The patent troll loses one.

Honeywell’s intellectual property licensing unit, Honeywell Intellectual Property International (HIPI), recently lost a patent infringement suit that it brought against Novatek, a Taiwanese LCD panel manufacturer. What’s notable is that Honeywell sued seven other defendants for infringing the same patent, and all of those defendants settled. Novatek refused to pay Honeywell licensing fees of $15 to $20 million. Instead, Novatek prevailed on a summary judgment motion of non-infringement.

HIPI is a non-practicing entity, otherwise known as a patent troll. That means that HIPI does not use its intellectual property in commerce. Not surprisingly, HIPI’s operations are largely separate from those of its parents.  HIPI monetizes Honeywell’s intellectual property through licenses or settlement agreements in litigation.

Implications For Defendants In Infringement Suits Brought By Patent Trolls

While much of corporate America hates patent trolls, a growing number are establishing their own trolling subsidiaries. Is there a problem with corporations bringing suits as patent trolls while also being sued by trolls? Conceptually, I see no problem. This legal strategy of playing both sides of the fence makes economic sense.

The case raises the question of when and whether defendants should resist the demands of trolls. The other defendants – Quanta Display, Renesas Technology, Denmos Technology, Chunghwa Picture Tubes Ltd., Benq USA, Acer America, and AU Optronics – might be kicking themselves for settling. Of course, it is possible that the facts were stronger against those defendants compared to Novatek. Because the settlements are confidential, it is difficult to analyze whether the settlement amounts made sense compared to the costs of litigating the matter. The average cost of litigating a patent is $3 million per party, excluding any damages if the plaintiff prevails. With this in mind, defendants can weigh the expected value of prevailing and losing.

With respect to the defendant’s legal strategy, does it matter whether the troll is backed by a corporation like Honeywell? Corporate trolls may have more resources to litigate. At the same time, corporate trolls may be less aggressive than non-corporate trolls in pursuing litigation. While non-corporate trolls derive all of their revenue from licensing and litigation, corporate trolls are tethered to a parent company that generally does not depend on the corporate troll for a large portion of its revenue. For these reasons, non-corporate trolls have a greater incentive to litigate to trial, while corporate trolls may be more willing to reach settlements. An analysis of the settlement and litigation of patent infringement suits, broken down by corporate and non-corporate trolls, would shed light on this question.

Douglas Y. Park
Twitter: @DougYPark