May 14, 2015 -
Many high-tech companies are being aggressively targeted by patent lawsuits that drain resources and hurt innovators, and the biometrics industry is no exception.
Late last month, four patent infringement lawsuits filed by Blue Spike against MorphoTrust USA and other Safran subsidiaries and even their customers were dismissed with prejudice by the Court of Federal Claims.
In this case, Blue Spike voluntarily dismissed its lawsuits filed in 2012 and 2013, and no money or any other consideration was paid to Blue Spike.
“They made demands for fairly high settlement payments that we were unwilling to make,” said Scott Boylan, MorphoTrust vice president and general counsel. “Early on in the case, we decided that their case had no merit and we were not going to pay them…I was given the order to win.”
Blue Spike is an excessively litigious patent owner that has sued numerous technology companies across a broad range of industries, and is often referred to as a “patent troll”.
It owns a family of four patents all titled “Method and Device for Monitoring and Analyzing Signals,” but each with slightly different patent claims. The basic idea behind Blue Spike’s patents is creating a digital template of a file that allows it to be compared to other files. The patents are related to music, but this is also vaguely similar to the templates used in the biometric industry to match a fingerprint, iris or face.
“What BlueSpike did is they took their patent that was initially issued for this music application and then they plead broadly against the biometric industry – basically looking at their patent after the issue to see if it applied to other applications,” Boylan said. “The problem for them, and the reason why they gave up is that the biometric industry has been there long before they filed their patent.” A number of MorphoTrust executives were actually part of the group that created patents in this area before BlueSpike did. MorphoTrust essentially beat them to the punch.
While MorphoTrust was able to get a summary judgement by the Court of Federal Claims, avoiding going to trial or an out-of-court settlement, it illustrates some weaknesses in the way patent law is applied in the U.S.
Why Patents Aren’t an Even Playing Field
The U.S. patent system is undergoing reform efforts, including legislation that has passed and pending legislation in Washington.
For instance, Blue Spike probably wouldn’t be granted the same patents if they had applied for them today because of their broad language. They would likely be limited to the application to which they were discussing and applying for.
But one of the biggest issues was that there can be wide discrepancies in how court venues treat patent cases.
The Eastern District of Texas was one of the venues MorphoTrust was sued in. The Eastern District of Texas, located in the town of Marshall, Tx., has become the venue for a huge volume of high-tech patent litigation, with nearly one in four of all federal court patent suits being there.
Part of the reason is that this particular court’s consistent refusal to end meritless cases in a summary judgement where a judge can deem there to be no “genuine dispute as to any material fact”. Another part is that the district’s rapid litigation timetable can put pressure on defendants to settle because they have too little time for preparing their case preparation – and traveling there.
“New legislation tends to focus on damages and who pays legal fees, and shifting of risk, which all could help but it’s not strong enough on the venue issue where you have courts that act differently within the same court system,” said Boylan .
MorphoTrust didn’t have to face the Eastern District of Texas court because it was granted a summary judgement by the Court of Federal Claims.
The Cost of Patent Trolls on the Biometrics Industry
Patent infringement claims still present an enormous challenge for the biometrics industry. “Biometrics has clearly become a focus because it’s clearly become a growth area…revenues are rising, and I think you’ll see that the trolls are going where the cash is.”
MorphoTrust won against Blue Spike in this instance, but it’s a system that makes it very difficult for companies to defend themselves.
“There is an extortion element here, because of the U.S. [legal] system we have patent issues going on almost all the time in the company and it’s the most expensive type of litigation you could be involved in,” Boylan said. “So, if you get a suit that you’re being sued, no matter what the merits of the case are, you know that if you go to trial with that case you’re going to spend multiple millions in legal fees to get to that trial.”
He noted that companies that become the target of patent trolls might typically try to negotiate a small out-of-court settlement, reasoning that this will cost less than even the investigation phase of a patent suit.
Boylan said that he feels the time and resources spent dealing with Blue Spike’s lawsuit could have been better used on other activities. “Probably less so than the money – the time that was taken up by some of our really smart scientists assisting the defense that they could have used doing research and more productive activities.”
The problems and weakness in the legal system are essentially used to extort money from people and companies, but it also impacts innovation in the biometrics industry.