Last week I wrote about Blackbird Technologies, a relatively new patent An entity in the business of being infringed — by analogy to the mythological troll that exacted payments from the unwary. Cf. NPE, PAE, PME. See Reitzig and Henkel, Patent Trolls, the Sustainability of ‘Locking-in-to-Extort’ Strategies, and Implications for Innovating Firms. with some ethical and practical issues. As I found out via Patently-O, it turns out that I’m not the only one who was wondering how they were going to keep confidential information away from their lawyers. In Blackbird Tech. v. Service Lighting et al., this exact issue came up.
Blackbird wanted its lawyers to gain access to the defendants’ confidential information. The defendants objected, based on Blackbird’s model of acquiring patents specifically for assertion, and the risk Blackbird might use the info to target acquisitions. Blackbird openly admitted to the court that this was their model:
“Blackbird generally acquires patents from the previous patent owners in exchange for a contractual promise to perform a thorough pre-suit investigation into potential infringement, and if litigation is initiated, to share a percentage of any eventual revenue received from litigating the patent with the previous patent owner.”
Because of the way Blackbird is structured and operated, the judge determined that Blackbird’s lawyers were sufficiently involved in Blackbird’s business to be considered competitive decisionmakers:
First, I do think that Ms. Verlander and Mr. Freeman are competitive decisionmakers. Ms. Verlander and Mr. Freeman are essentially the officers and principals of Blackbird, a business whose main practice is acquiring patents and asserting them in litigation. They oversee and manage all aspects of Blackbird’s litigation strategy, take active roles in litigating specific cases, and appear to have the final say in both company management and case resolution. Most importantly, although they do not handle the early stages of due diligence involved in Blackbird’s patent acquisition process, Ms. Verlander and Mr. Freeman essentially have the final say on what patents Blackbird will acquire and assert in subsequent litigations.
Based on this, the court concluded that there would be prejudice to the defendants should Blackbird’s lawyers see their confidential information. However, the judge did recognize Blackbird might have an interest in using their counsel of choice. So he crafted an order that respected both concerns.
First, if Blackbird’s lawyers want access to confidential information, they will be prohibited from prosecuting new patents related to lighting technology until at least one year after the litigation ends.
But more importantly, the judge recognized that (given Blackbird’s business model) the bigger risk was in Blackbird’s lawyers deciding what patents to acquire based on confidential information from the defendants. Accordingly, if Blackbird’s lawyers want to be allowed to see that information, they have to promise not to sue the defendants on any lighting technology patents acquired between now and the date one year after the litigation concludes.
Second, the Court will require that Blackbird agree to a covenant not to sue any of these Defendants for infringement of patents involving lighting technology that are acquired during the time between the entry of the protective order and one year after the conclusion of the litigation.
The judge made clear that that doesn’t mean Blackbird can just wait until after the year is up and bring a new suit—it’s permanent.
To be clear, if Blackbird acquires a patent on any lighting technology during the restricted time period, it may never assert that specific patent against these Defendants.
So at least in the District of Delaware, Blackbird’s business model is already causing them a little bit of heartache.