Patent Risk Digest

August 2017

A monthly update on market activity, legal developments, and policy related to patent litigation
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July Transactional Records Foreshadow New Patent Lawsuits

When ownership of a patent is transferred from one individual or entity to another, a recording of that transaction is often filed with the United States Patent and Trademark Office (USPTO). Such recordings typically precede patent lawsuits, as patent owners want to go into litigation with a “clean” transfer history (thus decreasing the chances that their rights to the asserted patent(s) will be challenged). A recording may be filed with the agency days, months, or even years after a patent transaction is completed.

Thousands of patent transactions were recorded with the USPTO in July, including transfers to entities the sole purpose of which is to assert patents in litigation. RPX noted roughly 20 such transactions among the July recordings, including several that have already led to new patent lawsuits. For example, a December 2016 transfer of two patents from Intellectual Ventures LLC to Strategic Intellectual Solutions, LLC was recorded with the USPTO on July 17. That same day, TMI Solutions LLC, an affiliate of Strategic Intellectual Solutions, began suing retailers over the patents, accusing the companies of infringement through their websites’ use of cookies. TMI Solutions has so far sued Bath & Body Works Direct, Nordstrom, Staples, The Gap, and Victoria’s Secret.

Other transfers recorded during July seem to foreshadow new litigation, including one executed on July 5 from an inventor to Rondevoo Technologies, LLC, involving a patent concerning a wireless input pen. Rondevoo was incorporated in California in April of this year and since then has acquired at least one additional patent (related to an electronic dating service). Rondevoo does not appear to practice or commercialize the patents it holds, and the individuals behind it also control several other entities, the sole purpose of which is to assert patents in litigation.

Wearables Campaign Tops 100 Defendants

July saw eight new defendants added to a litigation campaign started nearly five years ago by SportBrain Holdings LLC. With the suits against Anima, DailyFeats, Fengan Technology, Jiff, InvenSense, Guess, Mad*Pow Media, and Nokia, the number of defendants sued in the campaign is nearing 120. The July lawsuits, like their earlier counterparts, accuse the companies of infringing a patent through wearable computing devices, such as fitness trackers and smartwatches, as well as associated apps.

Since beginning its campaign in 2012, SportBrain has targeted both large and small companies, encompassing a broad scope of businesses:

  • Consumer electronics makers (Apple, Atlas Wearables, Bellabeat, Fitbit, iHealth Labs, LifeBEAM, Wellograph)
  • Apparel manufacturers (Adidas, Fossil, Nike, New Balance, Under Armour)
  • Retailers (Brookstone, Walgreens)
  • Insurance companies (Aetna, Blue Cross, UnitedHealth)
  • Software providers (Aptean, Jiff, Virgin Pulse)

 

Many of SportBrain’s cases have ended quickly, with court filings indicating that the defendants signed licensing and settlement agreements.

Exposure Risk Lingers Years After a Patent’s Expiration

Hybrid Audio LLC filed four new cases in July, one suit each against Adobe, AOL, CyberLink, and Navico. Hybrid Audio has now filed over 50 patent lawsuits, the majority of which have been brought since January of this year. The defendants are accused of infringing a single, expired patent through laptops, tablets, smartphones, and other devices using the MP3 standard. Hybrid Audio is seeking royalties from the date on which defendants received notice of their alleged infringement to the date of expiration (in September 2012) of the asserted patent.

Hybrid Audio LLC acquired the asserted patent in March 2016 from a similarly named Texas entity, Hybrid Audio, LLC. In 2010 and 2011, that Texas entity sued Apple, BlackBerry, Dell, HTC, Motorola Mobility, and Nokia over the patent; the infringement allegations focused on a variety of MP3-compliant devices, including audio players, smartphones, tablets, laptops, and digital photo frames. That campaign ended in 2013, following several apparent settlements.

As of July 31, Hybrid Audio LLC had roughly 20 open cases, including those against Archos, ASUSTek, Boynton Companies, Curtis International, Glassbridge Enterprises, Inspire Technology Group, Polywell Computers, RealNetworks, Rhapsody, and VIZIO.

Patent Plaintiffs Explore New Venues in the Wake of TC Heartland

In the nine weeks following TC Heartland—the Supreme Court’s May 22 decision regarding patent venue—the concentration of patent litigation has begun to disperse. Historically, the venue of choice for patent plaintiffs has been the Eastern District of Texas, which has been popular due to the perception that its relatively speedy system and inclination towards trials put extra pressure on defendants to settle. However, under TC Heartland, the Supreme Court returned to a narrower interpretation of a key part of the law governing venue for patent suits that allows a corporation to be sued where it “resides”: while before the term “resides” was interpreted broadly, allowing lawsuits in virtually any district for many defendants, a corporation now “resides”—and can thus be sued for infringement—where it is incorporated. (Suits can also be brought where a defendant has “committed acts of infringement” and has a “regular and established place of business”.) In light of this new limit, plaintiffs are shifting away from Texas in favor of venues in Delaware, Illinois, and California.

RPX data show that defendants in existing litigation in the Eastern District of Texas have eagerly tested post-TC Heartland ground over the past months, collectively filing more than 350 motions to transfer their cases to new venues, or moving for dismissal on grounds of improper venue. Some plaintiffs have conceded to transfers when faced with venue challenges, including IP Edge LLC (2017’s most prolific patent plaintiff to date). Like some other plaintiffs, IP Edge has also sought to get ahead of possible venue challenges, at times dismissing and re-filing existing cases in other districts of choice. This year alone, IP Edge, through its various affiliates, has filed over 200 patent infringement cases, including more than 70 since TC Heartland came down.

While it is too early to tell whether TC Heartland will drive an overall reduction in the number of new patent cases, the months following the decision have seen a decentralization of patent lawsuits. The threat of patent litigation remains far-reaching and continues to impact a sweeping range of businesses.