Patent Risk Digest

July 2017

A monthly update on market activity, legal developments, and policy related to patent litigation
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Q2 2017 Patent Litigation, by the Numbers

Patent plaintiffs brought more than 900 new patent infringement cases during the second quarter of 2017, filing suits against upwards of 840 unique defendants. As in previous quarters, the targets of patent infringement litigation during Q2 varied widely, encompassing a sweeping scope of businesses, both large and small. Additionally, in the wake of a Supreme Court decision issued in late May, RPX has observed the concentration of patent litigation expanding, as plaintiffs scramble to find additional venues in which to enforce their patents. More about that decision and its impact is provided later in this digest.

Serial Campaign Targeting Branch, Store, and ATM Locator Services Steadily Grows

Last year, prolific inventor and litigator Leigh M. Rothschild created a new plaintiff entity named Geographic Location Innovations, LLC (GLI) to continue an expansive litigation campaign that has been running for over three years. On June 8, GLI filed six new patent cases, suing BB&T, Capital One, Kroger, Choice Hotels, Gym-Mark, and Phillips 66. The defendants are accused of infringement through location services offered on their websites (e.g. Capital One’s Branch & ATM Locator). With these latest lawsuits, over 65 defendants, within many different industry sectors, have been sued over GLI’s location services patent.

Rothschild has conducted this campaign like a relay, passing the asserted patent from one entity to another to enforce in litigation. Since 2014, GLI and two other Rothschild-controlled three entities have collectively filed over 65 lawsuits against a large swath of industries, including the following:

  • Retailers (Dollar Tree Stores, Home Depot, Nordstrom, Safeway)
  • Logistics (Blue Tree Systems, Geotab, Skypatrol, Smart Fleet, UPS)
  • Car sharing (LYFT, Uber)
  • Automakers (Nissan, Honda, Hyundai, Volvo)
  • Wireless carriers (AT&T, T-Mobile, Verizon)

 

GLI is one of more than 25 litigating entities created by Rothschild. To date, entities controlled by the inventor have launched hundreds of patent lawsuits, hitting many different types of companies, large and small.

Sprawling Security and Encryption Campaign Gets a Second Life

In mid-June, CryptoPeak Security, LLC filed its first patent cases, suing 1-800 Contacts, Abercrombie & Fitch, Advance Auto Parts, Cabelas, First Citizens Bancshares, GameStop, Jack Henry & Associates, MGM Resorts, Papa John’s, Teladoc, Tractor Supply, and Wal-Mart (Jet.com). The defendants are accused of infringing an encryption patent through their websites’ security systems. But while CryptoPeak Security is new to litigation (in its current iteration, anyway; more about that later), the patent it is asserting is a familiar one. To date, more than 70 defendants, representing diverse business sectors, have been sued for alleged infringement of CryptoPeak’s patent.

CryptoPeak Security acquired the patent at issue from an apparent affiliate, formed in Texas, named CryptoPeak Solutions, LLC. Since 2015, these plaintiffs have collectively sued over 60 defendants over the same patent, focusing on the website security systems of a broad scope of businesses:

  • Retailers (Barnes & Noble, Macy’s, Office Depot, Sears, Wal-Mart)
  • Financial services companies (Aetna, Ally, Discover, Scottrade)
  • Online printers (Cimpress, Shutterfly)
  • Hotel chains (Hyatt, Intercontinental, Marriott, Wyndham)
  • Insurance companies (Aetna, Allstate, New York Life Insurance, State Farm)
  • Travel and hospitality websites (Expedia, Orbitz, Priceline)
  • Wireless carriers (AT&T, Verizon)

 

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

The individuals behind CryptoPeak seem to be adjusting their litigation tactics in light of the Supreme Court’s decision in TC Heartland, which in May established that for the purpose of choosing a venue for patent litigation, corporate defendants are deemed to “reside” only in their state of incorporation. (See here for more information.) Whereas one CryptoPeak was formed in Texas, and filed all its cases in the Eastern District of that state (historically, the preferred venue of patent plaintiffs), the new CryptoPeak was formed in, and has filed all of its cases so far in, Delaware—the state in which each of its June defendants was incorporated.

CryptoPeak’s patent assertion campaign is an example of how plaintiffs can quickly modify their litigation strategies to keep up with changes in patent law. It also illustrates how a large group of companies, greatly varying in their size and market sector, are at risk for being sued over the same patent.

Plaintiffs Adapt to TC Heartland

The Supreme Court’s May 22 decision in TC Heartland may be responsible for a lull in new patent lawsuits filed in June. However, the ruling appears to have has also caused the concentration of patent cases to disperse as plaintiffs explore new venues in which to bring litigation.

For decades, plaintiffs could file patent cases in nearly any district court in which a defendant had even minimal business contact; for example, wherever a defendant sold products, or offered services, that were accused of infringing a plaintiff’s patent(s). This broad interpretation of the patent venue statute allowed plaintiffs to “venue shop”, bringing cases in courts that were considered more “plaintiff friendly”. Historically, the venue of choice for patent plaintiffs has been the Eastern District of Texas, which is popular due to the perception that its relatively speedy system and inclination towards trials put extra pressure on defendants to settle.

The TC Heartland decision has limited the options for the venue in which a new patent infringement case may be filed. Now, patent cases must be brought either where the defendant has “committed acts of infringement” and has a “regular and established place of business”, or where it was incorporated (assuming it is a US corporation).

In the wake of TC Heartland, some plaintiffs, such as Express Mobile, Inc., have thrown in the towel on Texas, so to speak, conceding to dismissals or transfers of their cases already ongoing in the Eastern District of Texas and filing new lawsuits elsewhere.

On the day that the TC Heartland decision came down, Express Mobile conceded to a motion by defendant Alpine Consulting to dismiss the case against it due to improper venue. (Express Mobile had sued Alpine in February of this year, accusing the company’s website building tools of infringing two patents.) But also on May 22, Express Mobile filed a yet another case against Alpine Consulting, this time in Illinois, the state in which Alpine was incorporated. And in June, Express Mobile filed eight additional new patent infringement cases, suing Brainvire Infotech, ePages, Mobikasa, Webflow, and four other companies, again over website building tools. The June lawsuits were filed in Delaware, where each of the new defendants was incorporated.

In contrast, some other plaintiffs have dug in their heels post-TC Heartland, beefing up venue-related allegations in amended complaints (filed in their existing lawsuits) or in new complaints brought in their preferred venue (typically the Eastern District of Texas). In June, Vaultet LLC filed one case each against American Eagle Outfitters, Avis Budget Group, and Disney, accusing the payment options on the defendants’ websites of infringement. All three cases were brought in the Eastern District of Texas; in its complaints, Vaultet points to the defendants’ retail locations in that district to establish venue there. Vaultet is an affiliate of IP Edge LLC, last year’s most frequent plaintiff in patent litigation. In 2016 alone, IP Edge and its affiliates collectively filed over 400 patent cases, targeting a myriad range of companies, products, and services.

The ultimate effects of TC Heartland on the patent litigation landscape are yet to be seen. But as illustrated by June’s litigation activity, and that of the second quarter of 2017, the threat of patent litigation to a vast range of businesses, operating in diverse sectors and geographies, remains imminent.