What Were They Thinking? Even the least experienced Massachusetts lawyer knows that when an answer to a lawsuit is not filed within the requisite 20 days and a default judgment is issued, the default is easily set aside as a matter of course based on even the flimsiest excuse. And, if the answer is filed only one day late professional courtesy mandates that the plaintiff permit the defendant to file late.
Apparently some lawyers in a large Boston law firm (unidentified) never got this message: they refused to agree to set aside a default under these circumstances, forcing the defendant (who filed his answer one day late) to file a motion to remove the default. After reviewing the law and (predictably) setting aside the default, Superior Court Judge Mitchell Sikora slammed the plaintiff’s lawyers hard:
Beyond the letter and purpose of the legal standards, conscientious judges and attorneys attempt to implement our litigation system with reasonable efficiency, civility, and common sense. This episode illustrates an egregious breach of those professional and cultural values. Counsel for Perrina Construction Company, a large Boston firm, has engaged in a mean-spirited and wasteful tactic. It has wasted the time and effort of an opposing attorney practicing in a small office. It has wasted the time and effort of the Superior Court. If one were to dramatize the public’s worst image of the contemporary litigator, it would employ the present scenario in which a large firm procures an instantaneous default and then stonewalls against its removal in utter disregard of the letter and purpose of the governing legal standards. The performance of the Perrina attorneys would be rich grist for the mill of a contemporary Dickens.
REMEDIAL ORDER FOR SANCTIONS
This cynical shenanigan will exact a price from its practitioners. The court will entertain a motion for an award of fees and costs from attorney Murphy. He will file and serve that application, supported by a verified itemization of the fees and costs, within ten days of the entry of the present Ruling and Order. From the date of service, counsel for Perrina Construction will have seven days for filing and service of any opposing papers.
The court will conduct a hearing upon that application on March 15, 2006. Attorney Murphy will attend. The court orders all three attorneys whose names appear on Perrina Construction Company’s opposition to the removal of default to attend that hearing. Attendance is not optional. All three attorneys shall attend.
Here is a link to the full case [link]
Patents. “Patent trolls” or “patent litigation firms” — companies which buy patents not to produce a product or service, but solely to enforce them in the courts — must be quaking under their bridges this morning. In yesterday’s decision in eBay v. MercExchange the Supreme Court appears to have bought the anti-troll argument whole hog, giving the federal trial courts the discretion to enjoin a patent infringer, and to include in its decision factors such as whether a patent holder practices the patent, is a self-made inventor or university researcher (factors favoring an injunction) or instead has purchased the patent from the inventor to obtain license fees (a factor disfavoring an injunction).
Before this case there was a more-or-less presumptive rule that a patent owner successful in proving infringement was entitled to stop continued use by the defendant, regardless of the identity of the patent owner. The eBay decision abolishes that rule; instead, the courts have been instructed to apply the traditional four-factor test for permanent injunctions, which weighs various equitable factors.
This decision will make it much more difficult for a patent litigation firm to obtain a permanent injunction against an infringer, especially in cases where the threat of an injunction is used as a holdup device by patent holders who exploit the leverage they have when a patent covers only one component that is part of a multi-component product. As the concurring opinion by Justice Kennedy, Stevens, Souter and Breyer stated:
In cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. . . . For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. . . . When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.
Not only do these four justices accept the argument that patent litigation firms may be treated differently from “legitimate” inventors, but they take a swipe at “business method” patents as well:
In addition conjunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.
The majority opinion, written by Justice Thomas, is careful to urge protection for university researchers and self-made inventors, implicitly distinguishing them from patent litigation firms.
To sum up, patent litigation firms are in a far weaker position to negotiate lucrative settlements based on the threat of an injunction today than they were only 24 hours ago. Unfortunately, the decision comes too late for Research in Motion, the maker of Blackberry cell phones and email devices which, under threat of an injunction, settled a patent infringement case in March for over $600 million. Had the eBay decision arrived ten weeks earlier, RIM almost certainly would have saved a substantial amount of money on that settlement.
The full decision is here [link].
In what comes as something of a surprise decision, the Supreme Court today ruled in favor of eBay in eBay v. MercExchange, holding that judges do not have to automatically enjoin companies from using patents that they have been shown to have violated. This decision shifts the balance of power in patent litigation away from patent enforcers in favor of defenders. The decision comes as a surprise because, based on comments by the Justices during oral argument, it appeared that the Justices were leaning in the opposite direction.
A link to the decision is [here].
An article discussing this case that I wrote for the April 28, 2006 issue of the Boston Business Journal while the case was pending is linked [here].
What Were They Thinking? Three California appeals judges thought not. In dismissing a defamation suit by two politicians who were listed as numbers one and two on a list of “Top Ten Dumb Asses,” the Court observed:
The accusation that plaintiffs are top-ranking “Dumb Asses” cannot survive application of the rule that in order to support a defamation claim, the challenged statement must be found to convey “a provably false factual assertion.” . . . A statement that the plaintiff is a “Dumb Ass,” even first among “Dumb Asses,” communicates no factual proposition susceptible of proof or refutation. It is true that “dumb” by itself can convey the relatively concrete meaning “lacking in intelligence.” Even so, depending on context, it may convey a lack less of objectively assayable mental function than of such imponderable and debatable virtues as judgment or wisdom. To call a man “dumb” often means no more than to call him a “fool.” One man’s fool may be another’s savant. Indeed, a corollary of Lincoln’s famous aphorism is that every person is a fool some of the time.
Here defendant did not use “dumb” in isolation, but as part of the idiomatic phrase, “dumb ass.” When applied to a whole human being, the term “ass” is a general expression of contempt essentially devoid of factual content. Adding the word “dumb” merely converts “contemptible person” to “contemptible fool.” Plaintiffs were justifiably insulted by this epithet, but they failed entirely to show how it could be found to convey a provable factual proposition.
Vogel v. Felice, 2005 WL 675837 (Cal. Ct. App., March 24, 2005).
Patents. I wrote an article under the above title [link] which was published in the Boston Business Journal on April 28, 2006.