The Prior Art

Patent Litigation Weekly: How to win $25 million in a patent suit—and end up with a whole lot less

This week: DeepNines collected $25 million when it won an infringement suit against anti-virus software giant McAfee Inc. in the Eastern District of Texas two years ago. But after paying off its Fish & Richardson lawyers and outside investors at Altitude Capital Partners, the small network-security company wound up with less than $800,000 of the $25 million. And now DeepNines is being sued by Altitude, which wants millions more than it's already gotten. A revealing look at how a leading player in the lawsuit-investment trade does business.

Third-party financing of lawsuits—often described as a new and growing phenomenon—has been much in the news lately. But outside investors have been making multimillion dollar bets on patent lawsuits for years. One of the field's leading players is Altitude Capital Partners, founded by investment bankers Robert Kramer and Warren Hurwitz. Altitude, which has been investing in patent lawsuits since at least 2006, boasts of having more than $250 million to spend on such litigation.

Last week, The Prior Art reported on one patent-holding company Altitude has invested in. This week, we offer the story of another Altitude investment—one that resulted in an acrimonious lawsuit between parties that used to be on the same side.

Patent Litigation Weekly: Foley Tries Turning Tables on Spangenberg

This week, the man behind a notorious network of patent-holding companies finds himself in an unaccustomed spot: on the defense.

When it comes to litigation, Erich Spangenberg, well known for running a network of patent-holding companies, is usually a plaintiff. Now, though, he's on the other side of a lawsuit, having been named as a third-party defendant in a dispute between patent-holding company DataTern and its former lawyers at Foley & Lardner.

DataTern—a spinoff of an operating company, Firestar Software—made news last year when it settled a closely watched East Texas patent infringement suit against open source software leader Red Hat Inc. The settlement was considered novel because of the protection it offered to Red Hat's developer community. At the time, the parties kept financial terms of the settlement confidential; it has since been revealed that $4.2 million changed hands. (See Red Hat's press release on this settlement; analysis of the agreement at Groklaw; IPLB profile of Red Hat lawyer Richard Fontana.)

Foley & Lardner, which represented DataTern in the suit, claims it is still owed more than $1.5 million in fees for its work on the case. But rather than paying up, DataTern filed suit against Foley in January, essentially saying the firm did such poor work on the matter that it should be the one doing the paying. With the litigation now heating up, Foley has named Spangenberg, his wife, Audrey, and several related companies as defendants in a third-party complaint filed on October 1.

U.S. Senate committee passes bill against "pay for delay" drug settlements — more in October/November IPLB

The Judiciary Committee of the U.S. Senate passed a bill today that would ban "reverse-payment settlements," which are settlements that end patent litigation between branded and generic drug companies in which the branded company pays money to the generic. The Federal Trade Commission, which calls the agreements "pay for delay" settlements, has been fighting against these settlements for a decade now, but hasn't been doing well in court. Three separate appeals courts have ruled that different reverse-payment schemes are, in fact, legal. Both generic and branded pharmaceutical companies, and lawyers who work for them, have defended the settlements; but the FTC says consumers are losing out on billions of dollars in potential savings.

It's a development that makes the cover story in the October/November issue of IP Law & Business, recently mailed to subscribers, particularly relevant. 

The story looks at the history of how reverse-payment settlements developed, and focuses on what this controversy says about the different views on patent rights held by courts, federal antitrust enforcers, and the drug industry.

It's a hot topic for the drug industry, but the underlying question could affect all patent owners: Are patents truly "property" rights, or merely an option to litigate?

It's available now on IPLB.com: "One Man's Drug War." 

 

Patent Litigation Weekly: Eolas in Texas, Triune Star fee award, and Guardian Media saga moves to appeals court

For Eolas, a Texas address, Dallas lawyers, and Plano targets.

Eolas Technology, a company built on a patent that originated at the University of California, has gone Texan. Eolas—having settled a previous infringement suit against Microsoft after winning a jury verdict of more than $500 million—this week asserted its 5,838,906 patent in a suit filed against 23 companies, including large banks, technology companies, and retailers. The goal, obviously, is to amass a new fortune via the patent wielded against Microsoft, as well its flashier child-patent, No. 7,599,985. The common thread connecting the targeted companies: they all employ browser plug-ins and “AJAX” technologies that have been used in some form on the Web for more than a decade.

Despite that, Eolas attorney Mike McKool of McKool Smith is confident the '906 patent will hold up in the current litigation. Speaking with The Am Law Litigation Daily, McKool emphasized that the patent has already been tested three times in PTO reexaminations. (It’s worth noting, of course, that none of the present defendants were around for those hearings.)

As for Eolas itself, the patent-holding company has evolved since it was last heard from. It had just one employee—Dr. Mike Doyle, who lives in the Chicago area—when it sued Microsoft, and its payroll doesn’t appear to have grown much since then. The Eolas website, however, claims the company now does research and development in addition to enforcing patents, though the links its research accomplishments are mostly brief descriptions of patents or patent applications.

Troll Tracker defamation case settles before going to jury

After four days of testimony, the "Troll Tracker" defamation lawsuit ended in a confidential settlement the day before the East Texas jury hearing it was set to begin deliberations. 

Plaintiff Eric Albritton and defendants Cisco Systems and Rick Frenkel, a former Cisco lawyer who blogged anonymously as the Patent Troll Tracker, settled the case Monday night, shortly after Judge Richard Schell ruled that the jurors would have to find "actual malice" on the part of Frenkel and Cisco in order for Albritton to win the punitive damages he was seeking from the tech giant. 

None of the lawyers involved in the case would comment on the settlement Monday. Cisco issued a statement Tuesday morning in which it said the dispute between the parties "has been resolved to their mutual satisfaction, and Rick Frenkel and Cisco apologize for the statements of Rick Frenkel on the Troll Tracker blog regarding Eric M. Albritton." Frenkel is now of counsel at the Silicon Valley law firm Wilson Sonsini Goodrich & Rosati.

Johnny Ward and Eric Albritton on Troll Tracker blog: "Let's get this shut down."

Plaintiffs T. John "Johnny" Ward Jr. and Eric Albritton took the stand in the closing days of this week’s closely watched Troll Tracker defamation trial, with Albritton tearfully telling the jury that two posts published by blogger—and ex-Cisco Systems lawyer—Rick Frenkel in October 2007 had "hurt" and "humiliated" him, while Ward described his strong and straightforward response to the offending posts as: "Let's get this shut down."

Ward took legal action the following month, seeking to depose Google officials to determine the identity of the then-anonymous patent blogger. Once Frenkel was identified as the Patent Troll Tracker several months later, both Ward and Albritton sued Frenkel and Cisco for defamation.

Ward and Albritton say Frenkel's posts, about changing a date on official court documents, were defamatory because they accused the two Texas lawyers of committing a crime.  Lawyers for Frenkel and Cisco maintain that the posts contain no such accusations, and are a mix of true facts and legally protected opinion.

Rick Frenkel takes the stand in Troll Tracker defamation lawsuit

Former patent blogger Rick Frenkel took the stand in the federal courthouse in Tyler, Texas, on Wednesday, and apologized for referring to the Eastern District of Texas as a "Banana Republic" in a post he published as the "Patent Troll Tracker." But Frenkel insisted his blogging about a patent infringement suit against his then-employer, Cisco Systems, was not defamatory.

"You know, I think I was outraged over a situation ... and I used words that were strong," said Frenkel. "But I sure didn't mean to hurt anyone by it." Frenkel apologized for using the phrase, and noted that he took it off the blog after 24 hours. In October of 2007, about 500 people per day were accessing the Troll Tracker blog, he added.

At issue in the case are two particular Troll Tracker posts, dated Oct. 17 and 18, 2007. Plaintiff Eric Albritton claims the posts accused him of a crime by alleging that he "conspired" with a courthouse clerk in the plaintiffs-friendly Eastern District of Texas to change a critical date on a docket in an infringement suit he filed against Cisco. For his part, Frenkel says he was outraged that the change was made without a motion being filed.

Troll Tracker defamation case goes to trial -- opening statements heard

A hot, muggy, Southern rainstorm came down in short squalls in Tyler, Texas, Monday morning, drenching the city’s central square just as jury selection got underway in the Patent Troll Tracker defamation case, being argued in the federal courthouse here.

The Prior Art blog is reporting from the trial over the next several days.

We’ve covered the background and development of Albritton v. Cisco Systems, a case brought by lawyer and east Texas patent litigation player Eric Albritton against Rick Frenkel and his former employer Cisco Systems, alleging that in the course of Frenkel's brief and anonymous blogging career, he libeled Albritton.

(Earlier TPA coverage of Albritton v. Cisco and Ward v. Cisco: Troll Tracker sued, 3/11/20008; Judge Ward's Son may have pursued Troll Tracker for months, 3/12/2008; Frenkel, Cisco to fight defamation suits in East Texas, 5/27/2008; Troll Tracker blogger Rick Frenkel moves to Wilson Sonsini, 8/4/2008; Troll Tracker defamation update, 11/7/2008; Cisco says Frenkel told the truth, 12/9/2008.)

More recently, sibling publication Texas Lawyer just published an overview of the facts of the case here.

Patent Litigation Weekly: Stanford Researcher Loses at PTO, Still Fights On

In the April/May issue of IP Law & Business, we reported on the plight of Bob Shafer, a Stanford University scientist embroiled in a dispute with Luxembourg-based Advanced Biological Laboratories, S.A. (ABL). ABL claimed it owned two patents that were being infringed by the world-renowned HIV-drug resistance database Shafer created, HIVdb.

To recap quickly: After ABL sent Stanford claim charts and a letter asserting its patent rights, Stanford sued to invalidate the patents. That case settled, with Stanford agreeing to post a notice on the database stating that users of HIVdb might infringe ABL's patents.

ABL subsequently sued Stanford, saying the university had violated the settlement terms; the company also sued Shafer for defamation, based largely on comments he posted on his website, harmfulpatents.org. Shafer, tapping his own savings, hired attorneys at Day Casebeer to file reexams on the two ABL patents. (Day Casebeer has since been purchased by Howrey LLP.)

ABL's counterclaims against both Stanford and Shafer individually have now been settled. And it certainly appears that Chalom Sayada, the French doctor who is ABL’s CEO, has concerns about how the litigation makes him look to HIV researchers. The joint settlement statement reads, in part:

Patent Litigation Weekly: Juniper’s Novel Defense Tactic Attracts Unlikely Allies

Peter Shipley is a Bay Area hacker and patent-holder who sues technology companies under the corporate name Enhanced Security Research, LLC. In 2007, ESR sued Juniper Networks in district court in California for patent infringement. Juniper struck back in February with a novel false-marking lawsuit, which The Prior Art reported on in June.

Juniper's argument, readers may recall, is that every time a browser loads Shipley's web page, an “offense” is committed because his mention of two patents he holds, Nos. 6,119,236 and 6,304,975, constitutes false marking. False marking occurs when a product is marked with the number of a patent that doesn't really cover it.

Shipley's attorneys at Townsend and Townsend and Crew and Robins, Kaplan, Miller & Ciresi argue that their client is simply posting his patent numbers as part of an online resume, not as a way of trying to sell or market a product. For that reason, they say, he can’t be accused of false marking.

Juniper’s line of attack against Shipley has now attracted an ally: the Public Patent Foundation, which has asked for permission to file an amicus brief on Juniper’s behalf.

PubPat's bid to jump into the case coincides with its ambitious plans for a false-marking litigation campaign, assisted by David Garrod, public interest lawyer by day and patent enforcer by night. (Garrod owns a patent and has sent East Texas love letters to a large chunk of the Internet, and two smaller companies. Garrod and PubPat founder Dan Ravicher are co-authors on the brief.)

Odom Weighing In On Bilski for Oregon? That's News to Oregon

The Bilski case is heading towards a resolution at the Supreme Court, and 44 amicus briefs already await the justices—with more to come.

One of those briefs is from Gary Odom. Odom is a litigation consultant who claims he invented, and now owns a patent on, the idea of customizable tool groups in software. He has sued Microsoft, and 28 smaller software companies, demanding royalties be paid to him.

Odom's amicus brief for the Bilski case has garnered some attention, owing to the fact that Odom seems to be claiming the brief is actually on behalf of the entire State of Oregon, where he resides. See the front page of the brief [pdf], which states "Brief For The State of Oregon." There's no other reference to the state anywhere in the brief, and no Oregon state lawyers are listed as coauthors.

In fact, no lawyers' names are in the brief at all. Odom is not an attorney, and his coauthor, Jordan Kuhn, is a Colorado patent agent. They describe themselves as "patent practitioners" and Odom also identifies himself as "an inventor and patent holder."

When TPA called Odom today, he wouldn't talk about the brief, saying only "I'm not available right now" before hanging up. Follow-up e-mails and phone calls to Odom and Kuhn went unreturned. In a blog post about Bilski, Odom works his way through a few scatological metaphors before calling his own brief "cogently potent in its brevity and conservatism."

Tony Green, a spokesman for the Oregon Attorney General, said no one in his office had heard of Odom's purported statewide representation before TPA called. "It is our preference that people accurately convey who they're writing an amicus brief on behalf of," says Green. "We neither authorized this or had any knowledge of it."

But Green wasn't overly concerned, since the Supreme Court's Bilski docket clearly states that the brief is on behalf of only Odom and Kuhn, not the state. "It's clear they understand who this is from," says Green.

Monday Miscellany

The Patent Litigation Weekly column took a hiatus last week as I worked on IPLB's annual patent litigation survey and an upcoming cover story. To hold over readers, here's some interesting copyright & patent reading from the past week:

• News companies filed an amicus brief denouncing a judge's order in the "Catcher in the Rye" copyright case, saying she didn't take proper note of the First Amendment before enjoining publication: "Here a book was banned on the basis of a two-hour hearing with no witnesses."
• When The Prior Art last checked in on mystery inventor Gregory Bender, he and his lawyer had filed patent-infringement lawsuits against 28 companies. Now it's up to 37 defendants in 24 different suits, and Judge William Alsup has declined to relate the cases, despite the request of Bender's lawyer. 
• Zusha Elinson on the advantages and disadvantages of joint defense groups in patent lawsuits. (free reg. required)

Update 8/11/09: To clarify, Judge Alsup's order told the parties that it may be possible to coordinate hearings on claim construction and invalidity issues, but infringement issues will remain separate.

 

Patent Litigation Weekly: Scott Harris Not So Inventive, Foes Say

Last week, The Prior Art interviewed former Fish & Richardson partner Scott Harris in connection with a pair of infringement suits filed based on patents issued in his name. Harris says those patents cover important inventions he came up with related to e-books and spam filters.

This week, his opponents are talking—and they say there’s not much to this patent lawyer’s "inventions."

Illinois Computer Research, or ICR, is a patent-holding company that owns Harris's "touch and feel" patent, which covers the displaying of books online. ICR sued Oprah's Book Club and Sony Electronics in December 2008, saying they infringed the patent, numbered 7,111,252. But ICR—owned by Florida lawyer James Beauregard Parker—has come up empty in the suit against Sony.

"The way they were reading the claims read directly on the prior art in our view," says Rich Gresalfi, the Kenyon & Kenyon partner who headed up Sony's legal team. "We asked them to go away, and they didn’t. We said, this case is over the top, and we're going to file an early summary judgment motion."  Once that motion was filed, ICR's lawyers at Niro Scavone dropped the case. (ICR's suit against the second defendant, Oprah Winfrey's Harpo Productions, is still pending.)

Are East Texas companies becoming pawns in the venue-shopping game?

Bedrock Computer Technologies is a patent-holding company owned by David Garrod, a former Goodwin Procter lawyer. Last month, I wrote about Bedrock's lawsuit against several of the biggest Internet companies—and CitiWare Technology Solutions, a tiny Longview, Texas software company.

Since the publication of that column, CitiWare's owner, Nate Neel-Smith, has taken down his old website and replaced it with a web page denouncing the lawyers who sued him. The lawsuit against him was a big mistake, says Neel-Smith, since he actually went out of business some time ago. "See how you might feel when your [sic] sent a BOGUS lawsuit on which you must waste time and money to defend!" writes Neel-Smith.

In my earlier column, I speculated that CitiWare's inclusion in the lawsuit was a strategy by Bedrock and its McKool Smith lawyers to maintain their preferred venue in the Eastern District of Texas.

The Recorder's Zusha Elinson has done some additional reporting that suggests that theory may be right. Elinson cites research by patent lawyer Yar Chaikovsky showing that since the Federal Circuit's TS Tech ruling in December, it's been easier for defendants to get out of East Texas when they want to—except when at least one local defendant is included in the suit. In those instances, the venue seems to stick. Elinson notes another example of a small East Texas company tangled up in venue politics: Plano-based Big Jump Media Inc., which runs Tangle.com, "a sort of Christian YouTube site that used to be called GodTube." McKool Smith is also lead counsel on the lawsuit involving Big Jump Media.

These small companies may have become "absurd pawns in the patent litigation venue-shopping game," writes Elinson. Read the full article.

Photo: J. Mullin, Longview, Texas

Patent Litigation Weekly: Catching Up With Scott Harris

Scott Harris has been an inventor since he was 12. Later on, he became a lawyer. About two years ago, Harris’s name started popping up in patent lawsuits. Ultimately, his involvement in the patent-enforcement business caused him to split with his former partners at Fish & Richardson.

But Harris was not the first big-firm lawyer to get involved in patent enforcement for personal profit, and others are still plying the trade. Which raises a question: Was Harris’s mistake that he formed a “non-practicing entity” or that he failed to hire his firm to do the legal work?

In recent days, two holding companies have filed new lawsuits based on Harris' patents. One is Southwest Technology Innovations, which used the 6,952,719 patent, describing an anti-spam filter, to sue six technology companies with anti-spam products: five of the defendants are large, and one is a small three-person company based in Orange County. The '719 patent was used to sue Symantec back in December, by another holding company asserting Harris patents. That lawsuit was transferred from Chicago to San Francisco in March. Harris's lawyers from the Niro Scavone patent boutique moved to add new defendants to the suit, but their motion was denied last month; the '719 patent was then transferred over to a new holding company controlled by Harris, Southwest Technology Innovations, which filed its complaint on July 9 [Complaint, PDF].

A second lawsuit, filed against Fujitsu and Lenovo by Innovative Biometric Technology, asserts patent 7,134,016, which describes a biometric security systems for computers.

The Prior Art took the occasion of these new suits to catch up with Harris and find out what he’s up to these days.