The California Central District Court: the New Hot Spot for International Intellectual Property Disputes

Daniel Cislo, Esq. [1] and Michael H. Anderson, Ph.D. [2].


The United States District Court for the Central District of California (CACD) has emerged over the past decade as a major hot spot for intellectual property (IP) litigation, with courthouses located in Los Angeles, Orange County and Riverside, California.

The CACD may in fact be one of the best places in the world for international companies to handle their intellectual property disputes. A recent study by Stanford Law Professor Mark A. Lemley found that CACD experienced the greatest number of litigated patent cases in the country from 2000 to 2010, at 2,289 cases. [3].

Copyright and Trademark filings in the CACD Courts have also sustained significant levels over the past decade. Between January 1, 2004 and April 17, 2014, the CACD has had 4,814 copyright case filings [4] and 4,609 trademark case filings. [5].

Over the past decade, the CACD has come to be known in the United States as the “perennial leader of IP Litigation.” [6]. There must be a good reason. This article endeavors to outline these reasons, and particularly point out the benefits of pursuing litigation in the CACD to companies domiciled outside the United States.

Several geographical and procedural advantages are thought to account for the rise in popularity of the CACD, including a speedy average time to trial resolution, a flexible Alternative Dispute Resolution system, and the absence of local rules for patent cases. In addition, the expanding popularity of the CACD derives, in part, from the initiation of its Patent Pilot Program in 2011.

The following article charts the growth of patent, copyright, and trademark filings in the CACD, and outlines the most important considerations for international companies pursuing their intellectual property disputes in the CACD. It is the opinion of these authors that the CACD offers perhaps the most attractive venue for such entities.

On balance, traditional considerations of time to disposition, a jurisdiction’s tendency to permit jury trials, and the general word-of-mouth reputation of a given venue fail to account for the increasing popularity among IP litigants for courts in the CACD.   Here, we offer an explanation for this growth by exploring eight potential causative factors, incorporating both traditional arguments, and those more difficult to quantify, like the value of the CACD’s diverse jury pool, the vast experience and diversity of its judges, and even the incomparably favorable weather of the locality.

1.) Largest Total Number of Intellectual Property Dispute Filings in the U.S., if Not the World

As discussed, the CACD experienced the greatest number of litigated patent cases in the U.S. from 2000 to 2010, at 2,289 cases. [7].From 2011-2013, the stream of patent case filings in the CACD has maintained a breakneck pace, averaging 285 patent filings per year.[8]. Every year CACD is the leader in the most IP cases filed in the U.S. [9] This trend is also apparent for copyright and trademark filings, which are as varied in subject matter in the CACD as patent cases. Because of the enormous number of intellectual property cases heard in the CACD, its judges have gained a reputation for skill and efficiency in the area of intellectual property law. In particular, the CACD has evolved into a hotbed for patent litigation. A historic leader in IP litigation, Los Angeles County took the national lead in patent, trademark and copyright filings for the past several decaded due to the experience and impartiality of its judges, its speedy trial dispositions, and its diverse jury pools. [10]. Home to sunny coastlines, a temperate climate, and bustling creative industries, the Los Angeles area may have even sustained itself as a hub of IP litigation activity because of its unique natural beauty, rich economy, and wealth of cultural attractions.

2.) Time to Resolution

The percentage of patent cases that resulted in trial in the CACD averaged only 1.5% in 2010. [11]. While some parties are prepared to withstand lengthy court battles and prefer to reach the trial stage, a greater percentage prefer to settle their disputes out of court and save the expense and risk of protracted litigation. For this latter group, the rapid average time to resolution and the flexible alternative dispute resolution system of the CACD are preferable to many other jurisdictions in the country.

Indeed, litigants on both ends of a dispute are generally interested in administrative efficiency. The speedy resolution of a lawsuit ensures the conservation of limited judicial resources while lessening the burden on the pocketbooks of litigants. Because intellectual property rights can have a limited lifespan, an expedient system also maximizes the commercial value of those limited rights by eliminating uncertainties and minimizing the threat of future litigation.

Luckily, the CACD boasts one of the most rapid average times to resolution in the country, at .89 years. [12]. This figure, for example, represents a ~40% decrease in disposition time relative to the Eastern District of Texas (1.24 years), which has had a IP-favorable reputation in the past. [13].

For other jurisdictions throughout the United States with less exposure to patent, trademark and copyright cases, courts find it difficult to strike the right balance between deciding cases quickly and deciding them equitably. Because the CACD sees more IP filings than any other district in the country, even cases that are resolved quickly are more likely to be resolved accurately.

3.) A Diverse Jury Pool

When an owner of intellectual property files suit involving a product sold nationwide, they typically have wide latitude to pursue their case in most, if not all of the 94 United States Federal Courts where acts of infringement occur. [14]. Despite this fact, IP plaintiffs continue to flock to the CACD in droves. The continued popularity of the CACD derives, in part, from the diversity of its jury pool and the sense of fairness from such a diverse pool of jurors, especially to non-U.S. litigants.

Indeed, the CACD is the single largest federal judicial district by population in the country, serving over 25 million inhabitants. [15]. This is a population on par with the population of Australia. [16]. Without a doubt, juries selected from this vast population base are culturally, ethnically and experientially diverse.

Generally, litigants are entitled to trial by jury when it comes to IP disputes, unless the dispute is a pure question of law or there are no facts in dispute. Juries are selected at random from a fair cross-section of the community. Randomization is also ensured by selection from local lists of registered voters in those divisions. The result is a jury pool of socially concerned citizens who are multicultural, as well as diverse.

In a study analyzing the performance of diverse juries, Adriana Gardella found that diverse juries raise a broader range of issues during deliberation and are more willing to discuss and debate complex issues in an adversarial forum. [17]. As a consequence, individuals serving on diverse juries are exposed to more information in their jury rooms and, on average, make more accurate decisions. Homogeneous groups tend to exhibit more of a pack mentality, and are prone to making difficult decisions on autopilot. [18].

Thus, perhaps one of the reasons so many IP litigants want to pursue their case in the CACD is the perception that its diverse population base will produce juries well equipped to arrive at accurate, balanced decisions. That is, a party’s nationality or ethnicity will not be held against them.

4.) A Diverse Judicial Bench and Intellectual Property-Seasoned Judges

An accommodating federal patent venue statute has long afforded international plaintiffs flexibility to file suit virtually anywhere in the country where infringement occurs. [19]. As a consequence, “venue shopping” has become a regular feature of litigation preparation, particularly with patent litigation. Generally, litigants at both ends of a dispute are attracted to jurisdictions with a reputation for impartiality, fairness, competence, and broad experience.

Southern California is home to many businesses in many different fields, as well as to the aerospace, entertainment, software, and videogame industries, thus giving rise to many patent, trademark and copyright cases.  Because of this, the judges in the CACD also have substantial experience presiding over a diverse range of intellectual property cases.   CACD judges tend to better understand the unique issues raised in IP cases, and recognize the nuances of intellectual property law.

In the CACD, the scale and cultural heterogeneity of California’s population base has engendered one of the most diverse groups of judges in the country. The judges in the CACD hail from a wide variety of backgrounds. The composition of the court is varied in nationality, gender, race, and previous occupation (including former defense lawyers, prosecutors, and intellectual property experts alike).

In total, 38 district court judges are currently assigned to the CACD. [20]. These judges include: eleven women, the first LGBT person to be appointed to the federal bench in California, four African Americans, four Mexican and Spanish Americans, four Asian Americans, three individuals born to immigrant parents, and one foreign-born individual. In fact, the current Chief Judge of the CACD, Hon. Judge George King, one of the most respected in the CACD was born in Shanghai, China. Judge King assumed his new position in September 2012. [21].

As in the case of juries, a more varied assortment of individuals comprising the bench often leads to better informed opinions. In May 2009, United States Supreme Court Justice Sonya Sotomayor reiterated this viewpoint. She articulated, on the record, her view that judges are the product of their backgrounds and experiences, and that they bring those experiences to their views and perspectives in a case. [22]. In the judge’s words, “Our gender and national origins may and will make a difference in our judging.” [23].

Although most judges strive greatly to overcome personal biases in formulating their opinions, the application of facts to the law is inevitably colored by personal experiences. Importantly, these personal experiences help judges to understand the views of litigants, resulting in more informed, thorough decisions.

Thus, the fact that the CACD is comprised of a highly diverse population of IP-seasoned judges undoubtedly contributes to its reputation as an excellent venue for IP disputes. International litigants are therefore well-served by bringing their IP disputes to the CACD, where they are likely to encounter judges with a wide array of personal and professional experiences.

5.) A Randomly-Selected Judicial Bench and Powerful Constitutional Protections Provide for Unbiased Adjudications

a) Random Assignment to Cases

In the CACD, judges are randomly assigned to each case. This institutional commitment to impartiality serves as an attractant for both domestic and international litigants seeking fair, accurate and expeditious judgments.

Random case assignment affects the dual purpose of maintaining fairness at trial and protecting the due process rights of litigants. By imposing a lottery-based system, CACD courts guarantee that each judge will be selected randomly, without regard to gender, race, age, or political or personal affiliation from the large pool of 38 judges and 25 Magistrate Judges. In addition, random selection of judges maintains the expectation of objectivity in the eye of the public, both domestic and international.   If citizens, inventors and industries cannot trust the courts to rule with impartiality, they are less likely to risk development and commercialization of their most valuable ideas.

Today, the lottery procedure in the CACD helps ensure that judge-shopping is nearly impossible. This feature is of particular importance to international litigants, as they do not have to fear that a case can be steered to a preferred judge.

b) Immense Powers Granted to Federal Judges by the U.S. Constitution

The Framers of the U.S. Constitution explicitly granted federal judges lifetime tenure so that they would be able maintain impartiality and protect the Constitution against “legislative encroachments.” [24]. The absence of term limits was of particular importance to the Founding Fathers of the Constitution. As Alexander Hamilton stated in Federalist No. 78, “nothing will contribute so much as [lifetime tenure] to that independent spirit in the judges which must be essential to the faithful performance of so arduous a duty.” [25].

The Framers intended that the grant of lifetime tenure would be reserved for only the most respected, highly educated, and honorable legal experts in the country. For this reason, the Constitution maintains that only the President of the United States may appoint a federal judge. Once appointed, a federal judge may only be removed by an exceedingly rare impeachment process carried out by the House of Representatives, followed by a conviction in the Senate. This is the very same process that is available to the Congress to expel a U.S. President.

As a result, federal judges hold one the most powerful and influential offices in the United States and are almost impossible to remove. This judicial power extends to and checks the other governmental branches in a manner unparalleled by many judicial systems in the world. For example, a federal judge not only maintains his or her judicial position for life, also maintains the ability to strike down unconstitutional acts by Congress. With this type of independence, federal judges can rule impartially and fairly without regard to political pressure or public sentiment.

Thus, parties considering litigation in the CACD may expect both the local guarantees of judicial neutrality intrinsic to a lottery-based system and the vast Constitutional protections afforded federal judges. What’s more, unlike other jurisdictions, the geographical scope of the CACD, the hugely diverse background of its residents, and the random selection processes culminate in a judicial bench devoid of local favoritism.

6.) The CACD Has a Patent Pilot Program Allowing Judges to Specialize in Patent Cases

In 2011, the CACD was selected by the Administrative Office of the U.S. to be one of 14 district courts to participate in the U.S.’s Patent Pilot Program.

At its core, the Patent Pilot Program is intended to, “steer patent cases to judges that have the desire and aptitude to hear patent cases while preserving the principle of random assignment to help avoid forum shopping.” [26]. Under the program, established pursuant to Pub. L. No. 111-349, judges who do not opt-in to the program have the option of keeping a patent case or transferring it to one of the specialized patent judges. [27]. This means that every judge in the CACD who is assigned a patent case has decided to hear that case and is likely to be highly interested in the subject matter of the dispute.

All judges may volunteer to take part in the program, but ultimately the Chief Judge of the district designates the specialized patent judges who will hear the patent cases in the Patent Pilot Program. Of note, in the CACD many federal judges elect to keep their patent cases instead of sending them to the Patent Pilot Program because of the high degree of interest in intellectual property cases.

Given the experience of judges in the CACD, in addition to their selection for this unique platform, international litigants can be assured that a fair and expeditious handling of their case(s) will be carried out by a federal judge who is highly interested in patent cases.

7.) The Absence of Patent Local Rules in the CACD Actually Favors Litigants

With the exception of a number of judges in the Patent Pilot Program who impose their own procedural patent rules from other jurisdictions, CACD does not have Patent Local Rules as part of its Local Rules. That is, there are no specialized CACD rules for handling patent cases. This allows a great number of judges to handle the technical nuances of patent cases in the manner of their choice. Litigants can propose those patent procedures that best address their case, which the judge can reject, accept, or modify as appropriate. The same applies to other types of IP cases.

Many other U.S. jurisdictions impose standardized norms, which regulate the timing by which parties must file their infringement, invalidity, and claim constructions arguments, along with other milestones in the trial process.

Other jurisdictions’ Patent Local Rules are often applied stringently, and attorneys have little maneuverability to depart from them. According to one local attorney, Patent Local Rules, “put lawyers involved in a case in a straitjacket, and they govern no matter what kind of a case.” [28].

The other jurisdictions’ Patent Local Rules can also be troublesome for parties, who are often granted insufficient time to understand the technology, the prior art, and thus develop their case. Such rules can also limit the parties’ ability to amend and supplement their arguments, and may prevent consideration of claim construction issues until briefing is exhausted on preliminary issues. In addition, in some courts, separate Markman hearings are imposed by Patent Local Rules in every case, despite the fact that they are often unnecessary.

Thus, Patent Local Rules can serve to impose homogeneity on complex cases where homogeneity is unwarranted. International plaintiffs contemplating litigation in the United States are often much better off in a flexible setting where judges can tailor court procedures to each particular case depending upon what the litigants suggest or the Judge finds appropriate. The flexibility afforded judges in the CACD by the absence of Patent Local Rules, in particular, not only permits plaintiffs and defendants the opportunity to develop their cases, but, in fact, both parties usually benefit from the efficiencies and consequent cost savings engendered by such flexible rules.

8.) The CACD Has One of the Most Convenient and Flexible Mandatory Alternative Dispute Resolution Systems in the Country

The CACD boasts one of the most flexible forms of Alternative Dispute Resolution (ADR) in the country with a significant emphasis on early resolution of disputes. First adopted in 1993, the Mandatory Settlement Procedures program established a variety of processes to facilitate settlement. This is perhaps why so many cases settle, and do so at an early stage in the CACD.

In brief, the program requires litigants in civil cases to meet with the trial judge, a magistrate judge, another district judge, an attorney settlement officer, or a private mediator to pursue settlement at least forty-five days before the final pretrial conference, and oftentimes much earlier. [29]. Early in the case the parties must agree on one of courts settlement options, or the assigned district or magistrate judge is authorized to conduct an appropriate settlement process. [30]. The CACD offers three settlement options: 1) a settlement conference with the district or magistrate judge assigned the case; 2) a mediation with a neutral party selected from the Court Mediation Panel; and 3) private mediation. [31].

The process of selecting a neutral mediator in the CACD is one of the most convenient in the country. Each party simply reviews a list of mediators available on the Court website and, when each side has determined their preferences, they confer and select a mediator amenable to both parties. If both parties are in agreement, private mediation organizations such as JAMS or ARC are also available options, but at greater costs as there is no charge for the CACD Magistrate Judges or CACD mediators. The flexibility of this system enables a tailored, cost-effective means of approaching dispute resolution.

9.) Securing Personal Jurisdiction and the Use of Declaratory Judgment Actions in the CACD to Resolve IP Disputes

As already mentioned, international companies can typically sue for infringement of their IP where infringement takes place. But, what if a U.S. company is threatening a company outside the U.S. with infringement claims? The Declaratory Judgment (DJ) is a form of legally binding preventive adjudication that is available in such scenarios. [32].

The DJ action allows an accused party to petition the court to conclusively rule on the rights and duties of the parties to the case. [33]. Alleged infringers often pursue DJ actions when they seek to “clear the air,” believing they have the right to engage in an accused activity because there is no infringement or the IP rights are invalid.

Assuming an “actual case or controversy” exists between two parties, a DJ suit can be brought if the local federal district court can properly obtain personal jurisdiction over the defendant in the DJ action. [34]. Fortunately, the sheer size, population density, and economic activity of Southern California results in a high likelihood that those threatened with litigation can obtain personal jurisdiction in the CACD.

A court of one forum can assert personal jurisdiction over a defendant residing in another state if that defendant has certain “minimum contacts” with that forum. Minimum contacts are typically established by a non-resident defendant if they: 1) have direct contact with the state; 2) have placed their product into the stream of commerce such that it reaches the forum state; [35] 3) have formed a contract with a resident of the state; [36] 4) have a non-passive website viewed within the forum state; or 5) seek to serve residents of the forum state. [37].

Those familiar with the scale of Southern California’s economy, consumer base, and export market understand that satisfaction of the above factors typically come easily for many potential defendants in the CACD. The CACD has jurisdiction over a heavily populated expanse of California, stretching from San Luis Obispo in Central California south along the coast to Orange County. This region encompasses over 25 million residents, a figure greater than the total population of Australia. [38]. Los Angeles County alone contains a population of over 10 million people. [39].

As a consequence, goods and services almost inevitably make their way into Southern California’s stream of commerce, are marketed to Southern California residents, and are bought and sold by Southern California residents. Thus, those who wish to have a determination that their accused activities are not infringing have unique prospects for securing personal jurisdiction and pursuing their case in CACD courts. Given a state GDP of $2.0 trillion and an export share of 11-15% of America’s total exports, there are few venues in the world where one is more likely to establish sufficient commercial contacts to support personal jurisdiction than the CACD. [40].


The CACD is the one of best venues for non-U.S. companies to litigate their IP cases in the U.S. A speedy average time to trial resolution, a diverse and randomly selected judicial bench, a flexible Alternative Dispute Resolution system, and the absence of Patent Local Rules for patent cases, all contribute to the growing popularity of the CACD.   Both domestic and international IP litigants are drawn to a large diverse judicial bench comprised of IP-seasoned judges, and the CACD’s Patent Pilot Program.

[1] Daniel Cislo, Esq. is the managing partner of Cislo & Thomas LLP which the Bar Register of Preeminent Lawyers lists in the top 5 percent of all law firms nationwide. Mr. Cislo also sits on the Board of Directors for the Federal Bar Association, Central District of California, and has practiced in the CACD in IP related matters for almost 30 years. The firm specializes in patent, copyright, trademark and other intellectual property litigation. A graduate of Loyola Law School and UCLA’s School of Engineering, he is admitted to the U.S. Patent Office as a patent attorney and is an inventor himself. Mr. Cislo handles all aspects of patent, trademark and copyright litigation cases in the Central District of California. He has handled over 400 IP Cases, primarily in the California Central District Federal Court with over a 98% success rate either settling or prevailing in IP litigation. He is admitted to the Federal Circuit Court of Appeals (CAFC) and the District of Columbia and numerous other courts across the country. Mr. Cislo is also the founder and creator of

[2] Michael Anderson, Ph.D. Dr. Anderson is a biochemist, geneticist and Associate at Cislo & Thomas LLP. He received a B.S. in Microbiology, Immunology, and Molecular Genetics from The University of California at Los Angeles and a Ph.D. in Chemistry and Biochemistry from The University of California at Santa Cruz. Dr. Anderson has also served as a legal clerk at the Munich, Germany office of Bird & Bird LLP. He has prosecuted biotechnological, mechanical and chemical patents.

[3]   Mark A. Lemley, Where to File Your Patent Case, 38:4 AIPLA Q.J. (Fall 2010, available at [Lemley’s survey utilizes the Stanford Intellectual Property Litigation Clearinghouse (“IPLC”), a comprehensive set of data on every patent lawsuit filed since 2000. The study here analyzes all of the 21,667 cases in the IPLC database that were resolved at the district court level between 2000 & 2010.]

[4] Justia Dockets & Filings, Case Search: All Copyright Case Filings in the California Central District Court between January 1, 2004 and April 17, 2014, 04/17/2014. available at:

[5] Justia Dockets & Filings, Case Search: All Trademark Case Filings in the California Central District Court between January 1, 2004 and April 17, 2014, 04/17/2014. available at:

[6] Leychkis, Yan, Of Fire Ants and Claim Construction…, Yale Journal of Law and Technology: Vol. 9: Iss. 1, Article 6, (2007).

[7] Mark A. Lemley, Where to File Your Patent Case, 38:4 AIPLA Q.J., (2010).

[8] Justia Dockets & Filings, Case Search: All Patent Case Filings in the California Central District Court between January 1, 2011 and Jan 1, 05/05/2014. available at

[9] Mark A. Lemley, Where to File Your Patent Case, 38:4 AIPLA Q.J., (2010).

[10] Leychkis, Yan (2007) “Of Fire Ants and Claim Construction…” Yale Journal of Law and Technology: Vol. 9: Iss. 1, Article 6.

[11] Mark A. Lemley, Where to File Your Patent Case, 38:4 AIPLA Q.J., (2010).

[12] Id.

[13] Id.

[14] 28 U.S.C. § 1400(b) (2006).

[15] Hans Johnson, California’s Population, Public Policy Institute of California: Just the Facts (2010),

[16] Australian Bureau of Statistics (31 October 2012). “2011 Community Profiles.” 2011 Census of Population and Housing..

[17] Adriana Gardella, Rating the Performance of Diverse Juries: A Scientific Perspective. Carlton Fields Jordan Burt, 2014.

[18] Id.

[19] 28 U.S.C. § 1400(b) (2006).

[20] Howard J. Bashman, Senate Confirms John B. Owens to Seat on Ninth, Stanford Lawyer (May 27, 2014),

[21]Gavel Passes to New Chief Judge in the Central District of California, Third Branch News (October 04, 2012),

[22] Charlie Savage, A Judge’s View of Judging Is on the Record, New York Times(May 14, 2009),

[23] Id.

[24] Dennis Shea, We Hold These Truths, Hoover Institution, Stanford University (May 1, 1997),

[25] Id.

[26] See Erik Larson, “Rocket Docket” Bill Introduced in Congress, IP LAW360, May 19, 2006.

[27] Larson, supra at § l(a)(1).

[28] Erin Coe, California Judge Sets Sights On Patent Local Rules Law 360 (March 23, 2011),

[29] Civil L.R. 16-15.4; General Order 11-10.

[30] Id.

[31] Id.

[32] Bray, Samuel, Preventive Adjudication, University of Chicago Law Review 77: 1275 (2010).

[33] 28 U.S.C.S. § 2201, (“Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.”).

[34] MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, (2007).

[35] Gray v. American Radiator & Standard Sanitary Corp., N.E. 2d 176: 761, (1961).

[36] McGee v. International Life Insurance Co., 355 U.S. 220, (1957).

[37] Helicopteros Nacionales De Colombia v. Hall, 466 U.S. 408, (1984).

[38] Australian Bureau of Statistics, 2011 Community Profiles, 2011 Census of Population and Housing ( (October 31, 2012),

[39] Emily Reyes, L.A. County population tops 10 million, highest in nation, Los Angeles Times (March 27, 2014),

[40] Origin of Movement of U.S. Exports of Goods by State by NAICS-Based Product, US Census Bureau (February 9, 2009),

A Post-Revisionist Look At Chinese Intellectual Property Law: A Report From The Periphery (Or The Frontier?) To The Core

Andrew Jensen Kerr† & Ding Ding††


The monolithic image of China as an intellectual property pariah persists in both the popular media and in academic literature. And not without reason. The derivative grey-market industry for counterfeit goods is so robust that it has spawned its own dynamic of retail tourism. Indeed, the U.S. government openly permits returning citizens to declare “one article of each type” of infringing good on return to the United States.[1] This so-called shanzhai phenomenon is certainly curious to the American abroad.[2] It seems that there is as much gradation in quality for fakes as there is in the “legitimate” market for the analogue branded product. Given this everyday contact with trademark infringement it is not surprising that the United States Trade Representative (USTR) continues to prioritize China on their IP watch list.[3] But China has responded to their IP regulatory lacunae by creating a legal framework that fills some holes still left open in the U.S. Indeed, it is an academic question whether China and the U.S. should “substantively converge” in how they manage the increasingly high-tech world of online counterfeiting.[4]


Context is important in China. And orthodox historiography has been eager to trace the genealogy of China IP back to its dynastic origins. Imperial China is commonly described as a place where the law was not the dominant form of private ordering.[5] Instead, a Confucian ethic of reciprocity shaped social relations, and notions of hierarchy and deference to the past were woven into the social fabric. William Alford explained in his canonical historical work how this kind of respect through imitation translated to a supposed absence of copyright law in early modern China.[6]

But here is the ineluctable fact that Max Weber and his armchair Orientalism couldn’t explain—how could Imperial China be characterized as non-innovative when it was also home of the transformative “four great inventions” of early civilization: paper, gunpowder, woodblock printing, and the compass?[7] Ken Shao posits the confounding question of how sixteenth-century Chinese publishers with larger businesses than their English equivalents “had developed copyright practice that did not contain the monopolistic nature of the London copyright claimers?”[8] Perhaps the missing link is the false equation of intellectual property with a codified intellectual property law. While it is true that IP rights were not protected by Chinese civil law until the early twentieth century,[9] a twelfth-century Chinese printing house made perhaps the world’s first copyright statement that their books must not be copied without permission.[10] In 1265, the provincial Fujian government issued a decree for IP protection.[11] These data points have led at least one scholar to argue that China has possessed an uncodified copyright law since the Song Dynasty (960-1276 CE).[12]

Recent Reform

In today’s China, the socialist ethos of communal property seems fundamentally at odds with the notion of profiting from knowledge. But after the Cultural Revolution, Chinese leader Deng Xiaoping re-constituted Chinese IP law as part of the Gaige Kaifang (“Reform and Opening Up”).[13] The formative Trademark Law of 1982 is representative of this modern push to rationalize the IP system of the People’s Republic of China (PRC).

With China’s accession to the World Trade Organization and concomitant adherence to the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS),[14] the nation has further improved its IP protections. In 2000, the Supreme People’s Court promulgated its version of the U.S.’s Digital Millennium Copyright Act.[15] In 2010, the Chinese government launched a Special Campaign to stamp out counterfeiting, and by June 2011, the campaign had resolved over 15,000 cases representing an aggregate $2 billion.[16] The Chinese government also “shut down over 9,130 plants making pirated and counterfeit goods and 12,854 underground factories.”[17] Despite these prodigious numbers the USTR continues to petition against China for their supposed derelict administration, an index of the overwhelming size of China’s counterfeit market.[18]

Lost in Translation?

But perhaps the U.S. government is not looking in the right places? Chinese IP regulation doesn’t exist in the same legal space as in the U.S. China is a civil law country, and thus the full force of stare decisis does not exist.[19] In addition, each of the three main branches of government possesses separate IP rule-making capacity. The Standing Committee of the National People’s Congress (and the NPC as a general body) authors statutes,[20] including foundational IP architecture such as the Trademark Law, Patent Law and Copyright Law.[21] The Executive, i.e. the State Council, produces something akin to administrative regulations, which require a lower quantum of deference.[22] China’s highest court, the Supreme People’s Court, publishes judicial interpretations that are binding on Chinese courts.[23] Of recent import is the 2012 Judicial Interpretation on Network Dissemination of Information, which identifies the shared interests of copyright holders, Internet service providers, and the general public, and extends the scope of information networks beyond the Internet to mobile technologies and intranets.[24] This hierarchy of authority between administration regulations and judicial interpretations remains unresolved.[25]

Apologists for the current state of Chinese IP point to its recent achievements and the need for an idiosyncratic, path-dependent approach to development (e.g. the centralized ambition for zizhu chuangxin or “self-driven innovation”).[26] China is already among the top five nations for patent applications through the Patent Cooperation Treaty.[27] It can be debated how many of these patents are of “high-quality.” Still, the development of drugs founded in Traditional Chinese Medicine such as Artemisinin and Tamiflu are evidence of China’s contributions to high technology.[28] There is also the second-order rejoinder of whether Western nations are themselves creating technologies that are “highly-innovative” or merely “highly-protectionist.”[29]

And thus the touchstone question for any developing nation: how to balance the static efficiency of antitrust with the dynamic efficiency of patent law?[30] It is telling that the Chinese Law against Unfair Competition of 1993 is a keystone for protection of trade dress and trade secrets in China. Courts are still in the process of trying to flesh out these protections. For example, the percolating Wanglaoji case has pitted two market-leading tea producers against one another.[31] Commentator Xie Xianhui (who also argued the celebrity iPad case) expects the Guangdong High Court to not only resolve the question of ownership of the relevant trade decoration, but to possibly comment on this separation of trade dress from trademark.[32]

Culture also informs this relationship of antitrust to IP. Professor Cheng notes how things like uncertainty-tolerance[33] or poverty alleviation goals can re-calibrate the line drawing process between IP integrity and access. In an emerging economy such as China the marginal value of an extra dollar can be profound, cordoning off the low-income family from access to a generic life-saving medicine. One could make a related argument that even for cultural products such as music or movies that lessened IP protections are necessary to educating individuals so they can participate in our increasingly globalized, cosmopolitan culture. In the Internet Age should there be formal protections to becoming cool?

Going Forward

IP in China is very much in a state of flux. The celerity with which the IP laws are updated is itself evidence of this rapidly changing area of law. For example, the Copyright Law of 1990 was first revised in 2001 and then endured another new round of revisions in 2010.[34] A third revision was published in 2011 but has been the subject of particular controversy.[35] This draft establishes expanded collective copyright management organizations (withdrawing from individuals certain IP rights related to compensation).[36] It has unsurprisingly inspired fierce objection among those in the literati or record industry. Famous writers and musicians have argued that they do not want to be “represented” by these organizations, which they characterize as incompetent and self-interested.[37] The recent backlash to Baidu Books, as illustrated by the “March 15 Letter by Chinese Writers,” is indicative of these same tensions.[38]

A recent September 2013 episode of CNN International’s On China focused on the rise of “e-commerce” in the world’s second biggest economy.[39] Observers expect China this year to add 50 million digital shoppers to their 2012 base figure of 220 million.[40] But what is interesting are the kaleidoscopic ways in which Chinese consumers can click “buy” differently than in the U.S. One concerning example is the trend of Qijiandian (or “flagship” stores) through eBay-like web portals, including the behemoth platform Taobao. These Qijiandian are licensed to operate directly by the product’s trademark owner; however, recent investigative journalism has uncovered that they are sometimes operated by third party agents.[41] So what happens when Qijiandian sell trademark infringing product to trusting consumers? It is unclear both how officious the Chinese government should be in imposing duties to monitor the integrity of these online sales and on who this duty to monitor should be imposed. However, it will be exciting for legal audiences on both sides of the Pacific to observe how the dynamic, though very different, Chinese IP system responds to these sorts of cutting-edge Internet issues.

Preferred citation: Andrew Jensen Kerr & Ding Ding, A Post-Revisionist Look At Chinese Intellectual Property Law: A Report From The Periphery (Or The Frontier?) To The Core, 30 Santa Clara High Tech. L. J. Online (2014),

* The Online Edition of the Santa Clara High Technology Law Journal is an independent scholarly legal publication founded in 1984 by the students of Santa Clara University School of Law.

† Andrew Jensen Kerr (B.A. Wesleyan 2005; J.D. Columbia 2011) is a Senior Lecturer at the Peking University School of Transnational Law.

†† J.D. & J.M. Candidate, Peking University (2015); B.S., Peking University (2011).

[1] U.S. Customs and Border Protection, Prohibited and Restricted Items (last visited Sept. 20, 2013).

[2] Peter K. Yu, Intellectual Property and Asian Values, 16 Marq. Intell. Prop. L. Rev. 329, 390 (2012).

[3] Matthew A. Marcucci, Navigating Unfamiliar Terrain: Reconciling Conflicting Impressions of China’s Intellectual Property Regime in an Effort to Aid Foreign Right Holders, 23 Fordham Intell. Prop. Media & Ent. L. J. 1395, 1428 (2013).

[4] See, e.g., Thomas K. Cheng, Convergence and its Discontents: A Reconsideration of the Merits of Convergence of Global Competition Law, 12 Chi. J. Int’l l. 433 (2012).

[5] Marcucci, supra note 3, at 1401.

[6] For example, the Chinese language is thought to have lacked a lexical for “rights” (quanli) until the nineteenth century. Id. at 1400-01.

[7] Peter K. Yu, Five Oft-repeated Questions About China’s Recent Rise as a Patent Power, Cardozo L. Rev. de novo 78, 103 (2013).

[8] Ken Shao, Zizhu Chuangxin and China’s Self-Driven Innovation: Calling for a Holistic Perspective, Cardozo L. Rev. de novo 168, 178 (2013).

[9] The first law to provide IP protection as a civil right was the Interim Trademark Charter of 1904. See Dong Baolin, Hede Yu Zhongguo Shangbiao Shiban Zhangcheng [Hart and the Chinese Interim Trademark Charter], 4 Shangbiao Tongxun [Trademark Communication] (1993).

[10] Zhang Xiuling, ed., Zhishichanquan Fa [Intellectual Property Law], 30 Beijing Daxue Chubanshe [Peking University Press] (2010).

[11] Zhang Yumin and Li Yufeng, Zhongguo Banquan Shi Gang [Abstract of the History of Intellectual Property Law in China], 1 Keji Yu Falue [Science, Technology and Law] (2004), at 43.

[12] Id.

[13] Id. at 44.

[14] World Trade Org., Protocol on the Accession of the People’s Republic of China, WT/L/432 (Nov. 10, 2001), available at

[15] Vincent Brodbeck, Using the Carrot, Not the Stick, 127 B. U. J. Sci. & Tech. L. 127, 137 (2013).

[16] Id. at 140-41.

[17] Shirley Liang, Tailoring a Safe-Harbor Standard for China: The Youtube Plus Standard, 41 AIPLA Q. J. 137, 164 (2013).

[18] The UN estimates that 70% of global counterfeits originate in China. See, e.g., Mark Turnage, A Mind-Blowing Number of Counterfeit Goods Come from China, Business Insider (Jun. 25, 2013), available at

[19] One notable development is that China is “perhaps the only country in the world to have established specialized intellectual property tribunals that hear civil cases in the first instance.” Marcucci, supra note 3, at 1415-16; Professor Martin Dimitrov describes these specialized tribunals as offering “the highest quality of judicial review that is currently available in China.” Id. at 1416; However, despite these courts, the empirical evidence suggests that foreigners make up only a small fraction of IP litigation in China. Id. at 1422-23.

[20] There is some ambiguity in the direct translation of the Chinese cognate “fa” to “law.” The authors instead prefer the more broadly applicable term “statute” here.

[21] Zhonghua Renmin Gongheguo Xianfa [Constitution of People’s Republic of China] § 67(2) (promulgated by the National People’s Congress on December 4, 1982).

[22] Id. at § 89(1).

[23] Zhonghua Renmin Gongheguo Renmin Fayuan Zuzhi Fa [Organic Law of the People’s Courts of the People’s Republic of China] § 33 (promulgated by the National People’s Congress on July 1, 1979, as revised).

[24] Zuigao Renmin Fayuan Guanyu Shenli Qinhai Xinxi Wangluo Chuanboquan Minshi Jiufen Anjian Shiyong Falue Ruogan Wenti de Guiting [Judicial Interpretation of the People’s Supreme Court on Issues Concerning the Application of Laws in Hearing Civil Cases Involving Infringement of the Right to Network Dissemination of Information], § 2 (China) (promulgated by the Judicial Committee of the People’s Supreme Court, Nov. 26, 2012, effective Jan. 1, 2013).

[25] Wang Zhiming, Xingzheng Fagui he Sifa Jieshi de Pengzhuang [The Conflict Between Administrative Regulations and Judicial Interpretations], 73 Zhongguo Jianchaguan [Chinese Prosecutor] 18, 18 (2008).

[26] See, e.g., Shao, supra note 8.

[27] Yu, supra note 7, at 80.

[28] Id. at 87.

[29] Shao, supra note 8, at 182.

[30] Thomas K. Cheng, A Developmental Approach to the Patent-Antitrust Interface, 33 Nw. J. Int’l L. & Bus. 1, 6 (2012).

[31] Xie Xianhui, Hongguang Zhi Zheng, Shui Ying Shengchu [Who shall win in the dispute of “Red Tin?”], 7 Dianzi Zhishi Chanquan [Electronic Intellectual Property] (2013), at 46-49.

[32] Id.

[33] An interesting etymological aside is that the the word for competition in Japanese, “kyoso,” is linguistically rooted in the charged concept of “quarrel.” This could be philological evidence for the conclusion that market economics is less organic for some cultures. See Cheng, supra note 4, at 468.

[34] Chen Xiang, Zhuzuoquan Fa Disanci Xiugai Shimo: Duochong Liyi Boyi Zhi Xinfa Nanchan? [The Third Revision on Copyright Law: Conflicts among different interest groups lead to the failure of the adoption of the new law?]Zhonghua Dushu Bo [Chinese Newspaper on Reading], (Mar. 6, 2013).

[35] Id.

[36] Id.

[37] Xu Ci, Zhuzuoquan Fa Xiugai Caoan Xianru Zhengyi Xuanwo (2) [The dispute arising out of the drafted revision of the Copyright Law (2)], Nanfang Zhoumo [Southern Weekend] (Apr. 20, 2012),

[38] See Emily Gische, Repercussions of China’s High-Tech Rise: Protection and Enforcement of Intellectual Property Rights in China, 63 Hastings J. L. 1393, 1409-10 (2012).

[39] CNN, On China, Episode 12 Transcript: China’s e-commerce, (Sept. 19, 2013),

[40] eMarketer, Ecommerce Sales Topped $1 Trillion in Sales for First Time in 2012, (Feb. 5, 2013),

[41] Huang Xu ed., Tianmao Zaojia Xilie Baodao (3) [Series on Counterfeit Products on Tianmao (3)], Diaonaobao [Computer Journal], 24 (Jun. 24, 2013),

Guidelines to Limit Criminal Prosecutions of Filesharing Services

Benton Martin and Jeremiah Newhall.

The high-profile prosecution of popular cyberlocker Megaupload for criminal copyright infringement is the latest in a series of recent criminal prosecutions of online filesharing services.[1] According to prosecutors, Megaupload’s operators profiteered from infringing content by collecting advertising revenue and selling premium access to unlimited streaming of copyrighted media without a license from the copyright holders.[2] They also showed awareness of infringement, the government says, by joking in internal emails about helping pirates, financially rewarding uploaders of popular content even if they’d been caught infringing before, and instituting an “Abuse Tool” that merely hid infringing files while still allowing access to them.[3]

This new wave of prosecution raises important, unanswered questions about the scope and propriety of criminal enforcement actions against online services facilitating storage and sharing of digital files. In our view, “secondary” theories of infringement developed through civil copyright law also apply in the criminal context. With that understanding, we propose guidelines for prosecutors to limit prosecutions to theories of liability already established in appellate (primarily civil) cases, pursue only the most notorious infringers, and target those filesharing-service operators that openly and successfully defy civil enforcement actions.[4]

I.  Background on Criminal Sanctions for Filesharing Services

Criminal copyright law dates back to 1897, and liability for aiders and abettors goes back to 1909,[5] but criminal liability for so-called “secondary infringement” is a new development. Only in the last decade did the Supreme Court recognize the civil liability of filesharing services, in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., which held that two Napster copycats, Grokster and Streamcast, could be on the hook for their users’ infringement, as long as their operators exhibited an intent to induce infringement.[6] That decision provoked further litigation over the extent that filesharing services could take advantage of the “safe harbor” provision in the Digital Millennium Copyright Act (DMCA) for Internet service providers that complied with takedown requests.[7] YouTube, for instance, successfully rebutted civil litigation from entertainment companies by arguing that it hadn’t been properly notified of infringing videos.[8]

After this civil theory of secondary liability was established, it didn’t take long for U.S. prosecutors to seek its application in the criminal context. These efforts began in 2010, as the United States targeted sites like NinjaVideo, an online database of infringing files, many of which are stored through Megaupload.[9] The government also pursued the operators of services providing embedded video of copyrighted television shows, though these prosecutions eventually stalled, in part because of lingering uncertainty about the liability of “social bookmarking” sites.[10] The government then turned its attention to Megaupload, charging the company and its operators with six different federal crimes ranging from aiding and abetting infringement to wire fraud. However, these charges hinge, in large part, on Megaupload’s operators being found guilty of “secondary” copyright infringement.

II.  Limiting Criminal Copyright Enforcement Against Filesharing Services

The Megaupload prosecution has spooked the tech community, which frets that, if the company is guilty of criminal copyright violations, many similar services may be as well. These concerns are compounded by the dire consequences of prosecution in this context: Although it has yet to be convicted, Megaupload has been shut down, its assets frozen, and its customers left unable to retrieve even lawfully stored data.

Not only would targeting every illegal filesharing service impose drastic sanctions, it would also be prohibitively difficult. Prosecuting filesharing services gives rise to unique challenges, including backlash from anticopyright advocates and difficulties in prosecuting infringers living overseas. Megaupload, for example, had headquarters in Hong Kong, operators in Europe and New Zealand, and, fatefully, some servers in the United States.

Given those concerns, prosecutors should save their powder for the worst offenders.[11] We thus propose three guidelines to limit prosecutions of filesharing services.

First, prosecutors should enforce criminal copyright law only in regard to theories of liability already established at the appellate level—especially in civil cases—to avoid untested criminal theories. This standard supports Megaupload’s prosecution, though perhaps not actions against embedded-video sites like TV Shack or Channel Surfing, where the law is more in flux. Some critics decry the idea of any criminal secondary liability as overextending Grokster,[12] but we think that the concept of “secondary” liability is embodied in 18 U.S.C. § 2, which covers “aiding and abetting.” Just as the 1909 Copyright Act allowed the targeting of theater managers assisting traveling performers infringing creative works,[13] section 2 allows the targeting of filesharing services assisting online infringement.

Some commentators speculate that services like Megaupload might avail themselves of the DMCA’s “safe harbor” as YouTube did.[14] But that provision says nothing about criminal sanctions. And the popular focus on the provision’s third of three elements—“notice and takedown” compliance—ignores that the first element is a lack of knowledge or awareness of infringing activity.[15] Satisfying this first element would necessarily defeat any criminal action: it is impossible to willfully infringe, as required for criminal copyright liability, without awareness of infringement. Because any willfulness defense will turn on the facts of individual cases, the availability of this defense should not bar criminal actions against filesharing services altogether.

Second, prosecutors should aim for prominent services like Megaupload. When indicted, Megaupload was the Internet’s 13th most-visited website, pulling in 4% of all Internet traffic with hundreds of millions of registered users and an average of 50 million daily visits.[16] This “big fish” factor is important because the lion’s share of filesharers are low-cost infringers, pirating 99-cent songs or $10 movies. So for many of these users, disrupting high-traffic sites is significantly likely to deter future illegal activities. A recent empirical study bolstered this theory, finding that digital revenues for movie studios increased by 6 to 10% in the wake of Megaupload’s shutdown.[17]

Third, criminal copyright enforcement should be saved for when civil enforcement is likely futile, as when a service’s operators egregiously disregard the law by scorning takedown notices and profiteering from blatant infringement. For example, the operators of the Pirate Bay posted and publicly ridiculed takedown complaints,[18] and Megaupload operators joked about “providing shipping services to pirates” and reposted links to infringing files after receiving takedown requests. Although imprisonment is not ideal, carrying with it the cost of running jails and the loss of wage-earners from the economy, a credible threat of prison may be the only effective approach to combating egregious disregard for copyright law. No doubt this is especially true for services that are able to absorb civil penalties as a cost of doing business, as Megaupload did with civil litigation against it by pornography company Perfect 10.[19]

III.  Benefits of Criminal Copyright Enforcement

Consistent with this last point, although we advocate for limited copyright prosecutions, we acknowledge the distinct benefits of criminal enforcement. First, extradition of overseas defendants, though difficult, is completely unavailable in civil cases. Second, because U.S. courts treat domain names as intangible property located wherever the domain-name registry or registrar is, and a Virginia company controls the registry for all .com and .net domain names, the federal government can shut down domain names through civil forfeiture, as it did by the hundreds in “Operation in Our Sites.”[20] (This technique wasn’t necessary with Megaupload as the company used a Washington-based registrar and ran 525 computer servers in Virginia.[21]) Third, as it did with Megaupload, the government can seize company assets, including servers with third-party data, on the basis that they were instruments or proceeds of criminal activity.[22] Finally, the government has the unique ability to collect evidence by search warrant, rather than subpoena. For example, based on the internal communications produced against Megaupload, technology journalists speculate that the government planted spyware to collect data from its operators’ local hard drives.[23] This information was unlikely to be discovered through civil process. Although government officials must comply with the Fourth Amendment, these protections are still being defined for the digital age.

Given these benefits, it’s curious that the government hasn’t prosecuted more U.S.-based services, like Florida’s Grooveshark, or other notorious foreign piracy sites, like China’s Baidu.[24] But it’s likely that federal prosecutors have concluded that it is not yet worth tackling the jurisdiction problems that would dog any prosecution of these foreign sites, and it would be inefficient to target Grooveshark now, as it’s still embroiled in litigation with music labels. It would also prevent the development of copyright law: civil cases are more likely to be litigated and develop precedent; criminal cases typically end in plea bargains. In our view, the existence of so many other infringing services also underscores the need for prosecutorial discretion: Prosecutors should file charges only when liability has been well-established in civil cases, evidence shows that infringers egregiously violated the copyright laws for profit, and civil enforcement efforts have been stymied.


Preferred citation: Benton Martin & Jeremiah Newhall, Guidelines to Limit Criminal Prosecutions of Filesharing Services, 30 Santa Clara High Tech. L. J. Online (2013),

* The Online Edition of the Santa Clara High Technology Law Journal is an independent scholarly legal publication founded in 1984 by the students of Santa Clara University School of Law.

[1] See, e.g., Timothy B. Lee, How the Criminalization of Copyright Threatens Innovation and the Rule of Lawin Copyright Unbalanced: From Incentive to Excess 55, 63-64 (Jerry Brito ed., 2012); Rob Fischer, A Ninja in Our Sites, The American Prospect, Dec. 15, 2011,

[2] See generally Superseding Indictment at 3, 6-7, United States v. Dotcom, No. 1:12-CR-3 (E.D. Va. Feb. 16, 2012), ECF No. 34 [hereinafter Indictment], available at

[3] Id. at 10–11, 32–33, 42.

[4] See Benton Martin & Jeremiah Newhall, Criminal Copyright Enforcement Against Filesharing Services, 15 N.C. J. L. & Tech. (forthcoming 2013), available at

[5] Miriam Bitton, Rethinking the Anti-Counterfeiting Trade Agreement’s Criminal Copyright Enforcement Measures, 102 J. Crim. L. & Criminology 67, 85 (2012); Note, Criminalization of Copyright Infringement in the Digital Era, 112 Harv. L. Rev. 1705, 1707 (1999).

[6] Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 932–33 (2005).

[7] See, e.g., Columbia Pictures Indus., Inc. v. Fung, 710 F.3d 1020, 1043 (9th Cir. 2013).

[8] Viacom Int’l, Inc. v. YouTube, Inc., 718 F. Supp. 2d 514 (S.D.N.Y. 2010). The Second Circuit affirmed the district court’s core legal analysis, but reversed on the basis that YouTube may have actually known some infringing videos. Viacom Int’l, Inc. v. YouTube, Inc., 676 F.3d 19, 33-34 (2d Cir. 2012).

[9] Lee, supra note 1, at 63-64; David Kravets, Megaupload Assisted U.S. Prosecution of Smaller File-Sharing Service, Wired, Jan. 20, 2012,

[10] See, e.g., Timothy B. Lee, UK TV Shack Admin Won’t Face Trial in US on Copyright Charges, Ars Technica Nov. 28, 2012,

[11] As the Attorney General recognizes, wise use of prosecutorial discretion is “essential to the fair, effective, and even-handed administration of the federal criminal laws.” Memorandum from Attorney  Eric Holder, Attorney General, U.S. Dep’t of Justice, to all federal prosecutors (May 19, 2010), available at Each office of the United States Attorney maintains written guidelines for exercising prosecutorial discretion. Id.

[12] See Lee, supra note 1, at 67-70 (arguing that secondary liability should not be extended in the criminal context because the doctrine has been fleshed out by the courts not Congress); Jennifer Granick, Megaupload: A Lot Less Guilty Than You Think, The Center for Internet and Society Blog (Jan. 26, 2012), (“But the first question from a defense perspective has to be ‘Can the Grokster theory of CIVIL liability even be the basis for CRIMINAL copyright claims?’ This has never been decided by any Court.”).

[13] I. Trotter Hardy, Criminal Copyright Infringement, 11 Wm. & Mary Bill Rts. J. 305, 315 (2002).

[14] See, e.g., Charles Graeber, 10 Days Inside the Mansion—and Mind—of Kim Dotcom, the Most Wanted Man on the Internet, Wired, Oct. 18, 2012,

[15] See 17 U.S.C. § 512(c).

[16]  See Indictmentsupra note 2, at 2-3.

[17] Brett Danaher & Michael D. Smith, Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales (Mar. 6, 2013), at 21, available at

[18] Stephen Bright, Current Development, The Current State of BitTorrent in International Law: Why Copyright Law is Ineffective and What Needs Change, 17 New Eng. J. Int’l & Comp. L. 265, 266 (2011).

[19] See Perfect 10, Inc. v. Megaupload, Ltd., No. 11-cv-0191 (S.D. Cal. July 26, 2011), ECF No. 16.

[20] See Mike Belleville, IP Wars: SOPA, PIPA, and the Fight Over Online Piracy, 26 Temp. Int’l & Comp. L.J. 303, 315 (2012); Jack Mellyn, “Reach Out and Touch Someone”: The Growing Use of Domain Name Seizure as a Vehicle for the Extraterritorial Enforcement of U.S. Law, 42 Geo. J. Int’l L. 1241, 1253-54 (2011); Andy Sellars, The In Rem Forfeiture of Copyright-Infringing Domain Names (May 8, 2011), at 32, available at

[21] David Kravets, Uncle Sam: If It Ends in .Com, It’s .Seizable, Wired, Mar. 6, 2012,

[22] Fed. R. Crim. P. 32; 18 U.S.C. § 2323; Lee, supra note 1, at 65–67.

[23] Greg Sandoval & Declan McCullagh, Feds: We Obtained MegaUpload Conversations with Search Warrant, CNET (Jan. 31, 2012),

[24] See Press Release, Senator Orrin Hatch (May 19, 2010), available at

Combining Law and Science; Making Technology Understandable in Patent Cases

         Combining law and science; making technology understandable in patent cases

 Phil McGarrigle† & John DiMattero††


In the U.S. Supreme Court case Association for Molecular Pathology v. Myriad Genetics 569 U.S.  (2013), quite a few different analogies, metaphors, hypotheticals and examples were used to explain the science and to compare the facts to other case law. Even though popular culture includes references to     aspects of DNA (on multiple TV dramas where forensics are featured in criminal investigations, for example) the technology in the case was still difficult to explain to a lay person. In fact, much of the oral argument transcript shows attempts to explain the science and less time directed to the policy arguments that one would expect at the Supreme Court.

Confusion about the technology at the heart of a legal dispute makes it difficult to apply the relevant case and statutory law. In fact, In Myraid, understanding the science was such a key point that Justice Scalia did not join the majority with respect to explaining the science as he did not “affirm those details on my own knowledge or even my own belief”. While it is understandable that the litigants wanted to reduce the technology to simple terms in order to focus on the legal issues, such simplification carries the risk that the legal decision is not based on accurate science.

Analogies can be misleading if they are too simple to convey subtleties and may not illuminate the critical issues for decision making. Justice Alito commented on overly simple analogies by saying, “You keep making the hypotheticals easier than they’re intended to be.” Oral Argument 7, lines 21-22. Also, in response to Justice Sotomayor’s analogy about baking a cookie, Mr. Castanias, representing Myriad, commented on the analogy by saying “that’s the problem with using the really simplistic analogies” page 36, lines 18-19.

Robert Merges discusses the concept of using analogies which simplify technology to make it understandable ( He suggests that reducing most technologies to their essentials in patent cases can blur the line as to whether the patent claims the idea (not patentable) or the application of the idea (patentable). When the analogy presents the claimed invention as more of an idea, this can lead the justices into a metaphysical discussion about the patentability of the claims. In effect, the analysis can turn into what Merges calls the “freshman seminar effect”, which describes the endless string of hypotheticals used to test the viability of various metaphysical principles.

Trial lawyers make use of analogies because they can explain complicated concepts of law or science to lay judges or juries. However, their use can be a double edged sword. If the analogy does not quite fit the purpose for which it is proffered, it can be challenged to the detriment of the proponent.

In Myriad, the Supreme Court did not adopt analogies by either side in the opinion. Perhaps this was because analogies failed to express the true debate in the case in that they did not describe how a compound can exist in nature, well integrated into its surroundings, but still not be patentable as the information it carries is not any different from the claimed subject matter. It could be that in simplifying the science, the physical aspects of DNA were lost and all that remained was the information carried by the DNA. To some extent, one could assert that this is a feature of all molecules, and that DNA simply has less of a structural element than other molecules.

Did the Court understand the science enough to make good law in this case? Superficially, the discussion in the opinion was accurate at one level, but it is less clear if the implications of the science were understood by the justices in the fullest sense. The amount of discussion at the oral argument and     the number of analogies brought up suggests that the science was a struggle to overcome.

The Litigator’s Viewpoint

John DiMatteo of Wilkie Farr & Gallagher LLP was involved on the peripheries of the Myriad case. He assisted Dan Ravicher of the Public Patent Foundation and Chris Hansen of the ACLU to prepare for oral argument in the Southern District of New York, before the Court of Appeals of the Federal Circuit , and before the Supreme Court. He, along with Willkie summer associate Cristina Quiñones-Betancourt offer some thoughts on the use of analogies via a question and answer format below.

1. What categories of analogies did you see in Myriad?

There were multiple categories of analogies, such as those focused on separation, purification/isolation/extraction, visualization, and those based on human intervention. See below.

  • Separation
    • A Single Leaf (Oral Argument 6-8, 64)
      • One cannot get a patent on a leaf picked off of a plant.
    • Plants, rocks, etc. (Oral Argument 57)
      • “Everything is inside something else.” (J. Breyer)
    • Organs (kidneys and liver) (Oral Argument 55-56)
      • Removing an organ from the body and cutting off a piece of that organ does not make the cut piece patentable.
    • Plant in the Amazon (Oral Argument 43)
      • E.g., “It takes a lot of ingenuity and a lot of effort to actually find that plant, just as it takes a lot of effort and a lot of ingenuity to figure out where to snip on—on the genetic material.” (J. Roberts)
  • Purification or Isolation[1]
    • Gold (Oral Argument 4-5, 9)
      • Gold itself is not patentable because it is a natural product, however a new process for extracting or using gold is patentable because those patents would not create a monopoly on the underlying natural product.
    • Lithium (Fed. Cir. Op. 1702, 1711 fn.7)
      • Noting that although lithium is not free in nature, it is not patentable because it is an element. However, a lithium compound is not the same as elemental lithium.
    • Extract from Leaves of an Amazon Plant (Oral Argument 7)
      • If you simply pick a leaf off of the plant and eat it, you cannot receive a composition patent for merely discovering the plant. However if, for example, the extract is only useful in a concentrated form, then the concentrated form of the naturally occurring compound may be patentable because the extract has been physically transformed and has also been given a function.
    • Extraction of an Entire Amazon Plant from the Amazon Forest (Oral Argument 43-44, 49)
      • The plant itself cannot be patented because it is a thing of nature that has not been manipulated. Thus, there’s a distinction between something that has been extracted as a whole from something larger and something that has been extracted as a whole and then further manipulated.
  • Structure That is Not Isolated or Separated from Its Environs
    • Magic Microscope (Fed. Cir. Op. 1698, 1701, 1711), Super Microscope (Oral Argument 18)
    • “[I]f an imaginary microscope could focus in on the claimed DNA molecule as it exists in the human body, the claim covers ineligible subject matter.”    Id. at 1698 (government’s argument).
    • The court disagreed with the government because the test fails to regard molecules as separate chemical entities that may only be useful once they are no longer bonded to other genetic material. Id. at 1701.
    • Moreover, the court argued that a magic microscope would be unable to see the subject matter at issue because the chemical bonds, or ends, of an isolated DNA strand are different from those of an unisolated DNA strand. Id. at 1711.
  • Degree of Human Invention and Alteration
    • Chocolate Chip Cookie (Oral Argument 35)
      • A person can create a chocolate chip cookie with natural ingredients and can receive a patent for the finished product, but cannot receive a patent for each individual natural ingredient used. (J. Sotomayor)

2. How were analogies useful to understand the science in Myriad or were useful for reasoning through the problem?

No one analogy perfectly framed the issue, they were helpful in at least framing an argument or a point of contention. The reason why no one analogy was found to best fit the issue – as a matter of science, is “isolated DNA” markedly different than DNA in the body – relates to the fact that there are two ways to look at “isolated DNA”: (1) from the chemist’s end of the telescope where DNA in the body (a long complex molecule tightly bound with other molecules) looks “markedly different” from an isolated portion of DNA (simpler and free of many other molecules) and; (2) from the biologist’s end of the telescope where the genetic information encoded in DNA in the body is identical to that found in its isolated form. As such, no one was able to find an analogy that simultaneously correlated with the chemistry and biology of DNA.

Nevertheless, the analogies used at each stage of the case, from the district court through the Supreme Court argument, helped narrow the discussion. For example, commenting on Myriad’s baseball bat analogy, Justice Roberts noted during oral argument that isolated DNA is closer to “snipping” a section of wood from a tree while a baseball bat requires more. (Oral Argument 41). Further, the analogy of finding a rare plant in the Amazon was useful in expressing the idea that finding the BRCA 1 and 2 genes was a discovery, not an invention.

3. When are analogies ineffective?

1) When they do not apply to the facts of the case, such as the Magic microscope analogy which did not take into account that a magic microscope would be unable to see the subject matter at issue. (Fed. Cir. Op. 1698, 1701, 1711);

2) When they are oversimplified, such as the analogy of picking a leaf off of a plant and eating it does not include any manipulation other than picking the leaf, a process that would be very different from extracting something from the leaf that is not easily visible or ascertainable with the naked eye.(Oral Argument 7); and

3) When they are used improperly, such as Myriad’s attempted to liken the DNA at issue to a baseball bat, which begins as a tree and then needs to be cut out of the wood. The Court noted, however, that a baseball bat needs to be invented. In contrast, DNA merely needs to be cut. (Oral Argument 41).

4. What was your favorite analogy and why?

I liked most the analogy of the plant that was discovered and uprooted from the Amazon. (Oral Argument 43-44, 49.) The analogy works in explaining the point that merely finding a gene for a particular disease is not an invention. Moreover, the analogy is easily extended to the concept of “isolated DNA”. Imagine that the botanist who discovered the plant used a well know enzyme extraction process to determine what enzymes are present in the plant. Once applied, the botanist discovers the specific plant enzyme that gives the plant a unique property, perhaps blue leaves. While an amazing discovery, the botanist cannot claim the blue leaf enzyme as an invention.

5. Are judges good at using analogies?

It all depends on the skill of the judge. In the Myriad case, the Supreme Court judges were good at determining which analogies did not work (e.g. the baseball bat) and which ones did (e.g. extracting a compound from a plant).

The Judge’s Perspective

Judge Whyte from the Northern District of California had a chance to comment on some aspects of analogies and their use in the courtroom. His responses to a series of questions are shown below.

1. How do judges handle technology issues?

I have had this discussion with some of my colleagues. There is a lot of reliance on law clerks for technical help. We generally tend to hire at least one technically trained law clerk at a time.

I also think that the judges depend heavily on tutorials from experts that are presented by the parties. I will decide what expert seems to make more sense and then I will apply the law to the facts that and hopefully I am more often right than wrong.

2. Do analogies help?

Yes. Tutorials can be at such a high level that I come out of it with just an overview, but not practical direction. It would be so helpful if a litigant can put something that I don’t understand into terms that I do. I often ask my law clerks to give me some real world example of the technology. Anything that helps me focus on the problem is welcome.

3. Do litigants use analogies effectively or are they overly simplified in favor of their position?

Analogies are very helpful unless you can see some basic flaw in them almost immediately. If so, it hurts their position because you assume the person has come up with the analogy is missing a step and therefore their position is not valid. So, I do think that analogies are very useful, but they have to be good because if they’re not, the other side is going to point out flaws in the argument which really hurts your position.

When presented with an analogy or other technical statement, I will try to take the attorney to a step beyond where they have gone to try to get them to say if this were the situation how they would analyze it. So often I get the answer that my facts are not the present case. The good attorneys will answer the question and are smart enough to realize that the new facts may make a difference to the result.

4. Do attorneys get tripped up using analogies.

Yes, they have to weigh the risk with the use of the analogy with its educational benefits. I would encourage analogies but I would probably test them with colleagues to make sure they have not missed something. Explaining technology is a struggle all the time.

5. Do attorneys use analogies in their presentations to the jury?

Claim construction is addressed by the judge, but juries need to make determinations that depend on some technical understanding. So, litigants may use analogies to educate them on the technology. I can’t tell you how many patent cases I have tried where part way through the case I finally understand the technology because of the presentation to the jury. Attorneys may presume the judge knows more than the jury, but I find these explanations helpful too.


The legal analysis of issues that are before a court in a patent case are complicated when they combine law and science. Scientific concepts can be difficult to explain to those who are not conversant with the particular science and problems arise when the parties overly simplify the technical descriptions using analogies. This oversimplification can distort the nature of underlying scientific principles and can lead to an incorrect understanding, ultimately producing a flawed result. Picking the correct analogies will benefit the court and lead to a better marriage of the science and the law.

Translating the science for non-scientists may become important as the Supreme Court continues to hear and decide cases having strong technology components. The victors may be the ones who can frame the issues using the right analogies.

[1]             Initial examples are aspirin and whooping cough vaccine. (Oral Argument 3-4).

†Phil McGarrigle (B.A. University of New Hampshire-Durham, J.D. Santa Clara University School of Law) is Senior IP Counsel at Jazz Pharmaceuticals and Lecturer at Law of Biotechnology at Santa Clara University School of Law

††Joe DiMatteo (B.A. Columbia University, J.D. Temple University) is the Chairman of IP at Holwell Shuster & Goldberg LLP

A Modality for Defining Patent Monetization Companies

Nicole Shanahan

Patent monetization companies are largely to blame for the inefficiencies in the patent marketplace today.  Many scholars, academics, and private research institutions have attempted to understand just how bad things have gotten, and that research has received deserved attention from the government, including President Obama who has been vocal on patent law reform.[1]  However, one of the largest problems with the patent reform discussion is the difficulty with terminology related to the business activities of patent monetization companies.  What still is not well understood from the depths of data explaining the fiscal impacts of our patent system is a comprehensive modality for precisely detailing the business model a patent monetization entity utilizes.  To adequately define and categorize these entities’ impact by their practices, a granular understanding of their behavior is necessary.

In an expanded paper entitled “Deconstructing the Patent Bubble: An Exploration of Patent Monetization Entities from Sewing Machine Combination to Rockstar Bidco,” I survey the history of commercial patent monetization since the first large-scale patent consortium formed in the1850s.[2]  In doing so, it became clear that there is a traceable evolution of patent revenue generating techniques.  Figure 1 below shows this progression, and the remaining portion of this article explains how these various business models operate with specific examples of each.  Noticeably, the new patent monetization entities have chosen from the ranks of prior models to create flexible, hybrid entities.[3]  By virtue of their immense diversity and numbers, these entities will be challenging and labor intensive to analyze under the proposed Saving High-Tech Innovators from Egregious Legal Disputes Act (SHIELD Act) and other legislative reform requiring courts to issue legal proceedings based on entity type.[4]

Figure 1: Evolution of Patent Monetization Entities by Practices

Evolution of Patent Monetization


1. Patent Consortium Model

Over a hundred years before the world came to know the term “patent troll,” the first strategic patent pool was formed to cover sewing machine technology.[5]  Patent pools, also known as consortiums, are among the oldest and longest surviving aggregation business models that continue to flourish today.  They are formed via an agreement between several companies who pay fees to aggregate and share licenses to valuable patents containing overlapping claims.  Sewing Machine Combination was the first known patent consortium that participating members leveraged as a means to overtake non-member competitors.[6]  Operating during a period known as the “sewing machine wars” between 1856 and 1877, when its last patent expired, Sewing Machine Combination provides an important historical example of how patent owners can escape commercial gridlock, and unleash productivity and innovation via cross-licensing agreements.[7]

While Sewing Machine Combination made it possible for the sewing machine manufacturers to start making and selling sewing machines, rather than working full-time on suing each other out of existence, it has yet to be seen whether modern consortiums provide the same level of innovation.[8]  In the smartphone industry, such attempts at efficient consortiums have just recently started to ramp up, but despite the existence of a few large smartphone consortiums, the rate of smartphone litigation continues to rise.[9]  The aftermath of the sale of Nortel Networks’ patent portfolio to Rockstar Bidco exemplifies how smartphone consortiums have served to create competitive patent thickets, known popularly as the “Smartphone Wars.”[10]  Current trends support the conclusion that the consortiums are serving valuable strategic purposes that help smartphone companies enter and compete in the marketplace through patent partnerships.[11]

If done correctly, the pro-competitive benefits of a successful smartphone consortium will outweigh any anticompetitive effects by promoting healthy industry competition, while still upholding licensing commitments such as those required under standards setting organizations.[12]  For example, Google’s adversarial relationship with the Rockstar Bidco consortium (consisting of Apple, Microsoft, RIM, Sony, Ericsson, and EMC) presents a unique opportunity to re-assess the treatment of standard-essential patents existing within competitive patent thickets.[13]

2. Lemelson NPE Model

While Non-Practicing Entity (NPE) patent litigation has been around for over 150 years, the first corporate-level patent monetization operation originated from Jerome Lemelson in the 1960s.[14]  This famed inventor described having patented “anything that came to mind,” and incorporated the Licensing Management Corporation in order to bring to market patents under his name as well as other independent inventors.[15]  Lemselon was the first person to use patent development as a business model, by hiring in the place of engineers and business people, an “army of patent attorneys” dedicated to drafting and prosecuting patent applications.[16]  He was one of the first to make use of contingency fee litigators and by the 1980s inspired several others to adopt the same business model.[17]

Among the most notable “Lemelson patent development companies” today are Rambus and Tessera.[18]  While Rambus generally receives less criticism from hardline NPE critics compared to other patent assertion entities because of their relatively high focus on research, Rambus has been involved in its fair share of controversy.[19]  Founded in 1990 as a chip developer by two inventor-professors, Rambus started as a licensing company that provided, in addition to patent licenses, the services of engineers to assist chip companies in their development of Dynamic Random-Access Memory (DRAM) technology.[20]

There are several companies that started as operating companies (in the business of making and selling actual products) but due to financial contraints or strategic purposes, opted for a strictly Lemelson approach.[21]  The largest of these entities is Tessera, who started as a manufacturer of semiconductor packaging.[22]  Today, Tessera no longer manufactures products and has been actively asserting patents not just in the federal courts, but also at the U.S. International Trade Commission (ITC).[23]  Tessera’s use of the ITC as a forum to pressure companies into paying licensing fees exemplifies how patent monetization companies have leveraged the ITC’s arguably lower standard for issuing injuctions.[24]

3. Acquire & Assert Model

The patent marketplace developments in the late 1980s to early 1990s were probably the most significant in terms of bolstering the NPE model.  Models built entirely on patent acquisitions and the transactions created by brokerages and auction houses made the patent marketplace a much more dynamic place.  The availability of entire portfolios paired with the greater availability of contingency fee litigators such as Raymond Niro (for whom the term “patent troll” was apparently first coined) meant that a patent monetizer no longer had to invest in engineers, patent attorneys, or technologist of any sort.[25]  The average cost of taking a company to court dropped dramatically and the speed at which these companies saw profits was staggering.[26]  Compared to the traditional Lemelson model that took much more time and investment, the acquisition-assertion model eliminated many of the barriers to entry of becoming a patent holding entity.[27]  Given the relative lack of transactions in the marketplace previously, these entities were able to pull from a larger pool of patent holders willing to sell their property.  These sellers included individual inventors unable to find contingency fee lawyers, failed start-up companies, or companies looking to partner with an assertion entity.[28]

Companies operating under the acquisition-assertion model are effective because of the economics surrounding patent litigation.  For example, in Texas it could cost an accused infringer more than $2.5 million to litigate a case with $1 to $25 million at stake.[29]  Discovery alone could cost as much as $1.5 million.[30]  The risks companies face when responding to infringement demands include massive litigations costs, the risk of a damages payments far greater than an early settlement payout and, worst yet, an injunction against their product.[31]  On the other hand, the patent holding company operating under the acquisition-assertion model has discovery obligations that are much smaller, oftentimes throwing together a handful of documents from the acquisition.[32]

4. Publicly Traded PMEs

Publicly traded Patent Monetization Entities (PMEs) run the gamut in terms of how they develop patent portfolios and the means by which they monetize them, but they deserve a unique category because they are subject to higher public scrutiny and generally rely on more stable patent revenue models.  There are currently seventeen PMEs listed on the public market.[33]  Another four PMEs who were once listed have since become delisted for various reasons.[34]  The group as a whole has seen high volatility on the stock market.[35]  The remaining publicly listed PMEs have lost substantial value since their IPO and have struggled to post profits for investors.[36]

After reviewing the list of companies and their past stock performance, it becomes clear that PMEs are more successful if they have many moderate sized wins versus a few large wins.  Thus, success becomes a matter of transaction volume: more portfolios mean more potential lawsuits and licensees as well as a guaranteed pipeline of royalties.  Other factors among the most successful publicly traded PMEs (such as Acacia, Interdigital, VirnetX, Universal Display, and Tessera) include: a diversity of patents covering a range of technologies, portfolios containing Standard-Essential Patents (SEPs), portfolios covering the mobile and semiconductor industries, portfolios that include patents in Europe and Asia, and regularity in launching new lawsuits.[37]  Alternatively, characteristics pertaining to struggling publicly traded PMEs include a change from an operating to non-operating model that fails to acquire new portfolios (TIVO, Document Security Systems, Wi-LAN, Opti, Inc., and Worlds, Inc.), a considerably high IPO valuation (RPX Corporation, Vringo), and attempting to go from a non-operating to operating model (Democrasoft, Asure Software).[38]  A full list of publicly traded NPEs as well as their classification is included in Table 1:

Table 1. Summary Chart of Public PMEs[39]

Chart of Public PMEs

5. The Hybrid PME

What makes modern PMEs interesting is their ability to articulate, execute, and sell hybrid monetization models.  The most famous of these, receiving their fair share of attention by both the media and scholars, are Intellectual Ventures (IV) and RPX Corporation.[40]  Interestingly, two of the founders of RPX Corporation previously worked at IV and all of the founders from both firms taken together have experience in every one of the models discussed above.[41]  Intellectual Ventures was founded in 2000 by Nathan Myhrvold and Edward Jung, both of whom formerly served in high-level positions at Microsoft.[42]  RPX Corporation’s John Amster and Geoffrey Barker were both former vice-presidents at IV and worked closely with Myhrvold in developing the company’s software licensing strategy.[43]

Both companies have had huge success raising private funds to finance portfolio development and in doing so, have come to own massive portfolios in a short amount of time.[44]  While today IV practices a combination of patent development (early Lemelson Model) and acquisition (Acacia’s model), it originally attracted financial backing from the companies that are now the target of its revenue model.[45]  With $5 billion in funds and an estimated 40,000 patents and patent applications, IV is the largest NPE in the world.[46]  While RPX Corporation has a portfolio that is just a fraction of that size, it also had early success attracting venture capital funding and support from early members, the first of which was Cisco (whose former head of patents, Mallun Yen, is now RPX’s executive vice-president).[47]  RPX Corporation has spent over $700 million to acquire approximately 3800 patent assets across several industries, most notably mobile handsets.[48]

Both IV and RPX view themselves as providing essential financial services, instead of legal services—a  distinction that presents obvious implications.  Nathan Myhrvold has often called his $5 billion in investments a venture capital fund,[49] and RPX formally changed their industry sector from legal services to financial services in 2009.[50]  Some researchers have estimated that for a $5 billion dollar fund to be successful, it would take at least $40 billion in returns over a ten year period (last year IV earned just barely $2 billion in revenue).[51]  This means IV will need to engage in high yield transactions that will likely require taking many more companies to court per year.  In contrast, RPX’s business model requires it to get the lowest possible price for “high litigation risk” portfolios,[52] but since prices must remain competitive for patent owners in order for them to make a deal with RPX in the first place, their cost saving services have nothing to do with the actual deal, and more to do with replacing lawyers’ fees.

6. Conclusion

Given the various differences in the way patent monetization companies operate, the government should pay special attention to the relative value of each practice. Some models provide a greater public benefit to others, but all seem to benefit from a market environment in which nuisance-based lawsuits remain the most attractive liquidation option.


Preferred citation: Nicole Shanahan, A Modality for Defining Patent Monetization Companies, 30 Santa Clara High Tech. L. J. Online (2014),

* The Online Edition of the Santa Clara High Technology Law Journal is an independent scholarly legal publication founded in 1984 by the students of Santa Clara University School of Law.

[1] See e.g., Edward Wyatt, Obama Orders Regulators to Root Out “Patent Trolls”, the new york times (June 4, 2013), (“Mr. Obama ordered the Patent and Trademark Office to require companies to be more specific about exactly what their patent covers and how it is being infringed. The administration also told the patent office to tighten scrutiny of overly broad patent claims and said it would aim to curb patent-infringement lawsuits against consumers and small-business owners who are simply using off-the-shelf technology.”).

[2] Nicole Shanahan, Deconstructing the Patent Bubble: An Exportation of Patent Monetization Entities from Sewing Machine Corporation to Rockstar Bid Co., (Working Paper, 2013), available at

[3] Id. at 22.

[4] Ryan Davis, Wide-Ranging “Patent Troll” Bill Floated By Top Lawmakers, law 360 (May 24, 2013), (“Many in Congress appear anxious to take action against patent trolls.  Similar bills introduced in Congress this year include the Shield Act and the Patent Quality Improvement Act.”).

[5] Adam Mossoff, The Rise and Fall of the First American Patent Thicket: The Sewing Machine War of the 1850s, 53 Ariz. L. Rev. 165, 170 (2011).

[6] Id.

[7] Id.

[8] Id. at 196 (citing Don Bissell, The First Conglomerate: 145 Years of the Singer Sewing Machine Company 87 (1999) (“[E]vidence abounds that indicates these main players also cooperated in price fixing and in other mutually beneficial policies”)).

[9] In one survey, Fish & Richardson saw a 29% increase in cases in 2010 and Finnegan, Henderson, Farabow, Garrett & Dunner saw its patent litigation caseload increase by almost 47%.  See Sam Favate, Patent Trolls And Smartphone Wars Mean More Litigation – Survey, Wall St. J. L. Blog (Dec. 1, 2011),

[10] See Thomas H. Chia, Fighting the Smartphone Patent War with Rand-Encumbered Patents, 27 Berkeley Tech. L. J. 209, 213 (2012).

[11] Id.

[12] Id. at 240.

[13] Id.

[14] About Jerome Lemelson, Lemelson-MIT, (last visited Jan. 24, 2013).

[15] Id.

[16] Colleen V. Chien, From Arms Race to Marketplace: The Complex Patent Ecosystem and Its Implications for the Patent System, 62 Hastings L. J. 297, 311-12 (2010).

[17] Id.

[18] Id. at 328.

[19] Rambus has avoided being termed a “patent troll” and NPE by many academics including Robin Feldman, Mark Lemley, and Colleen Chien.  See Colleen V. Chien, Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High-Tech Patents, 87 N.C. L. Rev. 1571, 1577-78 (2009) (“The term NPE generally refers to a patentee that does not make products or ‘practice’ its inventions.  Over time, the definition has been narrowed to exclude actors in the innovation enterprise who engage in significant research and development activities and individual inventors who seek to commercialize their inventions.”).

[20] Micron Technology, Inc., v. Rambus Inc., No. 2009-1263, 2009 WL 2356599 (Fed. Cir. July 2, 2009).

[21] Chien, supra note 16, at 321 (“According to a common progression, patents acquired defensively to protect product revenues are turned into assets to generate patent revenues.”).

[22] Company Overview, Tessera, (last visited Jan. 16, 2013).

[23] Taras M. Czebiniak, When Congress Gives Two Hats, Which Do You Wear? Choosing Between Domestic Industry Protection and IP Enforcement in § 337 Investigations, 26 Berkeley Tech. L. J. 93, 114 (2011) (“Cisco, Google, and Verizon wrote that because § 337 ‘is a trade statute focused on protecting domestic productive industries, not mere legal rights,’ litigation fees should not count at all towards that requirement.  A submission by other technology companies argued that the Commission should adopt a standard which requires investments probative of exploitation.  Arguing for the other side, Tessera focused on the IP rights enforcement mandate set by Congress, stating that Congress had tasked the ITC with ‘protecting the intellectual property rights of American innovators.’  Each side thus invoked one of the ITC’s mandates: the technology companies argued that the agency should stick to its trade roots, while Tessera pushed the Commission to be an IP enforcement forum.”).

[24] Jose M. Recio, A Change in Establishing the Domestic Industry Requirement at the International Trade Commission, 39 AIPLA Q. J. 131, 134 (2011) (“Unlike federal courts, which must adhere to eBay and apply a more stringent test for granting injunctive relief, the ITC can apply its own injunctive relief standard.  Therefore, NPEs wishing to seek an injunction, a formidable remedy in litigation, will likely consider the ITC an indispensable component of patent litigation.  This is because the ITC forum avoids the more stringent injunctive relief test applied in federal district courts.”).

[25] Mike Masnick, The Infamous Niro JPEG Patent Smacked Down Again, TechDirt (June 30, 2009),

[26] Id.

[27] Jennifer Kahaulelio Gregory, The Troll Next Door, 6 J. Marshall Rev. Intell. Prop. L. 292, 294 (2007) (“Even if the Patent Troll’s targets decide to put time and money into litigating the claim, the troll has usually acquired the patent for a nominal fee and has far less at stake than its opponent in a typical suit.  If the court finds no infringement or even invalidates the patent, the Patent Troll may nonetheless retain licensing fees previously collected from others for the patent.”).

[28] Id. at 298 (“Ware patented his identification card system invention in 1987, but failed to generate any revenue from it until Acacia Research Corporation called him in 2004 and offered to help.  Acacia contacted Ware when they noticed that a portion of his patent covered the use of a unique number to identify each credit card transaction.  Acacia successfully collected millions of dollars in licensing fees from about thirty companies for Ware.  Ware claims that without Acacia’s help, he never would have been able to afford to enforce his patent against the alleged infringers.”).

[29] Ho-Sung Chung, The Supreme Court Unjustly Declares Open Season on Patent Dealers, U. Ill. J.L. Tech. & Pol’y 227, 230 (2009).

[30] Id. (citing Craig Tyler, Patent Pirates Search for Texas Treasure, Texas Lawyer (Sept. 20, 2004), (“[A] defendant may consider it a win to settle a suit early by paying between $200,000 to $300,000 for a guaranteed result — a license to the patentee in order to continue business as usual — rather than spend 10 times that much in legal fees with no certainty of winning and real exposure to being hit with a huge monetary judgment.”)).

[31] Id.

[32] Id.

[33] Based on the author’s research.  See supra Table 1 for a full list of publicly traded NPEs as well as their classifications.

[34] See Shanahan, supra note 2, at 19 (“These four include Affinity Technology Group ( Inc.) who went bankrupt in 2008; Intertrust Technologies Corp, delisted in 2003 was acquired by a private joint venture of Philips, Sony and Stephens Inc. in early 2003; LecTec Corp was acquired by AxoGen in 2011, a company that does produce and sell products; and Mosaid Technologies Inc. was delisted from the Toronto Stock Exchange in 2011 for poor performance.”).

[35] Id. While four of the twenty-one PMEs have been delisted, many of the remaining seventeen have lost substantial value since IPO and have struggled to post profits for investors.

[36] John Vincent, Asure Software: Transforming a Class Patent Troll, Seeking Alpha (Nov. 15, 2007),

[37] The research conducted on publicly listed patent monetization companies is an extension of the research methodology first employed by James Bessen, Jennifer Ford, and Michael Meurer.  See Bessen, Ford, & Meurer, 34 The Private and Social Costs of Patent Trolls, Regulation, Winter 2011-2012, available at

[38] Id.

[39] Id.

[40] Robin Feldman & Tim Ewing, The Giants Among Us, Stan. Tech. L. Rev. 1, 81-82 (2012).

[41] John Amster and Geoff Barker teamed up with Eran Zur, a who spent the previous decade at Lemelson Medical, Education and Research Foundation (the current manifestation of Jerome Lemelson’s NPE that today practices a hybrid acquisition/development model).  See Matt Asay, Net Patent Aggregator RPX may have a Oedipal Complex, cnet News (Nov. 24, 2008),

[42] Leadership, Intellectual Ventures, (last visited Dec. 17, 2013.)

[43] Speakers, IPBCChina, (last visited Jan. 24, 2013).

[44] IV has raised approximately $5 billion in funds and has a portfolio of 40,000 patent assets.  See Jim Kerstetter & Josh Lowensohn, Inside Intellectual Ventures, The Most Hated Company in Tech, cnet News (Aug. 21, 2012),

[45] Id. These early investors include Microsoft, Intel, Sony, Nokia, Apple, Google, and eBay.

[46] Id.

[47] Amy Miller, Former Cisco IP Vice President Mallun Yen Moves to RPX Corp., The Recorder (Nov. 17, 2010),

[48] Growing Portfolio, RPX Corporation, (last visited Jan. 24, 2013).

[49] Kerstetter & Lowensohn, supra note 44.

[50] RPX Corporation made this change prior to filing for their IPO.  They are currently listed as a financial services company on their website and related business listings.  See RPX Corporation,, (last visited Dec. 16, 2013).

[51] Kerstetter & Lowensohn, supra note 44.

[52] Feldman & Ewing, supra note 40.