The Prior Art

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

2009-07-10T10:43:35-07:00

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

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

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

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

In one case, Fish lawyers represented SPH in an infringement suit filed against HTC Corp., Kyocera Corp., and Sony Ericsson. Fish lawyers also represented SPH when Kyocera filed a declaratory judgment suit in California seeking to invalidate Park’s patents. All told, six Fish lawyers worked on Park's suits.

The two district court cases were settled on July 1. SPH America's complaint at the International Trade Commission—in which Park asked the government to ban the importation of certain cell phones made by Kyocera, MetroPCS, Sprint Nextel, and Virgin Wireless—was withdrawn around the same time. The Fish lawyers were joined on the SPH cases by Park's attorneys at the newly formed Echelon Law Group: Tae Kim, a former Townsend and Townsend and Crew associate, and Andrew Chuong, a former Sidley Austin associate. Park's legal team also includes former Quinn Emanuel lawyer Adrian Pruetz, now of The Pruetz Law Group.

A Fish spokesman confirmed that Park—who, in addition to SPH America, owns at least two other patent-holding companies, WIAV Solutions, and WIAV Networks—is a former associate and a current client, but declined to elaborate.

In a statement, the firm said it never put itself in a "conflict position" while representing SPH America, and added: "In any event, our representation of SPH America is coming to a conclusion."

Fish has good reason to want to be rid of Park. He's made a habit of suing some of their biggest clients; in September, his WIAV Solutions sued Apple and Research in Motion.

This week, the ex-associate’s patent-enforcement campaign reached new heights when he filed lawsuits in Virginia and Texas against 58 technology companies demanding royalties on a vast array of wireless communication devices. And while Fish doesn't represent Park in either of those suits, the long list of new defendants again includes some of the firm's marquee clients, among them Apple and Nokia.

The patents at issue in one of the suits originated with the Electronics and Telecommunications Research Institute (ETRI), a non-profit government-funded Korean research organization. Park, a former examiner in the South Korean patent office, obtained exclusive licenses to the patents from ETRI.

SPH America is using the patents—including the four asserted in the most recent lawsuit, 5,960,029, 7,443,906, RE 40,385, and RE 40,253—to demand royalties on the WCDMA and CDMA2000 standards, which cover a wide array of WiFi-capable smartphones.

In his other big lawsuit, filed by WIAV Networks, Park is asserting ownership rights to the 802.11 wireless Internet standard, based on two patents that originated with Ricochet, a tech company that went bankrupt during the dot-com bust. The patents are 5,400,338 and 6,480,497. Ricochet sold the patents to a company called Terabeam, and Securities and Exchange Commission documents show that Park bought those patents for $2.5 million in 2007.

Park seems to especially have it in for Kyocera, which filed the DJ suit against SPH America in California. In June, Kyocera got hit with an extra lawsuit in Virginia with an additional set of patents, 6,212,408 and 6,278,887.

Echelon Law Group’s Chuong declined to comment on Park's lawsuits. Park did not return phone calls or e-mails seeking comment.

Fish & Richardson isn't the only big firm moving to distance itself from Park. Like Fish, Sidley Austin has been helping Park litigate since he started his campaign a year ago; after reaching settlements on an earlier WIAV case, against mostly small players, court filings indicate Sidley lawyers have terminated their relationship with Park.

Park isn't the first to say he should be paid paid for patents that allegedly cover the 802.11 wireless standard—nor is he the first to rely on East Texas courts to help him collect those payments.

WiLan, a Canadian patent-holding company, went to the Eastern District of Texas to sue a big swath of tech companies over 802.11 technology in 2007.

And CSIRO, an Australian government research organization, sued dozens of technology companies in 2006 over patent claims to 802.11 standards; the final defendants reached confidential settlements in April, midway through a trial in East Texas.

The CSIRO lawsuits may have opened the door to new patent claims over 802.11 standards, says Rich Vasquez, whose Bay Area IP boutique, Vasquez Benisek & Lindgren LLP, represented several defendants in those suits. Among those new claims: the July 7 suit filed by Park's WIAV Networks holding company against 3Com Corporation and computer parts manufacturers including Dell, Toshiba, Belkin, H-P, Motorola, and many other defendants—22 in total.

The WIAV Networks lawsuit, Vasquez says, "appears to be one more attempt to burden WiFi manufacturers' products with an unreasonable royalty. This demonstrates the problem of royalty stacking. The 802.11 protocols are supposed to be open standards."

In this instance, it seems more like open season on those standards.

The suits filed this week are:

SPH America, LLC v. Acer, Inc. et al, 08-cv-00702, E.D. Virginia, filed 7/6/09
WIAV Networks, LLC v. 3Com Corporation et al., 09-cv-00101, E.D. Texas (Texarkana), filed 7/7/09

Photo: flickr / Major Clanger

Good Magazine Goes Bad: The Ethics of Patent Trolling

2009-07-08T19:56:36-07:00

In its current issue, GOOD magazine has a lengthy profile of Erich Spangenberg, one of the most successful "patent trolls."

Good, founded by Ben Goldhirsh to be a magazine for people who "give a damn," missed a great opportunity to address the ethical quandaries at the heart of large-scale patent assertion. While I write for a primarily a legal and business audience, I think that the kind of people who read Good would want to know how widespread patent lawsuits affect them—as consumers and as citizens. It’s an important issue, given that the purpose for patents under U.S. law is to "promote the progress" of science.

It's one thing to say "patent trolls" aren't such bad guys after all and fill a needed niche in the economy. But Good goes so far as to compare Erich Spangenberg to Robin Hood. Hm... wouldn't we need some poor people to come into the picture after the "rob from the rich" part?

The reporter who wrote Good’s Spangenberg story really missed the point. First, she made the common mistake of mostly ignoring the most important public record of how patents are actually used—federal court litigation. It’s easy, but misleading, to go on and on about the "intellectual property business" when you conveniently ignore what's really happening—patent-holders going to court to enforce monopoly rights.

In the story, she allows Spangenberg to dramatically understate his patent caseload by saying he has sued "a bunch" of companies and has "eight or nine" cases going at once. I haven't tallied the number of defendants he’s targeted, but it's certainly in the mid-hundreds. PatentFreedom has Plutus IP, one of Spangenberg’s holding companies, with 65 lawsuits to its name (and some of those suits are sprawling, multi-defendant affairs.)

I know the writer was aware of my blog, and TPA posts alone could have provided her with plenty of leads to the litigation record, including the Wisconsin opinion where Spangenberg was found shuffling his patents around to repeatedly sue the same defendants, and where a judge found Spangenberg had engaged in witness tampering (that case is noted in the comments of the Good story, which are universally negative.)

The piece refers to patent infringement suits filed by Spangenberg as allegations of "idea stealing." But I'm not aware of a single instance where Spangenberg alleges any patented invention of his was actually copied or "stolen." His lawsuits, like most patent lawsuits, don't accuse anyone of copying anything. Rather, he makes straightforward allegations that others are trespassing on his idea-space.

(Some folks, like patent lawyer Lawrence Ebert, have criticized the fact that I continue to mention the presence or lack of copying allegations. Those criticisms are out of touch with reality. Copying and "stealing" are terms used constantly in discussions of patent disputes, and that's why I write about that.)

The nature of the claimed invention in these cases also raises serious questions about online rights. The Spangenberg companies, by suing hundreds of websites, have claimed a proprietary right over e-commerce itself. I'm not making that judgment based on an analysis of his patents—I'm making it based on the accusations in the lawsuits, filed against hundreds of companies that don't have anything apparent in common other than the fact that they sell stuff online. And while Spangenberg targets only big corporations, many of his imitators have no such scruples.

Yes, Spangenberg’s patents were duly issued by the U.S. Patent Office. But patents are routinely issued that describe advances that are either miniscule or simply not advances at all, as any serious patent practitioner can tell you.

What Good failed to grasp—to the point that it actually makes that amazing comparison to Robin Hood—is that his campaign amounts to an Internet tax, achieved through litigation. That's an arguable point, but it's an important one and worth debating. This story should have at least raised that issue (instead of telling us what brand of vodka Spangenberg likes best). Considering the $72 million that one Spangenberg company had in the bank as of 2007, the dozens of settlements since then, and the still unpaid $34 million plus interest that might be on the way from Hyundai, the Spangenberg patent tax could easily be $1 for every one of the United States' 138 million taxpayers.

Now, even if this "e-commerce tax" is three times that amount, it's still a relatively low one. It's hardly going to bring innovation to grinding halt.

But we're paying it, to Spangenberg and many others like him, many of them patent industry insiders, some of them wielding their own "inventions" that would not be recognizable as such to most people.

Why are we paying it? Why do the beneficiaries deserve it? Does it aid innovation and "promote the progress?" Is it fair? And why are the most important parts of these market-moving disputes—clear descriptions of the technology at issue, testimony about how these great innovations were created—largely kept from public view?

Good doesn’t bother to address these questions. Shoddy work from folks who say they "give a damn."

Photo: Flickr / zawtowers

Centocor v. Abbott: Biggest Patent Verdict Ever.

2009-06-29T19:14:08-07:00

This afternoon, a jury in Marshall, Texas, awarded the largest patent verdict in history: Abbott Laboratories must pay $1.67 billion to Centocor, a subsidiary of Johnson & Johnson, because its Humira arthritis treatment infringes U.S. Patent No. 7,070,775. The patent was developed at New York University and licensed exclusively to Centocor, which makes a medicine called Remicade that competes with Humira. Via Bloomberg.

The jury deliberated for five hours before issuing the verdict, which specifies $1.17 billion for lost profits and $504 million as a reasonable royalty.

"Maybe Abbott should've bought a cow," suggests The Recorder's Zusha Elinson.

See the jury verdict form [PDF].

Centocor was represented by Woodcock Washburn; local counsel was Dallas firm Sayles Werbner. Abbott was represented by WilmerHale, as well as Houston-based Beck, Redden & Seacrest and Gillam & Smith of Marshall. The case was filed on 4/16/2007: Centocor, Inc. et al v. Abbott Laboratories, 07-cv-00139, E.D. Texas (Marshall).

The second-largest patent verdict was a $1.5 billion award that Alcatel-Lucent won against Microsoft, but that was later overturned. The third-largest patent award, and still the largest ever enforced, is a $910 million judgment for Polaroid in 1986; that lawsuit ultimately wiped out Kodak's instant camera products. (Some report this award as $925 million, which was the amount of the settlement in 1991 that finally ended the litigation.)

Photo: Federal Courthouse in Marshall, Texas. J. Mullin

Patent Litigation Weekly: Honeywell loses a Texas "trolling" expedition

2009-06-26T15:46:56-07:00

This week: A Honeywell subsidiary created to assert patents gets stung in East Texas, plus: the Electronic Frontier Foundation knocks out another of its "most wanted" patents, but its "patent busting project" is mighty slow going.

Small Firm’s Sweet Win Over Honeywell

The phenomenon of "mutually assured destruction" generally creates a sharp check on the extent of patent battles between operating companies. In high-technology fields especially, companies possess—or can quickly acquire—some type of patent that would read on their competitors. So if they get sued, they can sue back to gain leverage.

But the rise of the patent-holding company has changed that calculus. Noting how effective a streamlined patent-enforcement operation can be, some corporations are creating licensing arms to enforce their patents against rivals or, in some cases, against companies that operate in industries they’ve left behind. One example is General Electric, whose licensing unit has filed at least three patent lawsuits three times since 2006. (Other companies do this without a separate licensing arm, a la Encyclopedia Brittanica.)

Honeywell International Inc. also employs this strategy. It sued eight LCD-panel manufacturers in 2006, alleging that the companies infringe its 5,041,823 patent, which covers a method of reducing flicker on such displays. The defendants argued that the patent, which Honeywell applied for in 1991, covers an older type of LCD technology not used anymore.

Seven of the eight defendants settled over the course of the litigation. The only one to hang on: a relatively small Taiwanese company called Novatek. And Novatek’s gambit paid off earlier this month when it won summary judgment of non-infringement in the case.

The most interesting facet of the case is Honeywell’s decision to embrace a business model that has been complained about loudly in some corners of corporate America. The New Jersey-based company created a licensing operation, Honeywell Intellectual Property International (HIPI), to monetize its IP. The Arizona-based subsidiary is kept quite separate from Honeywell’s operating divisions.

"They're trying to have their cake and eat it too," says Ted Herhold, a Townsend and Townsend and Crew partner and the lead defense attorney for Novatek. "They want to be large well-respected corporate citizen, and at the same time, they're acting like the patent troll holding up corporate America. They're on both sides of the toll bridge."

Herhold says that during the litigation he interacted only with HIPI representatives and their lawyers. HIPI, which is appealing, did not return calls seeking comment.

Honeywell, Herhold says, first approached Novatek in 2004, but after initial licensing discussions, the larger company backed off. Novatek was surprised when Honeywell filed suit in the Eastern District of Texas in 2006, says Herhold. It was the first major patent claim the company had ever faced.

"Being a Taiwanese semiconductor manufacturer up against an American household name, in Texas, was very disconcerting to them," Herhold says. Nonetheless, Novatek opted to fight. "They just felt mistreated by Honeywell," says Herhold, adding that Honeywell was demanded between $15-20 million in licensing fees. The other companies' settlements are confidential, and Herhold will say only that the amounts were "substantial."

The settling parties were Quanta Display, Renesas Technology, Denmos Technology, Chunghwa Picture Tubes Ltd., Benq USA, Acer America, and AU Optronics. The case is Honeywell International Inc et al. v. Acer America Corporation et al., 07-cv-00125 E.D. Texas (Tyler). Honeywell has two other pending lawsuits against dozens of panel display manufacturers alleging infringement of another LCD patent, No. 5,280,371.

EFF Patent Bust a Slow Train Coming

The Electronic Frontier Foundation has won another victory against one of ten patents it has targeted for PTO reexamination for committing "crimes against the public domain." The patent, owned by a company called Ideaflood but now transferred to another holding company called Hoshiko, covered a system for creating personally named subdomains. (The TPA blog, at thepriorart.typepad.com, like all TypePad blogs, would be a good example of an infringer.)

"It's an easy example to show why the system is kind of broken," says EFF's legal director, Cindy Cohn. "The prior art we relied on is in open source forums. This was a very obvious kind of thing."

But while this is a success story for EFF, which was assisted in this case by Klarquist Sparkman partner Richard McLeod, it also demonstrates how PTO reexamination proceedings are at best a limited tool for pushing back against patents. Patents like the one targeted in this instance, 6,687,746, cost around $15,000 to acquire, according to 2007 statistics from the American Intellectual Property Law Association. By comparison, a reexam can cost hundreds of thousands of dollars—and that's a bargain compared with litigation.

EFF’s victory comes some five years after Ideaflood first asserted the patent in the marketplace. Initially, the company merely threatened to sue. At the time, technology news services ran skeptical stories about the company’s claims.

Ideaflood went on to file suit against Google and a few other companies that year, but mysteriously dropped its claims several months after filing suit. While Ideaflood may have seemed a dangerous target when EFF created the project in 2004, there is no public record shows any assertions for at least three years—about the time the patent was transferred to Hoshiko. The entire EFF list looks dated at this point, and given its slow rate of success, you can see why nobody's in a hurry to create a new list—although PubPat is one public interest group that has continued to identify and challenge patents in reexam.

Still, Cohn believes that picking off the most egregious patents "helps the broader cause" of patent reform. So far, the PTO has granted reexaminations for six of the ten "most wanted" patents. Two—including Ideaflood’s—have been "busted," meaning all their claims have been canceled. A couple of the “most wanted” patents, such as the Firepond patent (yes, that Firepond),and one owned by Acacia Research, have corporate defendants fighting them hard, so there's less need for action by a public interest group.

Speaking of the broader cause, EFF will also be working with other groups to file an amicus brief in the landmark Bilski case now pending before the Supreme Court.

Hoshiko may not be using its patent, but it did hire lawyers to contest the reexam, and can appeal this ruling. But Cohn believes they don't have much of a shot. "There was a lot of prior art on it,” she says. “The road doesn't look good for them."

Photo: flickr / mariusm

Buying TiVo's bull in E.D. Texas

2009-06-25T14:20:57-07:00

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

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

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

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

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

Photo: Flickr / brent_nashville