As many gaming companies know, patent litigation tends to be more expensive than other forms of litigation due to the high stakes and sensitivity of the confidential information involved. Indeed, although most cases do not make it through to trial, litigating a patent matter tends to cost substantially more than general business litigation. Moreover, because patent cases involving the gaming industry often address essential technologies, the repercussions of a loss can substantially impact the gaming company’s ability to continue business. As a result, these companies are placed in a no-win situation. They are forced to spend millions of dollars or risk the loss of their businesses. To add to the complexity of patent matters, these cases were often handled just like any other matter in federal district courts and rotated among judges, some of them lacking experience with patents and technology.
With this backdrop, companies emerged that acquired patents solely for the purpose of targeting well-established businesses with specious claims that some element of something for which they held a patent had been infringed. These entities, colloquially referred to as “patent trolls,” pursued cases of dubious merit simply because they could extract large settlements as the cost of a significant settlement was only a fraction of actual litigation costs.
In response to this problem, Congress adopted the Patent Pilot Program in 2011 to establish a program in certain federal district courts to encourage enhancement of expertise in patent cases among district judges.1 The pilot program was intended to evaluate whether focused patent experience among particular judges would decrease appellate reversal rates, result in the timely disposition of patent matters and help address the expense and uncertainty of patent litigation. The United States District for the District of Nevada was one of 14 jurisdictions selected for the program.
Consistent with that selection, the United States District Court for the District of Nevada adopted Local Rules 16.1-1 through 16.1-21 (the “Patent Practice Rules”) to specifically address patent cases with the goal of making patent matters more efficient and reliable.
The Purpose and Methods of the Patent Practice Rules
The purpose of the Patent Practice Rules is to force the parties, at the very early stages of litigation, to determine and disclose, in detail, both their legal theories and the evidence supporting those theories. In connection with that purpose, the parties are also required to participate in (1) three settlement conferences scheduled at strategic intervals; (2) expedited discovery; and (3) immediate claim construction. The rules and process are not intended to benefit plaintiffs or defendants, per se, but rather whichever party has stronger claims. In theory, this results in a quick and accurate resolution of the case. For gaming companies, which traditionally do not bring trolling lawsuits, this provides a distinct advantage at resolving patent enforcement and defense matters.
Initial Disclosure of Infringement and Non-Infringement Contentions and Documents
Within two weeks of the initial scheduling conference, a party claiming infringement is required to serve on all parties a document titled “Disclosure of Asserted Claims and Infringement Contentions,” which must include: (1) each claim of each patent that is allegedly infringed; (2) a specific identification of each accused instrumentality; (3) a chart specifically identifying where each limitation of each asserted claim is founded within each accused instrumentality; (4) a factual description of any indirect infringement relating to direct infringement; and (5) a factual description of any direct infringement. The party claiming infringement must also produce patent file history, documents regarding prior use, documents regarding the conception and design and documents evidencing ownership.
Within two weeks of receiving the Disclosure of Asserted Claims and Infringement Contentions, a party claiming non-infringement is required to serve on all parties a document titled “Non-Infringement, Invalidity and Unenforceability Contentions,” which must include: (1) detailed descriptions of the grounds for contentions of non-infringement, invalidity, unenforceability; (2) an explanation regarding whether each item of prior art anticipates each asserted claim or renders it obvious; and (3) a chart specifically identifying where in each item of prior art each limitation of each asserted claim is found. The party claiming non-infringement must also produce (1) documentation sufficient to show the operations of any aspects or elements of an Accused Instrumentality; and (2) a copy or sample of identified prior art that does not appear in the patent file history.
In cases seeking a declaratory judgment that a patent is not infringed, is invalid or is unenforceable, the Non-Infringement, Invalidity and Unenforceability Contentions must be served within two weeks of the Initial Scheduling Conference with the Disclosure of Asserted Claims and Infringement Contentions due just 45 days thereafter.
These disclosures may be amended for good cause without leave of the court at any time before the discovery cutoff. After the discovery cutoff, the disclosures become “final” and may only be amended by order of the court upon a timely showing of good cause. That being said, the parties have a continual obligation to supplement incomplete or inadequate disclosures.
This process greatly speeds up the process by providing a scope of general issues for the patent litigation matter at hand.
Within 90 days of the Initial Scheduling Conference, the parties are required to serve on each other a list of patent claim terms they believe the court should construe. The parties are further required to meet and confer to narrow the list of terms. Within one month of exchanging terms, the parties are required to simultaneously exchange proposed constructions of each term and continue meeting and conferring. No later than 45 days after exchange of the lists, the parties are required to submit a Joint Claim Construction and Prehearing Statement, which includes (1) the construction of those terms on which parties agree; (2) detailed proposals regarding the construction of each disputed term; and (3) an identification of the most significant terms for resolution of the case, including any dispositive terms. The parties are then required to submit their briefs for the claim constructing hearing pursuant to a briefing schedule. The court may, but is not required to, conduct a Claim Construction Hearing.
This process also speeds up the patent litigation matter by further defining and narrowing the subject matter of the dispute.
Mandatory Settlement Conferences
The parties are required to participate in three strategically scheduled settlement conferences during this process: (1) a Pre-Claim Construction Settlement Conference within 30 days after submitting all initial disclosures and responses; (2) a Post-Claim Construction Order Settlement conference within 30 days after entry of the claim construction order; and (3) a Pretrial Settlement Conference within 30 days after filing the Pretrial Order or further order of the court. The goal of these conferences is to try to bring the parties towards resolution each time the matter is in a different stage of litigation as the parties narrow the claims, defenses and disputes.
As Nevada has many international gaming operators, gaming manufacturers, service providers and suppliers, it is a natural jurisdiction of choice for patent litigation for gaming-related patents. Additionally, the Nevada judiciary is comprised of judges who are familiar with the gaming industry and have presided over intellectual property matters involving gaming applications for many years. As a result, Nevada can be an advantageous forum for resolving gaming-related patent disputes. For gaming companies, the rules allow for a rapid assessment of the matter, construction of claims and an opportunity to resolve the matter. This reduces costs for both patent owners and those accused of patent infringement. It not only promotes settlement in matters with legitimate claims, but also allows a judge to more quickly dispose of frivolous and specious claims. Through the implementation of these special rules, the District of Nevada has provided gaming companies with a path toward mitigating the cost of patent actions.
1 Pub L. No. 111-349, 124 Stat. 3674 (available at http://www.gpo.gov/fdsys/pkg/PLAW-111publ349/html/PLAW-111publ349.htm).