"In contrast to previous economic eras,
intellectual property will be the primary source
of new wealth in the 21st century."
- Gregory A Piccionelli, 1989
 
AREAS OF PRACTICE
• Internet Matters
• Music & Other Entertainment Matters
• Intellectual Property Rights Enforcement
• Crowdfunding Matters
• Freedom of Expression Matters

Increasing Patent Troll Attacks And The Need For An Online Informational Resource

SEPTEMBER 2011

Adult entertainment companies are increasingly becoming the target of patent rights enforcement. In the last year alone scores of adult entertainment businesses have either been sued for patent infringement or have received letters threatening patent enforcement.

 

Patent infringement occurs when a party, without a license or other authorization, uses, manufactures, imports, sells, or offers for sale, patented technology, during the term of the patent within the country that issued the patent. For example, if an online adult entertainment company uses a patented computer process or Internet business method in association with its website without an appropriate patent license, the company may be infringing one or more patents and be liable for damages, which in many cases can be quite substantial.

 

In fact, when it comes to damages, neither copyrights, trademark rights nor any other intellectual property rights come close to the scope and depth of patent rights or the amount of liability that can often result from patent infringement. For example, unlike copyrights, which allow for the use of copyrighted material by non-owners for purposes of parody and other so-called “fair use” exploitations, there are no similar free speech exceptions to the patent monopoly. If a party, even innocently, infringes a patent, they are liable for damages, period. And when it comes to damages for patent infringement, the sky is the limit.

 

For example, not long ago, Sony Corporation was held to be an infringer of patents pertaining to certain tactile sensation simulation technologies owned by Immersion Corporation. The amount of damages Sony was required to pay to Immersion Corporation amounted to more than $150 million. Now if you are thinking that a damage award of that size must be unprecedented or that a case like Immersion v. Sonycouldn’t possibly involve the adult industry, you’d be wrong on both counts.

 

Patent damage awards over $10 million are common, and larger awards have ranged as high as the $1.5 billion award to Lucent Technologies in a patent infringement suit against Microsoft (Lucent Technologies, Inc. v. Gateway Inc. and Microsoft Corp.).

 

Further, it may surprise you that Immersion Corporation’s victory has a direct connection to the adult industry. This is because the patent rights exploited by AEBN regarding its revolutionary Real Touch™ haptic product come from patents granted to none other than Immersion Corporation.

 

A Growing Concern For The Adult Entertainment Industry

 

There is an ever-increasing probability that adult entertainment companies, particularly online adult entertainment businesses, will become the target of patent rights enforcement. This is because there are now a very large and growing number of issued patents pertaining to technologies that have become the foundation of the modern adult entertainment industry. These include patents involving online content distribution technologies, webpage navigation, videoclip previews, affiliate marketing programs, live videoconferencing, online dating, social networks, geomarketing, geotracking, haptics, virtual worlds, and almost every other technology either used by the adult entertainment business today, or likely to be used by it in the future.

 

This threat of increasing patent enforcement against adult industry companies has become patently apparent of late thanks to the actions of so-called “patent trolls”. A patent troll is an entity that generates revenue exclusively from enforcing patent rights in patents the troll owns rather than developing products that embody the technologies underlying its patents. Patent trolls that have targeted the adult entertainment industry include Acacia Media Technologies, Antor Media Corporation, Joao Control & Monitoring Systems of Texas, LLC, and most recently Lodsys, LLC.

 

For the unfortunate adult companies that are targeted by patent trolls, responding to their lawsuits or threats of lawsuits is almost always a costly matter. And it’s easy to see why. Mounting a defense against a patent troll, even if the defendant is in the right and has never infringed the patent in question, can easily cost millions of dollars in legal fees that are not generally recoverable even if the defendant prevails. In fact, even if a defendant is successful in convincing the court to rule that the patent claims asserted by a plaintiff are entirely invalid to begin with, the defendant is still unlikely to get any reimbursement of attorney’s fees unless the defendant can show that the patentee committed fraud on the patent office, which is rare and very difficult to prove.

 

For example, several years ago scores of companies in the industry were forced to deal with lawsuits filed, or threatened to be filed, against them by patent troll Acacia Media Technologies claiming that the adult companies infringed Acacia’s patents dealing with streamed media. The Acacia lawsuits are now infamous in the industry due to their enormous legal costs to adult companies, running into the millions of dollars over the six years it took for the defendants to prevail at the trial level.

 

But the Acacia case is also famous in the adult entertainment industry as a shining example of multi-company cooperation in which a large group of defendants, organized and financed in large part through the extraordinary efforts of VS Media (owner of Flirt4Free®), soundly defeated a well-financed company specializing in the business of bringing patent infringement actions.

 

 

Time To Organize

 

Recently, I was contacted by Diane Duke, Executive Director of the Free Speech Coalition (“FSC”) regarding the issue of patent trolls. Her call was specifically directed to the issue of the large number of adult entertainment companies that had been calling FSC for guidance regarding letters they had received from the patent troll Lodsys, LLC. Because of my experience with patent trolls as a patent attorney, Diane was seeking my opinion regarding what role, if any, FSC might play in assisting adult businesses that are targeted by patent trolls.

 

I was already somewhat familiar with the Lodsys matter and explained to Diane that the situation was very reminiscent of the Acacia matter several years ago and similar to the Joao case I handled last year. I told Diane that patent trolls will often target the adult entertainment industry believing that typical adult companies have deep pockets and are fearful of going to court because of perceived jury bias against pornographers. I also recalled for her, however, that the industry has proved time and time again, as it did in the Acacia and Joao patent troll matters, that many adult companies will vigorously defend their rights in court to defeat a patent troll.

 

Given the increasing patent troll threat facing the adult entertainment industry, Diane and I agreed that it would be a good idea to have an industry meeting with patent attorneys familiar with patent troll matters where attendees could discuss their concerns and learn about their legal options when dealing with a patent troll. And so, thanks to efforts of Diane Duke and FSC, on August 12, 2011, FSC sponsored a meeting at which myself and several other patent attorneys met with industry leaders to discuss the increasing problem of patent trolls and patent law in general.

 

At the meeting we discussed how patent trolls exploit the fact that patent infringement defense is so expensive that often a company accused of infringement will settle with a troll and pay to acquire a patent rights license despite the fact that the company is either not infringing the patent in question or the patent might be very vulnerable to attack and invalidation. Simply put, it is rare that a single adult company can, or is willing to, “go it alone” against a patent troll. This is why joint defense groups that share the costs of defense can be such an important weapon to combat patent trolls. Because of this, I suggested that FSC consider implementing an online program to coordinate the rapid creation of patent defense groups to respond to, and potentially deter, patent troll activity. I explained that if such a program is implemented, it could function to enable many individual companies facing patent litigation or the threat of litigation to pool resources to find prior art to invalidate the patent claims asserted by the troll and hire effective patent defense counsel with pooled funds.

 

Also, I expressed my opinion that if patent trolls knew with relative certainty that they would face a phalanx of united adult entertainment companies if they target the adult entertainment industry, over time such consistent united action would likely dispel any misconceptions that the adult industry is an easy mark for patent enforcement by trolls.

 

Diane adjourned the meeting with a promise to entertain and examine the idea of FSC establishing an online patent troll response resource of the type I had suggested. I also volunteered my services to assist in formation of such a resource being that I am perhaps the only licensed U.S. patent attorney that is also an adult entertainment attorney. Also, having been awarded dozens of patents for my own inventions, I expressed my willingness to share my experience and understanding of the strategies employed by patent owners to exploit their patent rights, including the inherent vulnerabilities of those strategies.

 

I sincerely hope that FSC does indeed augment its many services to the industry with an online means for adult entertainment companies to quickly link up and respond to future patent troll threats. If it does, I strongly urge every adult entertainment business to support FSC in its efforts.

 

Finally, if you are served with notice of a patent lawsuit against you or your company, or if you receive a threatening letter that alleges or intimates that you or your company are infringing patent rights, it is imperative that you contact experienced patent counsel and your adult entertainment counsel immediately. Simply ignoring a legal summons or any other threatening communication from a patent owner is nevera good idea. Failure to respond to a lawsuit can result in a default judgment, and continued infringement after notice could result in a trebling of damages awarded to the patent owner.

 

This article is not intended to be, nor should be considered to be, legal advice. I strongly urge you to seek the counsel of a qualified and experienced adult entertainment attorney familiar with patent law matters of the types discussed in this article.

 

1Gregory A. Piccionelli is an intellectual property and adult entertainment attorney experienced in Internet matters. He can be reached at Piccionelli & Sarno at (818) 201-3955 or

greg@piccionellisarno.com.

 

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