Academic journal article Yale Journal of Law & Technology

Controlling Patent Trolling with Civil RICO

Academic journal article Yale Journal of Law & Technology

Controlling Patent Trolling with Civil RICO

Article excerpt

ABSTRACT

The modern patent system is incapable of policing extensive .fraud. This inability to control fraudulent activity has created a system susceptible to abuse. The current remedies offered by the courts to counterbalance fraudulent conduct and trolling have not proved a sufficient disincentive to curb this behavior. Specifically, the remedies for fraud, such as inequitable conduct, have not proven capable of deterring repetitive abusers.

Civil RICO may be that solution. RICO has been an avenue pursued as a defense to patent infringement ever since RICO was extended civilly over legitimate businesses. RICO can be used as an effective deterrent to repetitive abuse of the patent system and extortionate litigation schemes that threaten large segments of industry. RICO has such an effect because of the scope of its remedies: treble damages, attorney's fees, and investigation costs. While civil RICO should not apply where the Patent Office's standard remedies of unenforceability for inequitable conduct compensate for individual instances of fraud, civil RICO can be used to limit repeated abuses of the system where these ordinary penalties do not work.

This paper will address the questions of why RICO deters patent abuse, where RICO stands with patent law today, what the standards for applying RICO to patent holders should be, and what the future holds for RICO and patent law.

TABLE OF CONTENTS

Introduction

I. Why RICO? Trolls, Lemelson, and Judicial Efficiency
II. What Is RICO?
   A. History of RICO
   B. The Allure of RICO--Flexibility and Mandatory Damages
   C. Elements of RICO
III. Limitations on Applying RICO to Patent Law
   A. Civil RICO and Patent Law--Mail Fraud and Wire Fraud
   B. Limitations on the Pattern of Activity--Length of Time and
       Number of Victims
   C. Limitations on Racketeering Activity--Drawing a Line
       Between Pre- and Post-Grant Activity
IV. RICO Applied
   A. Extortionate Litigation Schemes
   B. Fraudulent Filers
   C. Civil RICO and Brand Name Pharmaceuticals
V. Conclusion

INTRODUCTION

Aggressive patent enforcement suits by patent holding companies have become commonplace in the modern patent system. Such holding companies acquire their questionable patents by abusing the patent office. These "patent trolls" engage in excessive litigation, assaulting industry after industry and extorting huge sums of money. The current system's counterbalances to fraudulent conduct and trolling are not adequate disincentives to curb this behavior. Patent trolling has become such a huge issue that Congress and the Patent and Trademark Office (PTO) have proposed a series of substantial amendments to the patent system to alleviate trolling. However, using current law in new, creative ways may inhibit some troll behavior: when the behavior becomes extreme enough, systemic enough, and prolonged enough, the Racketeer Influenced and Corrupt Organizations Act, also known as RICO, may help stymie costly trolling.

The RICO Act was originally designed to prevent organized crime. However, the Act's broad reach due to its close relationship with fraud, mail fraud in particular, have led to a broad application of its provisions. Successful civil RICO plaintiffs receive huge awards: treble damages, reasonable attorney's fees, and investigation costs. The threat of such large damages will deter ambitious trolls from attempting fraud or extreme influence on the Patent Office and from engaging in overly litigious behavior. So far, however, the courts have met civil RICO challenges with little enthusiasm. Usually, civil RICO patent cases are dismissed for formalistic reasons. The Federal Circuit has also limited the conduct that qualifies for civil RICO to post-grant activity. However, a few key cases have refused to dismiss civil RICO challenges in the patent context; in particular, the Lemelson case lays a foundation for how RICO can be used to curb extreme trolling behavior. …

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