The Prior Art

Recent Patent Litigation Weekly Columns

 

Much of the patent news that was published on this blog has been moved to the IP Insider section of the Corporate Counsel website. Here's a list of the last several Patent Litigation Weekly columns—

 

Oct. 25, 2010: Big Patent-Licensing Deals Push Acacia Earnings to a Stunning High

No one has filed more patent lawsuits against corporate America than Acacia Research. But Acacia CEO Paul Ryan says corporations are embracing, not rejecting, his business — and the company's new numbers prove it.

 

Oct. 18, 2010: Call it the Canadian Bilski

Citing U.S. patent laws, rejecting the European view, and opening the door to a potential rush on business-method patents up north, a Canadian judge says Amazon's controversial 'one-click'

 

Oct. 4, 2010: NPE Makes Offer Some Companies Can Refuse

Offered the chance to cough up $80,000 apiece to license a patent once held by Intellectual Ventures, drugmaker Novartis and auto parts manufacturer Tenneco decided to fight back instead.

 

Sept. 27, 2010: Uniloc Keeps Filings Software Suits, and NPE Patents Fare Poorly at Trial

Undeterred by its district court loss to Microsoft — and waiting on a Federal Circuit appeal in any case — Uniloc sues dozens of companies for 'software activation.' Plus, a new study shows that troll patents don't hold up at trial.

 

Sept. 20, 2010: Skyhook Takes a Shot at Google

This week: The search giant faces a new kind of patent lawsuit — one brought by (imagine!) an actual competitor in an increasingly important space — smartphones

 

Sept. 13, 2010: Costco v. Omega — The Patent Angle

The world's largest chipmaker hopes to use a Supreme Court case about Omega watches to 'correct' the Federal Circuit's rules on international patent exhaustion

 

Aug. 30, 2010: Inside Google's Second Patent Trial

Earlier this month, lawyers from Google and Yahoo dismantled a notorious Spangenberg patent. That leaves Google's perfect troll-fighting record intact.

 

Patent enforcement companies speak at SF conference

Earlier this month, MDB Capital Group--an IP-focused investment bank that promises to help investors understand "the hidden value of intellectual property assets and future technological leadership"--held what it billed as its first annual "Bright Lights" intellectual property conference, bringing together IP-centric speakers from a variety of small and medium-size companies.

The Prior Art attended the opening panel, which included the heads of two of the largest, and most litigious, patent-holding companies—Erich Spangenberg and Paul Ryan, the CEO of Acacia Research Corp., the largest publicly traded patent-licensing company.

The panel also included representatives from consultancy ipCapital Group and RPX Corp., which buys litigated patents in order to strike deals between NPEs and operating companies, as well as IP guru Marshall Phelps. (Phelps is something of a legend for building IBM's legendary $2 billion patent-licensing operation; most recently, he helped Microsoft build up a patent-licensing operation before leaving the company last year.)

The most interesting part of the opening session came when Spangenberg and Ryan explained how their businesses work and and how they are changing.

NYT identifies one Ocean Tomo buyer

RPX Corporation, a defensive patent collector, didn't mind telling the NYT's Saul Hansell that it was the buyer that purchased Lot 19 for $300,000. The blog post quotes RPX CEO John Amster, who brokered a settlement with Acacia Research Corp. on behalf of his members in January in one lawsuit. 

 

Patent-holders' next target: medical device makers?

I reported a few weeks ago that following two big verdicts against Boston Scientific, patent-holding company Acacia Research Corporation filed a lawsuit in the medical-device area. Acacia subsidiary Cardio Access LLC filed a patent infringement lawsuit in East Texas against Boston Scientific, Medtronic, and Johnson & Johnson. Those three companies have fought patent battles in U.S. courts with regularity over cardiac stent technology.

(For more on that read "Keeping Arteries Cleared and the Courts Clogged," NYT Oct. 2007.)

Yesterday, Cardio Access dropped that lawsuit and re-filed in the same district, adding a fourth defendant, California-based Edwards Lifescience Corp. Same technology at issue, U.S. Patent No. 5,254,097, which relates to certain kinds of catheters and cannulae used in heart surgery. 

Cardio Access is represented by Texas-based Nelson Bumgardner Casto PC. Johnson & Johnson was represented by Sidley Austin in the first Cardio Access lawsuit; other defendants have not yet named counsel. I put calls in to both Acacia and Nelson Bumgardner but haven't heard back yet.

Acacia, based in Newport Beach, Calif., mostly acquires patents in the high-tech area, but it has bought in to a few medical areas, purchasing patents related to purifying plasmid DNA products (pdf), heated surgical blades (pdf), and recently some patents alleged they say to read on latharoscopic surgery (pdf). According to another press release, the company appears to have acquired what sounds like the Cardio Access technology (pdf) in January—one month before Boston Scientific started its $750 million losing streak.

For Acacia, that has to look like good timing. But it's worth noting that even after the big losses, BoSci's stock price has held steady. Acacia, meanwhile, has had its stock price tumble by nearly 75 percent since November, when it lost its first jury trial to a team led by Weil, Gotshal litigator Matt Powers.

Bitten by patent-fish? Try "Catch and Release."

Several large tech companies have teamed up to try to defend themselves against patent lawsuits in a venture called Allied Security Trust, first announced to the Wall Street Journal.

Seven of AST's 11 members have been publicly identified and were confirmed by CEO Brian Hinman (at right) when I spoke to him yesterday; they are Sun Microsystems, Hewlett-Packard, Cisco Systems, Google, Ericsson, Motorola, and Verizon.

The basics: membership costs a bit less than $500,000, and each member has to put up $5 million for patent purchases. The strategy is what Hinman calls a "catch-and-release" model: AST will buy the patents, give nonexclusive licenses to members that want one, and return it to the marketplace. That will recoup some of the members' costs; it will also, of course, keep the litigation environment a few degrees hotter for non-members.

Hinman is quick to point out that the fund is just one part of patent defense strategy, not a panacea. "We are not obtaining all the patents in the universe that are problematic," says Hinman. But AST will negotiate—quietly, through brokers—to buy some of the really problematic ones. "Litigation costs and settlements continue to be on an upward trend," he notes, and a little dent in costs could go a long way.

Are there enough fuzzy-boundary technology patents out there to keep defendants jumping regardless? We'll all find out in due time; meanwhile, a burgeoning class of IP middlemen has cropped up to help clients navigate the economy's ever-costlier patent landscape.

On its website, AST describes its mission as "freedom of operation and cost reduction." No profits for the trust, and no lawsuits against anyone—a promise that Nathan Myhrvold at Intellectual Ventures hasn't quite been willing to make, to the consternation of many.

AST goes public just a few months after PatentFreedom, another patent consultancy with a defense-side business plan, made its debut. Both companies rise against the backdrop of a stalled patent reform bill in Congress and an explosion in patent assertions.

Interestingly, both Hinman and PatentFreedom CEO Dan McCurdy have long work histories at IBM.  McCurdy spent about 12 years at Big Blue in various capacities, leaving in 1996; Hinman worked at the company for 15 years, and left his position as VP of Intellectual Property and Licensing just a few months ago to start up AST.

I'll have more on AST in the August issue of IPLB.

The spicy quote in AST coverage so far is from Acacia Research CEO Paul Ryan, who tells Bloomberg News that the formation of Allied Security Trust "is an acknowledgement" that its members are infringers. "Otherwise they wouldn't have any exposure," he says.

Just the sort of saber-rattling that can be good for the shield business, I imagine.

Blood in the water: Acacia sues Boston Scientific and Medtronic

Boston Scientific has taken two big hits already this year, both in E.D. Texas; most recently, a jury ordered it to pay $250 million to its rival Medtronic, the third largest patent verdict this year, according to Bloomberg News. In February, it was ordered to pay an eye-popping $500 million to an inventor. (That would be #1.)

Those giant payouts for medical-device lawsuits have left blood in the water. Just two weeks after the $250 million verdict, patent-holding company Acacia Research has launched a lawsuit against Boston Scientific,  Medtronic, and Johnson & Johnson, accusing the three companies of infringing patent no. 5,254,097, related to catheters. Acacia set up a Texas-based company, Cardio Access, LLC to pursue this lawsuit, filed two weeks ago. Cardio Access LLC v. Boston Scientific Corporation et al, 08-cv-231, E.D. Texas.

Boston Scientific, Medtronic, and Johnson & Johnson have been waging patent litigation battles around the country over various patents on stent and catheter technology. (So you can file this one under "living by the sword.")

This patent was originally held by a smaller medical company, New Jersey-based Datascope Corp., and was sold to Acacia in January, according to PTO records. Acacia typically uses a model of splitting licensing revenue with inventors, so Datascope likely has some skin in this game. (But to be clear, I don't know that.)

Datascope lost a patent infringement lawsuit brought by Johns Hopkins University and Arrow International, Inc. in June, which resulted in a injunction against a product it sells; then was hit with another suit in December, according to SEC records. So perhaps they'd like to be on the other end of one of these high-value suits. Two days after the Cardio Access lawsuit was filed, the company announced it's acquiring an Italian stent business that includes a patent portfolio.

UPDATE: In the original post I did not mention that Johnson & Johnson was also named as a defendant, along with its subsidiary Cordis. Post updated on 6/30.

Patent Player Acacia Takes a Hit

As anyone writing about patents quickly discovers, Acacia Research Corporation is a big name in a controversial business. Acacia makes money by getting companies to pay for licenses to its patents; those that won't pay often meet Acacia in court.

The Newport Beach-based patent-holding firm has filed dozens of patent infringement lawsuits against more than 100 defendant companies. But until last week, none of those lawsuits had been tested in a jury trial.

A Beaumont, Texas jury took only two hours Thursday to decide that Acacia’s lawsuit against Microsoft didn’t hold water, and tossed out Acacia’s patent to boot. The company’s stock has since lost more than a third of its value, dropping from $17.90 to just about $10.00 on Monday afternoon. Before closing arguments, an Acacia expert said Microsoft should be forced to pay $2.50 per copy of Windows XP, which various reports have pegged at between $600 million and $900 million.

Acacia's detractors say the company is a prime example of a "patent troll," using the threat of litigation  based on overly broad patents to make money off others’ hard work. Critics put the Newport Beach, Calif.-based company at the heart of a new industry they say abuses the patent system. Others have labeled their model "patent holdup" or even "patent terrorism."

The company does not share that view. Acacia officials say they defend innovation by helping small inventors and companies to outsource the difficult and costly business of licensing their patents.

"We’re the only really pure licensing company in the country that small technology companies can partner with," Acacia CEO Paul Ryan told me yesterday. "We have the expertise and experience—500 licenses including every major company in the country."

That gives the little guy leverage against big corporations that would otherwise blow off valid patents, said Ryan. Acacia's point of view is well articulated in this February 2007 profile, and in this 2006 interview with CNET.

Last week's verdict also leaves seven other East Texas lawsuits that Acacia filed last month in limbo, since they are based on the same patent asserted in the Microsoft case, 5,933,630. Ryan told me the company hasn’t decided whether or not to appeal the Microsoft verdict—which it would have to do to keep the other lawsuits alive.

The full story is in today’s Daily Journal, complete with some colorful quotes from Weil Gotshal & Manges partner Matt Powers, a Silicon Valley patent litigator who went toe to toe with a “dream team” of Texas plaintiffs’ lawyers to defend Microsoft. ("Defendant Microsoft Wins Big Patent Suit in Plaintiffs' Haven", 11/20/07) Marketwatch also has well-reported coverage of the lawsuit.

Computer Acceleration Corp. v. Microsoft Corp., 06-cv-00140, ED Tex.

Lawyers expecting the Eastern District of Texas to lose its pro-plaintiff luster shouldn't hold their breath. The day after its big win, Microsoft lost a round in the patent wars when the Federal Circuit upheld a $142 million ED Tex verdict against it for infringing a patent held by z4 Technologies.

A final note for blog readers--

The Battle in Beaumont was ultimately a dispute between two Washington State companies. The '630 patent originally belonged to eAcceleration, a software company located about 40 miles away from Microsoft headquarters in Redmond. eAcceleration CEO Clinton L. Ballard, who did not testify at the trial, is named as one of two inventors on the patent. Ballard's company was public but terminated its registration with the SEC on July 12, 2006, just six days after Microsoft was sued.