In response to yet another attempted shakedown by a patent troll, the courts,  in response to recent Supreme Court rulings, have started to issue significant sanctions:

This summer, the Supreme Court made it easier for defendants to collect fees when they win patent cases. The decision is starting to have an effect—the nation’s largest patent troll just got slapped with an order to pay $1.4 million in attorneys’ fees to NetApp, which it sued in 2010.

The case brought by Summit Data Systems, a branch of Acacia Research Corp., hinged on an accusation that NetApp infringed when its server-based software interacted with an end user on a Microsoft operating system. The two patents-in-suit, 7,392,291 and 7,428,581, relate to “block-level storage access over a computer network.”

But just two months before Summit filed its lawsuit, it sold licenses for those patents to 43 companies that were member companies of defensive patent aggregator RPX—including Microsoft.

“Nonetheless, Summit brought suit against NetApp barely two months after executing the Licensing Agreement,” wrote US District Judge Gregory Sleet in his order (PDF), which was unsealed on Tuesday. “It then took Summit 18 months to disclose the existence of the Licensing Agreement to NetApp.”

Summit’s expert said that Microsoft users infringe the patents, but he couldn’t determine whether Linux or UNIX systems infringed because he “didn’t have time.”

Sleet continued:

The facts of this case demonstrate that Summit pursued an action against NetApp without any basis for infringement, delayed disclosing the existence of the Licensing Agreement for eighteen 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… The claims were frivolous—Microsoft’s initiator software [was] licensed, so no system employing it could infringe the asserted patents. Summit’s motivation was to extract quick settlements that were dwarfed by the costs to litigate. Summit was objectively unreasonable in bringing a lawsuit against NetApp mere months after executing the Licensing Agreement that effectively eliminated its theory of infringement. Finally, the court is convinced that an award of attorneys’ fees in this case is necessary to deter this sort of reckless and wasteful litigation in the future.

………

Acacia is a patent-holding company that’s publicly traded on NASDAQ, and it’s sometimes considered the largest “patent troll,” since its various subsidiaries have filed more patent lawsuits than any other single company. The NetApp fee order is Acacia’s second major setback in recent months. In July, an Acacia unit holding an old Polaroid digital imaging patent lost a big case in which it was seeking royalty payments from 31 companies.

Here is the pertinent bit about the recent Supreme Court decision:

The Supreme Court overruled the lower courts. In their unanimous opinion for Octane Fitness v. Icon Health & Fitness, the justices found the Federal Circuit had taken a wrong turn in 2005 when it rejected the “holistic, equitable” approach toward attorneys’ fees and took up a “more rigid and mechanical formulation.” In order to get fees in a case, a party had to show that a litigation is both “objectively baseless” and “brought in subjective bad faith.”

That’s almost an impossible standard to meet, Octane’s lawyer Rudy Telscher told Ars in an interview before the February oral arguments. “You’ve got to show that the plaintiff brought a ‘zero merit’ case, and they knew that’s what they were doing.”

Instead, the Supremes said today that fees should be awarded in an “exceptional” case. That’s what the statute calls for, and the word “exceptional” should be given its ordinary meaning. “An ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position… or the unreasonable manner in which the case was litigated,” wrote Sotomayor.

The “Federal Circuit Court” above is formally known as the United States Court of Appeals for the Federal Circuit, but is probably better known as the “Patent Court,” which has had a ridiculously broad view of IP rights, they have literally allowed the patenting of a rainy day.

Thankfully, SCOTUS has begun routinely overturning the more extreme rulings of the patent court.