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: Patent Bar, Doctors Face Off in Prometheus v. Mayo

The April/May issue of IP Law & Business featured a story about Robert Shafer, a Stanford University researcher whose free HIV database had become embroiled in a patent dispute that led Shafer to believe medical method patents are out of control.

Since that story’s publication, groups representing most of the American medical establishment have become involved in two major patent cases that turn on the same question that Shafer confronted: just what kinds of "technology" should be eligible for patent protection?

One of those cases, Prometheus Laboratories v. Mayo Collaborative Services et al., is now headed to the Federal Circuit; oral arguments are scheduled for August 5. Amicus briefs filed on both sides show clearly the divide between the patent bar and medical professionals on this issue.

Patent Litigation Weekly: Ex-Fish Lawyer Turns "Troll," Taps Former Firm for Suits

For Fish & Richardson, the Scott Harris saga is a dark chapter in firm history. Harris, readers of this column will recall, is the former Fish principal fired by the firm when it was revealed that his patents were being asserted against some big companies. In the ensuing litigation, Fish accused Harris of committing a “stunning betrayal”: hatching plans to sue technology companies—some of them Fish clients—while he was still employed by the firm.

Compare the strong response to Harris’s transgressions with the firm's reaction to the activities of Choongsoo Park, a former associate in Fish’s Washington, D.C. office who departed last year.

While still a Fish employee, Park acquired rights to several patents that he claims cover CDMA2000, a widely used for standard for cell phones, and 802.11, the protocol used for wireless Internet connections. He also created a holding company, SPH America, to assert those patents.

After Park's departure, his former colleagues quickly took him on as a client, helping him enforce his patents by representing SPH America in two district court lawsuits, as well as high-stakes litigation before the International Trade Commission. (Documents from the SPH America ITC complaint available at Oblon, Spivak's ITC Blog.)

For Fish & Richardson, the Scott Harris saga is a dark chapter in firm history. Harris, readers of this column will recall, is the former Fish principal fired by the firm when it was revealed that his patents were being asserted against some big companies. In the ensuing litigation, Fish accused Harris of committing a “stunning betrayal”: hatching plans to sue technology companies—some of them Fish clients—while he was still employed by the firm.

Compare the strong response to Harris’s transgressions with the firm's reaction to the activities of Choongsoo Park, a former associate in Fish’s Washington, D.C. office who departed last year.

While still a Fish employee, Park acquired rights to several patents that he claims cover CDMA2000, a widely used for standard for cell phones, and 802.11, the protocol used for wireless Internet connections. He also created a holding company, SPH America, to assert those patents.

After Park's departure, his former colleagues quickly took him on as a client, helping him enforce his patents by representing SPH America in two district court lawsuits, as well as high-stakes litigation before the International Trade Commission. (Documents from the SPH America ITC complaint available at Oblon, Spivak's ITC Blog.)

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.

 

Scott Harris v. Fish & Richardson litigation is settled

The Scott Harris v. Fish & Richardson litigation (formally styled Illinois Computer Research v. Google) was settled yesterday. No real comment from the firm, which said only the dispute was "amicably settled" in today's Daily Journal (no link). Harris did say this: "In retrospect, there were certainly things I could have done differently. I did what I thought was right at the time."

All publicly available case documents for this case are available on Justia.com.

I'll update my L'Affaire Harris timeline again soon, and have some closing thoughts. 

Update 8/18: Harris told The Recorder that the whole situation could have been avoided if only Fish hadn't pressured him to sell his patents. "When I sold the patents, I lost control of them," Harris said. "While I had them, there was no way I would've sued a Fish client like Google -- telling me to sell the patents was one of the worst moves they could’ve made."

 

Friends of Harris say they're neither 'trolls' nor 'shells'

Scott Harris is an attorney who was ousted from law firm Fish & Richardson when his patent was used to sue firm client Google; Raymond Niro is the well-known patent plaintiffs' attorney who represents Harris. Both Harris' lawsuit against his former employer, and the firm's counterclaims against Harris, are ongoing.

Ray Niro doesn't like the term "patent troll," and has taken umbrage when that pejorative is used against his clients. It's not unusual for patent enforcers to ask judges to ban that term from court (as Rambus did recently.)  Indeed, it's increasingly common for courts to police the use of "hot button" words generally.

Now we learn Niro doesn't care for the term "shell entities" either; court documents filed last month lay out his novel attempt to re-align the patent patois.

Six new defendants in the Harris v. Fish litigation

I've been told that the U.S. Court of Appeals for the 5th Circuit will start a new custom for the In re Volkswagen en banc hearing, which took place this morning—putting oral arguments online. That's great, of course; as soon as it is, they promise to get in touch with me, and I'll have a post on it.

Until then—there's six new names on the docket in L'Affaire Harris, all shell companies that apparently exist to enforce Scott Harris' patents. Fish & Richardson said a few weeks ago they would be adding more entities to this litigation, and it looks like they have, although these names may all sound familiar to close readers of the defunct Patent Troll Tracker blog. These new parties are defendants because Fish is still arguing that they have ownership of Harris' patents, trying to put the genie back in the proverbial bottle. The case is still dubbed Illinois Computer Research v. Google, although Google is no longer a party.

If you're new to this story, you can consult my timeline about this big-firm IP lawyer whose patents got him into a heap o' trouble, as well as ALM coverage. Unfortunately, the most complete source for this story is no longer available.

Tomorrow I'll take a look at the recent twists. But for now, here are the six new parties. All lawsuits listed here have the Niro Scavone firm as plaintiffs' counsel. If nothing else, now we know what their favorite word is… innovative. The patent-holding company doth protest too much, methinks.

1. MEMORY CONTROL ENTERPRISE, LLC:  Sued Honda, Oakley, LG Electronics, and U.S. Cellular in Chicago based on Scott Harris' patent 6,704,791.

2. BARTEX RESEARCH, LLC: holding company set up by Florida attorney James B. Parker to hold Scott Harris' patent on bar coding technology; BarTex is suing FedEx in E.D. Texas.

3. INNOVATIVE BIOMETRIC TECHNOLOGY, LLC: no lawsuits.

4. PARKER INNOVATIVE TECHNOLOGIES, LLC: this company filed a lawsuit against 3COM in South Florida last year after a deal to buy 3Com's patent fell apart (says PIT). Has been quiet since that settled in July.

5. VIRGINIA INNOVATIVE TECHNOLOGY, LLC: no lawsuits.

6. INNOVATIVE PATENTED TECHNOLOGY, LLC: sued Nokia and Samsung in South Florida and Motorola in Chicago over alleged infringement of four Scott Harris patents. Also sued Icon Health & Fitness in South Florida, alleging infringement of a non-Harris patent. Both suits are ongoing.

And they throw in "any John Doe shell entities" for good measure.

 

Scott Harris' lawyers drop Troll Tracker deposition demand; Frenkel, Cisco say subpoena was meant to assist Texas lawyers' defamation attack

Part One: Scott Harris’ lawyers give up their effort today to depose Patent Troll Tracker blogger Rick Frenkel. Harris’ lawyers at Niro Scavone Haller & Niro (NSHN) had said they suspected Frenkel was working with opposing law firm Fish & Richardson, which is locked in litigation with its former top-billing lawyer and Niro Scavone client Scott C. Harris.

Cisco and Frenkel, in turn, claimed that Niro lawyers were using an overly-broad subpoena as a back-door route to uncovering evidence that could be used in the Arkansas and Texas pending defamation lawsuits against Frenkel and his employer. There was no secret alliance between  Fish & Richardson and Frenkel; rather, it was the Niro Scavone firm that could be sneakily helping Johnny Ward Jr. and Eric Albritton get more ammunition for their lawsuits, allege Frenkel his employer.

Harris' lawyers say they gave up on this deposition because Frenkel swore in his deposition that he had "no communication with anybody at Fish & Richardson concerning the underlying litigation and the related parties." That cancels the May 13 hearing that was scheduled in San Jose where Harris' lawyers would have faced off with attorneys representing Cisco and Frenkel.

From Frenkel's brief opposing deposition ("Movants" here means Scott Harris & Co.):

    The subpoena is, of course, much broader and seeks wide ranging information about the Patent Troll Tracker. Furthermore, we are informed and believe that the discovery in the Chicago case has put Movants on notice that Frenkel, consistent with his declaration in this matter, had no involvement with the Fish firm whatsoever regarding the Chicago case. We invite Movants to contradict our informed belief with evidence.
    What the court is left with is that Frenkel wrote matters displeasing to Movants and their counsel on the PTT. For this they have attempted to create an excuse to take his deposition. The subpoena raises not only issues of harassment and abuse, but also the right of speakers to publish their views free of legally imposed inquiry from and by the subjects of the articles when, as non-parties, they have no connection to the underlying litigation.
    The testimony sought may have relevance to the Arkansas and Texas litigation. The Arkansas and Texas litigation involve claims that Frenkel published defamatory comments on the PTT. Because portions of the discovery sought have no apparent relevance to the Chicago case but may have relevance to the Arkansas and Texas litigation, Frenkel fears that Movants' true motivation for issuing the subpoena and seeking to compel discovery is to circumvent the discovery orders of the Arkansas and Texas courts. Such conduct is a clear abuse of the subpoena power.

In its motion to quash, Cisco Systems makes similar arguments. The company points out that not only did Ray Niro put out a $15,000 (unclaimed) bounty to unmask Frenkel, but that when Niro was a guest on the Internet radio program "Lawyer 2 Lawyer" on March 27, he gave a friendly shout-out to the Texas lawyers behind the defamation suits, saying "I know Johnny Ward very well and I know Eric [Albritton] too."

From Cisco's Motion to Quash:

    Frenkel's Patent Troll Tracker is a popular website that provides interesting, timely, and important information to the patent community and others. As the name would suggest, its point of view was sometimes critical of shell corporations established solely for the purpose of filing patent litigation (colloquially known as "patent trolls") and thus, a counterpoint to Harris' website and Niro's written articles which generally extolled their virtue. A posting on October 18, 2007 of the Patent Troll Tracker has resulted in defamation litigation in separate federal courts in Arkansas (Texarkana) and Texas (Tyler) brought by two attorneys (not Niro or his firm).
    The following deposition Topics from the subpoena might have relevance to the Texas/Arkansas Suit but would seem to have nothing to do with the claims and defenses of the Chicago case:
    5. Factual bases for Patent Troll Tracker blog articles identified in Exhibits A to C.
    6. Investigative materials, sources for, and procedure for Patent Troll Tracker blog articles identified in Exhibits A to C.
    7. All Patent Troll Tracker blog entries concerning Scott Harris, Raymond P. Niro, NSHN, James B. Parker, Courtney Sherrer, or the relevant lawsuit.
    8. The origin and history of the Patent Troll Tracker blog.
    9. The decisions on subjects, including but not limited to Scott Harris, Raymond P. Niro, NSHN, James B. Parker, Courtney Sherrer, addressed in the Patent Troll Tracker blog.

"Harris' website" is presumably a reference to the remarkably named, and recently revived, www.imapatenttroll.com.

I'll continue this story over the next two several posts.

Other posts in this series:

• Part Two: Troll Tracker speaks, and vows to return
• Part Three: Is the Patent Troll Tracker a reporter?
• Part Four: Patent Troll Tracker and the Reporter's Privilege.

Troll Tracker, hunted: Scott Harris' lawyers come to San Jose

Scott C. Harris was fired from Fish & Richardson shortly after his patent on "Enhancing touch and feel on the Internet" was used to reach out and touch Google, a firm client.

That erupted into a web of allegations between Harris, his former firm, Harris’ lawyers at Niro Scavone—and now Patent Troll Tracker blogger and Cisco IP director Rick Frenkel. Now L' Affaire Harris continues in the good old Northern District.

Last week, lawyers from the Niro firm filed a motion in a San Jose federal court to compel Frenkel’s deposition. I only saw it this morning, and put off posting on it to finish another story; of course, I was promptly scooped by my friend John Letzing at Marketwatch.

Harris’ lawyers want to depose Frenkel this month; can’t wait, they say. Frenkel and Cisco have responded with a motion to quash the subpoena. Niro, of course, is Frenkel’s most well-known adversary; he offered a $5,000 bounty for Troll Tracker’s identity and upped it to more than $10,000. (Niro has said the bounty went uncollected; he doesn’t know who outed Frenkel).

The full petition to depose Frenkel is not online, although a request to speed up the process is.

"Richard Frenkel, in his blog, Patent Troll Tracker, promoted Fish’s ownership claims, creating doubt among potential licensees and boosting Fish’s claims to ownership of the Harris patents."

"Frenkel, as the Director of Intellectual Property at Cisco Systems, has a clear association with Fish & Richardson ("Fish") and its attorneys.  In fact, Fish has represented Cisco in several law suits such as Cisco Systems Inc. et al. v. GPNE Corp., Case No.1:07-cv-00671.  In addition to the professional relationship with Fish as in house counsel for Cisco Systems, Frenkel has maintained a professional relationship with Kathi Lutton, the head of the firm's Global Litigation Practice.  Mr. Frenkel participated with Kathi Lutton and John Dragseth (another Fish attorney) in a webinar on May 30, entitled KSR, Managing Intellectual Property.  Given this association between Fish and Frenkel, it appears that Frenkel was acting at Fish’s behest to interfere with ICR’s ability to license its patent portfolio.  Frenkel may be Fish’s agent or may simply be acting at Fish’s  direction.  ICR is entitled to know the extent of the relationship and common interest between Fish and Frenkel, because it directly impacts Fish’s tortious interference with ICR’s licensing activity.

In a September blog post, Frenkel had asked whether Harris was the "mastermind" behind these lawsuits—an allegation that Fish made explicitly, saying Harris targeted firm clients like Google and Dell for patent infringement lawsuits, a "stunning" betrayal by a top lawyer. Harris won't say whether he has any financial interest in the Illinois Computer Research v. Google litigation (07-cv-05081, N.D. Illinois).

In all, Frenkel wrote the Troll Tracker blog for nine months until he revealed himself; then he was sued by two Texas lawyers, one of whom may have been after him for some time.

Speaking of that lawsuit, the Johnny Ward Jr. defamation suit against Cisco and Frenkel has moved into an Arkansas federal court. Cisco and Frenkel are asking to transfer it, oddly enough, to the Eastern District of Texas.

Documents:

• Harris' request for a speedy Frenkel deposition. <link>
• Frenkel's opposition. <link>

eBay v. lawyers with patents

Google will be headed back to the Western District of Wisconsin to fight off a patent lawsuit it thought it had beat, thanks to yesterday’s appeals court decision in HyperPhrase Technologies v. Google. (Bloomberg News story here; court order is here)

That case is connected, by both venue and attorney, to the Netcraft Corp. v. eBay lawsuit that a Wisconsin federal judge tossed out last week on summary judgment. I wrote about that case in Monday’s Daily Journal, and it’s worth following up on here.

Like the MercExchange case that has dogged eBay for more than six years, the Netcraft litigation involves a patent-wielding lawyer-inventor.

Netcraft Corp. v. eBay Inc., 07-00254 (W.D. Wisconsin)

Andrew Egendorf is a Massachusetts lawyer-inventor who began laying a broad claim to the world of electronic commerce in the mid-90’s. (find a short bio with photo here). In May, he sued eBay for infringing on his patents on “Internet billing methods.”

Netcraft is the patent-holding company set up to assert Egendorf’s patents; in addition to the eBay litigation, he filed a Delaware lawsuit against five cell phone companies in October. Netcraft Corp. v. AT&T, 07-cv-00651 (Delaware). Netcraft’s parent company is called Tradecraft; another entity called Datacraft has popped up in some patent searches).

Netcraft's lawyer is Fish & Richardson partner Frank Scherkenbach—who also represents Google against HyperPhrase, a locally grown Wisconsin patent-holding company. eBay hired an Irell & Manella team led by Morgan Chu, who tells me that Irell started working with eBay in 2006.

Even though he lost this one, Egendorf can’t be too disappointed. After all, it looks like he cashed in a few weeks before he even filed the suit against eBay. He’s one of five named inventors on a “friend finding” social networking patent, number 6,618,593, which was sold for $2.86 million at the April 2007 OceanTomo auction.

Egendorf is a lawyer with deep connections to rise of the Internet. He helped found Symbolics in 1980 with some heavy-hitters out of MIT’s Artificial Intelligence Laboratory, and became the company’s general counsel in 1983.

Symbolics was the first dot-com ever, and the company soon had a famously uncomprising opponent: free software advocate Richard Stallman. Stallman has nothing but disdain for software patents like those Egendorf builds and litigates; he also took a mighty dim view of the folks who founded at Symbolics.

“They would get outside investment, not have scruples, and do everything possible to win,” Stallman said in a lecture transcribed here. Stallman had a bitter falling out with Symbolics, describing its founding as a “stabbing in the back,” but also said the company inspired him to created GNU, his free operating system.

In 1968, Egendorf and a friend wrote to Ralph Nader, describing themselves as "disgusted Harvard graduate students who must endure endless years of drivel in order to mechanically defend the guilty and profitably screw the consumer,” according to this article in the San Diego Union-Tribune. He urged Nader to enlist him in a “judicial jihad” and became one of the original “Nader’s Raiders.” Egendorf is interviewed in the Nader documentary "An Unreasonable Man," which I have not seen.

And file this under interesting timing: the "Andrew Egendorf" entry in Wikipedia was flagged for deletion on May 3, 2007—the same day Egendorf filed his lawsuit against eBay. If I were of a more conspiratorial mindset, I might think that suspicious. But it looks like the Wikipedians who voted to kill the page were mainly annoyed that it was written by his old buddy and former Symbolics president Russell Noftsker. The articlde-deletion debate is nothing special, and can be read here.

Short histories of Noftsker, Egendorf and venture capitalist Jean de Valpine, are on Noftsker's Wikipedia user page. The note on Egendorf mentions that his wife Linda is a well-known sculptor.

She's a would-be inventor, too. Linda Egendorf has her own patent application in the works--it's for a "method of creating a soft sculpture."