As Troll Debate Rages, Firms Pressed to Pick Sides
SAN FRANCISCO — As the rhetoric over patent trolling reaches a fevered pitch, litigation clients — on both sides — are demanding greater allegiance from their outside counsel.
At this year's American Bar Association Conference in San Francisco, for example, LinkedIn general counsel Erika Rottenberg told a roomful of people that her company asks firms about their work for non-practicing entities — and that dissembling could be a deal-breaker.
"While only a few [companies] have laid down a blanket 'no one who represents trolls will represent us' rule, I think the general sense in most Valley firms today is that as a practical matter you have to pick a side," Mark Lemley, director of the Stanford Program in Law, Science, and Technology, wrote in an e-mail.
Cooley, which like many large firms had at least dabbled in troll cases — and happens to work with LinkedIn — now says it will not represent patent assertion entities. Others, including attorneys who have never argued plaintiffs cases, bristle at the question, with one allowing that internal conversations on the matter are "awkward."
Patent assertion entities, too, want to know their lawyers have their hearts in the work.
"I think any client wants a law firm that really wants a relationship with you and your company," said Intellectual Ventures' chief litigation counsel Melissa Finocchio, a veteran of Micron, Orrick, and Cooley. Internally, her team is united and energized by the company's business model — and outside counsel should be, too, she said. Once they're pitching, she said, it's clear they want the work.
An analysis of IP litigation data compiled by Lex Machina suggests major tech firms are fading from a certain side of the docket. Intellectual Ventures, for one, has been represented by the likes of Weil, Gotshal & Manges; Irell & Manella and Quinn Emanuel Urquhart & Sullivan in the past. But this calendar year, the list of firms filing suits on its behalf is dominated by IP boutiques like Farnan, Desmarais and Tensegrity.
STICKS AND STONES
"For the native Valley firms, there is no appetite to do any work for the classic trolls," said Cooley's Michael Rhodes, former chair of the firm's litigation department, who represents Facebook, Google, LinkedIn and others in patent cases.
That bright line presents a departure from the Cooley of years past, which made exceptions on a case-by-case basis. In 2007, the firm represented an Acacia subsidiary that sued a slew of tech companies in the Eastern District of Texas. Acacia is no longer one of its clients.
Some companies will consider the entire firm "tainted" by representation of an NPE, one in-house IP counsel told The Recorder.
When IV began filing suits in December 2010, after amassing a portfolio of patents for a decade, it came hurtling out of the gates with three cases, one of which was filed by Weil's Jared Bobrow.
"They alienated a lot of potential clients by taking on that matter," the IP counsel continued.
But that was the last IV case filed by Bobrow, according to Lex Machina. Bobrow didn't respond to a question about his relationship with IV.
Ed Reines, a Weil IP litigator, said clients are able to see shades of gray. Companies and firms recognize a spectrum within the universe of non-practicing entities. Bans on representing all manner of patent monetizers, like universities, are seen as unlikely.
Rackspace GC Alan Schoenbaum is an outspoken critic of the troll problem. But he says the company doesn't have a ironclad rule against hiring law firms that represent PAEs so long as there's no conflict of interest.
"We certainly prefer law firms that don't represent PAEs but it is not a deal breaker for us at the moment," he wrote in an e-mail.
Though companies are willing to overlook certain representations, the last thing they want is to be caught unaware of a troll matter being handled by their attorneys, as Rottenberg alluded to in her talk. In-house counsel tend to know generally what firms are working on, but some acknowledged a reluctance to probe potential conflicts too aggressively.
"The question is: Do we focus enough on it, and do you jettison a firm that you have a relationship with because they work with NPEs?" said an in-house IP counsel at another Valley company.
Lawyers pointed out that conflicts are bound to arise when an entity is bringing cases that touch whole industries, highlighting the problems inherent in straddling plaintiff and defense matters. Some still do: Wilson Sonsini is counseling InterDigital, which has the second-largest patent portfolio after IV, according to PatentFreedom. Fish & Richardson also famously mixes plaintiff and defense work .
Law firms have faced criticism for working for trolls before. In 2008 the now-defunct Howrey put out marketing materials pledging not to represent trolls — and vilifying competitors that did. "Why support firms that are helping perpetuate this scourge on legitimate businesses everywhere?" one pamphlet read.
The Howrey campaign highlighted a sore subject for some lawyers — one that seems even more sensitive today.
"There is a lot of money at stake and it's a politically charged area right now," said Robin Feldman, director of the Institute for Innovation at Hastings College of the Law, who added that she did not have direct knowledge of conversations within firms. "Nobody wants to be a bad guy. As Washington begins to focus on these areas and definitions, everyone wants to be careful that they're on the right side."
And boutiques are eager to pick up the work others are deciding is too hot to handle. Farnan, a Delaware shop founded by former U.S. District Judge Joseph Farnan, has gotten a flurry of work since it began representing Intellectual Ventures. When it was founded in 2010, the firm handled just 25 patent cases total; in 2012, it had 237, according to Lex Machina.
In East Texas, the venue of choice for many NPEs, there seems to be a clearer line between firms that represent patent assertion entities and those that represent corporate defendants, one IP counsel noted.
The issue may find an analog in the sort of conflict pharma litigation lawyers contended with after passage of the Hatch-Waxman Act ushered in an era of showdowns between branded and generic pharmaceuticals. And as seeking exceptions became too tenuous a compromise, firms began choosing sides.
To be sure, tech GCs may be talking tough, but their war is also a rhetorical one — an effort to get Washington to take action.
As a practical matter, attorneys say, clients choose outside counsel based on a mix of factors, like skill set and cost. Ideological purity is just another differentiator.
"Indeed, lawyers are not the real problem," Schoenbaum said. "The law is the problem."