Audrey Spangenberg sees her story as a straightforward David versus Goliath saga: as CEO of a small, struggling software business, she resents search giant Google selling ads that are triggered by users typing her company's trademarked name, Firepond, into the Google search box.
"I was sitting around this one day, and I thought, I'm going to Google 'Firepond' and see what comes up," said Spangenberg. "I was blown away to see that one of the competitors was using my trademark as an ad word."
After consulting a team of lawyers, she filed a lawsuit against Google on Monday that she hopes will become the first class action trademark claim against the company's practice of selling ads on trademarked keywords, a practice she hopes to stop.
Spangenberg says her suit isn't about money, it's about respect for intellectual property. "I'm very troubled at Google's continued disregard for the trademarks of others," she says. "Unless we're a huge company like Google, our property isn't valuable?" That’s how Spangenberg framed the issue in an interview with IP Law & Business on Friday—and the way she framed it yesterday, when she told The New York Times that Google's policies made her "furious."
But that version misses the byzantine backstory to this suit: Spangenberg and her husband Erich already sit atop a sizable fortune, won through intellectual property litigation. Since 2004, the Spangenbergs have moved patents purchased from various sources—including Firepond—through a complex network of shell companies set up in the small town of Marshall, Texas. In the last five years, these companies have filed dozens of patent lawsuits against hundreds of companies, most of them in Marshall or neighboring towns in the Eastern District of Texas, a venue considered friendly to patent plaintiffs—the same venue for the new class-action trademark suit.
Spangenberg-controlled companies have sued Google for patent infringement three times, most recently on Tuesday, when a company called AFI Technologies, LLC, sued Google and 15 other companies for patent infringement, just one day after the FPX trademark suit was filed. The two other lawsuits, filed in 2007, are still pending.
Court records show that as of October 2007 the Spangenbergs had reaped more than $72 million by squeezing settlements from defendant companies. That figure doesn't include the $34 million they won in a 2007 trial against Hyundai Corp., but have yet to collect because the case is on appeal. (Hyundai has posted a $25 million bond.) Since then, federal court dockets indicate that dozens of additional companies have reached confidential settlements with Spangenberg lawyers, who have continued to file patent lawsuits.
In the high-tech world, entities like the Spangenberg companies that have no products or services but engage in widespread patent assertion, are colloquially called "patent trolls"; some patent lawyers prefer the less inflammatory term "non-practicing entities" to describe the vehicles used to bring such suits.
Audrey Spangenberg acknowledged during Friday’s interview that she owns the 12 U.S. patents that were purchased from Firepond in 2004. Those patents have served as the basis for a vast array of patent infringement suits. Spangenberg emphasized that her affairs are separate from her husband's, and in her role as Firepond's CEO she has nothing to do the patent lawsuits.
"We have our own businesses, and we do our own investing," she said. "I do not run the litigation of the patents."
Texas state records show that FPX was set up as a Marshall company in January at the same address that is home to many Spangenberg patent-holding companies. One month later, FPX purchased Firepond. Firepond has about 50 employees, most of whom work in the company's Mankato, Minnesota, headquarters. It is in the business of creating software that handles sales of complex products, but has struggled for years; SEC filings show the company lost $14.3 million in fiscal 2008 and $23.3 million the year before.
At the top of Erich Spangenberg’s holding-company pyramid is an entity called Plutus IP, named after the Greek god of wealth. Plutus IP is wholly owned by Acclaim Financial Group, which is controlled by Audrey Spangenberg. Last year, Plutus IP changed its name to TechDev Holdings.
Spangenberg's patent lawsuits are handled by many of the same lawyers working for Audrey Spangenberg in the trademark class action, including: Marc Fenster and Larry Russ of the Los Angeles firm Russ, August & Kabat; Andrew Spangler of Longview, Texas; and David Pridham, a former general counsel at Firepond. Another attorney on Spangenberg's trademark suit, Scott Kline, is a partner at Andrews Kurth, a large law firm. Unlike his co-counsel, Kline does not handle any patent litigation for the Spangenbergs.
Google has already fought off several trademark lawsuits with allegations similar to the FPX lawsuit, but they were not class action suits. The FPX lawsuit is a "well-structured lawsuit that squarely raises the issues," wrote Eric Goldman, a law professor at Santa Clara University who closely follows trademarked keyword litigation. The challenge for Spangenberg, says Goldman, will be whether she can form a viable class—no easy task in a trademark infringement lawsuit. Another attempt to create a trademark-related class action suit against Google, the 2007 Vulcan Golf, LLC v. Google Inc. suit, failed when the judge in the case refused to grant class certification. Still, Goldman sees the FPX class action suit as an innovative maneuver likely to spawn imitators in the plaintiffs' bar.
In April, Google suffered a setback in an important trademarked keywords lawsuit, Rescuecom v. Google, when the 2nd U.S. Circuit Court of Appeals refused to dismiss the suit. In that case, Google lawyers had argued that selling trademarked keywords wasn't even a "use in commerce," and likened it to the placement of trademarked products in the physical world, such as the practice of placing cheap generic drugs next to their branded counterparts.
That analogy doesn't hold up, said Scott Kline. At least some consumers will confuse the "sponsored links" bought by Firepond's competitors with Firepond itself, he said. "Firepond is not a large company, but has owners that believe very strongly that what's happened to Firepond and a lot of companies throughout Texas is wrong," said Kline. "We believe we can prove there was consumer confusion." Kline wants Google to switch its advertising practices to those of its competitors Yahoo and Microsoft, which do not sell trademarked keywords if the trademark owners object.
Kline and his colleagues in the FPX case filed a similar suit yesterday which seeks to represent all U.S. trademark owners nationwide, John Beck Amazing Profits, LLC v. Google.
By seeking to join hundreds of trademark owners in a crusade against Google, the Spangenbergs and their legal team have shown that their ambitions go well beyond their successful patent-monetization business. But that patent fortune has come with a few setbacks of its own. When Spangenberg filed suit against three car companies in Wisconsin in 2007, one of the defendants struck back hard. Spangenberg's patent infringement case was thrown out and DaimlerChrysler won a counter-suit for breach of a settlement contract they had reached earlier. Spangenberg was ordered to pay almost $4 million to cover his opponents' legal fees. That jury verdict is being appealed.
The Texas trademark class action suit, which was filed Monday, is FPX, LLC v. Google, Inc. et al, 09-cv-00142-TJW, E.D. Texas.
Photo: Moriori / Wikimedia