Why Technology Customers Are Being Sued En Masse for Patent Infringement & What Can Be Done

Last year, the Children’s Hospital of Philadelphia and the AIDS Healthcare Foundation were accused of patent infringement. Their alleged wrongdoing? Purchasing routers and using them to provide wireless services. A small Atlanta-based company called Bluewave, along with hundreds to thousands of small businesses, received demands for royalties for alleged patent infringement. The accusation? Using an off-the-shelf PDF machine. As incredible as they might seem, these mass patent assertions and the harm they cause are real – six out of the top ten patent litigation campaigns have exclusively named technology customers, not suppliers. This has drawn attention from state attorneys generals, Congress, and President Obama. In this article we explain the motives, opportunistic and legitimate, behind these demands, the harm they pose, and what can be done. To do this we draw from numerous sources – including surveys of in-house and outside counsel and our own experience litigating. Good business dictates that technology suppliers should generally step in to take care of their customers. But we find legal and practical barriers exist – demand letters and litigation complaints don’t identify the basis for liability, courts have denied declaratory judgment jurisdiction and the right to intervene frequently, and the courts have refused to protect customers from litigation even when suppliers have stepped up. We recommend that Congress and the courts work to (1) confirm the right of suppliers to intervene and bring cases, (2) minimize the burden on customers when suppliers do step up and participate, and (3) incent customer demand letters and complaints to specifically identify the product which gives rise to liability and disclose other basic information, so that customers may assess their own risk and pass on the demand to their supplier. We also provide a host of reforms that federal lawmakers should consider to make end users less attractive targets for patent lawsuits