Neat trick: Facebook dodges Spangenberg's search patent

PA Advisors, LLC is an arm of Erich Spangenberg's patent-holding empire. Its job is to assert U.S. Patent No. 6,199,067, which claims the use of user profiles in Internet search; it was used to sue Google, Yahoo, Facebook, and several other smaller players in November 2007. [full PA Advisors docket]

On Friday, Law360 reported that the suit was dismissed against Facebook; and remarkably, a Facebook spokesman said that no payment at all was made to Spangenberg. That's pretty unusual in a case brought by a patent-holding company.

If a case isn't going well, it's still typical for a plaintiff to get at least a small payment. That payment might not even cover the plaintiff's legal costs, so it's effectively a defense win; but it allows the plaintiff to save face. But not here: “After meeting with Facebook and learning more about our technology, we appreciate that PA Advisors decided to dismiss their claims without any payment or other agreement,” said the Facebook spokesman.

So they "learned more about the technology" and decided to drop the suit. Nice of them, hey? Vintage Spangenberg right there, only asserting patents against the hundreds of companies that are spot-on infringers. I called Facebook's defense lawyer, Orrick partner Neel Chatterjee, who declined to comment. PACER indicates that Facebook initially hired Fenwick & West, but Orrick took the case over in April.

The '067 patent is a child of the dot-com era, invented by Brooklyn-based inventor Ilya Geller in 1999. Geller was president and CEO of the now-defunct LexiClone. The company has a note on its site indicating it sold the patent to PA Advisors. (The note is dated May 2008, but the patent was sold before the suit was filed in November.) The phone number on LexiClone's site is outdated.

The PA Advisors suit continues ahead against defendants Yahoo, Google, ContextWeb, and Specific Media. Spangenberg's team consists of several of his usual lawyers like Andrew Spangler and David Pridham, plus the Fort Worth-based firm Friedman, Suder & Cooke, and the interesting addition of Joseph Diamante, a partner in Jenner & Block's New York office. PTT defamation litigant Eric Albritton was on Spangenberg's team but dropped off the case in late February. (Interesting timing—just a week or two before before filing suit against Rick Frenkel.)

Facebook has only been subject to two patent lawsuits in its brief corporate history; in addition to the PA Advisors suit, there was one brought in Pennsylvania by Cross Atlantic Capital Partners; it was filed in July 2007 and settled within six weeks.

Some good news: I noticed this weekend that Spangenberg has returned to naming his companies after gods and stars. Texas Secretary of State documents indicate that in January, Spangenberg has consolidated several entities, including PA Advisors, under the name Granicus IP. The following companies were all merged into Granicus IP:

• Travel IP Technologies, LLC (no litigation history)
• CT IP Holdings, LLC (no litigation history)
• MT IP Holdings, LLC (no litigation history)
• ST Sales Technologies, LLC (this company was responsible for one of the "let's do this again" lawsuits against car companies that got Spangenberg in trouble in Wisconsin.)
• PA Advisors Holdings, LLC (this was separate from PA Advisors, LLC; so PA Advisors still exists, but PA Advisors Holdings merged into Granicus.)

Granicus is a river god of Mysia (now Turkey), son of Oceanus and Thetys.

Image: Alexander's Charge at Granicus, via Wikimedia

Comments

[Ad Trader]

Joe - How do you think this will play out? Everyone settles for big/small dollars with PA?

[Joe Mullin]

Ad trader,

Thanks for your comment.

Something like 99% of patent cases settle before trial. So it is likely everyone will settle sooner or later. I'm too aware of my own limits to get into the game of guessing which cases will be in the 1% that goes to trial.

It's rare to find out how much the parties settle for. If it’s a big settlement and a public company, it might show up in an SEC filing. That's very unlikely to happen here, since a company as big as Google or Yahoo would only have to report a settlement that's “materially significant” (massive.)

We do know that it costs $4-5 million for a defendant to go to trial, even if they win. Often a patent-holding company will want to settle for just less than that amount. In this case, we have a plaintiff who has shown he is ready and able to take a case to trial, and win. (Orion IP got $34 million in damages from Hyundai back in 2004.) The lawsuit is in a district where defendants are very unlikely to win on summary judgment. We also know that the same plaintiff settled with a major car company, DaimlerChrysler, for $2.3 million... (although that was a few years ago.) It would make sense to me that a tough plaintiff facing a large defendant, as we have here, would be shooting for a settlement at least in the $2 million to $4 million range. That’s pure guesswork though. He could be aiming much higher...

I’m sure I have some readers who would know a lot better than I do… Maybe someone will see fit to enlighten us.