Seattle Patent Litigation Update (May-June 2008)

So my trial is now over. My posts will pick up and be more frequent. I'm happy to report a victory for one local inventor over Sears Roebuck and their advertising firm, Young & Rubicam. Jury returned a verdict for $1.7 million on Wednesday afternoon. It's a copyright case, so I won't go into detail here. If you are interested, here is a link to today's story in the Seattle Times.

May and June saw some interesting new patent filings in Washington. Here is a list:

June 10, 2008
Nintendo of America Inc v. Nyko Technologies Inc	WA Western	Lasnik	Patent	Federal Question
Plaintiff: Nintendo of America Inc; Defendant: Nyko Technologies Inc
May 28, 2008
Microscan Systems Inc v. Cognex Corporation	WA Western	Martinez	Patent	Federal Question
Plaintiff: Microscan Systems Inc; Defendant: Cognex Corporation
May 22, 2008
Brower v. Lowe's Companies Inc et al	WA Western	Robart	Patent	Patent Infringement
Plaintiff: Jerry E Brower, Jerry E Brower Defendant: Lowe's Companies Inc, Lowe's HIW Inc, Homax Products Inc
May 20, 2008
Westfield Outdoor Inc v. GCI Outdoor Inc	WA Western	Jones	Patent	Declaratory Judgement
Plaintiff: Westfield Outdoor Inc, Westfield Outdoor Inc, Westfield Outdoor Inc Defendant: GCI Outdoor Inc

The most interesting of these cases to me is Nintendo's action over Nyko Technologies to enforce rights in the NUNCHUCK controller for the Wii. Now that is what I like to see: a major technology player from the PNW showing confidence in our local district court to sort out complicated IP matters. This case is also interesting because it seeks to enforce design patent rights in the shape of the controllers amid great uncertainty in the law concerning design patent rights. The Federal Circuit has yet to issue a decision in the en banc review of Egyptian Goddess v. Swisa. Here is a link to post about amicus briefs offered in connection with that case, one of which I co-authored earlier this year on behalf of the Federal Circuit Bar Assocaition.

Microsoft and Nintendo Battle Game Controller Patents In ED of Texas

A recent claim construction ruling in a case involving both Nintendo and Microsoft set the stage for a Spring 2008 jury trial on a number of patents involving game controller technology owned by Plaintiff Anascape Ltd. Both Microsoft and Nintendo sought unsuccessfully to stay the entire litigation in view of an on-going reexamination of several patents-in-suit. Judge Ron Clark stayed the litigation as to some but not all of the patents. In his claims construction order, entered November 30, 2007, Judge Carter construed seven terms that relate to four patents, Patent Nos. 5,999,084, 6,102,802, 6,135,886, and 6,343,991. These patents all relate to the switches and buttons on controllers used for video games. The Order (link below PDF), awarded Anascape its definition for “pressure-sensitive variable conductance material,” finding that Microsoft's construction improperly tried to limit the definition of the disputed claim term by excluding a preferred embodiment of the term. He also agreed with Anascape's contention that no construction was necessary for terms related to individual button pressing. Anascape lost any literal infringement arguments concerning the terms “pressure-sensitive variable conductance material” and “means for creating an analog [output proportional to][signal representing] varying applied physical pressure.” According to Judge Carter, the jury will have to pass on these limitations under a theory of infringement by the Doctrine of Equivalents.

In large part, the claims construction order seemed to give Anascape what it wanted, however, Anascape just asked the Court to continue its trial date because of certain scheduling conflicts of its lead trial lawyers, McKool Smith.
AnscapeClaimsConstruction.pdf
AnscapevMSFTNoticeofClaimrejections.pdf
AnscapevMSFTPTOOrderReexam.htm
AnascapevMSFTNoticeofreexam.htm

Surprise Plaintiff in Nintendo Patent Litigation is Altitude Capital Partners

I reported here and here that Nintendo, along with others, was sued in the ED of Texas for infringement US Patent Nos. 5,592,555; 5,771,394; 5,502,689; and 5,247,621. The plaintiff was purportedly Saxon Innovations LLC, a new patent licensing company. Well, according to Patent Troll Tracker, the true plaintiff (i.e., beneficial owner of the claims in litigation) is Altitude Capital Partners. From their web site:

"Altitude Capital Partners is a leading private investment firm focused on investing $250 million of capital in businesses which own compelling intellectual property assets. We seek to invest in portfolio companies that have valuable patents, trademarks/brands, copyrights, royalty streams, trade secrets, and other intangible assets which will create a competitive advantage in creating value."

ACP doesn't meet the strict definition of "patent troll." It is more of an investment bank, having a business model focused on investment in IP, or investment in companies developing IP.

But when "portfolio companies" have no other business but enforcement of IP through licensing and litigation, the model moves away from pure investment, and into funding litigation in exchange for a piece of the action. This sounds a little like the old common law doctrine of champerty. This doctrine is in a state of flux right now. To date, I have not heard of champerty being asserted against those who fund patent litigation. The issue appears to have been raised by Peter Zura's 271 Patent Blog in September of last year in connection with a post regarding a patent suit against Toyota, alleging that hybrid technology in the Toyota Prius and Toyota Highlander gasoline-electric hybrids infringes on US Patent 5,067,932. The plaintiff in that case was apparently funded by Oliver Street Finance, LLC, who apparently agreed to pay "all legal fees and expenses in exchange for a portion of any recovery Solomon receives in the litigation equal to the greater of 40% of the recovery or the actual amount of legal fees and expenses."

According to Peter Zura, the law of Champerty is still very much in effect in the state of New York, albeit in limited situations where there is an agreement whose "sole or primary purpose" is the prosecution of litigation. The key words, of course, are "sole purpose." This would seem to exclude most, if not all, artfully drafted agreements to fund patent litigation. Cases cited in support of this proposition are Refac Int'l, Ltd. v. Lotus Dev. Corp. 131 F.R.D. 56 (S.D.N.Y. 1990) (finding assignment champertous where a five-percent interest in the patent was contracted in exchange for Refac's obligation to sue at least two alleged infringers within one month. The patent was subsequently invalidated for inequitable conduct by the Federal Circuit, but no opinion was given on appeal with regard to the agreement itself). Another case is American Optical Co. v. Curtiss, 56 F.R.D. 26 (S.D.N.Y. 1971) (finding assignment of certain IP that was expressly conditioned on the assignee bringing suit was champertous, and therefore void).

With today's raging debate over patent reform, it would make sense to start seeing champerty raised as a defense to patent litigation funded by investment banks like ACP. A brief look at the law of champerty in the state of Washington reveals case law explaining (at least in dictum) that the doctrine "has never obtained a foothold" here. Weed v. Foster, 58 Wash. 675, 678, 109 P.2d 123, 124 (1910). Later cases specifically hold "that maintenance and champerty is abrogated in the state of Washington pursuant to RCW 9.12.010." Giambattista v. National Bank of Commerce, 21 Wn. App. 723, 748 (D. I. 1978 (Dore, J., dissenting in part). Even if the doctrine of champerty were in effect, Washington cases seem to limit the doctrine to providing a defense to enforcement of allegedly champertous assignments. Id. Thus, it would not seem to provide any sort of defense to patent litigation funded pursuant to an allegedly champertous agreement. Other Washington cases addressing the doctrine of champerty include Harrison Mem. Hospital v. Ross, Case No. 25538-3-II, 2001 Wash. App. lexis 1485 (Div. II July 10, 2001) and Jordon v. Welch, 61 Wash. 569, 571, 112 P. 656, 657 (1911).

Champerty defenses aside, this suit raises real issues regarding the effectiveness of FRCP 7.1, which is supposed to require disclosure of the real parties in interest to litigation. Arguably, ACP is the real plaintiff in interest in the current litigation over US Patent Nos. 5,592,555; 5,771,394; 5,502,689; and 5,247,621, but the litigants (especially the Court) have no way of knowing this through normal operation of Rule 7.1.

For a very interesting article on emerging business models in IP, have look at this article from Raymond Millien and Ron Laurie, "Established and Emerging IP Business Models."

Established2007.pdf

New Kid On The Block

The Patent Holding Company that recently sued Nintendo of America for patent infringement in East Texas (6:07-cv-490) was formed just months ago on July 2, 2007. Follow these links to see documents of formation: SaxonFormation.pdf SaxonCorrection.pdf Here is a snippet from Patent Troll Tracker about the history of this Holding Company:

"Saxon purports to be a Texas corporation, but we all know how that song and dance goes. In fact, state records show that Saxon Innovations was formed on July 2, 2007, and is a subsidiary of Saxon Holdings, LLC, a Delaware corporation formed just a tad before the Texas corporation was formed, with a business address on Madison Avenue in New York City."

Read more about the history of the patents-in-suit here.

Nintendo Targeted by Patent Licensing Company in Eastern District of Texas

Nintendo was sued last week, along with cell phone makers Nokia, LG, Research in Motion, Samsung, HTC, and Sharp, for infringement of several patents claiming private wireless communications technology. The case is Saxon Innovations LLC v. Nokia Corp. et al. (6:07-cv-490) The patents-in-suit are U.S. Nos. 5,592,555; 5,771,394; 5,502,689; and
5,247,621. All patents were originally assigned to computer chip maker Advanced Micro Devices, Inc. The plaintiff is described as a "Texas-based licensing company," although it is becoming more common these days for shell companies to be formed in East Texas for the sole purpose of pursuing patent litigation there, as reported by Patent Troll Tracker. Nintendo seems to be a target because of its popular wireless gaming devices, including the Nintendo Wii.