From Fruit to Tiny Hamburgers: Patent Trolls Target Apple and White Castle

During the 2014 State of the Union address delivered on January 28, President Obama expressed support for anti-patent assertion entity (PAEs), or patent troll, legislation, “Let’s pass a patent reform bill that allows our businesses to stay focused on innovation, not costly, needless litigation.”

Companies such as Apple and White Castle have come out to plead for legislative help against the patent trolls, exposing numbers and facts that would normally not be shared.

This recent, national, exposure has brought patent trolls to a larger audience.  Patent trolls legally collect unused patents and file suits infringement suits against companies, simply for the purposes of gaining fees and settlements.  The patent litigation—and the recovery that results—is escalating: litigation costs came to almost $30 billion in 2011, which is more than quadruple the total of costs in 2005.  In addition, patent trolls filed 18% more lawsuits in 2013 than 2012, and there were 3.134 patent troll suits in 2013, which comprised more than half of all patent suits.  Alan Schoenbaum, the general counsel of a web-hosting company in San Antonio, Rackspace, says that patent litigation is “a shakedown…extortive behavior.”

Recently, patent trolls have entered the conversation in several ways, such as their effect on the existing patent system and possible state law remedies.  However, though state and federal legislatures, and now the President, have begun to take action on behalf of companies that have been targeted by patent trolls, now the companies themselves have been using the media to fight back themselves.  Companies such as Apple and White Castle have come out to plead for legislative help against the patent trolls, exposing numbers and facts that would normally not be shared.

Interestingly, patent trolls have targeted many different companies.  The expected, usual companies have been sued, such as Google and Samsung.   However, the trolls have also pursued other, less obvious companies, such as White Castle, a company with 406 locations, but only two lawyers comprising their in-house legal counsel.  This patent troll attack, which began last year, was surprising to White Castle’s VP of corporate relations, Jamie RichardsonSome predict that patent trolls not only will restrict technological discoveries, but may also “gobble up restaurant innovation.”  White Castle has already started to change the nature of its relationships with third-party technology providers “in a way that is not beneficial to innovation and the economy,” according to Lisa Ingram, the president of White Castle System, Inc.

Though it is not surprising that Apple has been on the receiving end of several patent suits, Apple did surprise the worlds of business and technology with recent revelations. Apple has stated that it considers itself the patent trolls’ top target in its December 16 letter to the Federal Trade Commission.  In Apple’s amicus brief for Highmark v. Allcare Management Systems, Apple reported numbers that of the most recent 92 cases over the past three years, 51, or over half of them resulted in payment to the troll.  In addition, Apple presently has 228 patent assertion cases against it that are unresolved, according to Apple itself.  These settlement figures were publically released on a weekend, front-page story in The Chicago Tribune.  Obviously, it is against general good form for businesses to release their settlement numbers, but it is a defense tactic.  However, in neither its letter nor its various amicus briefs does Apple number the patent lawsuits it has filed itself.