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Loser pays in action: punishment for a patent troll



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[Judge] Lourie wrote that Eon-Net's case against Flagstar "was part of Eon-Net's history of filing nearly identical patent infringement complaints against a plethora of diverse defendants, where Eon-Net followed each filing with a demand for a quick settlement at a price far lower than the cost to defend the litigation."

"The record supports the district court's finding that Eon-Net acted in bad faith by exploiting the high cost to defend complex litigation to extract a nuisance value settlement from Flagstar," he wrote. [...]

He observed that Eon-Net's settlement offer range of $25,000 to $75,000, which was less than 10% of what Flagstar spent defending its suit, "effectively ensured that Eon-Net's baseless infringement allegations remained unexposed, allowing Eon-Net to continue to collect additional nuisance value settlements."

He also mentioned that Eon-Net "had the ability to impose disproportionate discovery costs on Flagstar" because accused infringers often have "enormous amounts of potentially relevant documents."

Flagstar spent more than $600,000 to litigate the case brought by Eon-Net even though the district court stayed all discovery that not related to claim construction issues.

The patent troll and its attorney were ordered to pay over $631 thousand in sanctions and fees, though that does not fully compensate the defendant, given the appellate costs, and the costs to its business of diverting internal employees to comply with discovery obligations. [NLJ; Eon-Net v. Flagstar Bancorp (Fed. Cir. 2011)]

Relatedly, the E.D. Pa. has interpreted 28 U.S.C. § 1920 to make the costs of e-discovery taxable. The Third Circuit has a similar case pending on appeal. [Legal Intelligencer; Beck]

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.