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The Supreme Court has decided the last two patent cases it had before it this term, and I’m going to write some thoughts about each, starting with last week’s U.S. v. Arthrex.

People who make money by enforcing patents really, really don’t like inter partes review (IPR). Inter partes review is a system where petitioners can ask for specialized patent judges to take a second look at already granted patents, rather than having courts deal with it.

Congress voted to create IPR in 2011, and it has worked better than expected at killing off some of the worst patents. The intense dislike of IPR, especially by pharmaceutical companies, heavy patent enforcers like TiVo, and patent trolls, is why the U.S. v. Arthrex case went to the Supreme Court. The high court delivered its fractured 72-page opinion on June 21.

Arthrex is actually the second attempt to dismantle IPR that has gone to the Supreme Court—and the IPR process isn’t even ten years old. The first attempt, which was unsuccessful, was the the Oil States case, decided two years ago.

The short take on the 5-4 Arthrex decision? IPR is still alive and well. That’s very good for those of us who are hoping for a more balanced, less extortionate patent system.

It’s a tougher game when the other team gets to show up

“Inter partes” is Latin for “between the parties” and “review” is English for “review.” IPRs are like mini-litigations that take place in the U.S. Patent and Trademark Office. There’s testimony, evidence, and limited discovery. But it all takes place in front of a panel of administrative patent judges (APJs), rather than a federal district court judge. And the process is generally limited to 18 months, unlike federal litigation, which can drag on for years. The APJs just decide whether the patent claims are OK, or if they need to be tossed out. If the patent owner wants damages or an injunction—that still happens in court, not at the PTO.1 Like in litigation, the judges hear from both sides of the dispute—the owner(s) of the patent, and opponents of the patent who believe it is invalid. Hence, the “inter partes” nature of the procedure.

The process of getting a patent from the patent office is “ex parte.” That means wannabe patent owners get to have private meetings with the government. Other inventors and competitors aren’t allowed to show up. That’s part of the reason why so many patents suck, and why the government issued nearly 400,000 of them last year.

There’s an old military saying that no plan survives first contact with the enemy. Well, lots of patents don’t survive contact with actual experts who aren’t on the patent owner’s payroll. That’s why, in cases when the IPR process actually gets to a final written decision, most patents end up having at least some claims canceled.

The IPR process is also relatively “cheap.” It lowered the median cost to invalidate an undeserved patent from millions of dollars to around $250,000. That’s still a lot of money to fight off a possibly ridiculous patent, especially for a small company or a new one. But it’s much less than the $2-4 million it can cost to go to a federal jury trial.

IPRs have changed the economics of patent exploitation. Small businesses can now afford to fight off bad patents, especially if they band together; big businesses can afford to file IPRs on the regular; and specialized patent-defense companies like Unified Patents and RPX have helped their members avoid extortionate patent demands by challenging hundreds of patents using the IPR system.

Stop calling my officers inferior

Arthrex owns a patent on a knotless suture anchor. The patent explains that there are various ways doctors have of re-attaching tissue to bone when it becomes detaches, some of them involve tying knots, and apparently tying knots is a pain.

Competitor Smith & Nephew filed an IPR petition claiming Arthrex’s patent was invalid. After hearing evidence, a panel of administrative patent judges (APJs) agreed with Smith & Nephew, and invalidated Arthrex’s patent. Arthrex didn’t like that result, and argued to the Federal Circuit that the panel of APJs it faced was bogus, because they were appointed unconstitutionally.

The argument goes deep into the weeds of U.S. administrative law. Arthrex said the 200 or so APJs were just too darn powerful, with their annoying abilities to sometimes nuke patents. That made them “superior officers” who should have been appointed by the President and approved by the Senate (like the USPTO director herself). In a 2019 decision, the Federal Circuit agreed with Arthrex—but also imposed an immediate “solution” to the problem. They kept APJs as “inferior officers,” by saying they could be fired by the USPTO director. Voila, new rule, APJs now have less power, so everything is theoretically OK.2

Neither company was happy with this solution, and neither was the U.S. government, which felt that the IPR process had been thrown into disarray by the Federal Circuit’s Arthrex decision. Both parties and the U.S. government petitioned the Supreme Court, which took up the case and heard arguments on March 1, 2021.

In an extremely fractured decision, a majority of five justices agreed that there was a constitutional problem with the way APJs were appointed. But only four of those justices agreed on the fix to the problem, which was to let the USPTO director review the outcome in all IPR cases—thus continuing to keep APJs as inferior officers. The fifth vote, Justice Neil Gorsuch, wanted to throw out IPRs altogether. (Just as he did in Oil States.)

So to create a majority for the solution, the four judges were able to bring in three more votes—Breyer, Kagan, and Sotomayor. This extremely confusing constellation of agreement and disagreement is best understood by staring at this Venn diagram, created by Josh Landau, of Patent Progress.

A 5-4 decision sounds like a nail-biter, but in this case, it really wasn’t. Remember that on the really important issue, which is the legitimacy of IPR, it wasn’t actually that close. Only Gorsuch would have voted to dismantle IPR.

Gorsuch, the new patent maximalist

Gorsuch really doesn’t care for IPR, and he’s made that clear in two cases now. In his dissent, he describes IPR as “a panel of bureaucrats wields unreviewable power to take vested property rights.”

If my view on IPR hasn’t been clear already: it’s the only chance for competitors or the public to get a second look at monopoly rights that get handed out willy-nilly by a government office. Given the views he has expressed in Oil States and now Arthrex, I am concerned we’ll never see a patent decision from this justice that treats users and everyday people fairly.

Gorsuch’s views obviously don’t dominate the court, and he’s apparently the only one that feels this strongly about the issue. But the high court changes over time. If and when Breyer retires, the court will lose its best advocate for a balanced approach to patents. Gorsuch will be sticking around for a long while.

Future USPTO directors will have more power over IPR

The USPTO director will now get to review IPR cases and throw out results she doesn’t like. That’s potentially not great, since USPTO directors often come from law firms or companies that enforce lots of patents. (We don’t yet know who Biden is going to pick to head the USPTO, but this decision raises the stakes somewhat.)

However, some smart folks have told me that the USPTO director wouldn’t dare to use this power to regularly intervene in patent cases, or the President might step in. How much intervention will we actually see? “Only time will tell,” as we say in the journalism biz.

So overall, the Arthrex decision is good news. IPRs have done a better-than-expected job of knocking out bad patents for almost a decade now, and they can keep on trucking, under the watchful eye of non-superior APJs.

Top image from Pixabay

A few weeks ago, a company you’ve probably never heard of, called Personalized Media Communications (PMC), won a $300 million patent verdict against Apple. Here’s the verdict form.

PMC is what patent lawyers call a “non-practicing entity,” or NPE. The company has acquired over 100 patents that date back to applications from the 1980s, and it uses them to demand money from companies that do stuff—mostly internet companies.

Not only does PMC not make anything, it’s never really tried. The company’s CEO admitted under oath that it’s never done any research and development1. Its principals simply manipulate the patent system to get more patents, many of which have priority dates that connect them to the original applications from the 1980s.

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And they’re still on the move; as of November, they were in licensing discussions with more big companies, like Walmart and Disney.2 PMC, which has been a party to more than 20 federal court litigations so far, has said Disney should pay it a cool $43 million for its streaming video services.3 And the company currently has pending litigation against Amazon and Netflix.

So how do they do it?

You can’t understand how the NPE business model works without looking at how companies like Personalized Media Communications win at trial.

I’d love to read the transcript of the PMC v. Apple trial that just concluded, but I can’t. The transcripts aren’t yet on public databases, and are still being analyzed and redacted4 by the lawyers on both sides. They won’t be public until a few months after trial. 5

However, there is another set of documents that reflects directly on this case: transcripts from the PMC v. Google trial that took place in the same court—Judge Rodney Gilstrap’s courtroom in Marshall, Texas—back in November of 2020.

PMC’s case against Google resolved very differently than the case against Apple. PMC lawyers wanted Google to pay as much as $183 million in damages, saying that YouTube infringed four PMC patents. But the verdict was a clean sweep for the defense: the jury found that Google didn’t infringe any patents, and PMC walked away empty-handed.6 PMC recently gave notice they will appeal their loss to the Federal Circuit, which is not surprising.

The PMC v. Google transcripts provide a close look at how PMC, one of the oldest and most successful NPEs, operates. In the case against Apple, PMC employed a different law firm, and put forward different witnesses. They changed up their game, faced a different opponent, and ended up with a huge verdict. When the PMC v. Apple transcripts become available, it will make for a fascinating comparison.

A Family Business

During opening statements, PMC attorney Arun Subramanian described the origin story of PMC inventor and founder John Harvey to the jury:

John Harvey went to Yale in the 1960s on a Navy ROTC scholarship, and he graduated and served in the Navy. He actually was deployed to Vietnam twice on a Navy destroyer… We've got some pictures here from his younger Navy days.

He was a communications officer. He worked with things like encryption, signal processing, and it was really in the Navy that Mr. Harvey's fascination with communications technology really took shape.

So fast-forward a few years to 1981. Mr. Harvey sat down with an electrical engineer whose name was Jim Cuddihy. And together, Mr. Harvey and Mr. Cuddihy put together ground-breaking inventions in communications technology that were ahead of their time.7

TVs in the 1980s had “rabbit ear antennas, “knobs” that “would sometimes fall off,” and “grainy pictures,” Subramanian said. “By using the power of computing and digital signals and networks,” Harvey and Cuddihy sought to “enhance and improve what TV… could be in the future.”

They filed their first patent application in 1981, and founded PMC that year. Today, Personalized Media Communications lawyers describe the company as a “family-run business” with seven employees.

PMC’s business “is to license out the technology of Mr. Harvey and Mr. Cuddihy so that companies that want to use that technology with permission can do so,” Subramanian explained. “The company has over 20 licensees, and they've earned millions and millions of dollars from companies who have paid for the right to use PMC's technology.”

The job of a non-practicing plaintiff is to normalize their business. And that’s not as hard as you might think. How could Harvey and Cuddihy not have something special, if so many big companies paid them millions of dollars? And they’re talking about those huge licensing deals right here, in front of a black-robed federal judge who has already explained that patents—and the judges, juries, and lawyers who deal with them—are Very Important Things.

To the extent that Harvey and Cuddihy ever had an idea for an actual product, it seems to have been a kind of computerized graphical overlay on top of a TV screen. At some point in the early 1990s, PMC demonstrated a prototype to some potential investors in New York City. The prototype system consisted of a VCR and a computer that were hooked up to another TV screen, which combined the video streams in some way. It wasn’t connected to the internet.

Whatever this contraption was, it was likely pathetically out of date when it was shown off. By the early 1990s, in universities, computer scientists were tinkering with the first web browsers; on the consumer market, Prodigy and CompuServe were already duking it out for dominance, with more than a million paying customers between them.

PMC never made any for sale. And as the CEO admitted, they didn’t even spend on R&D. Instead, they embraced the fantasy language of the patent troll—one in which real companies, like Sony and Arris and other licensees, “took licenses in our inventions because they were using those inventions,” in the words of PMC’s general counsel, Thomas Scott.8

Subramanian’s opening statement did a decent job of making it sound like John Harvey was a scrappy engineer who was ahead of his time. He left out that Harvey spent his post-Navy life working in finance, not engineering. PMC is largely a collaboration between two old Yale buddies, one of whom became an investment banker, and another who became a patent lawyer.

The Submarines Surface

Subramanian went on to explain how PMC’s four patents (1, 2, 3, 4) were infringed by various YouTube features. PMC claimed a patent on a “remote intermediate transmitter station” covered YouTube’s system of caching videos at Edge Nodes. Subramanian showed PMC’s ‘528 patent, which in Claim 21 describes “determining the absence of complete generated television image data,” and then “advancing to subsequent information.” Then, summoning a fanciful world in which early YouTube engineers had even heard of the ‘528 patent, much less ‘followed’ it, Subramanian told the jury:

Following the steps of the methods in the '528 patent, YouTube knows how to skip over the missing frames and the incomplete frames and go to the next complete one. So that's what's happening behind the scenes.

Subramanian also claimed that YouTube’s system of showing thumbnails infringed a PMC patent related to a “multimedia presentation,” and that PMC’s U.S. Patent No. 7,769,344 described YouTube’s DRM system.

All four of the patents claim priority back to a 1981 application. How is this possible, when patents typically have a 17-year or 20-year term? Well, it used to be possible to file so-called “submarine patents,” in which the application can be filed and then argued over (prosecuted) at the U.S. Patent and Trademark Office for an extremely long time. Then the clock starts ticking towards expiration only after the USPTO grants the patent.

This particular method of manipulating the patent system was banned in 1995, when the USPTO changed how it calculates patent terms. But Thomas Scott—PMC’s general counsel, who testified at this trial—was determined to be one of the last to take advantage of the old system. In June 1995, one day before the new law went into effect, Scott filed more than 300 new patent applications—all linked to the original 1981 patent.

In 1999, Personalized Media disclosed this strategy to the New York Times, adding that its goal was to “seek licensing agreements from companies using technologies described in its patents.”

Harvey and Scott were one of the earliest, boldest proponents of pure patent licensing as a business model. It has paid off handsomely. All four of the patents it used against Google, just like the DRM patent it used against Apple, appear to be linked to that batch of hundreds of applications that Scott filed just under the wire in 1995.

“They exist to exploit the patents”

Google didn’t even try to invalidate the patents at trial. Instead, its lawyers focused on the non-infringement—emphasizing that these old patents were simply not relevant to YouTube.

“These patents are old 1981 inventions, and they don't apply to the sophisticated internet we have today,” Google lawyer Charles Verhoeven told the jury during his opening.9 He continued:

PMC—they’re a licensing company. They do not make any commercial products. They do not sell any commercial services. They exist to exploit the patents that Mr. Harvey has obtained over the years. That’s all they do…

The inventions in this case, three out of the four of them, all occurred in 1981. The fourth one occurred in 1987. That's 25 years before Google even acquired YouTube. 25 years. Now, we've been around this world long enough to know that in 25 years, technology doesn't look anything like it looked the previous 25 years.

Today, we have laptops. We have smartphones. We have the Internet. There was no Internet that was commercially available in 1981, none. And there's no mention of the word ‘Internet’ anywhere in these patents.

Two days later, when PMC general counsel Thomas Scott was on the stand, Verhoeven was again able to emphasize PMC’s do-nothing business model.10

Q. (Mr. Verhoeven) Did PMC's prototype work ever lead to a commercial product, whether it was made by PMC or another company?

A. (Mr. Scott) It certainly did.

Q: Okay. What commercial product?

A. Well, the ones made by our licensees.

Q. And it's your testimony that they developed your prototype?

A. No, they -- they developed their products and -- and took licenses in our inventions because they were using those inventions.

Q. Did any outside parties, and by that I mean non-PC -- non-PMC entities, invest money in the development of the prototype?

A. Not -- no.

Q. And the prototype itself, not the licenses, but the prototype, that was never sold to anyone, correct?

A. No.

Q. The prototype no longer works?

A. No, it does not work anymore -- any longer.

Google met with PMC principals at least twice, in 2011 and 2015, to discuss buying its patents. In the first meeting, PMC employees showed off claim charts demonstrating how they believed Apple infringed—and how much money Google could make by buying PMC’s patents to launch a lawsuit against Apple. Both pitches fell flat, since Google never made a purchase.11

Google was communicating with PMC as early as 2009, when then-PMC chairman Gerald Holtzman sent an email to Google’s Kent Walker entitled “Our New Patents.”

In 2011, Holtzman, who passed away in 2018, along with PMC licensing agent Boyd Lemna, made a presentation to Google urging the search giant to purchase PMC’s patents—to sue Apple. They presented claim charts, and (allegedly) estimates of how much money Google could make by buying PMC patents and launching lawsuits.

Google met again with PMC in 2015 in New York. A lot of the testimony about these meetings was in a sealed court, and isn’t available in the transcripts. But it’s clear that the discussions didn’t work out, and everything went quiet until 2019, when PMC filed its lawsuit.

In the end, is Apple a victim of PMC? In a strictly logical sense, yes, I do see it that way. In my view, the NPE business model is simply unethical, regardless of how much money its victims have.

But Apple is a particularly unsympathetic victim. Not just because it’s one of the richest companies on earth, but because Apple has such a long history of leveraging intellectual property, and particularly DRM, in ways that are anti-competitive and bad for society. That’s why Cory Doctorow sees an “especial and delicious irony” in Apple losing so big in a trial that’s purportedly over, in part, who invented DRM. His recent post inspired by the PMC verdict recounts how Apple has pushed the limits of the IP system to its own benefit. I highly recommend it, and if you want a more holistic view of how IP gets abused, Cory’s work is required reading.

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Image: Eric McCarthy / flickr

I’m almost done plowing through the January patent lawsuits of 2021. It’s been interesting to go through each of the cases from a month but it’s also beyond my bandwidth to keep this up, so after I finish my full list for January stats I’ll have to change tack, and will just pick a few of the most interesting cases to write about in future months. If you have thoughts on what cases are most worth covering, I’m all ears: joe@letterspatent.org.

Today, I’ll briefly examine all the patent cases filed by non-practicing entities (NPEs) between January 18 and 24. So this is Week Three of the year, which is kind of Year Zero for the Letters Patent calendar. I’ve already written posts running down who filed cases in week one and week two. For the week of Jan. 18-24, I counted 44 utility patent lawsuits, of which 27 were non-practicing entity (NPE) cases. That’s 61% of the total.

Here’s the third edition of my litigation spreadsheet which has all case numbers and case names for those interested.

The most popular district was again the Western District of Texas, with 15 of those cases. A full 14 out of the 15 W.D. Texas cases were NPE cases. The second most popular district was Delaware, with 11 cases filed. Notably, only 3 of the 11 Delaware cases were NPE cases.

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The one lawsuit that really jumped out at me from this week I covered in some depth last week: that’s the Thompson v. Melcher case. An Oregon resident says he has a patent on his state’s MyODFW mobile app, and has sued the head of the Oregon’s Department of Fish and Wildlife for infringement.

The rest of the NPE cases this month are nothing really out of the ordinary. There are appearances by both Raymond Joao and Leigh Rothschild, whose inventions have already made multiple appearances in 2021 lawsuits. There are a few new entities, including one asserting patent rights over highlighting in e-books. Also, we see two different entities asserting patents that came through Intellectual Ventures. Even as it may be winding down, IV patents are having a long-term impact on the U.S. litigation landscape that may last for years to come.

Without further ado, here’s what I found out about the NPE cases that were filed from Jan. 18 to 24:

32. Pixel Display LLC v. Hisense Co., Ltd. et al [Complaint]

Pixel Display is a new NPE just getting started. Address is an Austin virtual office. This is its third lawsuit suing over U.S. Patent No. 7,245,343, originally issued to Japan’s NEC Corp. in 2007. The patent comes by way of Intellectual Ventures.

33. Castlemorton Wireless, LLC v. Legrand North America, LLC [Complaint]
    Castlemorton Wireless, LLC v. Ubiquiti Inc.

U.K.-based Castlemorton has filed more than 30 lawsuits based off Geoffrey Bagley’s patent claiming rights to international wireless standards.

34. Intellectual Keystone Technology LLC v. JOLED Inc. et al [Complaint]

This NPE was created in 2013 as a wholly-owned subsidiary of Samsung Group. “IKT will be tasked to find out which patents are helpful and valued for Samsung,” an unnamed industry source told the Korea Times. It’s suing JOLED and Asustek, as an add-on to the lawsuit that Samsung filed against those defendants earlier in the month. And JOLED apparently threw the first punch here, suing Samsung earlier in 2020.

This whole Samsung v. JOLED & Asustek dispute is going to be worked out in Waco, Texas, because of course it makes sense for a Korean company to battle a Japanese company and a Taiwanese company in Waco. Very cool and efficient.

35. Heavy Duty Lighting, LLC v. RAB Lighting, Inc. [Complaint]

Newish entity has filed 3 cases so far over LED lighting patents. Its address is the Ni Law Firm in Dallas, Texas, which also signed off on the patent transfers. Asserting a bunch of patents that originated at Japan’s Sharp Corporation.

36. BCS Software, LLC v. Zoho Corporation [Complaint]
    BCS Software, LLC v. Open Text, Inc. [Complaint]

BCS Software has filed 18 lawsuits, all in the Western District of Texas. Four appear to be based on this patent, number 8,819,120, “Method and system for group communications.” The accused products are team-based file-sharing systems.

The company is based in a co-working space in Waco, Texas, and is registered to do business under the name Bluebonnet Consulting Services, although I can’t find any evidence it’s done any business at all. Its members are Douglas R. Baum and Marlena Fitts, both of Austin. Baum is also connected to Vindolor LLC, another NPE with 10+ lawsuits to its name.

37. Aperture IP LLC v. Wyze Labs, Inc. [Complaint]

Aperture IP has filed two lawsuits this year, based on patent number 7,598,580, originally granted to Taiwan-based Kingpak Technology.

The company was formed in November, with Adam Baumli, an attorney and portfolio manager at IP Valuation Partners, listed as the managing member.

The defendant is Wyze, a Seattle-based smart camera startup that has moved into other smart home products. Crunchbase reports $45 million in total venture funding for this still-young startup with perhaps 100 employees. Wyze’s door camera, which looks like a Ring competitor, is accused.

38. Sharpe Innovations, Inc. v. Verizon Communications Inc. [Complaint]

Company is based at a residential address, an “all brick waterfront mansion” with a boat dock in Mineral, Virginia. U.S. Patent No. 8,573,986 for “SIM Card Adaptor” is owned by Sharpe Innovations. The patent describes a plastic cutout allowing use of a smaller SIM card in a device that would otherwise hold a larger SIM card. Verizon’s SIM Starter Kit, which includes a Micro SIM adapter, is said to infringe.

Before transfer, the patent was co-owned by named inventor Cameron Alan Holmes; Odette Kim Holmes; and William Andrew Sharpe.

Since 2017, Sharpe has filed 14 lawsuits against cell phone companies and vendors.

39. Lexidine, LLC v. Onyx Enterprises International Corp. [Complaint]

Lexidine is owned by Mr. Eric Park, the inventor on U.S. Patent No. 7,609,961. Park’s patent claims to cover brake light cameras. There’s no evidence Lexidine does much, but Park appears to also be affiliated with a company called Savv Automotive, which shows cameras for sale (but they’re all sold out).

Since 2019, Lexidine has sued 13 companies making automotive cameras, in various judicial districts.

40. Social Positioning Input Systems, LLC v. Lytx, Inc. [Complaint]
    Social Positioning Input Systems, LLC v. Particle Industries, Inc. [Complaint]
    Social Positioning Input Systems, LLC v. ClearPathGPS, Inc. [Complaint]

Social Positioning Input Systems (I’ll call it SPIS) is another creation of Leigh Rothschild, a serial litigator who often sued small companies. Rothschild entities have filed lawsuits every week of 2021 that I’ve looked at so far.

In these lawsuits, SPIS claims infringement of patent number 9,261,365, which claims “sharing information for a positional information device.” Basically, if you have a GPS tracking system, SPIS might take a bite. All three of these defendants do different types of vehicle tracking using GPS.

41. Flexiworld Technologies, Inc. v. Canon, Inc. et al [Complaint]

Flexiworld, which did business as Flexiwave, is in that class of NPE that definitely had some products, once upon a time. The Portland-area company still has a website up, which looks like it hasn’t been updated since 2006. It advertises some Bluetooth products, but just looking at them, they’re clearly from another era.

Flexiworld sued Skype for patent infringement way back in 2007. No litigation from then until 2020, but now it’s found new meaning in patent lawsuits. Flexiworld sued Amazon and Roku last year, and now has sued Canon over wireless printers.

42. Safe Driving Technologies LLC v. Ford Motor Company [Complaint]

Safe Driving Technologies (SDT) inherited the IP of Applied Computer Technologies, which still has a website up and looks like a once-upon-a-time company. Inventor Mouhamad Naboulsi founded Applied Computer Tech, and he used to work for Ford Motor Company, the defendant in this case, following a stint at Mazda.

The complaint states Naboulsi demonstrated his invention, a way to reduce distracted driving, to Ford executives, and was asked to assign his invention to them, but declined. “Mr. Naboulsi was eventually terminated in December 2004” by a manager at Ford, the complaint states. “While the official reason for termination was a ‘conflict of interest,’ Mr. Naboulsi believes that he was terminated because he refused to assign his invention to Ford.

Naboulsi says Ford’s Sync 3 system infringes four of his patents (1, 2, 3, 4). This is the first and only lawsuit from Safe Driving Tech so far.

43. Rock Creek Networks, LLC v. D-Link Corporation [Complaint]

Rock Creek is a new entity, a Texas LLC holding U.S. Patent No. 6,671,750, which originated at Japan’s NEC. It sued 3 other companies on Jan. 28, following this suit against D-Link filed on Jan. 22.

44. Trenchant Blade Technologies LLC v. Samsung Electronics Co., Ltd. et al [Complaint]

Samsung sued Trenchant Blade Tech, along with a company called Longhorn IP, last year in California. Longhorn has some patents it got from AMD, and Trenchant Blade is holding patents that were assigned to it from TSMC, a Taiwanese chipmaker.

Now Trenchant Blade has sued in its preferred district, the Western District of Texas. Trenchant Blade has a website (and a blog!) on which it announced this lawsuit. Points for transparency. “The patents at issue relate to state-of-the-art semiconductor manufacturing and chip packaging technologies,” it states.

45. Terrestrial Comms LLC v. Plantronics Inc. [Complaint]

Terrestrial Comms is located in a Dallas virtual office and his filed several lawsuits against a half-dozen electronics makers, as well as retailer Best Buy. Plantronics bluetooth earpieces are accused of violating patent 7,411,552.

46. Caselas, LLC v. Hancock Whitney Bank [Complaint]
    Caselas, LLC v. Altra Federal Credit Union [Complaint]
    Caselas, LLC v. Eastman Credit Union [Complaint]
    Caselas, LLC v. First National Bank of Omaha

Caselas is an entity controlled by lawyer-inventor Raymond Joao, and I wrote about it as case #1 in my roundup post from a few weeks ago. Caselas’ business is to file lawsuits claiming that it was Joao who invented the idea of warning people about credit card chargebacks. Personally I don’t think this is a particularly credible claim, but it hasn’t stopped Caselas from suing banks large and small. My current count shows Caselas has filed 23 litigations, all filed since December.

47. Light Speed Microelectronics, LLC v. NXP Semiconductors N.V. et al [Complaint]

48. Liberty Patents, LLC v. Lattice Semiconductor Corporation [Complaint]
    Liberty Patents, LLC v. Texas Instruments, Inc. [Complaint]
    Liberty Patents, LLC v. Analog Devices, Inc. [Complaint]

I covered Liberty as case #11 from my Jan. 26th post, when they were preemptively sued by Lenovo. Liberty is owned by a Texas attorney who has filed around a dozen lawsuits. These cases assert two patents that originated at Cypress Semiconductor, and like Liberty’s other cases, the patents were transferred by way of Intellectual Ventures.

50. Pop Top Corp. v. Ectaco, Inc. [Complaint]

Pop Top has used a “web highlighting” patent, number 7,966,623, to sue Ectaco, Barnes and Noble, and Rakuten Kobo, all of which make e-reader apps.

The inventor is Sunnyvale resident Rohit Chandra. The complaint claims Chandra “built companies which… offered widgets, superior search results, tools for curating web documents, highlighting, social networks, etc.” It says the app that powers Ectaco’s Boox e-reader infringes. Previous lawsuits accuse the Nook and Kobo e-readers of infringing as well.

Chandra’s LinkedIn page also says he invented the “Personalized/Vanity URL (e.g. http://username.domain.com), in the form of Patent No. 6,085,242.

That’s all for this week. Please send feedback about what you do or don’t like in this newsletter, as well as tips for cases to take a closer look at, to joe@letterspatent.org.

Image: From U.S. Patent 9,047,170, “Safety control system for vehicles.” See Case #42.

What if you could get a patent on a new government program? Then, you could ask for the government to pay you royalties just for running that program. Nice work, if you can get it.

Oregon resident Iiley Thompson is the named inventor on U.S. Patent No. 10,257,651, “Mobile electronic device for identifying and recording an animal harvest.” Shortly after his patent issued in 2019, Thompson’s lawyers sent a letter to the Oregon Department of Justice, suggesting that the Oregon government take a license to his patent.1

Thompson claims that the Oregon Department of Fish and Wildlife’s MyODFW app, which allows hunters and anglers to complete their licensing paperwork on a mobile device, infringes his patent.

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Claim 1 describes:

• Entering animal harvest data (i.e. how many fish of a certain type you caught) into a computer

• Uploading the harvest data, together with location data, to a second computer (operated by someone else)

• Checking the data against the maximum allowed by the user’s license

In other words, Thompson patented following state laws, and filing the appropriate paperwork, but you know, connected to a powerful computer network. Claim 2 describes the same system, but specifies a mobile device as the first computer and a server as the second.

On January 22, Thompson filed a lawsuit claiming that MyODFW infringes his patent. But he didn’t sue the state or any of its departments—he sued Curt Melcher, the Director of the Oregon Department of Fish and Wildlife, personally.

Making it Personal

Because of a legal concept called sovereign immunity, you generally can’t sue a state government, or any of its departments, for patent infringement. When I saw the Thompson v. Melcher case as I was going through this year’s first patent lawsuits, it struck me as a possible attempt to do an end-run on sovereign immunity.

I ran this hypothesis by Joshua Landau, patent counsel at Computer Communications & Industry Association, who agreed that it did look like a way to put legal pressure on a state when you can’t sue the state. He pointed me to a 1908 Supreme Court case called Ex parte Young, which suggests just this method to get around sovereign immunity. Plaintiffs can sue a state official who they believe is in violation of a federal law. In this case, because Thompson is barred from arguing that the State of Oregon is violating his patent, he’s saying Melcher personally has contributed to the infringement of his patent.

The Ex parte Young route doesn’t provide a way to get damages, only an injunction, and indeed Thompson doesn’t ask for damages in his lawsuit. If Thompson’s extremely broad claims are valid, in my view, that would basically mean shutting down the MyODFW app.

"It certainly looks like an attempt to put pressure on the state, both through legal expenditures, and by threatening to enjoin a service they provide," Landau said. "Suing an individual official is a plausible strategy to try to get around state sovereign immunity in some cases, but there are significant open questions."

Among those questions would be whether or not Melcher has a significant enough connection to the allegedly infringing app. Melcher is a longtime public servant who has served as ODFW’s director since 2015.

Patenting A Government Service Is Pretty Bad

Regardless of who is being sued, Thompson’s patent on e-tagging wildlife is very problematic in and of itself. Most government services aren’t really “inventions.” So there really shouldn’t be patents on collecting benefits, or getting a certain type of state-granted license, or reporting your taxes. And because of the Alice v. CLS Bank Supreme Court case, similar “do it on a computer”-style patents should be banned, as well. We shouldn’t be seeing patents that cover “requesting benefits plus a powerful computer network” or “sending your paperwork to the government oh but on a smartphone.”

But we do see them all the time, because it’s a broken system. Patent examiners have, on average, 19 hours to prove applicants like Iiley Thompson should not get a patent.2 Applicants get an unlimited number of do-overs, as long as they can keep paying for them.

Thompson’s patent application was filed in 2015. At that date, it was utterly predictable that government services like hunting licenses would continue to move online, as they already had been for many years.

And it wasn’t just predictable in a general sense—it was specifically predictable that Oregon regulators would move their hunting licenses to smartphones. They were already moving other ODFW services to smartphones, and were being as public about it as possible. By late 2014, about a year before Thompson filed his patent application, the Department linked smartphones to its hunting map. This was reported in The Oregonian, the state’s largest newspaper. By mid-2015, ODFW had come out with a fishing-specific app, which was reported in the Klamath Falls Herald and News.

So it’s hardly shocking that in March 2016, ODFW got started thinking about how they could improve their licensing process. The timeline for Oregon’s creation of electronic licensing is laid out in this ODFW PowerPoint.

Notably, Thompson never actually created his own app, at least not one that’s ever been made publicly available. As his complaint states, “Thompson has never offered nor sold, and has never authorized nor licensed any other to offer or sell, a system or method covered by the claims of the ‘651 patent.”

Thompson runs a footwear business in a town just south of Portland, and has an extensive resume of work in that industry, including stints at Adidas and Nike. I asked Thompson to talk about his case to get his side of it, but he declined an interview. I also emailed the public information office at the Oregon Department of Fish and Wildlife, but didn’t hear back.

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That’s all for this week. Due to various life things that I did not foresee, the newsletter is out on Thursday this week, but I’ll be back to Wednesdays next week. My next post will go through a couple dozen NPE lawsuits that have been filed in the last month.

In other news, I’m excited to have a DocumentCloud account for Letters Patent. For those interested in looking at the legal documents associated with the cases I’m covering, it should be a nicer reading experience.

Legal Documents from this post:

• Thompson v. Melcher Complaint

• Thompson v. Melcher Exhibits A-D

Image: Drawing from U.S. Patent 10,257,651

In the past two newsletters, I looked at the first batch of patent lawsuits that were filed in 2021. As I explained in my post about how to define a patent troll, I have a particular concern about abuses of the patent system caused by non-practicing entities (NPEs). 

This week I want to focus on something quite different, by looking at a case where the plaintiff is not an NPE. Hug Sleep is a small Wisconsin company, founded by a husband and wife team. They make an adult swaddle product called the “Sleep Pod,” and had a recent marketing coup when they appeared on the TV show “Shark Tank.” On January 15, they filed a patent lawsuit against a California-based competitor called called MartX, which makes a product called ChillPajama.

It’s an important contrast to our ongoing discussion over NPEs. The Hug Sleep v. MartX case is how people expect patent disputes to work. A company that makes a physical thing you can hold in your hand has used a patent to force another company, with a similar thing, out of the market.

Today I’m going to explain why this “normal” use of the patent system1 is still very problematic for consumers, competition, and the economy at large. In my view, Hug Sleep’s patent and its lawsuit don’t meet the Constitutional goals of the patent system, which is to “promote the progress of science and the useful arts.”

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A bit of housekeeping: you may have noticed that it’s Wednesday. After several weeks of publishing on Tuesdays, I’ve decided that future editions of the main Letters Patent will come out on Wednesday mornings. I’ll also continue to send out occasional Saturday posts with patent-related news links.

I reached out to Hug Sleep to see if they would talk about their story and the reasons behind this lawsuit, but they didn’t respond.

Hug Sleep: A Compressed History

The founders of Hug Sleep, Matt and Angie Mundt, created a compression swaddle for adults, and started selling it in early 2019. They got early positive reviews in Fast Company and BuzzFeed.

In October 2020, the Mundts and their “Sleep Pod” were featured on ABC’s Shark Tank. They told how they started their company with just $2,500, and converted that to $490,000 in sales within 16 months.

“As this fabric stretches, it wants to compress, providing a gentle, calming pressure, helping you to relax and fall asleep,” Matthew Mundt told the Sharks. “It truly simulates the feeling of being hugged.”

The TV appearance seems to have been a major success. The Mundts received offers from all five of the Sharks, at exactly the price point they requested. (Fans of the show will know how unusual it is to get five offers.) They ultimately accepted offers from two, selling 20% of the company for $300,000.

Within just a few days of the show’s broadcast, the Mundts published a video update on their Facebook page saying they had temporarily sold out of product. “We’re overwhelmed, but overjoyed with the response,” Angie Mundt said.2

But when it came to selling compression sleep products, Wisconsin-based Hug Sleep wasn’t the only game in town. Out in California, another company was selling compression sleepwear, marketing it direct to consumers at ChillPajama.com.

Hug Sleep’s lawsuit against MartX, the company that makes ChillPajama, says their product infringes U.S. Patent No. 10,463,179. Hug Sleep wants damages, interest, and an injunction that would prevent future sales.

The Disappearing Competitor

After seeing the lawsuit, I became curious about ChillPajama, so I Googled the company. By the time I performed this search in late January, ChillPajama.com had already shut down its website. However, a Google cache still remained available, and I was able to see a version of the site that was up on January 8, just one week before this lawsuit was filed.

The website featured a chart that outlined the difference between their sleep compression product and “The Competition,” which I’m pretty sure describes their view of the Hug Sleep product. ChillPajama was selling for $64.99, which is $15 less than the current Hug Sleep price of $79.99.

Here’s the (now deleted) chart that ChillPajama created to explain how their product was different from, and better than, the patented Hug Sleep product.

I haven’t bought or handled either of these products. But just based on the description, it’s clear that ChillPajama was trying to differentiate itself from the competition, and improve upon the Hug Sleep product, not just copy it.

In particular, a product you can walk around in seems pretty different than a product designed specifically for sleep. Hug Sleep’s FAQ specifically recommends against walking in their product, and Shark Tank investor Robert Herjavec actually fell out of bed and hurt himself when he tested the product on TV. ChillPajama’s chart also shows differences in fabric, cut, and compression level.

I have no idea who created ChillPajama and no way to contact them. The parent company, MartX, is a Delaware LLC that was formed in August 2019. Since Delaware’s Secretary of State allows for considerable secrecy in regards to who owns LLCs, the trail pretty much runs dry there. The address in the complaint looks like an unlabeled warehouse in Placentia, California, and Google Street View isn’t particularly revelatory.

ChillPajama claimed it had its own patent pending, but searching USPTO databases for ChillPajama and MartX doesn’t turn up an application at this time.3

This “Promotes the Progress?”

Let’s concede that the creators of the Hug Sleep product created something innovative. And, let’s even assume they used their patent to prevent a competitor from copying their idea, at least on a basic conceptual level,4 and thus “free riding” off their innovation and producing a lower-cost product. A lot of folks would say that the Hug Sleep patent lawsuit represents the system working exactly as intended.

Still, I would argue that Hug Sleep’s litigation, and others like it, creates real problems for the economy and innovation.

First, competition is very good, and Hug Sleep’s lawsuit has already limited it. People who want compression sleepwear, like consumers in most markets, are better off with more choices. ChillPajama was selling what appears to be a different product for a lower price. Sleep Pod might be good for some consumers, while others would prefer the ChillPajama. Now, they won’t get a choice. They won’t even see the comparison chart that ChillPajama made, which has already been wiped off the Web by Hug Sleep’s litigation.

Maybe ChillPajama was a Johnny-come-lately that started making its product only after Hug Sleep blew up following the Shark Tank appearance. If that’s the case, then we have to ask… So what? Popular products are supposed to have new market entrants, which improve quality and lower prices. That’s Econ 101, but for reasons that remain unclear to me, patents are treated as some kind of hall pass out of normal economics.

Second, the Hug Sleep patent seems very broad, and may well prevent future competitors. ChillPajama tried hard to make clear how different its product was. Reading the Hug Sleep patent and the complaint, it’s unclear how one could make compression sleepwear and not run afoul of the Mundts and their legal claims.5 Simplifying Claim 1, it describes:

• A body portion and neck portion that are sewn together

• Fabricated based on a “stretchable material with memory”

• The sleepwear must have a “stretched” mode and a bigger “unstretched” mode

• An entrance for arms and legs

Patent system defenders often say that it’s beneficial to force others to “design around” patents, and that this is somehow part of the innovation process. This is a dubious claim. A design-around is socially valuable only when it leads to new and useful technology, not when it’s an arbitrary change just to avoid a lawsuit.6

Third, Hug Sleep built on the innovations of what came before them, like all people do. And there’s nothing wrong with that! But why shouldn’t MartX be allowed to do the same? Compression has been used in athletic products going back decades, and as a runner I can attest that the popularity of compression clothing has reached new highs in recent years. You don’t have to be a marketing Ph.D. to think of expanding this trend into different areas, like sleepwear.

Even looking just at compression products specifically targeted towards sleep, it’s easy to find ones that pre-date Matthew Mundt’s 2019 patent application. A company called Fabric For Wellness sells compression sheets and a “Compression Sensory Body Sock,” both of which have reviews dating back to 2017. Just like the Mundts, that company has promoted their product as an alternative to weighted blankets.

In last week’s post, I noted that about 75% of non-pharma patent cases were filed by non-practicing entities. In that final 25%, we find a just a few small manufacturing companies like Hug Sleep. Cases like Hug Sleep v. MartX are supposed to be the “good” lawsuits.

But ChillPajama made a strong and direct pitch that they had the better product. Now maybe that’s true, and maybe it isn’t, but that’s supposed to be for consumers to decide. (Not to mention, being able to make a lower-priced product is innovative in and of itself, although it’s a type of innovation that’s often unfairly derided in patent debates.)

I truly wish the Mundts and Hug Sleep all the best. They seem like nice people, and I’m sure they worked hard for their success. Their Sleep Pod seems like a popular product that fits the zeitgeist. But I think we’re all worse off when the Hug Sleeps of the world can so easily delete their competition by filing a patent lawsuit.

Images, from top: Hug Sleep founders on TV (ABC); Robert Herjavec tests out the Sleep Pod on Shark Tank (ABC); ChillPajama product shot (ChillPajama.com website).

Today I’m publishing the second installment of my analysis of January patent lawsuits. The first installment, published last week, covered Jan. 1-10. Here’s the Week One spreadsheet. Before that, I wrote about my methodology for identifying patent trolls. Today’s letter today covers litigation from Jan. 11-18, and has a spreadsheet as well, with venues and case numbers.

This week saw 63 patent lawsuits filed, and once more, just over half of them (51%) involve non-practicing entities (NPEs). Looking just at non-pharmaceutical cases, we see 57% of them are NPE cases. A full 75% of the non-pharma lawsuits were filed by either NPEs or another type of serial litigant. Western District of Texas is by far the most popular venue, with 21 of the lawsuits (31%).

Given the volume of litigation and my personal bandwidth, I’m necessarily going to be picking and choosing which ones I write about. I’m happy to hear suggestions about which cases to look at more closely, or other types of feedback. Send it all to joe@letterspatent.org.

If you find this newsletter interesting or helpful, the best thing you can do to help me out is to subscribe and share it with others. Oh, and there are comments on the posts! If you’d like to discuss what’s presented here, that’s a great place to do it.

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In upcoming posts, I’ll finish looking at all the January NPEs, and will also look more in-depth at a few cases I’ve found particularly interesting.

13. Napco, Inc. v. Landmark Technology A LLC [Complaint]
    Landmark Tech’s Demand Letter

It takes a special kind of person to threaten people over patents just for selling things on the Internet. It takes an extra-special person to do it for more than 20 years. Lawrence Lockwood, the owner of Landmark Technology, is that special guy.

Starting in the late 1990s, Lockwood was able to get a few patents related to online financial transactions. He quickly commenced sending out letters to small businesses—candy shops, toy companies, and more—demanding $30,000 in patent royalties. Today, his letters ask for $65,000. (It’s negotiable.)

When asked during a deposition what he did for a living, Lockwood replied: “I’m currently litigating my patents.” Lockwood also reportedly said that he had “never, for any length of time, used a personal computer.” 

Those quotes were reported by the Los Angeles Times back in 2003, in an article that described Lockwood as a former travel agent. In a 2011 piece in the San Diego Union-Tribune, Lockwood is called a “former producer of infomercials.” One of Landmark’s earlier patents was analyzed in EFF’s Deeplinks blog. That patent has now been retired, and more recent lawsuits involve Patent No. 7,010,508. 

This month, a company is fighting back against Landmark’s threats. North Carolina-based Napco owns, among other businesses, the website Binders.com, which sells, you guessed it, binders. Landmark sent Napco one of its $65,000 demand letters back in October, and this lawsuit is Napco’s response. The complaint seeks to invalidate the ‘508 patent, which has been used against more than 70 small companies. Napco’s lawsuit also claims that Landmark violated a North Carolina state law against bad-faith patent assertions.

“[I]n recent years Landmark has focused its patent enforcement efforts exclusively on smaller companies who may not have the financial resources to file invalidation actions,” Napco’s lawyers write. 

The ‘508 patent is basically a patent on computers communicating with each other. Plus multimedia, plus e-commerce (“inquiries” and “orders.”)  But Claim 1 takes 400+ words to explicate this, full of bloated jargon like this: 

means for selectively and interactively presenting to said operator interrelated textual and graphical data describing a plurality of transaction options, and for selectively retrieving data from said mass memory;

Which is just a user, some data, a transaction, some data, and some memory. So, the Internet.

Landmark’s strategy is based on its targets not wanting to spend the money to fight back. It can’t afford too many Napcos, in other words. It would be great if Napco really sees this case through, as far as they can. This is a noxious patent owned by a uniquely unsympathetic plaintiff.

14. Omega Patents, LLC v. Bayerische Motoren Werke AG et al [Complaint]

Omega Patents has filed 14 patent lawsuits. The one against BMW uses Patent No. 9,458,814, filed in 2014, and claims the rights to remote-start vehicle technology. The case was originally filed in Georgia, and was transferred this month.

Omega Patents isn’t an NPE, although it’s hard to tell at first glance. It’s owned by inventor Kenneth E. Flick, who sells vehicle security stuff, including a remote-start product, at a retail location and at caralarm.com.

Remote start technology wasn’t even new in 2004, when GM became the first company to offer the technology direct from the factory. Flick claims his 2014 patent application included “additional functionality and user convenience,” compared to earlier systems.

Court documents in other cases show that Flick pleaded guilty to federal copyright infringement and smuggling charges in 1987. He admitted to counterfeiting cassette tapes overseas and importing them into the U.S. for sale at flea markets. Years later, Flick sued the federal government to get back his rights to legally possess firearms, arguing that “his crimes occurred long ago and did not involve violence, and … he is now a responsible and law-abiding citizen.”

So, Flick really wants to pack some heat. Courts have not accepted his arguments, though. On December 29, 2020, Flick petitioned the Supreme Court, and his lawyers stated in part:

Flick is a prolific and notable inventor and entrepreneur. He currently owns over 150 U.S. patents and numerous parallel foreign patents. Since 2003, Flick’s holding company has earned over $50 million in revenue from licensing his patent portfolio to various companies in the car audio and security industry.

Moreover, his former distribution business has sold millions of car alarms, directly employing nearly 100 Atlanta workers. Flick continues to manage his patent and licensing portfolio and invent new products.

Did Flick share any actual technology with his licensees for the $50 million they paid him? Or did his competitors just pay him for what they’re already doing, on threat of lawsuit?

15. Lupercal LLC v. BBVA USA Banchares, Inc. [Complaint]

Lupercal LLC says they invented mobile deposit. I’d love to get a royalty on every bank transaction, too, wouldn’t you?

Joao Bock Transactions and DataTreasury are two other NPEs that have claimed rights to check deposits. USAA also claims they invented mobile deposit; they successfully sued Wells Fargo, and have said they’ll be licensing others.

I suspect the real story behind the “invention” of mobile deposit is that everyone knew it was coming years before it happened, which was why Congress passed the Check 21 Act in 2003.

Lupercal has filed 9 lawsuits in the past two years. The defendants are PNC Bank, Frost Bankers, JP Morgan Chase, PNC Financial, CitiBank, Comerica, Plains Capital Bank, Branch Banking & Trust, and now BBVA.

16. Traxcell Technologies LLC v. Google [Complaint]

Traxcell holds an array of patents it claims are “fundamental patents in wireless technology.” It has a small website, and its address is a UPS store in Marshall, Texas.

The inventors still appear to own the two patents at issue, U.S. Pat. Nos. 9,918,196 and U.S. Pat. No. 9,549,388. Traxcell, which has sued 10 companies, claims Google Maps infringes. Who else claims to have patent rights to online mapping? NPEs including PanoMap, AGIS Software Development, Vederi LLC, and LBS Innovations, as well as operating company InfoGation.

17. Proven Networks, LLC v. Microsoft Corp. [Complaint]

Proven Networks is an NPE owned by the partners of a Los Angeles law firm. I covered its lawsuit against Broadcom in last week’s post.

18. Core Optical Technologies, LLC v. Amazon.com, Inc. et al [Complaint]
    Core Optical Technologies, LLC v. Comcast Corporation et al

Core Optical has 10 lawsuits to its name, including these two, but that number doesn’t reflect all the companies sued. The Amazon lawsuit accuses CenturyLink as well, and the Comcast suit also names Cox, Google, Zayo, Apple, and Alcatel, so that’s eight big defendants. This NPE, based at a residential address in Irvine, Calif., uses a single expired patent belonging to Mark T. Core, identified as the CEO and President of Core Optical. The patent was challenged at the Patent Office as well, but unfortunately the Patent Trial and Appeal Board did not institute a review.

19. Cedar Lane Technologies Inc. v. Lenovo Group Ltd.

Cedar Lane is a Canadian NPE that has filed more than 80 lawsuits since kicking off its litigation spree in 2019. Its business address is at a law firm in tiny Nelson, British Columbia. It asserts seven patents that have various origins including Polaroid and Fujitsu, but all passed through the hands of Intellectual Ventures. Here’s one example.

20. MyClerk LLC v. Impinj Inc.

Only one defendant so far for MyClerk LLC, which wields Patent No. 10,133,888, related to RFID tags. The patent originated at Japan-based Universal Entertainment Corp., a maker of arcade games and slot machines.

21. Castlemorton Wireless, LLC v. Accton Technology Corporation et al [Complaint]
    Castlemorton Wireless, LLC v. ADTRAN, Inc.
    Castlemorton Wireless, LLC v. Newell Brands Inc. et al

U.K.-based Castlemorton owns this U.S. patent, invented by Geoffrey Bagley, who worked at a scientific research organization that’s part of the U.K. Ministry of Defence. It’s been used in 31 lawsuits and claims that products based on the international wireless standards, 802.11b and 802.11g, “necessarily infringe” the patent.

22. BE Labs v. CommScope Technologies LLC [Complaint]

BE Labs has a bare-bones, two-page website with a copyright notice from 2012. The company claims it’s the developer of the “only” technology that “enables the wireless distribution of streaming HD video.” BE Labs is the original owner of the twopatents, which have been used to sue more than 40 companies.

23. Neo Wireless LLC v. Dell Technologies et al. [Complaint]
    Neo Wireless LLC v. Apple Inc.
    Neo Wireless LLC v. LG Electronics Inc. et al

These are the first three lawsuits. Neo Wireless is owned by a Pennsylvania patent lawyer, David Loo. From the complaint:

Mr. Loo has over a decade of experience as a licensing executive and patent attorney with a well-established track record of assisting companies, inventors and patent holders to ensure they are fairly compensated for their inventions

24. 2BCom, LLC v. Netgear, Inc.

2BCom’s website explains that it is “an an IP licensing company specializing in wireless technologies, including Wi-Fi and Bluetooth.” It’s filed 6 cases since April 2020. 2BCom’s president is John Nix, a telecom and internet entrepreneur with a lot of patents to his name, although 2BCom’s patents appear to be purchased. They were originally filed by Toshiba. The accused products are routers.

24. Aperture IP LLC v. ADT LLC [Complaint]

25. Sovereign Peak Ventures, LLC v. TCL Technology Group (3 cases)

26. BCS Software, LLC v. CodeLathe Technologies, Inc.

27. Hanger Solutions, LLC v. Extreme Networks, Inc. [Complaint]

First case for Hanger Solutions. Allthreepatents passed through Intellectual Ventures. Corporate documents show Hanger Solutions is affiliated with Georgia attorney Scott Wharton and one of his legal partners, Lucas Geren. Wharton’s law firm was linked to a controversial patent assertion scheme in 2013, which involved demanding $1,000 per worker from companies using scan-to-email technology.

RPX research links Hanger to other NPEs with former IV patents, as well.

27. 602531 British Columbia Ltd v. Fanatics Holdings, Inc. [Complaint]

This strangely named Canadian company is a subsidiary of Wordlogic, which owns the patent. Apparently Wordlogic claims its patent covers predictive text entry. Last year Techdirt reported on the threat letter Wordlogic sent to the Wikimedia Foundation. Wikimedia sued to invalidate the patent, and Wordlogic settled the matter in July. The patent still lives on, obviously.

27. Symbology Innovations LLC v. The American Automobile Association, Inc. [Complaint]

Symbology’s patent on “presenting information about an object” is a Leigh Rothschild special. He showed up in last week’s list of lawsuits, and will surely see again. Symbology is the most litigious entity on this week’s list, having filed more than 200 lawsuits. The company claims to own the idea of scanning QR codes with your smart phone, which is just one of many, many things that Leigh Rothschild did not invent.

29. Akoloutheo, LLC v. Sense Corp. [Complaint]

Akoloutheo LLC appears to be a family patent litigation business. The LLC is owned by Rochelle Burns, and the lawyer litigating the case is Ronald Burns, both residents of Frisco, Texas. Two dozen plus defendants sued so far. The patent originated at a Seattle-area Web 1.0 startup called Infomove, and Burns is using it to sue consultancies that offer big data analytics (“platform as a service” appears to be the common jargon used by defendants.)

Archived images of the Infomove website suggest the company crashed in the first dot-com bust around 2001.

One of Sense Corp.’s business verticals is “vaccine management.” Do we really want companies hoping to help with the vaccine rollout to be fending off ridiculous patents that originated with failed dot-com startups?

29. Transcend Shipping Systems, LLC v. Mediterranean Shipping Company S.A.

Transcend is patent attorney-inventor Raymond Joao’s litigation vehicle for extracting settlements from the shipping industry, and I covered it last week. MSC is his 5th target for this campaign.

30. DatRec, LLC v. Philips Medical Services [Complaint]
    DatRec LLC v. Allscripts Inc.
    DatRec LLC v. McKesson Corporation

Patent is on a method of using a “database of personal data records,” and is being used to sue companies over health records databases. It originated with Famillion, an apparently defunct Israeli startup.

31. AML IP, LLC v. Blizzard Entertainment, Inc. [Complaint]
    AML IP, LLC v. Kingsisle Entertainment, Inc.
    AML IP, LLC v. ArtCraft Entertainment, Inc.

U.S. Patent No. 7,177,838 is on “electronic tokens,” and AML says the tokens used in World of Warcraft infringe. AML is a Texas LLC that’s owned by another Texas LLC, called Dynamic IP Deals. Dynamic IP is a “patent monetization” firm, and its president is Carlos Gorrichategui. RPX research links Gorrichategui to several other NPEs.

Finally, one notable non-NPE lawsuit. Koninklijke KPN, a Dutch state-owned telecom, has filed six lawsuits since the start of the year demanding patent royalties on all kinds of wireless products.

Thanks for reading! Send feedback and tips to joe@letterspatent.org.

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Photo: Filing Cabinet by mightymightymatze

Hello readers, 

In my Tuesday newsletter this week, I started going through January NPE lawsuits. I’ll finish up the January cases in forthcoming letters, and will also mix in some in-depth coverage. If you’re enjoying the newsletter, please subscribe and share.

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Here’s the patent news I found most interesting this week.

One of the owners of a big Colombian sugar company is trying to patent panela, a traditional unrefined sweetener that’s hundreds of years old. Colombian lawyers “would like to know how an ancestral process so richly documented in Colombia could have escaped the attention of the U.S. Patent and Trademark Office,” the NYT reports. “Not only do colonial-era records describe it in minute detail but technical universities all over the country also produce literature on panela.”

The chief concern is U.S. Patent No. 10,632,167, granted last year. A Letters Patent reader pointed out to me that the inventor, Jorge Gonzalez, has been getting sugar-processing patents for awhile. See, for instance, U.S. Patent No. 6,245,153, with an application dating to 1999. (The New York Times)

The first remote patent trial is taking place in a Seattle federal court, over Zoom. Scuf Gaming, a 350-employee Atlanta-based company, says Steam controllers made by video gaming giant Valve infringe its patent, No. 8,641,525. The co-founder of Scuf testified Tuesday that $10 per device for 1.6 million devices would be a fair royalty. Valve says they don’t infringe, and the jurors will see that clearly once they have the accused controllers in their hands. They’ll be shipped via UPS.

Zoom trials make sense to me during this pandemic era, but it’s disappointing that the public access is audio-only. If the 9th Circuit can do live video, district courts should be able to manage it too. (Scott Graham / Law.com)

The U.S. government wants to maintain the review system for granted patents, which is a good thing. Government lawyers have filed their brief explaining to the Supreme Court why they shouldn’t throw out the inter partes review (IPR) system that was created by the 2011 America Invents Act.

In the upcoming United States v. Arthrex case, the high court will consider some wonky administrative law arguments about whether the judges for the Patent Trial and Appeal Board, which oversees IPRs, were selected properly. If the IPR system were to be thrown out entirely—as Arthrex and some other groups are pushing for—the patent trolling problem will get much worse. The case is now fully briefed, and oral argument is March 1. (Bloomberg Law)

Have a great weekend!

Photo: Panela by Wladimir Valdes

Last week, I published my litigation spreadsheet for Week One of 2021, and explained how I find and identify patent trolls. This week, I’m going to briefly run through some details of the non-practicing entity (NPE) cases from that week. 

In the coming weeks, I’m planning to briefly look at all NPE cases for the month of January. Today’s newsletter is part one of that process, covering the first week of the month. Case numbers on all of these litigations are in the linked spreadsheet, along with districts & the filing dates. 

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I’ll be publishing three types of posts in my Tuesday newsletters. Posts like this one that round up many NPE cases; in-depth posts that focus on a single case; and more wide-angle looks at how U.S. patent disputes operate.

From Jan. 1 to Jan. 8, there were 37 cases filed, of which 19 were NPE cases (51%). Of the 19 NPE cases, 11 of them were filed in the Western District of Texas.

1. Caselas, LLC v. UBS Bank USA [Complaint]
   Caselas, LLC v. Volusion LLC [Complaint]
   Caselas, LLC v. Prosperity Bancshares, Inc. et al [Complaint]
   Caselas, LLC v. Farm Bureau Bank, FSB [Complaint]
   Caselas, LLC v. BBVA USA Bancshares, Inc. [Complaint]

I briefly discussed Caselas’ claims last week. Lawyer-turned-inventor Raymond Joao claims these five patents cover financial systems that warn about credit card chargebacks. Those claims have allowed him to sue just about any credit card-issuing bank, along with e-commerce companies like Austin-based Volusion. The earliest two patents are 7,529,698 and 7,661,585, which date to applications from 2001.

Let’s consider for a minute whether it’s even possible for someone to have “invented” a warning system about chargebacks in that time frame. Consumers’ right to dispute credit card charges (which cause a refund called a “chargeback”) has been guaranteed by law since the Fair Credit Billing Act passed in 1974. So we’re talking about a process that has been mandated by law for decades. Is writing down and communicating about a particular consumer’s use of that law really an “invention?” I would argue it’s not, at least not in the sense that the great majority of people in this country understand the term. If you add in language about computers and processors and data—nope, it’s still not an invention.

There are also many earlier patents about using computers to analyze consumers’ credit history, and then making decisions based on that history. Here’s one that dates to 1985. This earlier patent came up in Joao’s patent application process, but he was allowed to modify the claims to work around it, despite its description of extremely similar concepts.

How can USPTO issue such obvious patents? To my mind, there’s still no better explanation than Charles Duan’s essay on how Amazon got a patent on white-background photography.

2. Proven Networks LLC v. Broadcom Inc. [Complaint]

Proven Networks, which has filed more than 20 lawsuits in the past year, is in many ways a pretty typical NPE. But its ownership structure is special. Proven Networks is owned by attorneys at the same law firm that is litigating its patents, Los Angeles-based, Russ August & Kabat. 

In the January case against Broadcom, Proven Networks is using two patents on managing data traffic. The patents originated at Alcatel-Lucent. Proven Networks says that the Virtual Traffic Manager and load-balancing controllers sold by Brocade, a Broadcom subsidiary, infringe. 

Proven Networks, a California LLC, was originally called RAK Investments III. The company changed its name in 2020, just before it started its big litigation campaign. Documents filed at the California Secretary of State’s office show that Larry C. Russ and seven other partners at the law firm are invested in the NPE. 

Most of Proven Networks’ lawsuits have been filed in Western District of Texas or the Eastern District of Texas. This case was filed in West Texas, despite the fact that it involves a California law firm-owned NPE suing a California tech company.

3. Transcend Shipping Systems, LLC v. CMA CGM (America) LLC et al. [Complaint]

Transcend Shipping Systems LLC owns more patents created by Raymond Anthony Joao. He has owned a lot of NPEs over the years, including Joao Bock Transaction Systems LLC, which was active from 2011 until 2016, when the company was hit with a $1 million sanction. I’m not sure how many litigations Joao has filed, but it could well be in the hundreds. He has been in the game for years. With Transcend, Joao is suing shipping companies.

In this lawsuit, Transcend says that the GPS container tracking system used by CMA CGM, a French shipping company, infringes five of its patents.

Transcend sued Maersk and Hapag-Lloyd last month, getting the attention of the shipping industry trade press. Will Joao’s newest NPE bring a whole new industry to the table seeking patent reform? 

4. Mod Stack LLC v. VirtualPBX.com, Inc. [Complaint]

Mod Stack has filed more than 40 lawsuits using U.S. Patent No. 7,460,520, a method for “using multiple call controllers of voice-band calls,” filed in 2003 and issued 2008. The patents originated at Paradyne Corp., which was sold in 2005. The target in this case, San Jose-based VirtualPBX, has less than 100 employees. 

Mod Stack’s headquarters is a Texas virtual office. It’s said to be connected to IP Edge, which seems to be the parent company for a huge number of NPEs. Mod Stack started suing in 2015, solely in East Texas; since the TC Heartland decision came down in 2017, it’s filed suits in Delaware, Illinois, and California. 

5. Grecia v. Cullen/Frost Bankers, Inc. [Complaint]

William Grecia is an individual inventor who claims to have invented… a lot of things. He’s filed over 60 lawsuits, although until this month, he was on a long break from he has taken almost two years off from his last new filing.

This lawsuit says San Antonio-based Frost Bank infringes U.S. Patent No. 8,402,555, which covers a “personalized digital media access system.” Grecia says that the Zelle payment system, used by many banks, infringes. He wants royalties and an injunction, i.e., to shut down Zelle until he gets paid.

A different Grecia patent was used to sue well over a dozen of the nation’s biggest companies, including JP Morgan Chase, Apple, Amazon, Sony, Spring, T-Mobile, MasterCard, and Visa, before it was demolished last April in a case against Samsung and big banks.

I don’t think losing a patent like that is much of an injustice, to say the least. Grecia feels differently, however. He wrote a letter to Senators Thom Tillis and Chris Coons complaining about losing some of his patents, stating: “The value of my patents have been gutted by billions of dollars of value due to the PTAB threat, my inability to stop infringers, and even worse, being a patent holder today places you as the villain.”

6. Media Chain, LLC v. Roku, Inc. [Complaint]

Media Chain LLC is Delaware-based, formed in 2018 “to own and commercialize the Patents” of Christopher Estes, a former music executive. This appears to be its first patent lawsuit. Media Chain sued Roku over six patents, including Patent No. 9,715,581,  which basically describes loading authorized “media content items,” then collecting user data. 

7. Dual Control Systems LLC v. Sure Grip Controls Inc. [Complaint]

Dual Control Systems LLC has a residential address in New Jersey. They’ve sued just one target so far, a Canadian firm that makes joysticks to drive construction equipment. 

The founders of this company put up a website in 2017 soliciting donations for a new gaming controller, claiming that “our radical new design will allow people to play games like never before.” By late 2018, the website was discontinued, with its last iteration saying the joystick was “in development.” Later that year the founders were granted U.S. Patent No. 10,137,366 for a “dual joystick controller.”

Their lawsuit is based in West Texas, filed by a law firm that has filed dozens of cases for patent plaintiffs. 

8. Scanning Technologies Innovations, LLC v. Ideabud LLC d/b/a Ticketbud [Complaint]
   Scanning Technologies Innovations, LLC v. Yapsody Entertainment, Inc.
   Scanning Technologies Innovations, LLC v. VBO Tickets, Inc. 

Scanning Tech Innovations (STI), which has filed more than 40 patent lawsuits, is controlled by Leigh Rothschild, another longtime serial plaintiff. Rothschild has won EFF’s Stupid Patent of the Month award three different times. STI is a Texas LLC, based in a Miami virtual office. 

The patent supposedly solves problems around “inventory management” and getting “information associated with articles of commerce.” 

The complaints state: “The ‘101 Patent claims do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet.” 

But STI is suing different companies that invariably have completely different code and are managing inventory in different industries. The defendants this week sell event management software. In October, STI sued an access control company, Alvarado Manufacturing; in December, STI sued an app called Goods Order Inventory. 

STI is suing small companies in, again, the Western District of Texas. Per Crunchbase, Ticketbud is 1-10 employees; Yapsody and VBO Tickets are in the 11-50 employee range.  

9. Display Vectors LLC v. Shaghal Ltd [Complaint]
   Display Vectors LLC v. BenQ America Corp.

An old Samsung patent was sold to Intellectual Ventures, and is now held by Display Vectors LLC. The patent, number 6,785,128, was filed in 2000 and covers a hinge and support mechanism for portable computers. It’s being used to sue over Ematic brand portable DVD players. 

This patent is one of 54 patents that IV transferred to Display Vectors in 2019. The BenQ lawsuit involves Patent No. 7,712,318, which originated with Ricoh. (No further assignment info available.) 

RPX says Display Vectors is linked to other NPEs including Digiframe Frame Technologies, LLC (target: digital photo frames); Script Transform LLC (target: baby monitoring products); and Symmetrix Video Systems LLC (target: video-conferencing platforms).

10. Lightside Technologies LLC v. Curtis International [Complaint]

Lightside Tech has sued Curtis International, a Canadian firm, over patents related to video frame-rate conversion. This appears to be the 11th company Lightside has sued with its patents, which were created by Kinya (Ken) Washino. 

Washino’s patents have been involved in various NPE lawsuits going back at least 10 years. Some of his inventions were co-created with Barry Schwab, who invented amazing technologies like changing the channel (circa 2016).

Documents in another case state that Marc Shulman and Barry Schwab are co-owners of Lightside. A Chinese attorney, identified as Ms. Gu Ping, may also have a “pecuniary interest in the outcome of the case.” 

Shulman is a Michigan attorney who has been involved in litigating other Schwab/Washino patents, including the massive campaign (200+ lawsuits) of an entity called Hawk Technology Systems.

The Lightside v. Curtis complaint goes on a bit about Washino’s biography, describing his education in Japan and how he acquired “a first class broadcast engineering license” in 1981. Later he moved to the U.S., formed a “video services company,” and started applying for patents in 1993.  

11. Lenovo (United States) Inc. v. Liberty Patents [Complaint]

Liberty Patents started filing lawsuits in September 2020, and has sued 11 companies so far, including Lenovo, Texas Instruments, Broadcom, and Acer, among others.

Now Lenovo has filed a declaratory judgment action against Liberty Patents. This is a type of lawsuit in which the target of a patent holder goes to court first, seeking to invalidate the patents.

Liberty is using two patents that originated at Cypress Semiconductor. Those patents were acquired from patent-holding giant Intellectual Ventures in late 2019. Lenovo wants to move the dispute to North Carolina, where its U.S. office is based, and away from the two Texas districts, “venues that are perceived to favor plaintiffs.”  

Lenovo says Jon Rowan, a Texas attorney, is the sole owner of Liberty Patents. The complaint says IV is getting a cut of the action from any of Liberty’s proceeds: 

Liberty paid only a nominal fee upfront for the patents and has given Intellectual Ventures a security interest in the portfolio and/or in Liberty’s proceeds from litigation or otherwise… Intellectual Ventures is entitled to at least a portion of the proceeds from Liberty’s litigation, licensing, and other patent enforcement efforts. 

The complaint notes that a different NPE owned by Jon Rowan, American Patents LLC, sued Lenovo in 2018, alleging infringement of four former IV patents. That case was dismissed (an apparent settlement) the following year. Rowan’s law firm office has been linked to NPE lawsuits since at least 2017.

12. Rothschild Broadcast Distribution Systems, LLC v. Verkada, Inc. [Complaint]

Leigh Rothschild again. This lawsuit involves U.S. Patent No. 8,856,221, a “system and method for storing broadcasting content in a cloud-based computing environment.” This patent was EFF’s Stupid Patent of the Month four years ago. By then Rothschild had already sued 25 companies, including a small startup; now he’s used it to sue more than 70 companies.

The patent is on, well, video content—but connected to a powerful computer network! Who’d have thunk it? Especially way back in 2011, before YouTube was even—oh, wait, actually YouTube had already been streaming for six years when Rothschild filed this patent. Pretty much anyone dealing in digital video is a potential target, and RBDS has sued big entertainment companies like Disney, as well as companies like Verkada that offer security products that use digital video.

That’s all for today! Thanks for reading, please share if you like it, and feedback is always welcome. I’m at joe@letterspatent.org. 

Photo by frankieleon

This newsletter is still a work in progress, and I’m definitely interested in hearing what types of posts folks find helpful, or less helpful. I got some great feedback on my post from earlier this week about How to Find a Patent Troll. If you want to get in touch, I can be reached at joe@letterspatent.org.

I’ll be back on Tuesday with a letter digging into the details of some January litigation.

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Here’s the patent news I found most interesting this week.

USPTO Director Andre Iancu resigned on Tuesday. In his farewell speech, Iancu said that until he “reformed” it, PTAB had been a “death squad” for patents (it wasn’t). He also called for Congress to alter Section 101 of the U.S. patent laws, which is currently the best defense against the worst software patents. (USPTO) 

The biggest patent verdict in history is toast. Merck had won a $2.5 billion jury verdict against Gilead over patents on its Hepatitis C treatment, but lost on appeal. The Supreme Court has now refused to take the case. This could signal the death of broad “genus” patent claims. Fewer broad pharma patents sounds like good news to me, but there are some esteemed IP law professors who defend genus claims. (Susan Decker / Bloomberg) 

VLSI v. Intel is going to trial in Waco, despite the Covid-19 situation. Jury selection is scheduled for Feb. 11 in this case, in which a Fortress-backed NPE is seeking billions in damages from Intel. The Federal Circuit denied Intel’s petition seeking a mandamus order to stop the case from going to trial in Waco. (Scott Graham / Law.com) 

A Utah company wants $1 per resident for its patent on contact tracing. I wrote about this one for EFF’s Deeplinks blog. When USPTO issues a patent on an epidemiological method that’s at least 150 years old, we’re looking at a truly broken system. (EFF Deeplinks)

Photo: USPTO

Today, I’m going to show you five ways to figure out whether someone who files a patent lawsuit is a patent troll.

One of the types of posts I’ll be sending out in this newsletter will take a big-picture look at patent litigation in the U.S., starting in January of 2021. Here’s a spreadsheet I made of all 37 utility patent lawsuits filed in the first week of the year. 

Who’s filing these lawsuits? Where are they being filed? What technology are the parties fighting over? And finally, why are there so many of these disputes? 

Most patent lawsuits in the U.S. are filed by companies that don’t do anything except threaten people over patents. This was true last year, it’s been true for well over 10 years now, and it’s a pretty fair bet that it will be true in 2021. It’s a perennial fun fact that I am obsessed with. In the tech sector, these do-nothing companies are often called “patent trolls.” In the legal field, people also use nicer terms, including non-practicing entities (NPEs) and patent assertion entities (PAEs). In this newsletter, I’m primarily going to call them NPEs. 

Of the 37 lawsuits filed in the first week of the year, 19 of them (51%) were initiated by non-practicing entities. 

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In today’s newsletter, I’m going to explain how I examine a patent lawsuit and identify patent holders that are NPEs, in an effort to open-source my own methodology early on. It’s more art than science. 

Important caveat: I am reliant on public information, and while I think I was pretty careful, I do make mistakes. I welcome any corrections that are based on verifiable information. The scope of this project doesn’t allow me to contact many parties directly. But to be clear, I’m happy to discuss the cases I list here, with the parties or their attorneys. I can be reached via email at joe@letterspatent.org. 

The Case of Caselas LLC

As an example, let’s take the plaintiff that filed the most cases this week. As you can see on the spreadsheet, a single plaintiff, Caselas LLC, filed five different lawsuits in the Western District of Texas. On Jan. 6, Caselas sued UBS Bank USA (6:21-cv-00006), Volusion LLC (6:21-cv-00007), Prosperity Bancshares, Inc. (6:21-cv-00005) and Farm Bureau Bank, FSB (6:21-cv-00004). The following day, Caselas sued BBVA USA Bancshares Inc. (6:21-cv-00011). 

The lawsuits all allege infringement of five patents that Caselas says cover financial systems that warn about credit card chargebacks. The earliest two patents are 7,529,698 and 7,661,585.

Technique #1: Let Me Google that For You 

How can we learn more about a mystery company like Caselas? First, we Google it. Really. 

If we see an entire page of links relating to patents and patent litigation, and not a single link that seems to point to a website owned by the company in question—well, that’s a pretty good sign the company’s main business is patent lawsuits. 

And indeed, every one of the top links that come up in my search for Caselas are related to the company’s patent litigation. The same is true for nearly all 12 of the NPE’s I identified in this week’s chart. Even the two NPEs that have only filed one case each don’t have active websites that come up in a Google search. 

It’s weird to not have a website. Almost everyone selling things has some Web presence these days. If the thing you’re selling is software—and most of these NPEs are suing over software products—then you definitely need a website. 

Some NPEs do have websites. They might be “once upon a time” companies featuring decade-old press releases, or “I swear I’m gonna have something soon” websites promoting a product that’s coming… one day. 

But most don’t bother. And why should they? Creating an LLC to threaten or sue people over patents has become an accepted fact of life in federal courts. As I explained in an earlier post, I’m not a fan of this activity, but we should be clear that it’s perfectly legal. 

Technique #2: Count Up Lawsuits 

Companies that actually produce goods or services don’t typically sue a lot of other companies. It’s an expensive drain of time and money from whatever your business is. 

It’s also really hard to run an actual business and maintain relationships when you’re in constant legal battles. Even when there’s no love lost between competitors, it’s pretty unusual to see a legal assault launched against three or four companies in the same industry at once. 

Looking at Caselas LLC, we can see this company has already filed 13 lawsuits—within one month! Of the 12 companies that appear to be NPEs in this chart, 10 of them have filed multiple patent cases (4 or more), with some having filed dozens.

Repeat litigants often stretch the claims of their patents beyond belief. In some cases, NPEs are suing throughout an industry, claiming that multiple independently created systems infringe their patents. 

Operating companies have certainly launched major patent litigation campaigns, but it’s rare. 

Technique #3: Check the Address

Most of the time, the company shows an address on either its legal complaint, or the corporate paperwork it files with the Secretary of State in its home state, or both. Look up the address. Is it a residential address, a virtual office, or mailbox shop like a UPS store? Those are signs of a non-practicing entity. It’s not impossible to have a home-based business that produces goods and also is making a case for patent infringement, but again, pretty unusual. 

Caselas LLC, for instance, is based in a Palm Beach condo. What’s more, the same address is used for other NPEs, which appear to have the same owner. 

Other NPEs follow a similar pattern. Looking at this week, Media Chain LLC is based at a UPS store in Miami; Dual Control Systems is based at a residential address in New Jersey; the address for both Rothschild Broadcast Distribution Systems and Scanning Technologies Innovations LLC is a virtual office in Miami. Lightside Technologies’ address is its registered agent in Texas. 

Technique #4: Check the Venue 

Was the lawsuit filed in a district court that’s become popular for patent owners, but has no obvious connection to the plaintiff or the defendant? It used to be that filing in the Eastern District of Texas was beneficial to NPEs, but the new popular district is clearly the Western District of Texas. Here’s a good explanation from Patently-O on the rapid rise of W. D. Texas. 

About one-third of the lawsuits (13 out of 37) in the week we’re looking at here were filed in West Texas, making it the most popular district by far; Delaware was a distant second, with 5 cases. Looking solely at the 19 NPE cases, 11 of them (58 percent) were filed in West Texas. 

This is a small clue, since the same venues that are popular with NPEs are also popular with big companies. Samsung’s lawsuit against JOLED and Asustek, for instance, is based in West Texas. 

Technique #5: Check the Patents

Reading patent claims is painful. Saying they’re written in “legalese” doesn’t do justification to the damage these documents have done to the English language. Sometimes they’re just indecipherable to non-patent professionals (and that includes me). 

But one thing to look for is whether they use fancy techno-language to dress up the fact that the patent claims really just describe things that happen in everyday life, like watching an ad or mixing a drink. In their complaints, patent owners will have to describe not just their own patent claims, but also must detail the specific products they believe are infringing. So, that also gives a better (and often, more readable) idea of what they think their patents cover. 

Were the patents transferred around repeatedly? Some NPE patents have been sold repeatedly. The patents originate with operating companies but have long moved on. 

If the patent hasn’t moved around much, who’s the inventor? Every patent has a named inventor. If the inventor is the employee of a company, their patents will typically be assigned to the employer. But lots of NPE patents stick with the original inventor, who has made a career out of threatening people over their patents. 

In the case of Caselas, the name of the inventor, Raymond Joao, is a strong clue. Joao is a New York patent attorney with a very long history of patent lawsuits. His cases have been highlighted by EFF’s Deeplinks blog and Techdirt, among other publications.

In fact, several of the NPEs from this week are run by inventors with long histories of patent lawsuits, including including Scanning Technologies Innovations (inventor Leigh Rothschild), Rothschild Broadcast Distribution Systems (Leigh Rothschild again), Transcend Shipping Systems (Raymond Joao again), and William Grecia (who has filed more than 60 patent lawsuits under his own name). 

Other NPEs aren’t inventor-controlled. Display Vectors LLC has patents that originated at Samsung and Ricoh; Proven Networks LLC has patents that originated at Lucent Technologies. 

Why does this matter? 

In my opinion, serial patent litigants are bad for citizens, bad for the economy, and often make claims that are simply intellectually insulting. They undermine the Constitutional rationale for our patent system, which is that the limited monopolies of patents should only be granted to “promote the progress of science and the useful arts.” 

Let’s be clear, not all the harm comes from NPEs. If a company does nothing but litigate patents, in my opinion, that’s bad. But if a company does make something, but is still focused on filing patent lawsuits, rather than inventing—well, that’s bad too! 

Even in the first week of the year, we can see lawsuits that I have not designated as NPEs that could be very problematic. Of the 9 “small company” lawsuits, 5 of them are filed by very litigious plaintiffs. Reading the complaints of the patent-holders I marked as “individual,” it’s not clear what, if anything, those patent owners are contributing to the state of the art.

Still, it’s important to look at NPEs, if nothing else because they are the majority of patent lawsuits. I don’t think a company like Caselas LLC “promotes the progress of science,” and after 13 years, I’ve never heard a convincing argument to the contrary.

That’s it for this week. In subsequent letters, I’ll categorize the rest of the January patent lawsuits, and write more in-depth on a few interesting NPEs. But I hope it was helpful for me to “open source” how I look at these cases. 

I appreciate feedback, as well as tips about what I should cover here—both NPE-related and not. You can reach me at joe@letterspatent.org. 

Image: Troll Hunter by James Shields, CC BY-NC-SA 2.0

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I’ll also have occasional roundups of patent stories that interested me, like this post. Those will come out later in the week. Next Tuesday’s newsletter will start digging in to the new patent cases filed in 2021.

• Courts in China and the U.S. are fighting over who should have the authority to decide a worldwide 5G patent battle between Ericsson and Samsung, and each company has apparently hired a former Chief Judge of the Federal Circuit—that is, the top patent judge in the U.S.—to make its case. (IP Watchdog)  

Lawsuits have been filed in the Wuhan Intermediate People’s Court of China, the International Trade Commission (ITC) in Washington D.C., and federal court in Marshall, Texas.

Former Chief Judge Randall Rader is working for Samsung, and told the East Texas court that letting the Wuhan legal action move forward would be just fine. Rader, who has spent several years working in China since leaving the bench, filed a declaration saying so on Jan. 1:

In recent years, China has become a world center for IP dispute resolution… China also features competent intermediate courts and a “Federal Circuit-style” central appeal court for all IP disputes in the IP Division of the Supreme People’s Court. 

Ericsson, meanwhile, has former Chief Judge Paul Michel, who filed his own brief on Jan. 7, saying there are “significant reasons to be concerned with a single, relatively unknown court in Wuhan divesting this Court—as well as every other non-Chinese court—of… authority.” This week, E.D. Texas Judge Rodney Gilstrap decided both suits can move ahead in parallel.

• Intellectual Ventures, the huge Seattle-based patent troll, has licensed 8,400 U.S. patents to defensive aggregator RPX, in a deal that suggests IV is winding down its operations. (IAM Media)

RPX’s CEO says the deal’s value is in the “low nine figures.” It means that RPX members, which include a lot of big companies, now can’t be sued over these patents.

Intellectual Ventures produces a lot of press material saying it’s all about supporting inventors and invention. But make no mistake, its main business was always threatening other companies with its massive hoard of patents. IV partnered with relentless patent litigants like Leigh Rothschild, whose non-practicing entities have filed hundreds of lawsuits, and profiled him as a great guy who’s just stuck in “invention mode.” 

When IV’s patents have actually been tested in court, it turned out the crown jewels of its portfolio were bad—really bad. 

• Appellants in patent cases won outright at the Federal Circuit only 12% of the time last year, with 9% getting mixed results, and 79% being denied any relief. (Law360)

On district court appeals, when patent owners were appellants (that is, the party asking for the appeal), they won only 10% of cases and lost outright 77% of the time, with 13% of cases showing mixed results.

When patent challengers asked for an appeal they fared a little better, winning 17% of the time and losing 56% of the time, with 27% of cases being mixed results.

So challengers do a little better than patent owners, but also: it’s better to not be an appellant! The party that won its case in district court tends to prevail on appeal.

These statistics come courtesy of Perkins Coie partner Dan Bagatell, who also creates a “patent friendliness index” (PFI) for each judge. In 2020, the most patent-friendly judges were Judge Pauline Newman (89), Judge Kathleen O’Malley (79) and Judge Kimberly Moore (79). The lowest PFI judges were Judge Alan Lourie (48), Judge Todd Hughes (52) and Chief Judge Sharon Prost (54).

In all, the Federal Circuit considered 430 patent cases, of which 37 percent were appeals of inter partes reviews (IPR) from the Patent Trial and Appeal Board.

• The Federal Circuit knocked out more than 80 percent of software patents last year, when those patents were challenged last year under the Supreme Court’s Alice precedent. (IP Watchdog)

Many software patents challenged under Alice rules are the type of “do it on a computer” abstractions that I strongly dislike. The good news is that, for the most part, when judges actually hear the cases, Alice works. In 22 of the 27 cases that applied the Alice test, the patent was ruled ineligible. Three patents survived, one survived partially, and one was remanded to district court. I’ve bookmarked this excellent list of cases created by Theodore Rand, who is a 3L at UNH. Rand also wrote up brief descriptions of each case in a two part article.

More to read:

• Speaking of the success of the Alice framework, the Federal Circuit just this week dismantled a software patent belonging to iLife, which said that its 1999 patent on a body-mounted fall detection system should entitle it to royalties on the Nintendo Wii. iLife won $10.1 million from a jury, but its patent was invalidated post-trial. (Patently-O)

• I wrote earlier this week about Minerva v. Hologic, the Supreme Court’s upcoming case about an inventor’s right to challenge her own patent, which has big implications for inventive employees that go on to found startups. The case law dates to a 1924 case involving the inventor of Formica. (Letters Patent)

• Check out Matthew Lane’s op-ed explaining how a recent Federal Circuit decision could jack up drug prices by nullifying the “skinny label” approval process that generics rely on. Lane, the director of the Coalition Against Patent Abuse, says if the ruling isn’t reconsidered, Congress will have to intervene. (Bloomberg Law)

• The “widespread chaos” reflected in Samsung and Ericsson’s global venue fight relates to a U.K. ruling from last August, writes CCIA’s Josh Landau. That ruling allowed U.K. courts to set rates worldwide in fights over standard-essential patents. Landau predicted fights over jurisdiction, and companies seeking “anti-anti-anti-suit injunctions.” Four months later, the predictions came true. (Patent Progress)

That’s it! Have a great weekend.

Photo: Howard T. Markey National Courts Building, by AgnosticPreachersKid, CC BY-SA 3.0

In this newsletter, I’m going to dig into the many interesting and weird patent cases, especially ones that will be missed by mainstream press coverage. But even cases that go to the Supreme Court get little coverage. So this week I’m going to take a look at Minerva Surgical v. Hologic, which the Supreme Court announced on Friday they will be hearing this year. 

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The case revolves around a little-known fun fact in patent law: There’s actually a rule against talking smack about your own patents. This rule, called “assignor estoppel,” has a long history of being used to limit workers’ freedom to change jobs and compete against their former employers. On Friday, the Supreme Court said it would take up the case Minerva Surgical v. Hologic, which will address this problematic legal doctrine head-on. 

Assignor estoppel stops inventors from arguing that the patents that bear their name are  invalid. It seems counter-intuitive that inventors would want to offer such testimony, but for reasons we’ll get into below, it happens more than you might think. This ban on smack-talking one’s own patents works out very well for patent-owning companies, and very badly for employees who are also inventors. Unfortunately, this rule has been reinforced and expanded in recent decades by America’s top patent court, the Federal Circuit. The good news is, the rule has now drawn the attention of the Supreme Court, so it could be limited in a serious way, or perhaps even thrown out altogether. 

When Patents Attack… Their Own Inventors

Estoppel is a legal doctrine that “prevents one from asserting a claim or right that contradicts what one has said or done before, or what has been legally established as true.” Assignor estoppel prevents inventors (the “assignors”) from arguing in court that their patents are invalid. Just as with so many problematic patent ideas, it’s an idea that’s rooted in a real estate metaphor. The idea is that, just as with a deed of land, if an inventor sells a patent to someone, then the inventor can’t turn around and devalue that patent or suddenly claim that it’s worthless. 

The Federal Circuit, a specialized patent appeal court created in 1982, has applied the rule with boundless enthusiasm. In fact, the Federal Circuit “has never once refused to apply the doctrine,” according to Mark Lemley in his 2016 paper Rethinking Assignor Estoppel (p. 524). 

Lemley’s paper explains the rationale for assignor estoppel: “The idea is that it is unfair for me to sell you something, take the money, and then reveal that the thing I sold you was actually worthless. I am depriving you of your expectation, and I am profiting from that deceit.”

But the premises of that rationale are all wrong. First, modern inventors aren’t, for the most part, selling their own patents for a profit. “Employees are regularly required to assign their patented inventions as a condition of employment,” Lemley explains. This deal happens at the outset of employment, so the inventors are assigning away things they haven’t even invented yet—at their bosses’ insistence. These agreements even allow a company to apply for a patent in an employee’s name without that employee’s signature. 

Further, the inventor-employee’s involvement is sometimes minimal. They’re more or less handing off some paperwork to patent attorneys, and letting the lawyers see what kind of patent scope they can get from the U.S. Patent and Trademark Office. Yet after this sometimes marginal involvement in creating the patent, the inventor will be permanently stopped from testifying about the invention in court. That’s true even if the patent has changed hands, and gone on to a new owner who has a wholly different view of the scope of the patent than the inventor ever had. 

The idea that workers are pushed into creating patents that they don’t think are particularly amazing might be news to Federal Circuit judges, but it’s not going to surprise programmers, who know very well that sometimes employers push hard to get patents on marginal inventions. 

"I worked on a whole bunch of patents in my career over the years and I have to say that every single patent is nothing but crap," said Stephan Brunner, a programmer quoted in the 2011 NPR piece “When Patents Attack.” Brunner went on: 

I can't tell you for the hell of it what they're actually supposed to do. The company said we have to do a patent on this. ... Personally, when I look at them, I'm not proud at all. It's just like mungo mumbo jumbo that nobody understands and makes no sense from an engineering standpoint whatsoever. 

The Supreme Court didn’t create the assignor estoppel rule, and it has never really approved of it. Its few rulings on the matter have placed limits on the rule. This history is well-covered in Minerva Surgical’s petition asking for Supreme Court review. The Supreme Court first took up assignor estoppel in a 1924 case, Westinghouse Electric v. Formica Insulation. 

By that time, lower courts had already been applying the doctrine for decades, and the Supreme Court, which rarely took patent cases, didn’t want to rock too many boats at once. “In view of the usual finality of patent decisions in the Circuit Courts of Appeal, this court will not now lightly disturb a rule well settled by 45 years of judicial consideration and conclusion in those courts,” wrote Chief Justice William Taft. 

Still, the high court narrowed how it could be applied. Assignor estoppel didn’t come up again until 1945, in Scott Paper v. Marcalus Mfg., when the court again criticized it and narrowed it.

Inventor Control, Worker Control

Patent disputes that involve assignor estoppel sometimes fall into a particularly ugly category of IP lawsuit—ones that are really about controlling the mobility and freedoms of workers. Accusing a former worker of infringing on intellectual property can be used as a replacement for non-compete agreements. Non-competes are generally barred in some states (California, notably) and face limits in others. These agreements have, for good reason, received some really bad press in recent years. 

Non-competes can be a lethal threat to startups, which often get their initial talent by hiring away from the industry giants. When a non-compete can’t be used, a predatory and devastatingly expensive patent lawsuit can be the next best thing. Assignor estoppel can make this situation even worse, because the big player may have patents on which one of the startup’s recent hires is a named inventor.

“It is a familiar scenario when an established high-technology company files a patent suit against a small startup founded by its former employees,” writes startup lobbying group Engine Advocacy in its brief encouraging the Supreme Court to take up the Minerva v. Hologic case. “This is a common scenario in assignor estoppel cases.” The brief goes on to rattle off seven different cases, ranging from 1989 to 2019,  in which an inventor’s previous employer sues the inventor’s new company and uses assignor estoppel to prevent invalidity challenges. 

Why does this keep happening? Plenty of companies might be happy to offer paeans to capitalism when a competitor isn’t breathing down their neck. But it’s hard to stomach new entrants to your market, especially when the new competitor is doing well. That’s why, Engine points out, established companies can and do file patent lawsuits for reasons that have nothing to do with protecting intellectual property, including “anger, injured feelings, or a desire to prevent a startup from hiring away engineers.” The brief continues: 

Employee-inventors who have assigned rights in this perfunctory way face situations where current (or former) employers can effectively prohibit them from branching off and practicing in the same field.  If an employee’s previous work is (or can be) embodied in a low-quality patent, that creates a serious threat that her previous work will fuel meritless lawsuits where invalidity issues cannot be asserted in defense.

Lemley, who wrote the seminal paper on assignor estoppel, also contributed a brief on behalf of some law professors, saying the high court should take up the Minerva case. It, too, points out that the Federal Circuit’s view on assignor estoppel hurts employee mobility and the public interest: 

Assignor estoppel prevents the inventor and her privies from challenging the inventor’s patents. Yet these parties are at times in the best position to challenge the patent. The current reach of the doctrine even prevents these  parties from challenging the scope of the claims, no matter how broad and how far removed they are from the inventor’s contribution. And it does so whether or not the inventor had any say in the scope or even the filing of the patent. That broad reading of the doctrine serves no valid purpose. It can’t be justified by history. And it interferes with the policy goal of ensuring that only valid patents limit competition. 

The case now before the Supreme Court involves an inventor who has moved between companies. Inventor Csaba Truckai, created a surgical method and related device for treating severe menstrual bleeding. In 1998, he assigned the patents to a company he founded, Novacept. By the time Novacept got FDA approval for the device in 2001, Truckai wasn’t in charge of day-to-day operations. Novacept and the Truckai patents were later sold for $325 million, to the company that later became Hologic. In its brief, Hologic points out that Truckai personally got about $8 million from that deal.

Truckai went on to invent an improved device and founded a second company, Minerva Surgical, to implement it—and thus compete with Hologic. That led to the present dispute. Hologic says that the new device sold by Minerva still infringes Truckai’s old patents, while Minerva says it’s using a much new and improved device that doesn’t infringe.

The question is, what can Truckai say about it?

While Minerva is asking the high court to abolish assignor estoppel altogether. Hologic is asking for assignor estoppel to be expanded, and applied to the one venue that it doesn’t currently apply—at the Patent Trial and Appeal Board, which doesn’t allow assignor estoppel in its patent reviews (inter partes reviews).

Westinghouse Electric v. Formica Insulation—the first Supreme Court case to consider assignor estoppel, cited by both sides in this case—is an employee move case, just like the many cases cited in the Engine brief. In that case, the inventor, Daniel O’Conor, started work as an engineer at Westinghouse in 1907. There, he invented a method of manufacturing laminate by coating paper with Bakelite, an early plastic, and heating it. Ultimately, O’Conor and a Westinghouse sales agent, Herbert Faber, grew to believe that this new material wasn’t properly appreciated by Westinghouse. They went on to found their own company, Formica (“For Mica,” since they were creating a product meant to replace the insulating mineral mica). By 1930, Formica moved away from industrial use, towards the decorative laminate products like kitchen counters that Formica is still famous for. 

Faber and O’Conor were sued repeatedly by Westinghouse, but courts ultimately upheld their right to compete. The Federal Circuit’s view of assignor estoppel has effectively rolled back the clock, empowering patent-owning companies to abuse their former workers. Hopefully this particular type of patent bullying will be soon be reined in by the Supreme Court.

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Photo: Beatrice Murch / flickr

More Coverage and Briefs

Thanks for reading. This post is a good time for a reminder that this is a personal newsletter, which doesn’t reflect the views of anyone but myself. That includes my past, current, and future employers.

Supreme Court Briefs for Minerva Surgical v. Hologic:

• Minerva Surgical Inc. Petition for Cert

• Hologic Inc. Brief in Opposition

• Minerva Surgical Inc. Reply Brief

• Engine Advocacy Amicus in Support of Minerva

• IP Law Professors’ Amicus in Support of Minerva

Below are the few articles I found about this case:

• Supreme Court Will Hear Assignor Estoppel Case (Dennis Crouch / Patently-O)

• Supreme Court Will Review Doctrine of Assignor Estoppel (Eileen McDermott / IP Watchdog) 

• Justices To Review Assignor Estoppel In Patent Cases (Law360 / paywalled)

• Supreme Court Will Decide if Turnabout Is Fair Play in Patent Law (Scott Graham / Law.com / paywalled) 

Well, this was a hell of a week to start a newsletter about… patent litigation. 

Given the attack on the Capitol that took place this week, I really doubt patent disputes are at the front of anyone’s mind. They weren’t really top of mind for me, and I think about them pretty much every weekday.

I want to take a few paragraphs to just acknowledge this insane historical moment. It’s an odd time to start a new writing project, but it would also be a terrible time to stop one. The events of yesterday have made me more aware than ever that democratic rights are fragile and could be lost. That includes freedoms I’ve enjoyed and will exercise here, like the right to say what one likes about things that happen in our nation’s courts.

I don’t intend to make this a political newsletter, but it does seem that rule by con men and liars will continue to be a threat during my lifetime. In that context, even writing down simple facts strikes me as inescapably somewhat political. I can’t not notice that the mob that breached the Capitol on Wednesday scrawled “Murder the Media” on a doorway. It wasn’t an accident when they smashed AP cameras, made a noose out of a camera cord, and hung it from a tree. For years now Trump has called journalists the “Enemy of the People” while his enablers nodded, a perfectly knowing throw-back to a Stalinist phrase that was used to justify mass murder.

Things are bad, but they could be so much worse. Writers and journalists in this country only face physical threat in the most extreme and unusual situations. But none of this is a rule of history. It is only this way because so many people do the work to keep it this way.

Okay, let’s talk about the future. Going forward, my plan is to publish a Letters Patent newsletter each Tuesday morning; time permitting, I’ll see if I can publish occasional shorter pieces, like this one, on Friday or Saturday mornings. 

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So without further ado, here are five patent news stories from the end of the year that caught my eye.

• Patent Stats for 2020

Litigation was up last year, with 3744 district court cases filed in 2020, versus 3347 in 2019. That’s still significantly down from 2015, a year in which 5838 patent lawsuits were filed. Of those cases, some 2291 of them (61%) can be classified as non-practicing entity (NPE) lawsuits. The most notable litigation trend is that West Texas seems to have become the new East Texas—that is, a hotspot for patent litigation, and NPE lawsuits in particular. The Western District of Texas had a 216% increase in patent cases, with 808 lawsuits filed. A full 83% of the West Texas suits were filed by NPEs. (Unified Patents) 

Separately, Unified reports that discretionary denials were up 60% in 2020, compared to 2019. “Discretionary denial” is a phrase used by the U.S. Patent and Trademark Office when it refuses to institute a petition seeking to review a granted patent (an inter partes review, or IPR).

Finally, the U.S. Patent and Trademark Office issued 352,040 utility patents last year. IBM has been the top acquirer of patents for 27 years in a row; I haven’t seen the press release yet, but I doubt they lost that streak in 2020.

• IBM v. Airbnb settlement

Just before Christmas, IBM settled its patent lawsuit against Airbnb for an undisclosed sum. This is one of several IBM lawsuits against Web 2.0 companies, which demand royalty payments based on early Internet patents (some from the Prodigy era). In my view, these IBM patents are only very marginally connected to what the Web companies are doing today, and I’ve long viewed IBM’s patent assertions as essentially legal bullying. IBM filed its lawsuit against Airbnb back in March [Complaint], and it’s the most recent of several high-profile conflicts with big Internet companies. A brief in the Triangle Business Journal (North Carolina) passes on Airbnb’s statement that “IBM has recognized this action was not fruitful for either company.”

IBM also threatened Twitter (2013), and sued Priceline (2015), Groupon (2016), Expedia (2017), and Zillow (2019). Of those cases, only the litigation against Zillow seems to be outstanding. IBM was able to wring a $36 million payment from Twitter in 2014; the case against Groupon went to a jury trial and resulted in a $83 million verdict, followed by a $57 million settlement.

• VLSI v. Intel heading to trial

The first big patent trial of 2021 could happen as soon as Feb. 15, despite serious concerns about coronavirus. The case, VLSI v. Intel, is in the fast lane headed towards a jury trial in West Texas. VLSI is a non-practicing entity that’s backed by litigation funder Fortress Investment Group. The NPE acquired semiconductor patents from NXP Semiconductor is seeking billions in damages from Intel. The two sides are doing last-minute jockeying over venue, with Intel seeking an Austin trial, and VLSI holding out for an earlier trial in Waco. (Scott Graham / Law.com)

• U.S. v. Arthrex at the High Court

The amicus briefs on both sides have now been filed in the U.S. v. Arthrex Supreme Court case, which is set for oral argument at the Supreme Court on March 1. Medical device maker Arthrex wants to throw out the USPTO’s entire review system for granted patents, inter partes review (IPR), basically because of a snafu in administrative law. The decently-functioning IPR system is a bulwark against some of the worst patents, so it’s important that Arthrex not succeed in trashing the system. EFF, Engine, Niskanen, Unified Patents, Coalition Against Patent Abuse, CCIA, Apple, and Intel, all filed briefs warning the Court how bad life without IPRs could be. On the other side, TiVo, Koch-backed Americans for Prosperity, U.S. Inventor, Pacific Legal Foundation, and the Cato Institute are rooting for Arthrex. (SCOTUSblog)

• Apple v. VirnetX

Looking back a few weeks on this one, but I want to note that Apple continues to try to limit the damage from a brutal series of trial losses to VirnetX, a publicly traded NPE. VirnetX wants to tack on $116 million to the $503 million verdict it got from an East Texas jury in October, as well as get an 84-cents-per-unit royalty on infringing units. Apple says damages should be slashed by 75%, because the jury should have been told that VirnetX’s patents were knocked out in a USPTO review. (Bloomberg) 

That’s it! Have a great weekend, take some time away from the news and enjoy the fact that we still have a functioning court system. If you enjoy the newsletter, please share it with a friend!

Chart: Unified Patents

Before we start analyzing the litigation record, readers deserve to understand a bit more about how I’m looking at these things.

Today, let’s look at how to identify a patent troll. We’ll look at my own definition of patent troll, why you should care about trolls (even if you don’t work in the tech or legal fields), and I’ll debate some common opposing views. 

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First, what is a patent troll?

In my view, a patent troll is a person or company that makes money chiefly from accusing others of patent infringement.

A second but just as important question: Why should I care?

It matters because every week, patent trolls demand money from other people. Often, the targets have never even heard of the patent troll—often an anonymous LLC—that’s coming forward and seeking payment. Some of the trolls’ demands are directed at big companies, but plenty of them are directed at small companies and even individuals. The public perception of patent cases is that they’re lawsuits about “copying,” but that just isn’t true.

This behavior is profoundly unethical, and perfectly legal. And just about every time, it works. The patent trolls get paid, and the victim walks away with frustration, confusion, and a lighter wallet. Their targets lose money because they have to pay lawyers to defend themselves, and quite often they have to pay settlements to avoid drawn-out litigation and even more legal fees. Sometimes, they pay a lot of money.

But here’s the thing: the trolls’ targets aren’t the only losers. We all lose to patent trolls. We lose because this costly game drains away billions of dollars that would otherwise be used to create jobs and build companies. That money gets siphoned off, mostly, to investors and lawyers who are already well-off by any reasonable standard.

And we lose because in a larger sense, patent trolls are telling lies, and getting away with it. They’re telling an untrue story about how and why new inventions happen (about “innovation,” that overused buzzword.) Sometimes the “invention” really isn’t an invention at all. Other times, they’re just taking advantage of the fact that U.S. patent law allows them to wildly exaggerate the value of a very specific and tiny step forward. Unfortunately, these lies are egregious, and widespread, and staggeringly successful.

We’re not living in an era where lies are easily flushed out of our body politic. That’s become painfully obvious in recent years. But I can at least observe what’s going on and write about it, and hope that will make some small dent in the world.

The Patent-ic Dialogues

Back to my definition of patent troll, which again is a person or company that makes money chiefly from accusing others of patent infringement. This view is my own, and I’ve developed it over the years. As I said in my introductory letter from last week, I’m not a lawyer—just a concerned citizen.

Of course there’s no “official” definition, and other people, including many people I respect, have different views about what constitutes a patent troll. Let’s take a look at some alternate views, presented here by my imaginary friend, a Patent-Loving Guy.

Patent-Loving Guy: I think of “patent troll” lawsuits as involving low-quality patents. And gosh darn it Joe, some patents are just really good! The inventor should get a monetary reward for these high-quality patents. 

I’m not sure the difference between a “high quality” and “low quality” patent matters much. I’m concerned with how the patent is used. A “high quality” patent is often just one that holds up in court and makes the owner money. If a company makes most of its money from accusing others of patent infringement, I’m still putting them on the troll list. 

Let’s imagine a hypothetical company — I’ll call it Amazing Innovations LLC. Amazing Innovations buys a patent, then sues 50 companies over some basic Internet technology—like say, putting maps on a website. The target companies haven’t heard of the troll, and haven’t heard of the patent. They either invented their online maps themselves, or more likely, acquired them from a company that makes map software, like Google or Mapbox.

If Amazing Innovations didn’t really invent a novel technology for putting maps online, then a lot of people might say the patent is “low quality” and it’s a shame that they were able to file 50 lawsuits over it and get paid. And I agree. As I said, I think that’s bad and harmful behavior. 

Now let’s say Amazing Innovations was an incredible Internet pioneer and its patent describes a real invention it created. When a jury evaluates it, they find it valid and infringed. A lot of people would say that’s a “good quality” patent. And in some sense, I can’t disagree—the patent has done its job as a legal instrument. 

But I still think that’s bad. The company is making money from lawsuits, not from any products or services. 

Finally, it’s almost never true that the trolls were once great inventors. Federal courts are a rarified and controlled environment, and even patents validated by judges and juries often wouldn’t hold up if experts debated them in an open and public forum.

Patent-Loving Guy: But what if the infringer copied the patent owners?

In tech patent cases, actual copying is extremely rare. In fact, it almost never happens. Patent owners don’t have to prove copying, and don’t even have to allege copying, to win their case. The patent holder just has to show that you’re trespassing on their “territory,” as defined in the patent, and they win. 

In the rare cases where patent owners have evidence of copying, they have a strong incentive to put it on the record in their court papers. It will help them win and get more money. The reason copying allegations are extremely scarce in the litigation record is simple: there is no copying! There’s a widespread public belief that companies frequently copy technology from others, but it’s a myth. At least, we can say there’s very little evidence for it.

Patent-Loving Guy: Joe, I get that you don’t like people who buy up patents and then use them to sue. But surely in cases where the patent is still owned by the named inventor on the patent, you won’t call that person a “patent troll.”

Well, if they make their living suing people over patents, then these folks do indeed go on the troll list. In fact, plenty of non-practicing entities fall into this category.

Back to the Amazing Innovations example. Let’s say they didn’t buy patents and the owners are the original, named inventors. Once, they ran a real company called AmazingTech. It made amazing stuff for a few years, but in the end, like many small businesses, AmazingTech couldn’t quite make it. The owners were left with nothing but patents. They moved the patents into Amazing Innovations LLC, and are now making a bunch of money (possibly more than AmazingTech ever made) suing 50 Internet companies.

For the victims of Amazing Innovations LLC, and for the public, the results are the same. 50 companies spend money on lawyers just because they do Basic Internet Things, and a lot of them are going to have to pay off Amazing Innovations just to limit mounting legal costs. My position, as you know, is: That Is Bad.

By the way, when the “classic” patent trolls (purchasers of patents) actually go to trial, you can be darn sure the original inventor is going to be there. There’s often a revenue split between a patent owner and a patent monetization company. In other cases, named inventors might get paid fees (like, hundreds of dollars per hour) as a litigation consultant to the trolling company.

Patent-Loving Guy: Damn Joe, you really hate inventors!

I think inventors are awesome, and they’re everywhere. Humans are inventive people. We invent stuff all the time. But inventors aren’t just people who are named on patents. Inventors who own patents represent a small proportion of overall human inventiveness. As for the tiny group of inventors who seem to be highly lawyered up and constantly threatening other people—I would say their inventions warrant increased scrutiny, let’s put it that way.

Patent-Loving Guy: Well, some companies have great inventions and work hard, but it just doesn’t work out. What’s wrong with letting them recoup some of their R&D investment by monetizing their patents?

Well, instead of “monetizing your patents,” how about just getting a real job? That’s what most of us have to do. I’ve invested time and money in things that haven’t worked out. Lots of people have, especially people who try to start businesses.

If a company makes its money off threatening people over patents, that’s a problem for me. Most folks who want a return on their investment have to produce a product or service that someone else want—not just threaten others. I like how Techdirt editor Mike Masnick phrased it, when he interviewed a different patent-loving guy some years ago: a business relationship built at the end of a pointy stick isn’t much of a relationship.

The non-practicing entities may well have invented good things in the past, and they might do something great and innovative in the future. But honestly… So what? We’ve all done good things in the past. Maybe they rescued a puppy in the past. Maybe they’ll save another puppy tomorrow. That’s nice and I commend them for it. But right now, they’re using a pointy stick to demand money. I’m not cool with that.

Patent-Loving Guy: So basically any company that gets a few patents, finds infringement, and files lawsuits against the infringers—you’re going to call them a troll. You just hate patents and Patent-Loving Guys like me.

Well, remember my definition. The troll “makes money chiefly from accusing others.” An operating company that files one lawsuit against a competitor, or even several, won’t fall into that category.

And look, lots of operating companies file patent lawsuits that are bad and anti-competitive! Just because they’re not a “patent troll,” it doesn’t mean they’re outstanding corporate citizens. I wasn’t a fan of Amazon’s “one-click” patent, I wasn’t a fan of Apple’s patent lawsuit against Samsung, and I’m not a fan of Oracle suing Google (that case did involve a patent in its original form). I’m not a fan of IBM’s heavy-handed patent licensing regime. So I’ll be looking at big tech lawsuits in this newsletter, too.

But operating companies are at least trying to please their customers and participate in the economy to make most of their cash. And if they sue someone over patents, they can often be sued back in a retaliation lawsuit. So there are different incentives.

I’m not saying trolls are the only problem with our patent system, by any means. But they are kind of a perfect distillation of what’s wrong. Trolls are the 200-proof version of patent corruption.

Patent-Loving Guy: OK, so what are you saying? If I make 51% of my money from patent licensing, then I’m a “troll?”

Look, I admit there’s some gray area. But yeah, if an operating company makes say 30% of its money from patent litigation, and 70% of its money selling services or stuff, then it probably shouldn’t be called a troll. That’s why I had to put “chiefly” in my definition.

But I have to tell you, this is very rare. That’s why, as you will see reading this newsletter, the litigation record is chock full of patent troll cases, but has relatively few cases between true competitors. When you see a company start to lean heavily on patent accusations, it’s often because its products aren’t exactly thriving. (Ahem, Blackberry.)

And look, this “chiefly”thing works both ways. I can’t prove with total certainty that trolls are making all 100% of their cash from patents. I can only go off what I see in the public record. Maybe the owner of Amazing Innovations LLC makes $900,000 a year licensing patents and $200 of his money selling poetry (patent limericks, probably). I mean, that seems like a patent troll to me. But I’m sure he’ll email me demanding to be called a poet.

Patent-Loving Guy: Look, Joe, some people are great at inventing but not executing. Licensing patents is a way for an inventor to do what they do best—invent—while others build the product.

Joe: OK, great. I’m not starting a newsletter about those people, unless they go around demanding money from other people. In your magical world of peaceful patent licensors, my newsletter will quickly run out of things to cover.

Patent-Loving Guy: So by your definition, Thomas Edison would be a patent troll!

It’s honestly weird that you and your buddies keep bringing up Thomas Edison, and equating him to anonymous patent-owning shell companies like Amazing Innovations LLC. Have you heard about that New York power company that’s known as Consolidated Edison? Yes, Edison had patent disputes and sued people over them. And all that fighting over currents got pretty nasty, so maybe the guy was a jerk. I don’t know, I wasn’t there. But he operated quite a bit in the actual marketplace, so he doesn’t fit my definition of a patent troll, or any definition I’ve heard of.

Patent-Loving Guy: Universities sue over patents too. Are they patent trolls?

No. Back to the definition, universities don’t make most of their money accusing others of patent infringement. But as with the other non-troll patent litigants I mention above, I think some university behavior around patents has become extremely problematic and requires scrutiny.

Patent-Loving Guy: Look, lawyers demand money from other people all the time. They’re representing clients who have experienced injury and need compensation. Maybe you just don’t like lawyers.

Nice try, but no. I don’t have a general problem with lawyers or lawsuits or plaintiffs. Many small patent plaintiffs hire attorneys on a contingent-fee model. Not only do I not have a problem with that fee model, I think it’s beneficial. Contingent-fee lawyers provide valuable legal services to people who wouldn’t otherwise get them.

I just have a specific problem with people filing lawsuits or making threats over patent infringement, especially when they do it over and over again. If you want to go through every type of litigation, I could add that I also find defamation lawsuits and certain other SLAPP-y legal claims to be 99% bullshit, but I’m not going to get into that here.

Okay! That’s all for this week. I’m looking forward to digging into some actual cases, and we will get to that, but I wanted to write my views on some of the basics first. Today was about definitions—the next letter will be about tactics. It will cover the techniques I use to identify a patent troll, and will include a fun example.

Photo: Fremont Troll / Roshan Vyas

Every week, dozens of oddly named shell companies file patent infringement lawsuits around the country. These mystery LLCs demand millions of dollars in payments from the companies they sue, and often, they seek to shut down products altogether—to shut off websites, turn off online services, wipe products off shelves. 

These are the “patent trolls.” They own patents, and claim to represent the interests of inventors. But they’re using a definition of “invention” that would be unrecognizable to any American growing up on stories about Ben Franklin or the Wright brothers. 

What they have invented is a way to leverage the US litigation system. Because of the multi-million dollar cost of defending patent cases in court, defendant companies both large and small tend to pay out settlements. The settlements can range from a few thousands dollars to hundreds of thousands of dollars. Many of these patent demands are directed at small businesses, even one-person businesses. 

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Some of the more infamous examples from the past decade include the patent troll Lodsys going after app developers and demanding a half-percent of their revenue, and the “scan-to-email” patent demand letters that went out to tens of thousands of small businesses in 2013. 

In aggregate, the economic impact is massive. A 2012 study estimated the direct legal costs of patent trolling at $27 billion annually. And the false invention narrative that patent trolls create do terrible damage to our understanding of how real invention works. 

Why are our courts filled with patent litigation that doesn’t make much sense, is crowded in secrecy, and obviously hurts the public interest? Why can companies with just a handful of patent-savvy investors get away with trying to siphon off one percent of iPhone revenue, or sue a big TV company seeking 3.5 percent of their video-streaming revenue? 

In this newsletter, I’ll focus on three types of posts: 

• Analysis of patent lawsuits that get filed in a month, or a week, or a day. How many lawsuits are filed by trolls? Where are the cases filed? Who owns the patents, and what are they claiming they “invented?” 

• In-depth exploration of a particular patent case. I’ll look closely at a patent case, usually one that goes to trial or has an extensive litigation record. 

• Essays that explore why our patent system is broken, and how to fix it. 

I’ve been reporting on patent trolls since I first took a job in the legal press, and they’re still on the march. I’ve written about patent litigation since 2007, as a journalist for The American Lawyer magazine group, Ars Technica, the AFP, and as an advocate at the Electronic Frontier Foundation. 

Thirteen years later, the never-ending barrage of bizarre and secretive patent lawsuits has become a new “normal” for the legal world. Many lawyers, and other patent system insiders, make serious money from the modern reality of non-stop patent threats. That’s true not just for those working for the trolls and the big patent-owners, but also for the armies of lawyers that must be arrayed against them. 

In just one week earlier this month, at least nine of these companies filed patent lawsuits. You probably haven’t heard of Geographic Location Innovations LLC, DigiMedia Tech LLC, or Transcend Shipping Systems LLC. But you have heard of the companies they’re suing: Bridgestone Tire, Estee Lauder, Panasonic, and shipping giant Maersk, among others. They’re also suing smaller companies like Government Employees Credit Union, a credit union in El Paso, Texas. 

With 2020 coming to a close, patent troll lawsuits are as broad as ever, their targets as just as varied, and their claims are just as outlandish as they were when I first learned what a “patent troll” was. 

At the moment, there’s no way to completely stop this patent scam. But we can work together to stop the patent trolls’ worst excesses. Right now, patent trolling has been made legal by our federal courts. That doesn’t make it right. We can’t let the worst abusers of the patent system march into Congress and claim they wear the mantle of “innovation.” Publishing a more complete public record about the abuses of the patent system will help us all learn more—and build a community that will fight back and win this debate. 

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Three important caveats before we start: 

I don’t make money off patents or patent disputes, either on offense or defense. The only stock I own is in broad index funds. 

• I look at patent disputes as a concerned citizen. I am not a lawyer.

• This newsletter is a personal project and reflects solely my own personal views, not those of any of my employers, past, present or future. 

I hope you’ll subscribe and join me on this journey!

Photo: Federal Courthouse and Baxter Building in Marshall, Texas CC-BY Nicolas Henderson