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Why it may pay for supplement firms not to settle with patent trolls
Dietary supplement companies are no stranger to patent-infringement lawsuits-particularly when it comes to patent trolls. Patent trolls, also known as non-practicing entities (NPEs), are companies that do not make supplement products themselves but rather profit by acquiring rights to a patent and then suing companies by claiming patent infringement. By asserting one patent, a single patent troll may sue a large number of companies.
In the United States, patent troll cases have become a growing problem, across all types of industries, namely because, other than risking the cost of going to court and losing, patent trolls have little to lose. Patent trolls bank on the chance that the defendants (the companies being sued) will settle-which is often a likely occurrence. Because plaintiffs and defendants must pay their own legal costs in patent troll cases, companies will often choose to settle these cases and pay the plaintiff licensing fees instead of incurring the cost to go to court, which can total upwards of $1 million. Also, in patent troll cases, the winner is generally not awarded a monetary prize.
One NPE in particular, Tawnsaura Group, has become well known in California, having filed suit against nearly a hundred dietary supplement firms in recent years. In 2012, Tawnsaura began suing essentially a who’s who of the supplement industry-everyone from NBTY and Guthy-Renker to Puritan’s Pride, Bodybuilding.com, Gaspari Nutrition, Herbalife, and Ultimate Nutrition-in total, approximately 87 companies. The lawsuit centered on patents Tawnsaura Group owned for the amino acid L-citrulline.
L-citrulline converts to L-arginine in the body. L-arginine spurs nitric oxide production, which helps maintain healthy blood circulation and prevents muscle fatigue; thus, in supplements, L-citrulline is promoted for heart health and sports nutrition benefits. Tawnsaura acquired its L-citrulline patent from an individual inventor, Dr. William Waugh, who passed away before his patents were then sold to Tawnsaura, which shortly thereafter began suing supplement firms. In general, Waugh’s patent covers oral administration of L-citrulline to increase the plasma concentration of L-citrulline in human subjects. Part of the patent reads:
This invention is a novel method in orthomolecular health to sustain favorable amounts of L-arginine efficiently within the human body for preservation of good health and amelioration of various disease states. The method provides administration of sizable amounts of L-citrulline as a precursor substance for bioconversion to L-arginine in order to maintain greater blood plasma concentrations of L-arginine as potential substrate for various metabolic functions…
But there’s a problem with certain claims in Waugh’s patent-and this problem led the judge in the case to ultimately award summary judgment to the supplement companies.
During the trial, it was revealed that, prior to when Waugh filed the patents, L-citrulline had already been sold on the market for the benefits Waugh mentioned, in the form of an L-citrulline product (Stimol) from a French company. This meant that Waugh’s patent claims weren’t novel to begin with. Moreover, during the trial it was revealed that Waugh had tried to publish an article about his “discoveries,” but the journal rejected the article, stating that the information in Waugh’s article was already known.
In short, the court ruled that Waugh’s patent was invalid in the first place-essentially, the U.S. patent office should never have granted those patents-and awarded summary judgment to the defendants. The remaining supplement firms won the case-a victory on the side of the supplements industry.
Settling Not Always the Best Option
But not all firms can celebrate in that victory. Throughout the Tawnsaura L-citrulline case, many companies in fact did end up settling with the patent troll.
William R. Trueba, Jr., an intellectual property attorney and founding member of Florida-based law firm Espinosa Trueba PL, who represented one of the supplement companies in this case, Vitacost.com, says this case can serve as a lesson on why it may not always be in companies’ best interest to settle in patent troll cases. In fact, he says, in cases where a patent troll is suing a large number of companies within the same industry, it may behoove those companies to work together in their defense. In the Tawnsaura L-citrulline case, during pretrial the court consolidated individual company cases; as a result, the companies were able to file a joint motion for summary judgment to seek to invalidate Tawnsaura’s patent claims-in effect, forming a joint defense group.
“I think one takeaway is that if you find yourself in a suit with a bunch of your competitors, sometimes you have to put the pride aside and work together. If you do so, you may be able to either lower the settlement value by showing a collective show of force, or even potentially invalidate the patent,” Trueba, Jr., tells Nutritional Outlook. As mentioned, going these patent troll cases alone can be very costly to a supplements firm. By working together, companies can share in the defense costs of hiring experts, etc.
The U.S. government has made attempts to reform legislation to help stem some of these pervasive patent troll cases. But, so far, the fight is far from over. Among the numerous bills proposed and failed, attempted reforms aim to make it more difficult for patent trolls to file cases, in part by requiring patent trolls to be more transparent (often times these are shell companies that can simply fold and pop up again under a different name) or-as is the case elsewhere, such as Europe-to require patent trolls to pay defendants’ legal fees should the patent troll lose.
In the meantime, supplement companies are still very much vulnerable to patent troll cases. In fact, the legal team representing Tawnsaura in this case has also sued supplement manufacturers in cases involving other nutritional ingredients, including D-aspartic acid. In fact, Tawnsaura, its related companies, and their lawyers are responsible for the majority of the current patent troll cases against supplement firms.
Trueba, Jr., says that supplement companies involved in e-commerce are even more vulnerable to patent troll cases, because many patent troll cases involve Internet marketing. For now, the majority of companies will continue to settle in these patent troll cases.
But even if legislation reforms attempt to make it more risky for patent trolls, that may not stem the tide, Trueba, Jr., says. “I think it’s still not going to do enough because if you [a supplement company] have to take a case all the way to the end in order to shift the burden of attorneys fees onto a plaintiff, who’s going to take that risk? You have to know you have a really good case before you do that and then spend half a million dollars or more to get to the end.”
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