Patent Risk Digest

November 2017

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

When 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)—particularly if the new patent holder intends to assert the transacted asset(s) in litigation. Such a recording may be filed with the agency days, months, even years after a patent transfer has been completed.

Thousands of patent transactions were recorded in October, including some transfers to entities the sole purpose of which is to assert patents in litigation. RPX noted roughly 20 such transactions during the month of October alone, including several that have already led to new patent lawsuits. For example, a September 22 transfer of five network protection patents to Network Security Technologies, LLC was recorded with the USPTO on October 13; by the end of the month, Network Security Technologies had sued four companies over two of the patents: Bradford Networks, ForeScout Technologies, McAfee, and Pulse Secure. The defendants are accused of infringement through provision of network security products. Network Security Products is controlled by patent attorney Brian Yates, affiliates of which have filed approximately 780 patent infringement lawsuits targeting a vast range of defendants.

Password Management Campaign Puts a Sprawling Set of Companies at Risk

In October, Cumberland Systems, LLC filed patent infringement suits against four more customers based on their alleged use of a password management system provided by Keeper Security. The October cases against AT&T (AT&T Mobility), Chipotle, JPMorgan Chase, and Texas Freight Services followed the dismissal of each of the plaintiff’s first-wave defendants: Cashstar, iReverse, Edmunds.com, Mainstream Technologies, Marriott, NC Financial Solutions, Start-ups.com, Sony, The Rocket Science Group, True Media, and Verizon. All of these companies are identified as Keeper Security customers on that provider’s website, and/or on websites that compare various software products; they are accused of infringing a password encryption patent. Most of Cumberland’s suits to date have been dismissed within just a couple months of filing, some following apparent settlements.

Scope of Virtual Reality Experience Campaign Expands to Include New Targets

October saw 20th Century Fox, Caterpillar, Deere & Company, and Ford added to the litigation campaign of Virtual Immersion Technologies LLC. The latest defendants are accused of patent infringement through use of “an interactive, real time virtual reality system”, such as an online video advertisement of Ford’s use of Facebook’s Oculus VR headset, or Deere & Company’s equipment training simulators.

Virtual Immersion is controlled by Equitable IP Corporation, affiliates of which have filed over 100 patent infringement suits to date. It began its campaign in 2016, first filing suit against several adult entertainment companies, then hitting Comcast (NBC Universal Media), Hyatt Hotel, and TATA Motors (Jaguar Land Rover). Each of those cases ended within several, uneventful months, some following settlements.

Earlier this year, Virtual Immersion sued AltspaceVR, Boeing, Lockheed Martin, and Silver VR Technologies; all but Lockheed Martin are active defendants as of the publication date of this report.

Appeals Court Overturns a Texas Judge’s Patent Venue Test

In June, in a case filed by Raytheon against Cray, Judge Rodney Gilstrap of the Eastern District of Texas—the most active patent judge in America by number of cases, in what has historically been the most popular venue in which to bring patent lawsuits—developed his own test for determining whether a defendant has a “regular and established place of business” in his district (and thus can be sued in what is largely considered to be the country’s most plaintiff-friendly patent court). Under Judge Gilstrap’s test, a single Cray sales employee, working out of his home in Athens, Texas between 2012 and 2016, and who marketed the accused products to customers outside of the Eastern District of Texas, was sufficient to establish venue in that district.

Cray appealed Judge Gilstrap’s ruling to the Federal Circuit Court of Appeals, arguing that the judge’s test was too liberal and would allow too many companies with a slight connection to Texas to be sued there. On September 21, the Federal Circuit reversed Judge Gilstrap’s denial of Cray’s transfer motion, finding that he had abused his discretion by misinterpreting the patent venue statute. According to the appeals court, a defendant must have a physical, geographical location in the district in which it carries out its business; its place of business must be regular, and have sufficient permanence; and finally, its place of business must be “of the defendant”—that is, it cannot be solely a place of the defendant’s employee (e.g. a home office).