The Prior Art

App Backwards: Lodsys, Texas Troll, Targeted in Patent Suit

By Andrew Goldberg

Lodsys, the litigious patent-holding company that filed suit in the Eastern District of Texas last week alleging that several independent developers of software applications used on mobile devices infringe its patents on in-app purchasing, is now on the defensive and facing a patent infringement suit of its own.

ForeSee Results, a Michigan-based company that designs online customer-satisfaction surveys used by many businesses, brought an action Tuesday in the U.S. District Court for the Northern District of Illinois seeking a declaratory judgment that its product does not infringe Lodsys's patents.

In its complaint, the company contends that Lodsys’s patents are invalid and argues that the patent-holding company, which has threatened to sue ForeSee customers including Best Buy and Adidas over their use of ForeSee's surveys, should be enjoined from pursuing such legal action [Download Foresee Results Complaint].

Although ForeSee's lawsuit is not directly related to mobile device apps, it does implicate two of the same patents at issue in Lodsys's suits against Apple iOS app developers. As a result, a decision by the Illinois district court to invalidate Lodsys' patents could potentially throw a wrench into the holding company’s strategy of hauling app developers into court in Texas.

For its effort, ForeSee has tapped the kind of legal firepower that small app developers most likely can't afford in their fight with Lodsys. The survey company is being represented by lawyers at McDermott, Will & Emery. For its East Texas suits, Lodsys, which is based in Marshall, Texas, is being represented by the Seattle-based firm of Kelley, Donion, Gill, Huck & Goldfarb and The Davis Firm in Longview, Texas.

Among those presumably rooting for ForeSee to prevail in Illinois are the seven iOS app developers--including the makers of such iPhone apps as Twitterific and QuickOffice and the games Mega Poker Online Texas Hold ’Em and Hearts and Daggers--that have already been sued by Lodsys in East Texas [Download Lodsys v. App Developers]. That dispute hinges on the functionality that enables users to make purchases from within an app.

Lodsys claims it's litigating in Texas against the little guys in lieu of going after Apple directly because the tech giant already licensed the patent at issue as part of a mass licensing deal it struck with Intellectual Ventures, the patent-holding company that owned the patents in question prior to Lodsys.  App developers, according to Lodsys, are not covered by that licensing agreement.

In a blog post on its website about Apple, Lodsys wrote: “The scope of their current licenses does NOT enable them to provide ‘pixie dust’ to bless another (3rd party) business application," adding,  "From Lodsys’ perspective, it is seeking to be paid value for rights it holds and which are being used by others.” Specifically, the company is demanding .575% of all U.S. revenue from any app that uses its patents.

But Apple general counsel Bruce Sewell disputes Lodsys' contention, arguing in a letter, sent two weeks after Lodsys's notice to developers, that "there is no basis for Lodsys' infringement allegations against Apple 's App Makers."

"I believe that your letters are based on a fundamental misapprehension regarding Apple's license and the way Apple's products work," wrote Sewell. "Under its license, Apple is entitled to offer these licensed products and services to its customers and business partners, who, in turn, have the right to use them."

For anxious app developers, of course, Apple's letter is only a start. Indeed, as the Electronic Frontier Foundation put it, "Even careful developers who hire lawyers to do full-scale patent searches on potential apps surely would not expect to investigate the technology that Apple provides. Instead, they would expect (with good reason) that Apple wouldn't provide technologies in its App Store that open its developers up to liability – and/or would at least agree to defend them when a troll like Lodsys comes along."

For the developers' sake, it's worth wondering whether there's an app for indemnification.

 

Straight Outta Marshall: Local Lawyer Gilstrap Tapped to Replace Ward

By Andrew Goldberg

When Judge T. John Ward--the man most closely associated with turning the Eastern District of Texas into a patent litigation hotbed--retires in October, his likely successor shouldn’t have much trouble finding his new workplace.

After all, James Rodney Gilstrap, the 54-year-old Marshall, Texas, lawyer nominated last month by President Obama to succeed Ward, works right across the street from the federal courthouse where Ward presides, at the offices of Smith & Gilstrap, the law firm he co-founded in 1984. 

When it comes to substantive judicial policies, court observers don’t expect Gilstrap, a former Harrison County Judge, to stray too far from the path that Ward blazed.

“There will be style differences because every judge has a little bit different style on the bench, but I don’t anticipate the substance will change because Judge Gilstrap is familiar with how the local court is run,” says Michael Smith, a name partner at Marshall law firm Siebman, Reynolds, Phillips & Smith whose dealings with Gilstrap include the two men’s participation in a 16-year effort aimed at restoring the historic statehouse building that sits on Marshall’s town square. “The Eastern District judges tend to do a lot of things in similar ways, and I expect that he’ll follow in that tradition.”

Gilstrap, who was nominated by the Democratic president and has the support of the state’s two GOP senators, was one of three names on the shortlist formally recommended by the Texas Democratic delegation a year ago, according to Tex Parte, a sibling blog published by Texas Lawyer. The other two were Magistrate Judge Chad Everingham, who regularly presides over patent cases in the Eastern District of Texas, and Longview, Texas lawyer Eric Albritton, who served as co-counsel in patent infringement cases brought against Boston Scientific and Johnson & Johnson over cardiac stents that generated big jury verdicts for the plaintiff.

If confirmed, Gilstrap will likely inherit Ward’s packed patent docket, where the time to trial peaked last fall at just over three years. Much like Ward, who only tried one patent case before he came on the bench (He represented Hyundai Electronics in a $25 million patent infringement suit brought by Texas Instruments), Gilstrap also has only limited patent litigation experience, despite having served as local counsel in a number of patent cases. For example, he represents Bluestone Innovations Texas in an infringement suit brought against various foreign companies over LED technology, and defendant Capital One Financial Corp. in a patent suit brought by LML Patent Corp. against a number of large banks over patents on payment services. His representation, however, doesn’t appear to include the kind of big tech companies often dragged into patent suits in East Texas.

While it’s too soon to tell how Gilstrap’s ascension to the bench will affect patent infringement cases in the jurisdiction, Smith doesn’t believe that Gilstrap will be at a disadvantage. “He’s seen some patent cases. I don’t believe he’s actually tried one, but he has seen the cases go through the system for a number of years, so he’s familiar with patent litigation,” says Smith, who was planning to serve with Gilstrap as local counsel for co-defendants in a patent case before Smith’s client settled out.

Gilstrap, who declined an interview request, moved to Marshall after graduating from Baylor Law School in 1981, three years after receiving his B.A. magna cum laude from Baylor University. Before co-founding Smith & Gilstrap, where in addition to the occasional patent case his wide-ranging practice covered everything from oil and gas to real estate and probate law, Gilstrap worked as an associate at the law firm of Abney, Baldwin & Searcy from 1981 to 1984.

Smith first got to know Gilstrap personally during the 12 years that Gilstrap served as Harrison County Judge from 1989 through 2002. “My wife is the county treasurer, so he and my wife worked together for a long time in county government. Every four years, they ran together on the same ticket,” says Smith. (In Texas, the County Judge is the chief administrative position in county government, not a judicial office.) “I was going through some scrapbooks, and I found his picture at my wedding 15 years ago,” says Smith. “But it’s old Marshall family, so I’ve known him forever.”

Like Smith, Carl Roth of the Roth Law Firm is confident that things in Marshall won’t change too much with Gilstrap on the bench. 

“He’s very professional and even handed,” Roth says.  “He spearheaded several important projects for the county [as county judge], not the least of which was the restoration of the historic county courthouse and airport improvements, and he managed to do it without political controversy.”

Jeffrey Thompson, a Republican County Commissioner who worked with Gilstrap, a Democrat, on the Commissioner’s Court from 1995 to 1998, agrees that Gilstrap was adept at working across party lines on budget matters as County Judge. “We had no problems at all between party affiliations.  Anytime you’re dealing with votes, they can be construed as just Republican or Democrat. But during that time, I don’t think there was any straight Republican push or Democrat push,” he says. 

Thompson looked to Gilstrap as a mentor. “As a freshman commissioner coming on the court kind of green, I found his open door policy very helpful,” says Thompson, who is thrilled that Ward’s successor will come from the extended Marshall family.  “The candidate could come from anywhere across the United States,” he says.  “To fit the need locally right here from Marshall, it was very delightful.”

While judicial nominees are always subject to the vicissitudes of the Senate, court observers don’t see anything controversial about Gilstrap’s nomination.

“The two senators from Texas have wholeheartedly endorsed his candidacy. The White House has nominated him. He was recommended by the Texas Democratic delegation. He has literally dotted ever i and crossed every t that you can,” says Smith. “I’m just hopeful that there’s no unforeseen obstacle because of something unrelated to his nomination because I think his nomination is about as clean as a nomination can be.”

Gilstrap’s work ethic and experience in public service will serve him well on the federal bench, according to Thompson. “He’s not going to be blind-sided about issues that could come up during his tenure. He’s not going to shoot from the hip. He’ll do his homework. He’ll do a good day’s work. He’ll show up, he’ll suit up, and he’ll perform his duty. No questions asked,” says Thompson.

What's so bad about "business method" patents? Small PR firms "goosed" by a patent on press releases

Those who have read the U.S. Supreme Court’s Bilski decision know that it involved a big "almost" — a four-justice minority that wanted to ban business method patents. While that's an ill-defined term, it's clear that such a ruling would have effectively invalidated many patents already involved in litigation.

Lawsuits asserting business method patents continue to be filed. In Marshall, Texas, a patent that seems to cover the act of distributing a press release online (No. 6,370,535) was used to sue six companies that are in that business; it was filed on Friday June 24—just three days before the Court ruled in Bilski decision that business methods will continue to be patentable. The plaintiff  behind the suit is a strangely named patent-holding company: Gooseberry Natural Resources, LLC.

One defendant targeted by Gooseberry who spoke with The Prior Art, eReleases owner Mickie Kennedy, reacted as many small companies do when hit with such a lawsuit—surprise that a patent claiming to cover what his business does could even exist.

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.

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

Buying TiVo's bull in E.D. Texas

Zusha Elinson's amusing sign-of-the-times column, published in today's Recorder, deserves to be spread wide and far. I've been eager for this one since I first began overhearing Elinson dutifully call county fairs and small-town newspapers to track down the gem that is this story: Buying TiVo's Bull. (Free reg. required.) Definitely worth the wait.

Elinson reveals that back in 2006, while TiVo was engaged in life-or-death patent litigation with Dish Networks over its "time warp" DVR patent, the company paid the record-breaking sum of $10,000 to purchase the Grand Champion Steer at Farm City Week in Marshall, Texas. Then the company named the bull "TiVo." Two weeks later, a jury awarded TiVo $74 million in damages.

"It didn't affect the outcome of the case," Sam Baxter, the McKool Smith lawyer who made the purchase on behalf of TiVo, tells Elinson. "Lawyers and facts win cases, and not much else." Baxter also notes that TiVo tactfully waited until after the trial was over to advertise its purchase in the local paper, the Marshall News Messenger.

One jury consultant interviewed for the story agreed but was unimpressed by the tactic: "Buying a cow like that I think is bullshit. I think it's insulting — the idea that people are so simple that something like that will influence the case."

Another little nugget: TiVo isn't the only tech company with significant litigation in the E.D. Tex that has become a real believer in boosting community events in Marshall as well. Elinson notes: "Stagecoach Days — the May celebration of Marshall as a transportation hub featuring the 'Little Mr. & Mrs. Stagecoach Pageant,' a parade and car show — is now known as Samsung Stagecoach Days." Read the full article.

Photo: Flickr / brent_nashville

Patent Litigation Weekly: PubPat and "Patent Troll" Make Strange Bedfellows

The view that software patents are an impediment to progress—common among technologists—is rare among patent attorneys. But Dan Ravicher is not a typical patent attorney. He founded the Public Patent Foundation (PubPat), a public interest group that, according to its website, "represents the public's interest against undeserved patents and unsound policy." PubPat recently helped the ACLU launch a major challenge to human gene patents. In the past, PubPat has also challenged broadly asserted software patents, which Ravicher believes "hinder — rather than promote — innovation."

Meanwhile, it's not unusual that a patent-enforcement company recently set up in East Texas would file suit there this week against ten Internet-based and software companies. Nor is it unusual that Texas corporate records show the company is owned by an erstwhile big-firm lawyer, in this case David Garrod, formerly of Goodwin Procter.

What is surprising is that at the same time he is trying to wring licensing fees from such big online names as Google, Yahoo, and Amazon, Garrod is also spearheading a major PubPat initiative: filing lawsuits to rid the marketplace of false patent markings.

The company Garrod owns, Bedrock Computer Technologies, LLC, filed a lawsuit on Monday alleging that the defendants infringe U.S. Patent No. 5,893,120. The list of defendants includes seven big Internet companies—Google, Yahoo, MySpace, PayPal, Amazon, Match.com, and AOL—as well as the world's largest futures exchange, CME Group, and two software companies located in the Eastern District of Texas.

Patent-Litigation Weekly: The Photo-Sharing Files

This week: A snapshot look at how the surge in infringement suits by patent-holding companies is causing big woes for small companies, and potentially affecting the ability of many people to engage in a popular pastime.

Creating and sharing images—drawings, paintings, photographs—are among the most ancient of human activities, and throughout history, technology that makes that sharing possible has been embraced as rapidly as it appears. Today, that technology takes the form of software applications for computers and cell phones.

That all helps explain why the collection of scrappy entrepreneurs who run small and medium-sized photo-sharing companies didn’t always think about patents as they built up their businesses.

But patents are certainly on their minds now that they’ve been sued for infringement by a company they've never heard of, in a place they've never thought about, in a case that illustrates how the surge in lawsuits by patent-holding companies isn’t just taking a bite out of big companies—it’s hitting small businesses too.

"You can't imagine the stress this caused, me thinking the company I put 10 years of effort into could have folded because of this," says Jeff Kelling, a partner in Texas-based software maker FotoTime.

Patent Litigation Weekly: The Lone Star Edition

This week: a low-profile Texas doctor is looking for a piece of the growing medical software market; a holding company controlled by a former Townsend partner files more lawsuits; and last week's one and only lawsuit filed in the Eastern District of Texas.

Texas Doc Has Eyes on a Prize

• Prompt Medical Systems v. iMedica Corp. 09-cv-01286, S.D. Texas, filed 4/28/09.

The Obama administration has made the switch to electronic medical records a key part of its economic stimulus plan, and is set to give health care providers $17 billion in federal funds to help make it happen. Much of the work will be done by medical technology companies hired by hospitals to implement the new records.

Eager to get some of that stimulus cash, medical technology companies are rolling out new products to help with the switch—and patent lawyers and their inventor clients are rolling out new lawsuits in response.

Medical software provider iMedica launched a new version of its Patient Relationship Manager software at the end of March. Last week, iMedica joined a growing club: companies that have discovered they will have to pay off a low-profile South Texas opthalmologist and his attorneys—or risk being shut down. 

Patent Litigation Weekly (April 6-10)

This week: The empire strikes back--Cisco Systems and Citibank file counter-suits against the patent holders making claims on videoconferencing and check-imaging, respectively; a defunct company with a less than stellar track record in the patent lawsuit business keeps filing; and a familiar player with a new name in E.D. Texas.

• Cisco Systems, Inc. v. Teleconference Systems, Llc Et Al. 09-cv-01550, N.D. California.

Teleconference Systems is a shell company set up by Acacia Research Corp., the Orange County-based patent-holding company that has, by one estimation, filed more patent suits than any other. Teleconference Systems was set up to enforce the 6,980,526 patent, which is related to videoconferencing; the patent is owned by Margalla Communications, a consulting company in Woodside, California, which presumably will share in any licensing booty Acacia wins.

On March 27, Teleconference filed its first patent lawsuit in Delaware, alleging that several companies in disparate industries have infringed the '526 patent. Teleconference is represented by Anthony Simon of The Simon Law Firm in St. Louis (formerly Simon Passante).

Troll Tracker update: Frenkel told the truth, says Cisco

On Friday, Cisco Systems unsealed its motion for summary judgment in the Albritton v. Cisco Systems defamation lawsuit, one of two libel lawsuits suits filed against ex-Troll Tracker blogger Rick Frenkel and his then-employer, Cisco.

There's a lot of information here, but the takeaway point is this: Cisco says Frenkel's articles were accurate. And in the United States, of course, you're allowed to publish true information, even if it hurts someone. What Albritton said was defamatory was either true (the docket was altered), or fell into the categories of opinion and rhetoric (words like "conspiracy") or just wasn't about him, says Cisco's lawyer, Charles Babcock of Jackson Walker.

Cisco also argues that Albritton's reputation wasn't injured at all by Frenkel's two articles, which involve a changed filing date in the ESN v. Cisco Systems lawsuit. As for co-defendants John Noh and Mallun Yen, the company  says they had no role writing, reviewing, editing, or publishing Frenkel's articles.

Polaris IP, suing Google, argues for wide-ranging discovery

On Friday, I wrote about how lawyers working for Polaris IP (Erich Spangenberg) want to use the discovery process in Polaris IP v. Google to learn more about Google's patent reform efforts. Google asked for a protective order; now Spangenberg's response is available. [PDF via Justia]

What's the relevance? Polaris lawyers want to know "Google’s views and efforts relative to the Accused Instrumentalities being able to use the patented technology of others without providing damages adequate to compensate for the infringement." The "Accused Instrumentalities" are the Google products Spangenberg believes he should be paid a royalty on: Google Search, AdWords, and AdSense.

If I hadn't recently watched a patent trial (almost) in its entirety, I think I'd have a hard time understanding what Polaris might be after. But now I can imagine the deposition clips that a skilled lawyer could get from this: "Do you really expect this jury to believe that Google respects patent rights? Isn't it true that Google doesn't want to pay when it uses other people's intellectual property? Didn't Google spend millions lobbying Congress to get the penalties for using other people's intellectual property reduced?" ... and so on.