APTWater makes water treatment systems that clean up polluted groundwater and wastewater. You’ve probably never heard of APTWater. I hadn’t, nor had a friend who lives near their headquarters and works on water issues.
Of course, that didn’t stop a patent troll from suing APTWater over their wastewater treatment technology. APTWater wasn’t the only one sued—at least two other water treatment companies were sued as well.
But instead of being forced to litigate to defend itself, or taking an unfavorable settlement offer, APTWater responded by filing a petition for inter partes review (IPR). Using IPR, APTWater succeeded in achieving a quick (and likely reasonable1) settlement from the patent troll after the PTAB determined that the patents were likely invalid.
Trolls As Shields
ThinkVillage-Kerfoot is the company that sued APTWater. ThinkVillage claims to help inventors get products on market; in practice, they seem to be a set of holding companies which don’t make anything, just sue people. (None of these companies appear to actually market a product or service.) That’s the ThinkVillage part of the name—the second part refers to the source of the patents.
In the case of APTWater case, the “Kerfoot” part of the name refers to Kerfoot Technologies, an actual company. Kerfoot also makes water treatment systems and competes with APTWater. If Kerfoot had sued APTWater directly, then APTWater might have filed counter-claims. By spinning the patents out to a third entity, any lawsuit by APTWater would have to be a separate lawsuit, heard in a separate case by separate jurors. Jurors in the suit brought by ThinkVillage-Kerfoot wouldn’t be aware of the counter-claims and wouldn’t hear the full dispute.
This type of arrangement, often referred to as “privateering,” is intended to protect the original patent owner from any backlash from patent assertion while still allowing the patent owner to benefit. Typically, the original patent owner receives a portion of any licensing and litigation revenues generated by the privateer, giving the original owner an ongoing financial interest in the privateer’s success, while the formal separation of the privateer as a company allows the original patents to maintain deniability.
But even if the original patent owner can’t be directly targeted, there’s one thing that the privateer holds that’s valuable to the original owner—the patent itself.
IPR Gets Around The Privateering Shield
By allowing APTWater to challenge the patent directly, with a quicker resolution, IPR allowed APTWater to cut through the advantages of the privateering structure. Instead of several years of litigation, APTWater had an indication of likely invalidity within 6 months of filing their petition and a settlement within 7 months. This cut the legs out from under ThinkVillage-Kerfoot’s litigation campaign. While the patents still technically exist, if Kerfoot ever asserted them, the new defendant could simply file the same IPR that APTWater filed.
With their patents effectively unusable, ThinkVillage-Kerfoot hung up their privateer’s cutlass. The other cases were also settled. ThinkVillage-Kerfoot was dissolved and the patents were given back to Kerfoot Technologies, the original patent owner.
By filing a petition for inter partes review, APTWater saved money not only for themselves, but for other water treatment companies targeted by ThinkVillage-Kerfoot. That money is money APTWater can spend developing new technologies for water treatment.
- While the settlement terms are confidential, when a patent owner settles shortly after an institution decision finds their patent to be reasonably likely to be invalid the settlement is typically reasonable for the petitioner. ↵