The Prior Art

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.

Patent Litigation Weekly: Eolas in Texas, Triune Star fee award, and Guardian Media saga moves to appeals court

For Eolas, a Texas address, Dallas lawyers, and Plano targets.

Eolas Technology, a company built on a patent that originated at the University of California, has gone Texan. Eolas—having settled a previous infringement suit against Microsoft after winning a jury verdict of more than $500 million—this week asserted its 5,838,906 patent in a suit filed against 23 companies, including large banks, technology companies, and retailers. The goal, obviously, is to amass a new fortune via the patent wielded against Microsoft, as well its flashier child-patent, No. 7,599,985. The common thread connecting the targeted companies: they all employ browser plug-ins and “AJAX” technologies that have been used in some form on the Web for more than a decade.

Despite that, Eolas attorney Mike McKool of McKool Smith is confident the '906 patent will hold up in the current litigation. Speaking with The Am Law Litigation Daily, McKool emphasized that the patent has already been tested three times in PTO reexaminations. (It’s worth noting, of course, that none of the present defendants were around for those hearings.)

As for Eolas itself, the patent-holding company has evolved since it was last heard from. It had just one employee—Dr. Mike Doyle, who lives in the Chicago area—when it sued Microsoft, and its payroll doesn’t appear to have grown much since then. The Eolas website, however, claims the company now does research and development in addition to enforcing patents, though the links its research accomplishments are mostly brief descriptions of patents or patent applications.

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

Will patent-holding companies flock to the International Trade Commission?

Below is an excerpt and link to my most recent story, on patent-holding company Saxon Innovations' complaint filed at the International Trade Commission, published earlier this week on The AmLaw Daily. The AmLaw Daily also has a link to the Saxon complaint. 

Each year a growing number of IP lawyers heads to the International Trade Commission, asking officials there to enforce Section 337 of the Tariff Act of 1930. That Depression-era law forbids various "unfair trade practices," including the importation of products that infringe a U.S. patent--the goal is protecting domestic industries and jobs.

But a new complaint brought by a Texas patent-holding company is looking to stretch the boundaries of what constitutes a "domestic industry" worthy of protection.

Last month, Saxon Innovations LLC filed a complaint asking the ITC to ban importation of six models of cell phones manufactured by Nokia Corp., HTC Corp., Research in Motion, Inc., and Palm, Inc., as well as a television controller created by Panasonic Corp. Saxon argues the devices infringe three of the 180 patents it bought from a spin-off of chipmaker Advanced Micro Devices, Inc., in 2007. Saxon isn't the first patent-licensing operation to file a complaint at the ITC, but a few factors make it stand out even in that small group.

What would the Commission be protecting by issuing an exclusion order on behalf of Saxon? The "industry" begins and ends with Saxon, a company that fits neatly within the definition of what some patent reform advocates call a "patent troll”: five employees, no products or services, a growing trail of litigation, and a leased office in the Eastern District of Texas, a popular venue with patent plaintiffs.

Read the whole story at AmLaw Daily: A New Troll Hangout?

"Patent Hawk" lawsuit was an inside job, says Microsoft

Patent consultant Gary Odom, who blogs and does business as "Patent Hawk," used to help Microsoft defend itself against patent lawsuits. But in August, Odom slapped his former client with a patent lawsuit of his own. On his blog, Odom took a quick break from denouncing patent reform to announce his new project, in an understated post titled "Tool Groups."

Odom gamely admitted that Microsoft had been his client for years. "They had every opportunity for friendly discussion," he wrote.

New documents filed in the case reveal much more about Odom's relationship with his client-turned-target. Not only did Gary Odom work for both Microsoft and one of its outside law firms over a period of several years—he actually signed contracts in which he agreed not to file his own patent or IP lawsuits, and agreed to disclose his own patent activity. 

But Odom broke those promises many times over, say Microsoft lawyers. He secretly acquired his own patents, ultimately asserting one in this lawsuit, claiming it covers features of Microsoft Office 2007.

Blast from the (recent) past — Troll Tracker's take on 2007

In my last post I discussed briefly our 2007 patent litigation survey. In January, Patent Troll Tracker blogger Rick Frenkel reported his own survey of 2007 patent litigation, counting defendants in seven top jurisdictions and extrapolating those numbers to report a dramatic 31.5% increase in the number of defendants sued last year.

I have not checked this data, but I can say most of the lawyers I spoke to for our annual patent litigation survey thought there was a clear increase in multi-defendant lawsuits. (Google experienced an 800 percent increase in patent litigation last year, to take one prominent example.)

I think it's worth getting a variety of views out there about the year that was in patent litigation, and I'd rather let this stand in Frenkel's own voice. This post is from an archived copy I saved in late February.

Patent Venue: Is E.D. Texas the "new Delaware?"

Things got busy recently with the close of another print issue and I have committed blog-neglect; but this week TPA is officially back on track.  

Our annual patent litigation survey is up. More on that later this week. I'm not giving anything away if I note that last year was the year E.D. Texas officially became the patent litigation capital of the country, with 371 patent filings in 2007.

In our survey, we measure which law firms are doing the most work; but arguably the most interesting patent data these days is about venue. I recently added a new patent blog to my reading list: the Patent Appeal Tracer, by Cleveland lawyer Kyle Fleming. Kyle has some interesting new data up today about venue in patent cases, measuring each district's patent infringement filings on a per judgeship basis. On that basis, E.D. Texas is again the leader, with 46.375 cases per judgeship, and Delaware is close behind with 41 cases per judgeship.

West Wisconsin rates third, with 25 cases per judgeship. (The Western District of Wisconsin, based in Madison, has only two judges, and pulled 50 patent cases last year.) Some observers thought W.D. Wisconsin might be the "new E.D. Texas," but the recent $3.8 million smack-down of the Plutus IP patent-holding empire might put a chill on that.

C.D. California, New Jersey, and N.D. California are in 4th, 5th, and 6th places, respectively. Take a look at the full table at PA Tracer. To me, this data further shows how extraordinary the E.D. Texas concentration is, and it's interesting that Delaware is right up there with it. Delaware, of course, is home to lots of big corporations, at least on paper, so it's not surprising that some kinds of litigation would concentrate there.

On his now-defunct Patent Troll Tracker blog, Rick Frenkel wrote that patent lawsuits actually shot way up in 2007, when you look at the number of defendants sued. He counted defendants in several popular patent venues and extrapolated to arrive at his estimate. Most of the lawyers I spoke to for our patent litigation survey backed that up (anecdotally), saying that multi-defendant lawsuits seemed way up over the previous year.

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."

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.