The top patent court in the United States has approved a fine of $1.4 million in legal fees against the Acacia Research Corporation. The court referred to the corporation as the largest publicly traded “non-practicing entity”. Acacia will have to pay the fine as a result of making frivolous lawsuits.
United States District Judge Gregory Sleet made the ruling of fining Acacia one year ago. The case was one of the first to be decided based on the new Octane Fitness case law. The new case law makes it easier for defendants to have their legal fees covered in frivolous patent lawsuits.
Last week Judge Sleet’s decision was upheld by the United States Court of Appeals. No further comment was made on the matter.
The lawsuit initiated in 2010 when a subsidiary of Acacia, Summit Data Systems LLC, asserted that NetApp was in infringement of a pair of its patents. However, it turned out that Acacia had already sold these patents. Acacia eventually tried to drop the case, but NetApp pursued legal fees for its trouble.
Judge Sleet reviewed the case and ruled that Acacia and Summit Data Systems had completely wasted the time of everyone involved. He went above and beyond in penalizing Acacia, as he forced the company to pay for everything from legal fees to other costs such as expert fees.
Sleet wrote, “Summit pursued an action against NetApp without any basis for infringement, delayed disclosing the existence of the Licensing Agreement for 18 months, extracted settlements from co-defendants worth a fraction of what it would actually cost them to defend the lawsuit, and then voluntarily dismissed its claims with prejudice prior to the court issuing a ruling on the merits.”
Acacia tried to appeal the ruling by saying that it was being unfairly fined, but the company was not successful in its appeal. NetApp responded by saying that Acacia was well-known for its widespread patent-licensing. Acacia has earned millions of dollars selling patents in the past.
The recent ruling is making non-practicing entities like Acacia more hesitant to bring similar cases to court, as they fear that their cases will not only be dismissed, but they may also be responsible for legal fees and other court costs.
The appeal counsel for NetApp Ed Reines said, “Acacia’s assertion of frivolous claims was only thwarted by NetApp’s courage in taking the risk its fees would not be reimbursed. Judge Sleet intended this sanction to deter 'wasteful and reckless' patent litigation, and hopefully it does."