The Prior Art

Centocor v. Abbott: Biggest Patent Verdict Ever.

This afternoon, a jury in Marshall, Texas, awarded the largest patent verdict in history: Abbott Laboratories must pay $1.67 billion to Centocor, a subsidiary of Johnson & Johnson, because its Humira arthritis treatment infringes U.S. Patent No. 7,070,775. The patent was developed at New York University and licensed exclusively to Centocor, which makes a medicine called Remicade that competes with Humira. Via Bloomberg.

The jury deliberated for five hours before issuing the verdict, which specifies $1.17 billion for lost profits and $504 million as a reasonable royalty.

"Maybe Abbott should've bought a cow," suggests The Recorder's Zusha Elinson.

See the jury verdict form [PDF].

Centocor was represented by Woodcock Washburn; local counsel was Dallas firm Sayles Werbner. Abbott was represented by WilmerHale, as well as Houston-based Beck, Redden & Seacrest and Gillam & Smith of Marshall. The case was filed on 4/16/2007: Centocor, Inc. et al v. Abbott Laboratories, 07-cv-00139, E.D. Texas (Marshall).

The second-largest patent verdict was a $1.5 billion award that Alcatel-Lucent won against Microsoft, but that was later overturned. The third-largest patent award, and still the largest ever enforced, is a $910 million judgment for Polaroid in 1986; that lawsuit ultimately wiped out Kodak's instant camera products. (Some report this award as $925 million, which was the amount of the settlement in 1991 that finally ended the litigation.)

Photo: Federal Courthouse in Marshall, Texas. J. Mullin

TiVo wins big in court, but is losing customers

TiVo has achieved one of the most famous patent-infringement victories of the past decade, slamming its competitor Dish Network (EchoStar) with a jury verdict that ultimately added up to $105 million—and winning a second nine-digit ruling against Dish this month when an East Texas judge found the satellite-TV provider to be in contempt of court and ordered it to pay $103 million for continuing to infringe TiVo's patent.

Now BusinessWeek has an interesting story on the rest of TiVo's business—that is, winning over subscribers who want to use TiVo services. The company's Irell & Manella legal team can't help with that battle, and it isn't going well—at all. If it hadn't been for its courtroom victory, TiVo would have barely been profitable last year. Its subscriber base is down almost 40% since 2006. Now TiVo's CEO says the company wants to be the "Google of Television," but it's a crowded field.

The article notes that one of TiVo's competitive advantages is its 140-patent portfolio. But the TiVo story may shape up to be a powerful reminder that success in court doesn't equate to success in the marketplace. A final question is whether additional patent enforcement actions will become more attractive to TiVo if its new business plans don't go well.

Photo: flickr / M0les

Two big IP verdicts slip away from plaintiffs

Two historic verdicts, one copyright and one patent, were overturned this week.

• The recording industry's sole jury win in a music downloading case was overturned on appeal Wednesday. The problem was Jury Instruction No. 15, which told the jury the record companies don't have to prove any copyrighted files were actually transferred. Defendant Jammie Thomas was found liable and ordered to pay $222,000. But a federal judge in Duluth, Minnesota said that instruction was wrong, and Thomas will get a new trial. [Wired]

• Alcatel-Lucent's $1.5 billion jury verdict against Microsoft, for infringing patents on mp3 technology, was overturned  by the Federal Circuit. (That award had already been overturned by a district court judge; and the appeals court upheld that judge's decision.) If the Alcatel-Lucent award had been reinstated, it would have been the largest patent infringement verdict ever. [AP] [MarketWatch]

The biggest patent verdict instead remains Polaroid's lawsuit against Kodak's line of instant cameras; the suit wiped out Kodak's instant camera business by the late 1980's and awarded $910 million to Polaroid in 1991.

Alcatel-Lucent was represented by Kirkland & Ellis; Microsoft by Fish & Richardson.

 

SAP settles E.D. Texas patent lawsuit for $83.3 million

It's not a jury verdict, but it is eight digits long and comes from East Texas. On Friday, it was announced that German software company SAP agreed to pay $83.3 million to settle patent infringement claims brought against it by supply-chain consultants i2 Technologies Inc.

Dallas-based i2 filed this case in the Eastern District of Texas (Marshall) in September 2006, asserting seven patents were infringed by SAP. In August 2007, SAP hit back, firing off its own patent suit against i2 in Northern California (Oakland). Doesn't look like that case went too far, and it has also been stayed pending this settlement.

i2 Technologies' revenues have steadily declined over the last several years. For 2007, i2 Technologies reported a $17.7 million net profit on $260 million of revenue.  The company has about 1,300 employees. [10-K] The much larger SAP reported a €1.94 billion net profit on €10.25 billion in revenue. [6-K]

The case was i2 Technologies US, Inc. et al v. SAP AG et al., 06-cv-00352, E.D. Texas. It was slated to go to a jury in November of this year, in Judge T. John Ward's court.

i2 Technologies was represented by McKool Smith in this litigation; SAP hired Finnegan Henderson.

This settlement is clearly no fun, but the more worrisome litigation for SAP is surely not a patent lawsuit but competitor Oracle's allegations of "corporate theft on a grand scale." Oracle says its damages in that case are likely to be $1 billion, reports MarketWatch.

 

Trademark disputes and the hometown advantage

Of course, I dutifully prepared a post titled "Monday Morning Trademark Notes" over the weekend, only to have the biggest trademark news of all strike... right after the post publishes. I'm referring, of course, to a French court's decision yesterday that eBay must pay $61 million to LVMH Moet Hennessy Louis Vuitton SA.

We're still waiting for a decision on the Tiffany v. eBay case heard late last year in Manhattan. I have reason to believe a lot of folks are waiting on that verdict; I've noticed quite a few hits on my own blog by people searching for terms like "tiffany ebay verdict," despite the fact that I mentioned the Tiffany v. eBay case only once, quite briefly, in December.

Dan Slater at the WSJ raises an interesting question: could the French ruling could be considered a "hometown verdict?"

That's a question that could be asked in plenty of stateside IP disputes, as well. Viacom sued Google in Manhattan, not California; Tiffany's sued eBay in Manhattan.

We're not talking about venue shopping; in both of those examples, plaintiffs sued in their home base. But still, it's interesting to think about what kind of hometown advantage can be reaped. If I were a big mark-holder, I'd like Manhattan. A Manhattan jury is likelier to have folks who, if they don't work for a big fashion brand themselves, might have a brother or aunt or half-sister's dog walker's buddy who is connected to such a company. Similarly, a Northern California jury is likely to have jurors with connections to technology workers. People in Los Angeles are more likely to sympathize with a movie studio.

Maybe I'm stating the obvious here. But I live in San Francisco and spend a lot of time with family and friends in Los Angeles. Both of those regions have large and diversified economies. Despite that, it's surprising to me how much they can both feel, in a way, like "industry towns."

Monday Morning Trademark Notes

Playing catch-up a bit after spending Thursday & Friday at the Federal Circuit Bench & Bar. 

It's been a tough month for shoes:

• Collective Brands, the company that owns PayLess ShoeSource and Stride-Rite, has settled a trademark infringement case brought by K-Swiss by paying $30 million; that comes on the heels of its massive loss last month.

People are talking trademarks-in-cyberspace after the ICANN decision in Paris. Internet regulators at ICANN vowed to free up more virtual real estate, and are immediately hacked by Turks, who announce "Everybody Knows Wrong." (isn't that always how these things go?)

Reaction to ICANN decision:

• CNET worries about "domain chaos."
• Trademark lawyers will stay busy, but dot-com owners "have nothing to worry about," writes Domain Name Wire.
• The LA Times quotes one consultant saying that ICANN has been "hijacked" by the "domainers" who buy & sell web real estate.
• LAT also has my vote for cleverest headline: ".sky is the .limit." Much better than the newspapers that disappointed with headlines like "dot-personaltouch."
• IP Watch has some on-the-ground reportage from Paris.

 

Monday Patent Notes: "Patent Elves," Naked Cowboys, and a big Microsoft verdict

• Did you know patent litigation actually increases competition? (Also, night is day, black is white, and 2+2=5, all to be addressed in future posts.) Who thinks more lawsuits are good for the economy? File that under "not surprising": Two consultants from litigation-support company LECG, joined by a partner from Howrey LLP. (Wait, isn't that the "no trolls" law firm? Hmm...) Read their new paper, which seems to suggest that so-called "patent trolls" should be renamed "patent elves." Reported Friday by IPlaw360 (subscribers only). 


• File this under "even less surprising." Not reported by IPlaw360 is the company that paid for the discovery of this new math: Qualcomm, a big-time patent licensor. (The authors did the right thing by disclosing this fact in a front-page footnote.)

• Today, an April jury verdict for Alcatel-Lucent and against Microsoft was upped from $358 million to $512 million, the AP reports. That makes this the biggest patent award of 2008 so far, even bigger than both massive verdicts against Boston Scientific. Microsoft will appeal.

• The Naked Cowboy, a New Yorker who claims M&M/Mars stole his outfit idea for an advertisement, still has hope, reports the WSJ law blog. A judge threw out his privacy claim but his trademark infringement claim lives on...

 

ClearChannel will pay out $90 million in E.D. Tex patent loss

In April, ClearChannel lost $66 million when an E.D. Texas jury found it guilty of infringing a patent held by holding company Grantley Patent Holdings. Now, the judge in the case has tacked on $16.5 million and interest payments, for a total of almost $90 million.

There have been five big plaintiffs' victories in East Texas already this year; the smallest one was $21 million. My colleague Nate Raymond at The American Lawyer has a good roundup of those decisions here.

The trial was with Judge Clark in the Lufkin division. Grantley Patent Holdings was represented by Minneapolis-based Robins, Kaplan, Miller & Ciresi LLP, led by partner Ron Schutz (pictured). ClearChannel was represented by Andrews Kurth. Notably, ClearChannel doesn't appear to have hired any Eastern District counsel. (Grantley had help from Beaumont-based Germer Getz.) This appears to be the only patent case Grantley has filed, so far.

Via Patently-O.

Schutz tells me that the inventors are the plaintiffs in interest; Billy Shane Fox and a business partner own Grantley Patent Holdings, and they control the company that supports their MaxaGrid product. The company is in decline now with two employees, but once had a contract with Clear Channel, which used many of its products for scheduling radio advertisements.

During closing arguments, Clear Channel's counsel, had the hometown advantage, noting that he was born & raised in nearby Marshall, according to Schutz; but that didn't overcome Schutz, who had his own story to tell about being born on a farm in Minnesota and how he was the first person in his family to get a college degree.

On the way out, "A guy comes up to me and says, well, Mr. Schutz, I think you out humbled them," says the lawyer. Schutz is featured in this week's National Law Journal "Winning" supplement: Mom's Advice Wins.

Grantley Patent Holding Ltd. v. Clear Channel Communications, Inc. 06-cv-00259-RC, E.D. Texas.

Spangenberg must pay $3.8 million in legal fees

Earlier this month I wrote about how Erich Spangenberg could be on the hook for $4 million in attorneys' fees to car companies that he repeatedly sued for patent infringement. He will indeed have to pay. There's a story on Law.com today.

We learn that Orion IP—perhaps the most active of Spangenberg's many patent-holding companies—has raked in $72.3 million over a few years, forcing about 100 companies into settlements by claiming various aspects of their websites infringe the handful of software patents he bought.

Judge Barbara Crabb's order will surely put a chill on patent-holders who thought that the Western District of Wisconsin might become the new E.D. Texas. The lawyers that took down Spangenberg's empire are from Kilpatrick Stockton; this is a huge victory for them.

I have more to add on this case, which reveals some of the inner workings of this mysterious business.

But first, and I'm speaking solely on my own behalf here, it's incredibly dismaying that Judge Crabb has allowed nearly every document filed in the case since trial to be filed under seal. This lawsuit is, in one sense, about online shopping technology. That affects everyone in this country. For three months now Crabb has operated a secret, closed court; I've read through hundreds of patent dockets and I've never seen anything like it. This should stop. I don't know if it's legal, but I know it ain't right.

 

Verdict: H-P must pay $184 million to Cornell University

I'm going to continue to do short posts when I see big verdicts or settlements in IP lawsuits, with the hope that over time the verdicts & settlements category grows into a useful database of the larger verdicts.

Last Friday, Cornell University won $184 million from a hometown jury (Northern District of New York). The patent in question was invented by Cornell Professor Hwa C. Torng, described in U.S. Patent No. 4807115, "Instruction issuing mechanism for processors with multiple functional units," issued 1989. Press reports from Newsday and the Syracuse Post-Standard say Cornell originally asked for $900 million in damages; IPlaw360 says that number is a mistake, and the damages request was $575 million.

The jury also ruled that infringement was not willful. They calculated damages based on a 0.8% royalty for $23 billion in sales. Cornell says they will appeal. H-P also argued they were protected by patent exhaustion and implied licenses, but the jury rejected those defenses.

 

Guess who else wants some of Immersion's patent victory cash? Microsoft.

Earlier this month, I wrote about Internet Services, LLC, or ISLLC—that's the patent-holding company that Immersion Corp. approached about out-sourcing its patent litigation in the adult games and "teledildonics" market but now says Immersion owes it some dough from its $82 million patent infringement verdict against Sony. Update on that: an Oakland federal judge threw out ISLLC's claim on summary judgment on May 16.

While reviewing Immersion's recent SEC filings for another story (coming this week), I noticed that there is a much bigger fish than little ISLLC that wants a piece of the patent-infringement booty Immersion won from Sony—namely, Microsoft, which settled with Immersion for $26 million but signed an agreement that it would get a big piece of any settlement between Immersion and Sony. After all, Microsoft knew what Immersion needed the money for: to pay its very expensive Irell & Manella legal team to keep fighting a patent battle against Sony. And why just settle when you can switch sides?

Between the $82 million verdict, interest, and future agreements, Immersion ultimately collected almost $130 million from Sony, according to Immersion's recent SEC filings. But it avoided calling any of that a "settlement" and has refused to pay Microsoft; last year, Microsoft sued Immersion in Seattle federal court asking for at least $27.5 million; it raised that to $35.6 million after a failed mediation in December.

There wasn't much coverage of this remarkable agreement; the Seattle P-I's Microsoft reporter had a couple good blog posts last year on the lawsuit and the business strategy backdrop of the Microsoft settlement.

But Microsoft lawyers goofed when they filed their June complaint against Immersion, disclosing some confidential terms of the Immersion-Sony agreement: namely, they noted that Sony had an option to get licenses for non-PlayStation games, and disclosed the price: $10 million and a royalty of 25 cents for each game sold.

Microsoft filed a new complaint without the confidential price information, and the original was sealed 10 days later. But Microsoft's PR people had already emailed the original complaint to both Seattle newspapers, as well as CNET and Ars Technica (and it's still available). Immersion filed a counter-claim for breaking the confidentiality agreement in September; Microsoft has moved to throw that out on summary judgment, and a decision is pending.

 

Who owns stripes? A German shoe company owns stripes.

Another day, another 9-digit punishment for the loser of an intellectual property lawsuit. Adidas told a jury that not only do they own their own three stripes brand, but anyone who makes shoes with multiple parallel stripes is guilty of trademark infringement.

Last week, adidas won a mammoth $305 million verdict that the loser, the parent company of Payless Shoes, is now begging to get out of. In court papers, Payless lawyers say that adidas' expert fed the jury bogus numbers, telling them that the illegally striped shoes accounted for 1.7 percent of Payless sales revenues but for more than 21 percent of profits over nine years—that would be triple the profit margin Payless earned on all other products.

How do companies win cases like this? Surveys that try to establish consumer confusion. But even if consumers were confused, what were they confused about? Unless the shoes actually had fake "adidas" tags, it's hard for me to believe anyone was confused about the source of the product. And that's what trademarks are supposed to do—make sure consumers have reliable information about the source of a product or service.

Collective Brands points out that none of the survey data proves that adidas lost even a single cent. Not only that, the massive verdict adds up to more than 15 times the profits that Collective Brands made on all the "infringing" shoes.

The adidas "we-own-stripes" litigation campaign isn't limited to shoes; the German company has also sued companies like Nike, Ralph Lauren, and Abercrombie & Fitch, who have all dared to use stripes in their clothing.

Citizens, you've been warned! If you want to use parallel stripes, call Adidas' trademark lawyers first.