April 22, 2011 8:00 AM, EDT

Opinion: Passing Through the Patent ‘Troll’ Booth

By Kevin Bell and Richard Oparil

Patent Litigation Partners

Patton Boggs LLP

This Opinion piece appears in the April 18 print edition of Transport Topics. Click here to subscribe today.

PJC Logistics LLC, a company based in Hewitt, Texas, recently launched an attack on the trucking industry by filing nine lawsuits for patent infringement in federal courts around the country, naming 237 transportation companies as defendants and alleging infringement of U.S. Patent 5,223,844 — also known as the “844 Patent” — which is titled “Vehicle Tracking and Security System.” The allegation of infringement against each defendant was based on its use of “electronic position-based fleet management and tracking systems in its fleet of trucks, vans or other vehicles.”

To members of an industry not accustomed to being accused of infringing a patent they didn’t know existed, PJC Logistics’ allegations seemed frivolous and incomprehensible. As one company executive asked during a recent series of presentations conducted by members of our firm, “You’re telling me that I can be sued for patent infringement for something I bought and paid for?”

The answer is yes, if the person you bought it from did not have a license to the patent being asserted against you.

The question asked more frequently by all the defendants is, “Who does something like this?” The answer is: a “patent troll” — a company that invents nothing itself, instead buying patents from others for the sole purpose of suing businesses to obtain money. And the warning is: Get used to it.

As technologies are implemented and improved in various industries, companies are at an increased risk of being sued for patent infringement. This is particularly true as federal or state regulators move to require companies to use electronic tracking or other technology.

Patent trolls prefer quick money settlements and are almost always represented by attorneys working on a contingent fee basis. Defendants who settle early once run the risk of becoming an easy mark for the next troll. In fact, some defendants already have faced patent litigation filed by ArrivalStar SA — a company with a similar business model to PJC Logistics that our firm is litigating against actively.

PJC Logistics was incorporated in February 2011 and lists the same address as PJC Properties LLC. Patrick Curry is the president of PJC Properties and has a history of working in the transportation industry. It appears that PJC Logistics is being used as a holding company solely to bring patent-infringement lawsuits.

The 844 Patent was issued from the U.S. Patent and Trademark Office on June 29, 1993. The original patent claims were subsequently altered by a PTO process called “re-examination.” In a re-examination proceeding, the claims are examined a second time by the PTO in light of new patents or printed publications. In the end, several original claims of the 844 Patent were canceled or amended and new claims were added. The re-examination claims being asserted by PJC Logistics generally cover mobile units used in vehicle monitoring or tracking systems.

Defendants who are served with the complaint will need to retain patent counsel. Fortunately for many of the defendants here, some vendors have indicated they will indemnify their customers for the pending litigations. The vendors will not “replace” the indemnified trucking company defendants as parties in the case. The individual companies remain defendants, subject to the litigation process and procedures, including discovery, once it begins.

If these cases go all the way to trial, defendants can expect to spend at least the next two years in litigation. For many defendants, this becomes a part-time job that will compete with their daily responsibilities.

If indemnification is available, defendants should consider having their own counsel review any engagement letters and other agreements before signing. Each defendant should understand to what it is agreeing and any rights it is being asked to waive by being jointly represented with many other defendants.

In addition, some defendants may not want to be jointly represented and would rather go a separate way on litigating individually (while still having access to shared information with the large group under an umbrella joint defense agreement).

Defendants will be required to collect documents and information and to refrain from deleting or destroying anything that could relate to the case, including e-mail and other information stored electronically.

Deposition testimony will be required as well as attendance at telephonic or in-person meetings with counsel.

In certain instances, some defendants may want to retain their own patent counsel solely to monitor and address individual concerns and needs. For example, a defendant may be sensitive to producing information to a third party such as logbooks, toll receipts and certifications by users of vendor products. Companies thus may wish to have their own counsel work with them to respond to discovery requests or defend key personnel at depositions.

The transportation industry’s uniting to defend against PJC Logistics’ claims is a positive step. In the pending litigations, the overall risk regarding infringement of the 844 Patent and monetary damages that could result will rest on the shoulders of vendors for defendants that are indemnified. However, the litigation process will still cause disruption and drain company resources.

Patents are an important component in society to encourage people to invent new things. It is equally important, however, to defend against patents when there is a good-faith belief they are not infringed or invalid.

Patton Boggs LLP is an international law firm with expertise in transportation issues and offices in Washington, D.C., and Northern Virginia.