looks an awful lot like what we expected to show up last year, right before Senator Harry Reid stepped in and killed the bill. With the Republicans taking over in Congress, however, Reid no longer has the power to do that. Meanwhile, Schumer, who has long been supportive of patent reform and is basically taking over Reid’s leadership position as Reid prepares to retire, has declared that this time the bill is getting done.

That’s all good. The bill is a good start. But, unfortunately, it’s not nearly enough. It does target some of the symptoms of the problems of the patent system, but does little to fix the underlying causes. The bill targets the worst of the worst: the patent trolls who thrive on shaking down companies. Specifically, the bill aims to do a few key things:

  1. Fee shifting on ridiculous lawsuits: It would allow for attorneys’ fees to be awarded if the patent holder was not “objectively reasonable” in filing the lawsuit. The Supreme Court has already made it easier for courts to award attorneys’ fees, but this would slide the scale over a bit in a helpful way. This certainly increases the risk for patent trolls who have no real case.
  2. Limiting discovery: Defending a patent lawsuit is crazy expensive. We often hear stories of it costing like a million dollars just to get to trial. And one big expense is “discovery,” in which the patent holder gets to ask for all sorts of information from the company its suing — emails, plans, source code, etc. This process is super expensive and there’s not much you can do about it. It often starts pretty quickly after a lawsuit is filed as well. This new bill would put limits on early discovery, allowing those sued to seek motions to dismiss the case altogether or to transfer venues. That could decrease the early cost, taking away some of the pressure on defendants to just settle, and giving them more ability to fight back against bogus claims.
  3. Limits vague demand letters: The patent troll’s weapon of choice is often to send totally vague demand letters, insisting companies infringe without telling them how. It also makes it easier for the FTC to go after those who send such bogus threat letters.
  4. Protecting some end users: We’ve highlighted plenty of cases where patent holders sue those who make devices or software, and then sue a variety of end-users as well. This bill, in a fairly limited way, would put those kinds of lawsuits on hold until the manufacturer can fight the infringement in court. But this only counts if the troll also has sued the manufacturer. So it’s a bit limited.
  5. Transparency: The bill would make it harder for trolls to hide behind shell companies. This is a fairly big deal, as many patent trolls have a series of shell companies, and often you have no idea who really owns the patent. The bill will also require actual lawsuits to be a lot more clear in terms of what they’re actually suing over and why the defendant infringes (and what it infringes).

These are all good things, but it’s unlikely to truly be enough. Missing, unfortunately, is the expansion of a program that would allow the patent office to do a faster review of crappy patents, known as the covered business method (CBM) process. This is too bad — as this was an idea that Schumer had been a strong champion for, but which Microsoft and IBM pushed back very hard on, as they HATE the idea that the USPTO might start invalidating their crappy patents with a quick review.

Yet, as Schumer knows well, this CBM tool has proven tremendously effective in dumping a bunch of crappy financial services patents. Hell, just this week, DataTreasury, a massive trolling operation that has received over $350 million in settlements had its key patents invalidated via a CBM review. It’s too bad that program couldn’t have been expanded. Blame Microsoft and IBM.

But there are a lot of other problems that the new bill doesn’t touch at all. Yes, it may shut down the worst of the worst in trolling, but will still allow plenty of bad situations to flourish. Bad patents will still get through and be used to hinder innovation. The new bill does absolutely nothing to address the situation with independent invention either, and that’s a major problem in the patent space.

Either way, even with this incremental fix, it’s likely we’ll see a bunch of ridiculous claims that the above changes in patent law will somehow harm inventors, though, I can’t see how that’s true. As long as you’re transparent and upfront with how the infringement happens, and don’t file “objectively unreasonable” lawsuits, it seems like patents are still a powerful tool to demand money from companies.

Filed Under: cbm, chuck grassley, chuck schumer, covered business method, fee shifting, john cornyn, patent act, patent reform, patent trolls, patents, patrick leahy, transparency
Companies: datatreasury

from the could-be-worth-paying-attention-to-this-one dept

Back in June, we wrote about how the 7th Circuit appeals court, in a ruling written by Richard Posner, totally rejected the Sir Arthur Conan Doyle Estate’s ongoing attempt to claim copyright over the character of Sherlock Holmes, even though everyone knows that all but 10 Holmes stories are in the public domain. The Estate asked the Supreme Court to put a stay on the ruling, which was quickly rejected, though it’s still expected that the Estate will ask the Supreme Court to review the entire case (which the court seems unlikely to take).

In the meantime, Posner has again ruled on the case, concerning the plaintiff (remember, it was a declaratory judgment suit against the Estate), Leslie Klinger, and his request to have his attorneys’ fees paid. The court grants the request but also uses the opportunity to trash the filing of bogus lawsuits around intellectual property with the hope of getting someone to pay up a small fee. In short, he bashes copyright and patent trolling pretty broadly in the ruling. Posner has been fairly vocal about his concerns with the patent system and patent trolling, but he clearly sees how it applies to copyright trolling as well. This ruling might be somewhat useful to those dealing with copyright trolling case (especially in the 7th circuit…).

Posner highlights a few recent papers about copyright trolling, and how troubling it is:

Copyright holders, the authors explain, have larger potential upsides and smaller downside risks to filing suit, since if they win they obtain damages but if they lose they don?t have to pay damages (although a loss, especially if recorded in a published opinion as in this case, may make it more difficult for them to play their extortionate game in future cases). So copiers or alleged copiers may be ?induced into licensing [that is, paying a fee for a license to reproduce] the underlying work, even if this license is unnecessary or conveys non-existent rights.”

He uses the example of the song Happy Birthday, which is currently involved in litigation, in a case that we’ve argued has some similarities to the Sherlock Holmes case. It’s good to see Posner see the parallels. From there, he notes why it’s so important to award attorneys’ fees in these cases, otherwise trollish behavior will continue:

Unless Klinger is awarded his attorneys? fees, he will have lost money?to be precise, 25,679.93(25,679.93 (25,679.93(30,679.93 ? $5,000)?in winning an appeal in which the defendant?s only defense bordered on the frivolous: a Pyrrhic victory if ever there was one.

And then, the bigger smackdown occurs:

The Doyle estate?s business strategy is plain: charge a modest license fee for which there is no legal basis, in the hope that the ?rational? writer or publisher asked for the fee will pay it rather than incur a greater cost, in legal expenses, in challenging the legality of the demand. The strategy had worked with Random House; Pegasus was ready to knuckle under; only Klinger (so far as we know) resisted. In effect he was a private attorney general, combating a disreputable business practice?a form of extortion?and he is seeking by the present motion not to obtain a reward but merely to avoid a loss. He has performed a public service?and with substantial risk to himself, for had he lost he would have been out of pocket for the 69,803.37infeesandcostsincurredatthetrialandappellatelevels(69,803.37 in fees and costs incurred at the trial and appellate levels (69,803.37infeesandcostsincurredatthetrialandappellatelevels(30,679.93 + $39,123.44). The willingness of someone in Klinger?s position to sue rather than pay Doyle?s estate a modest license fee is important because it injects risk into the estate?s business model. As a result of losing the suit, the estate has lost its claim to own copyrights in characters in the Sherlock Holmes stories published by Arthur Conan Doyle before 1923. For exposing the estate?s unlawful business strategy, Klinger deserves a reward but asks only to break even.

This is why fee-shifting and attorneys’ fees are so damn important in both patent and copyright trolling cases. It’s too bad that this year’s patent reform bill was killed over this, just because some short-sighted trial lawyers hate fee shifting. Posner rightly explains just why it’s important. Without it, it allows this extortion (and thank you to Posner for directly calling it that) to continue over and over again, because the cost of fighting back is just too high.

Posner also makes one other point that doesn’t directly impact other trolling cases necessarily, but is interesting. He suggests that the Conan Doyle Estate may be playing with antitrust fire for abusing a “monopoly” it has no legitimate right over:

We note finally that the estate was playing with fire in asking Amazon and other booksellers to cooperate with it in enforcing its nonexistent copyright claims against Klinger. For it was enlisting those sellers in a boycott of a competitor of the estate, and boycotts of competitors violate the antitrust laws. The usual boycott is of a purchaser by his suppliers, induced by a competitor of the purchaser in order to eliminate competition from that purchaser…. This case is different, in its facts but not in economic substance or legal relevance, because the boycotters enlisted by the Doyle estate were buyers from the victim, rather than sellers to it. But functionally they were suppliers?suppliers of essential distribution services to Klinger.

In the end, the court tells the Estate to pay up $30,679.93 in legal fees to Klinger, which just covers the cost in the appeals court. Klinger is still seeking more for the cost of the district court ruling as well.

Filed Under: attorney's fees, copyright, fee shifting, leslie klinger, richard posner, sherlock holmes, trolling
Companies: conan doyle estate

from the fee-shifting-ftw dept

We’ve been talking about the importance of fee shifting in deterring bogus patent trolling suits for a while now. And while the trial lawyers fear of fee-shifting stupidly led them to kill the patent reform bill that included them, thankfully, the Supreme Court made fee shifting in patent cases more reasonable after smacking down the Federal Circuit (CAFC) once again.

The impact of the Supreme Court’s ruling in the Octane Fitness case around fee shifting is already being felt. We already noted that NewEgg was able to pursue fees against a troll, but in another high profile case, a court has already ordered a patent troll to pay up for the bogus lawsuit it brought.

You may recall this case: After patent troll Lumen View went after startup FindTheBest, FTB’s CEO Kevin O’Connor announced that he’d spend 1millionfightingthetrollratherthansettlingforthe1 million fighting the troll rather than settling for the 1millionfightingthetrollratherthansettlingforthe50,000 offered. In response, Lumen View accused O’Connor of “hate crimes” for calling Lumen View a patent troll. Later, Lumen View sought (and thankfully failed) to get a gag order on FTB for revealing information that was perfectly fine to reveal. In fact, Lumen View demanded that FTB try to remove prior disclosures from the internet.

Of course it was all just posturing. While this was going on, Lumen View kept making more and more desperate attempts to get FTB to settle. But FTB knew it didn’t need to settle because it wasn’t violating the patent — something it made clear to Lumen View right at the beginning. In the end, the court not only found that FTB didn’t infringe, it invalidated the patent itself (US Patent 8,069,073, in case you were wondering).

And, now, Judge Denise Cote has also told Lumen View that, in light of the Octane Fitness ruling, it has to pay FTB’s legal fees as well. The ruling notes that it was clear from the outset that FTB didn’t infringe (whether or not the patent was valid), and Lumen’s continued pursuit of FTB was clearly abusive.

First, Lumen’s lawsuit against FTB was “frivolous” and “objectively

unreasonable.” “To be objectively baseless, the infringement

allegations must be such that no reasonable litigant could

reasonably expect success on the merits.” …. No reasonable litigant

could have expected success on the merits in Lumen’s patent

infringement lawsuit against FTB because the ‘073 Patent claimed

a bilateral matchmaking process requiring multiple parties to

input preference information, while FTB’s “AssistMe” feature

utilizes the preference data of only one party. Lumen’s own

claim construction brief construed the independent claim of the

‘073 Patent as requiring two or more parties to input preference

data. That submission urged the term “preference data” to be

construed “in conjunction with its plain and ordinary meaning.”

And Lumen’s Complaint alleged that FTB’s infringement was

predicated on the alleged use of bilateral preference matching.

But FTB does not employ bilateral preference matching.

And the most basic pre-suit investigation would have

revealed this fact…. And if there were any confusion on this score — and Lumen has provided no basis to find it was confused by the website — Lumen was certainly on notice of this fact from the outset of the litigation. FTB’s Seigle and O’Connor informed Lumen that

FTB’s AssistMe feature did not use the bilateral or multilateral

preference matching process in a telephone conversation of June

19. And FTB’s attorney again informed Lumen by telephone and by

letter of June 26. Yet Lumen proceeded with an obviously

baseless lawsuit, failing to point to any specific way in which

FTB infringed the patent.

The Judge makes it clear she knows that this was purely about trolling for settlement money all along:

Lumen’s

motivation in this litigation was to extract a nuisance

settlement from FTB on the theory that FTB would rather pay an

unjustified license fee than bear the costs of the threatened

expensive litigation. Lumen never sought to enjoin FTB from the

allegedly infringing conduct in its prayer for relief. Lumen’s

threats of “full-scale litigation,” “protracted discovery,” and

a settlement demand escalator should FTB file responsive papers,

were aimed at convincing FTB that a pay-off was the lesser

injustice.

Furthermore, the judge notes that since Lumen filed a bunch of very similar complaints, fees are certainly justified since the company seems to be using patent lawsuits as “part of a predatory strategy aimed at reaping financial advantage from the inability or unwillingness of defendants to engage in litigation against even frivolous patent lawsuits.”

This is a great win for a company that was willing to stand up against a bogus patent troll lawsuit, and it’s great to see that the troll will now have to pay up (how much will be determined later). Once again, we see how badly CAFC had screwed things up (for years!) with its ridiculously high standard for patent fees. Thanks to the Supreme Court fixing things in the Octane ruling, hopefully, we’ll see more companies willing to stand up to trolls and not having to worry so much about how much it will cost to defend themselves against obviously bogus claims.

Filed Under: cafc, fee shifting, kevin o'connor, patent trolls, patents, supreme court
Companies: findthebest, lumen view, octane fitness

Newegg Given The Go Ahead To Pursue 'Douche Bag' Patent Troll For Fees

from the go-for-it dept

A few weeks ago, the Supreme Court smacked down the Federal Circuit (CAFC) for its made up rules that made it almost impossible to enable victims of patent trolls to get the courts to order the trolls to pay legal fees. As the Supreme Court noted, CAFC seemed to set up arbitrary rules for no reasons at all. And this is important, because courts almost never award legal fees, and with the untimely death of patent reform, hopefully this small change will at least help in the meantime.

Because of that Supreme Court ruling, CAFC has already sent one case back to the lower court to see if fees should be awarded. It’s a case involving Newegg, the online retailer who has put a firm stake in the ground concerning its unwillingness to deal with patent trolls. In this case, a company called Site Update Solutions sued a bunch of companies, including Newegg. Newegg got out of the case and then sought to recover legal fees, but had that rejected… under the old rules. Now a chastened CAFC has sent it back to the district court to review.

Newegg is certainly happy about this — putting out a press release with a quote from their top lawyer, Lee Cheng, about how they want to make life as difficult as possible for patent trolls who get in the way of innovative companies:

At Newegg, we’ve always believed paying off extortionists only encourages more extortion, and there had to be a negative consequence of suing Newegg without just cause,” Cheng added. “We insisted on seeking a return of our legal fees from Site Update. We [believe] Site Update’s demand that we waive our right to seek fees for dropping a lawsuit that should not have been filed in the first place was outrageous. What a joke. We believe that trying to make a patent troll pay, no matter what amount, sends the clearest possible message to all abusive patent asserters and their contingency fee lawyers that if they file a frivolous lawsuit against Newegg, they will suffer some consequence, even if it is only making less money or having to do more work than they planned to. This case also provides an excellent template for how a well-managed and organized joint defense effort allows participants to not just bask in the glow of beating a patent troll, but also save money compared to paying off a patent troll. We hope that our work will provide a beacon of hope for real innovators and honest entrepreneurs facing demands from abusive patent asserters. We want to encourage other defendants to create as much friction as possible, rather than feeding the beast with easy settlement checks.”

In talking to Cheng directly (who is not known for holding back his opinions), he was even more direct in his feelings about patent trolls and having to deal with these lawsuits:

People who assert bad quality patents or demand ridiculous amounts of money for patents that do not add any value to society are douche bags. They have gotten away with their abusive practices far too long. I think I can safely say that our customer base approves of the spankings we administer.

As a Newegg customer, I can safely say I agree with that.

Filed Under: cafc, fee shifting, lee cheng, patent trolls, patents, supreme court
Companies: newegg, site update solutions