The Biggest Troll

Submitted by patentadmin on Fri, 08/27/2010 - 15:58

From the "fact is stranger than fiction" department, we report on the bizarre case of a giant Japanese corporation suing a giant Taiwanese corporation in a court in Madison, Wisconsin. (Ricoh Company v. Quanta Computer Corp.)

Ricoh is an electronics manufacturer employing approximately 100,000 people, of whom over 40,000 are in the U.S. It produces, among other things, photocopiers, printers and digital cameras, with annual sales of about $20B.

Ricoh alleged that Taiwan-based computer manufacturer Quanta infringed two of Ricoh’s U.S. patents directed to optical drives. Therefore, emulating those despised creatures, the dreaded “patent trolls,” it sued the accused infringer, choosing one of the trolls’ newly preferred venues, the Western District of Wisconsin. We are thus treated to the spectacle of a Midwestern jury, including a receptionist, a pre-school cook, a former dairy farmer, a race car mechanic and a barista deciding the outcome of a technological dispute between two Asian corporate behemoths.

Well, the jury ultimately decided in favor of Ricoh, awarding damages in the amount of $14.5M. In addition to money damages, Ricoh had demanded a permanent injunction barring Quanta from producing further optical drive units until it had taken a license from Ricoh – a license which Ricoh’s attorneys had repeatedly made clear would carry a hefty price tag.

Here is where the case gets really interesting. The judge denied the injunction, holding that Ricoh should be treated like a “patent-holding company” because it hadn’t produced any of the patented optical drives since 2004. Yes indeed, kiddies, the judge was treating Ricoh Company like a (gasp) TROLL!

This, of course, drove Ricoh’s attorneys, who had billed more than $6.0M on the case, into a frenzy. They argued that the patents-in-suit were “crown jewels”: “If disc drive manufacturers are allowed to cherry-pick and use the most well-known and used patents in Ricoh’s portfolio – and forced, at most, to pay a compulsory royalty on those individual patents – then it would become much more difficult for Ricoh to license the rest of its portfolio.”

Ricoh explained that it had left the optical drives market because “Korean and Taiwanese manufacturers were able to enter the marketplace with cheaper drives without R&D expense” and because their labor costs were “probably about one third of Ricoh’s expense level.”

The Court was apparently unmoved by the plight of a Japanese company facing low-cost Asian competition: “Plaintiff is not a researcher or a self-made inventor.” Also, Ricoh had already licensed the entire optical drive industry, proving that it was willing to exchange any competitive advantage, conferred by the patents, for cash. “Plaintiff has not shown that an injunction would serve any purpose other than to increase its leverage in negotiations for a higher licensing fee.”

It was all unavailing. The Court ordered Ricoh to make a motion for an ongoing royalty if its license negotiations with Quanta were unsuccessful.

THE LESSONS TO BE LEARNED: (1) If you don’t practice the patented invention, you’re not going to get an injunction; and (2) any patent owner can be a troll.

Submitted by Anonymous (not verified) on Mon, 09/13/2010 - 20:03


"If you don’t practice the patented invention, you’re not going to get an injunction"
-- unless you also file an ITC complaint. And, seeing as the ITC has tended to rule rather favorably for NPEs, that would seem more advisable than ever.

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