Our Litigator of the Week is Yar Chaikovsky, the global co-chair of Paul Hastings' IP practice. For eight years, he fought on behalf of internet security company Trend Micro against Intellectual Ventures—a non-practicing entity that's been called “the most hated company in tech” for its aggressive patent litigation strategy.

Represented by Susman Godfrey, Intellectual Ventures wanted $150 million in damages. And they had some early success, winning a $17 million verdict for patent infringement from Trend competitor Symantec. But up against Chaikovsky, IV walked away not just empty-handed, but also on the hook for a chunk of Trend's legal fees.

It's a win that sends a cautionary message to other litigation-happy non-practicing entities: If you lose, it could cost you big-time.

He spoke with Litigation Daily about the case.

Litigation Daily: This was a long fight. Who is your client and how did it all begin?

Yar Chaikovsky: We represent Trend Micro, a global leader in cybersecurity solutions. On December 8, 2010, Intellectual Ventures started its litigation campaign after being in existence for almost a decade.

They sued multiple companies in different technological fields: security software, DRAM and flash memory, and FPGA industries. In the security software space, Intellectual Ventures sued four companies: Trend Micro; McAfee (Intel); Symantec; and Check Point. In the DRAM and flash memory space, IV sued Elpida and Hynix. In the FPGA industry, IV sued Altera, Lattice Semiconductor and Mircosemi. Our client Trend Micro has had one of the longest roads.

CNET in 2012 called Intellectual Ventures “The most hated company in tech.” From your perspective, why did they have that reputation and was it deserved?

Intellectual Ventures gained that reputation when they changed their business model from being a company that generated inventions, funded inventions and licensing patents to becoming a patent monetization firm—a non-practicing entity—that sues people.

That started on that day in December 2010 when they decided to sue all those companies, including my client Trend Micro. Instead of doing what they originally set out to do and be an invention factory, IV sued all these companies, including companies that were in the same space as their investors at the end of 2010 and continued to do so going forward. IV turned its business model into a gigantic patent troll. No one likes patent trolls. Most of its investors didn't like it.

Upfront, did Trend Micro consider just settling and moving on? Why did they decide to fight?

No, when someone is seeking hundreds of millions of dollars from you for worthless intellectual property—you do not settle. Given IV's financial demands, Trend had no option but to litigate.

Do you feel like there were some larger principles at stake in this case?

Yes. You don't want other non-practicing entities coming after you if you quickly settle. If you fight the big ones (such as IV) and you win, it sends a message to NPEs that Trend will litigate to victory.

Moreover, if you sue us and we win, we will be seeking fees if the case supports it—if it stands out from others. Moreover, we were at the forefront in applying the Alice abstract idea test in district court, especially in a procedural posture where the patents had been litigated (and some found to be infringed) before a jury in the Symantec case prior to our hearing.

Symantec faced similar claims but with a much different outcome – what happened?

Trend filed its patent-ineligibility motion in November 2014, seeking a judgment of invalidity. This put the court on notice that it would have to consider the patent ineligibility issue.

After IV won a $17 million dollar verdict against Symantec in February, [U.S. District Judge Leonard Stark in Delaware] decided that he would hear Trend Micro's motion. The breadth of IV's infringement claims in the Symantec trial in all likelihood made the court more interested in Trend's patent ineligibility motion.

After a hearing, Chief Judge Stark granted summary judgment in Trend Micro's favor on both patents.

In addition to the Symantec trial loss, others had settled with IV, but we pursued the patent ineligibility issue soon after the Supreme Court's Alice decision, leading to a complete victory and avoiding trial altogether.

IV proceeded to appeal Chief Judge Stark's ruling. In April 2016, we handled the oral argument at the U.S. Court of Appeals for the Federal Circuit. In September 2016, the Federal Circuit issued its decision finding that both patents asserted against Trend Micro were patent ineligible.

Thereafter, Fortune stated, “The end may be in sight for software patents—which have long been highly controversial in the tech industry—in the wake of a remarkable appeals court ruling.”

What stands out to you in the Federal Circuit opinion affirming Judge Stark's summary judgment decision?

The concurrence from Judge Mayer. He would hold all software patents ineligible under the First Amendment.

On Sept. 24, the court awarded $444,051 in legal fees. What grounds did you cite in arguing for the award?

As soon as our win was affirmed by the Federal Circuit, we moved for an exceptional case finding based on the changed opinion revealed by IV's technical expert during the earlier trial against Symantec and IV and its counsel's subsequent attempt to convince the district court otherwise.

Trend pursued this issue from the moment the expert changed his opinion.

IV subsequently attempted to cover-up the changed opinion in briefing and argument to the court. At a later hearing, the court found IV's overall conduct related to the changed opinion exceptional and awarded attorneys' fees from the bench.

We had the benefit that we argued about this change, its impact on Trend, and the 101 motion on the same day. Given the justifications for the change from counsel for IV, this strategy was all to the benefit of our client.

What message does the award of legal fees send to other NPEs?

Don't sue Trend Micro. Don't take positions in cases that stand out from others. If you provide our clients with an opportunity to pursue fees, we will pursue and obtain fees on behalf of our clients

Does your strategy differ when litigating against an NPE versus a company that actually uses the technology at issue?

Yes and no. When a plaintiff is a NPE, you focus on their lack of manufacture of products, lack of engineers, and other factors unique to a NPE.

As the defendant in a NPE case, you focus on your client being an innovator, employer of many, developer of intellectual property, and producer of products (among other things). Your client is good corporate citizen—a good person.

If the evidence supports it as it often does, the NPE is portrayed as someone the fact finder should not want to side with. A bad person.

Were there other themes you stressed?

Yes. We focused the court in both the Symantec case and our case on the abstract nature of the asserted patents, especially after the Supreme Court Alice decision. By drawing this to the court's attention prior to the Symantec trial, we were able to have the court focus on the breadth of IV's infringement contentions, which further established how abstract these ideas were.

Who else was on your team and how did you all work together?

The case started when the team worked McDermott and then moved with the team and me to Paul Hastings. Over the years, the team has included David Beckwith, Stuart Bartow, Allan Soobert and Phil Ou.

At different stages of the case, there were different teams and different team members. In discovery, I worked a great deal with David Beckwith, who has now joined us at Paul Hastings. Then I began working with Stuart Bartow and eventually Allan Soobert. After the successful affirmance of the 101 ruling by the Federal Circuit, I worked with Phil Ou to find the case exceptional and obtain attorney fees from IV.

What do you hope is the legacy of this case?

With the finding of an exceptional case and now award of fees, I hope that is case is recalled as one of the final nails in the coffin in IV bringing suits and continuing to expand its business model.

Yes, IV has some remnant cases against companies it has sued in the past (and continues to sue). But the hope is this cases stops further new suits against new defendants. This appears to be supported by IV selling its patents recently instead of suing companies. They are divesting themselves of the patents.

So at least in some small part, the hope is this case helped change IV's business model, its pursuit of tech companies, and also a change in other NPE's behavior in how they bring suit and pursue their cases.

Moreover, this case should be recalled for the fact that you can win on patent eligibility even after others lost at trial.