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Judge considers forcing aggressor to pay attorneys' fees

Plutus IP, a patent assertion company, suffered a major blow last March after a jury found the company shuffling patents between shell companies in order to launch multiple lawsuits against the same target, circumventing a previous do-not-sue covenant.

Now, U.S. District Judge Barbara Crabb is mulling over whether or not to force Plutus IP owner Erich Spangenberg to pay DaimlerChrysler’s attorneys’ fees.

The covenant dates back to 2006, when Plutus settled with car company DaimlerChrysler over a “broadly-worded” patent on software the company uses for sales tracking. Rather than challenge the patent – a battle it was likely to have won – DaimlerChrysler instead opted to settle with Plutus IP for $2.3 million in order to stave off a court battle that would have been far more expensive. As part of the settlement process, Plutus IP entered into an agreement not to sue DaimlerChrysler for the sales technology or any other related patents.

Reports indicate that Plutus then transferred the patents in question to an unknown Plutus affiliate, and proceeded to file three additional suits against DaimlerChrysler, as well as Mercedes-Benz and Toyota, in March 2007. This time, however, DaimlerChrysler chose not to settle, instead countersuing the Plutus affiliates for break of contract. The jury’s decision in favor of DaimlerChrysler concluded a three-day trial that found Spangenberg in breach of the March 2006 settlement agreement.

Joe Mullin, author of patent and IP blog The Prior Art and reporter for IP Law & Business magazine, notes that Spangenberg sits at the “heart” of a “massive empire” of patent-holding companies, including Taurus IP, Gemini IP, Caelum IP, Phoenix IP, Orion IP, and Constellation IP, together with his attorney David Pridham.

Mullin reports that his investigation of the case is complicated by the Wisconsin court’s unusually high propensity for granting Spangenberg’s requests to seal court documents, and the case court docket reports indicate a complicated array of parties on both sides.

Spangenberg could be on the hook for up to $4 million in attorneys’ fees, payable to DaimlerChrysler’s legal team at Kilpatrick Stockton LLP. Mullin notes that Spangenberg acknowledged having $6 million in the bank of account of one of his “many shell companies,” adding that the amount is “surely just a small fraction of his fortune.”

“I can't see any justification for this radical action,” wrote Mullin. “Federal judges are often too loose in allowing lawyers to seal documents in patent cases, but this is by far the worst I've seen.”

While U.S. Judge Barbara Crabb has yet to reach a decision regarding attorneys’ fees, the suit underscores a larger political climate of large technology companies turning against firms that hold patents on a “speculative” basis, exercising their patent rights in a court of law without building products of their own.

The highly controversial Patent Reform Act, which ZDNet recently called “dead for 2008,” sought to reform abusive patent practices like “forum shopping,” or the act of filing patent claims in preferred, patent-friendly venues like the Eastern District of Texas, as well as streamline the infringement complaint process and place caps on damages awards. The bill pitted the computing industry, which is currently plagued by patent-trolling by the likes of firms like Plutus IP and SCO, against the pharmaceutical industry, which says it relies on current practices and awards amounts to protect drug research.



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Not all IP companies are like this
By noirsoft on 6/6/2008 8:20:09 PM , Rating: -1
Before the mandatory flood of anti-IP posts flood this post, I feel compelled to point out that not all companies dealing with IP are like this. There are companies whose only business is the buying and selling (and licensing) of patents who are not in it to sue everybody. It is the wave of the future.

In the dawn of the computer age, people used to assert that software had no value outside of bundling it with hardware, since it wan't a physical product. Once people got over that, software quickly outstripped harwqre as the prime mover of the computer industry.

Soon, though not to the same degree, people will come to accept that a pantent has value independent of an implenting product, and the marketplace for IP willmature, and this kind of company and lawsuit will go away.

Does the patent procedure need to be reformed? Yes. Is the answer to cripple anyone who has great ideas but no ability to build a prototyype? (i.e. no more pure IP patents) No.




RE: Not all IP companies are like this
By Reclaimer77 on 6/6/2008 8:37:58 PM , Rating: 5
quote:
Is the answer to cripple anyone who has great ideas but no ability to build a prototyype? (i.e. no more pure IP patents) No.


I uprated you but I do not agree with this.

What needs to happen is that a company should get x amount of time to develop a product or partner with someone who actually CAN develop the product or you lose your patent. Its that simple. If you can't conceive your idea into a working prototype in 5 or 10 years, then sorry, you never will. Your just being a patent troll and the market is worst for it.


RE: Not all IP companies are like this
By Some1ne on 6/6/2008 8:58:49 PM , Rating: 5
If you uprate someone and the post, your vote gets taken away from them. Or at least, I think that's how it works.


RE: Not all IP companies are like this
By Reclaimer77 on 6/6/08, Rating: -1
RE: Not all IP companies are like this
By Some1ne on 6/6/2008 9:14:05 PM , Rating: 5
Yes. Try it:

1. Go to an old thread that nobody is paying attention to anymore, like http://www.dailytech.com/Article.aspx?newsid=11993 .
2. Vote somebody up.
3. Reply to their post. Just for fun, type what their uprated score is in your post.
4. After posting our reply, see if their score matches what is typed in your post.


RE: Not all IP companies are like this
By exanimas on 6/6/2008 10:52:03 PM , Rating: 5
Great post! I up-rated it. Then I posted this.


By maverick85wd on 6/7/2008 12:04:23 PM , Rating: 2
why didn't you write his updated score?


RE: Not all IP companies are like this
By TomCorelis on 6/7/2008 12:46:29 AM , Rating: 2
If you post in a thread, your votes are nullified and you lose your ability to rate people, for that thread only.

See, now I have lost my ability to rate posts. :-)


By Reclaimer77 on 6/7/2008 8:04:26 AM , Rating: 2
Well like mom always said " its the thought that counts ".


RE: Not all IP companies are like this
By Pottervilla on 6/7/2008 11:43:43 AM , Rating: 2
How does a person gain the ability to rate posts in the first place?


RE: Not all IP companies are like this
By TomCorelis on 6/7/2008 2:25:39 PM , Rating: 2
Rating other posts requires a minimum comment count.


By Some1ne on 6/8/2008 2:28:09 AM , Rating: 1
So in other words, spamming will get you there?


RE: Not all IP companies are like this
By noirsoft on 6/7/2008 1:52:24 AM , Rating: 3
Someone with a million brilliant ideas should not have to stop to build every single one before being able to earn a living. Patent trolls do not come up with brilliant ideas. They try to patent obvious (or already implemented but unpatented) solutions, and rely on the broken nature of the current patent system to make money via lawsuits.

Fixing the system will allow companies and individuals to exist solely to _invent_, not to manufacture, market and sell. Fixing the system to allow this and stop patent trolls will increase innovation.


RE: Not all IP companies are like this
By glennpratt on 6/7/2008 3:38:28 PM , Rating: 3
quote:
Someone with a million brilliant ideas should not have to stop to build every single one before being able to earn a living.


I absolutely disagree. Ideas are easy to come up with. Very, VERY few patents merit the term brilliance, especially to someone in a respective field.

Patents don't exist to reward ideas alone, they are to reward inventors - people who have an idea and then believe in it enough to take the risk to develop.


RE: Not all IP companies are like this
By Lerianis on 6/8/2008 12:27:17 PM , Rating: 2
I have to agree. Personally, I am for only a FINISHED PRODUCT being able to be patented (i.e. a book, a piece of software (Microsoft Office, OpenOffice, etc.), a network card, etc.).

None of this piece meal patents on IDEAS that anyone could come up with and that it is basically just a race to see who can come up with idea first, patent it, and then just WAIT for someone to make a product that encompasses your idea to sue them (which is the MAIN THING these piecemeal patents are being used for).


By EricMartello on 6/9/2008 9:26:52 AM , Rating: 2
The reason it is possible to patent an idea is to allow the inventor to enlist third party help in making the idea a reality. While it there are many tinkerers who create prototypes of their ideas without help, bringing a product to market is a complicated and expensive process. Without patent protection, anybody who the inventor brings on as a contractor or partners with can steal the idea and run with it. Patenting your idea, if you plan to build a business around it, is pretty much step one.

Patents are similar to Copyrights in that they both can protect intangible properties, however unlike copyrights which ONLY apply to creative works and are automatically granted to the creator, patents must be applied for and typically require supporting documentation to show that the idea actually has merit.


By soxfan on 6/7/2008 11:59:36 PM , Rating: 2
" Patent trolls do not come up with brilliant ideas. They try to patent obvious (or already implemented but unpatented) solutions, and rely on the broken nature of the current patent system to make money via lawsuits."

Minor correction. Patent trolls generally do not try to patent anything. Typically they acquire (purchase) intellectual property assets such as patents, and then assert them against perceived infringers. They are given the derogatory name "troll" because they seek payment for patented technology that they did not help develop, which is generally perceived as an unsavory (though legit) business practice.

But not all patent trolls are successful. Just look at the stock price of patriot scientific (PTSC) and you'll get a kick. There are some great forum posts about them on ragingbull.com too.


RE: Not all IP companies are like this
By spluurfg on 6/7/2008 6:30:37 AM , Rating: 3
quote:
If you can't conceive your idea into a working prototype in 5 or 10 years, then sorry, you never will. Your just being a patent troll and the market is worst for it.


Pharmaceuticals struggle to bring products to markets based on patented research in a time-frame of 5-10 years, despite having done the research themselves and filing very specific, non-generic patents for it. Clinical trials take ages...


RE: Not all IP companies are like this
By omnicronx on 6/7/2008 11:31:31 AM , Rating: 2
I am pretty sure they have 20 years from the day they filed the patent. Whether or not it takes 15 years to bring many drugs to the market is a totally different story.


By Lerianis on 6/8/2008 12:28:46 PM , Rating: 2
It doesn't actually take that long. Most times, to make the product and test it, it only takes 4-5 years. It is getting the approval of the FDA or whatever consumer protection organization in the country you live in that takes much longer than that, and adds numerous delays to the process.


RE: Not all IP companies are like this
By Strunf on 6/7/2008 12:02:47 PM , Rating: 3
Pharmaceuticals struggle ?
Ya but they make billions of profit 20 years is more than enough to get the money from the research back.


RE: Not all IP companies are like this
By spluurfg on 6/7/2008 3:05:15 PM , Rating: 3
quote:
Many of Big Pharma's biggest blockbusters will soon lose their patent protection. Deloitte, a consultancy, estimates that $55 billion of products will go off patent in 2009 and will then face competition. At the same time, pharma bosses are being asked to defend patents in costly legal battles against an increasingly confident and litigious generics industry. As generics firms evolve from mere copycats into innovators in their own right, many such firms—led by Israel's Teva, India's Ranbaxy and Dr Reddy's Laboratories—are vigorously challenging patents.


quote:
The best way out for the established drugs industry would be to find lots of clever new blockbusters to replace the ones going off-patent. But as the industry's sagging share valuations suggest, the new-drugs pipelines at big firms have run dry.


quote:
Yet the clouds have darkened over Big Pharma. The industry's share prices have performed pitifully and a new report from Accenture, a consultancy, calculates that a whopping $1 trillion of “enterprise value”, which measures future profitability, has been wiped out because investors have lost faith in drugmakers' growth prospects


Source of above excerpts: The Economist

Fact is, pharmaceutical research is hugely expensive, and clinical trials take a LONG time. From filing patent to getting their product approved for the market, the process could take 10 years or more. And when the patent expires, generics move in to produce the drug en-masse, essentially destroying profits from that drug to the pharmaceutical company that invented it.

I'm not saying this is bad for the consumer -- it helps consumers get cheap drugs after a while. But I am simply offering a counterpoint to the OP's assertion that after 5-10 years, a patent holder is negatively impacting the market. If patents expired after 5-10 years, generics would completely destroy pharmaceutical companies' market share, and there would be no 'billions of profit' to fund new pharmaceutical research.


RE: Not all IP companies are like this
By Reclaimer77 on 6/7/2008 5:17:39 PM , Rating: 2
" Clinical trials " imply there is a drug to test. That your patent idea DID produce a quantifiable and tangible result. So my " 5-10 " years statement wouldn't matter here.

Besides I'm not trying to suggest tyranny. Look, if after 10 years you can show that your actually TRYING to do something with this idea, fine. You get an extension or something. Shiny ?

To be honest I was more interested in the tech patents industry.


RE: Not all IP companies are like this
By spluurfg on 6/8/2008 3:37:05 AM , Rating: 2
quote:
" Clinical trials " imply there is a drug to test. That your patent idea DID produce a quantifiable and tangible result. So my " 5-10 " years statement wouldn't matter here.


I think I agree in general with your original point. I just wanted to point out that determining the line between a patent troll and an intellectual property company would have to be drawn carefully. ARM for example has its IP used in the vast majority of smartphones, but is an IP-only firm and doesn't build stuff.

But I am definitely in agreement that the patent-to-sit-on-it-and-troll model doesn't do the market nor society any good, and an activity based benchmark is sensible.


RE: Not all IP companies are like this
By Oregonian2 on 6/9/2008 3:57:25 AM , Rating: 2
Yes, companies that only design things but don't build them would be in trouble. Contract engineering houses, consultants, etc.


RE: Not all IP companies are like this
By JS on 6/9/2008 8:30:46 AM , Rating: 2
You are confusing patents with copyright and intellectual property in general.


By Yawgm0th on 6/9/2008 11:53:48 AM , Rating: 2
But the confusion is justified. The entire paradigm of IP in the United States is inherently flawed. The patent system is probably the worst offender, but even that is debatable.


By Oregonian2 on 6/10/2008 8:30:03 PM , Rating: 2
They are related somewhat. Design houses sometimes live off their patented IP and is one reason a company might have them do a design rather than someone else (in addition to possibly licensing it out). Not all IP is patented, but some is.

Additionally, I've read stories of folk who have had great ideas that they patented but still had years of development work before they were able to get around other problems in a working system ($$$ sometimes being one of the problems). People should just keep it to themselves and perhaps die with the idea just because they didn't have the money to build one?


RE: Not all IP companies are like this
By Strunf on 6/7/2008 6:44:16 PM , Rating: 2
20 years patent may be after you have made your own tests in "secret" and release it to public, there's no reason to patent a drug that hasn't been released yet, unless you fear a spy may steal your research but that can even happen before you fill the patent anyway.

Ya economist interests and consumers interests very often collide, in one hand the big pharma companies will loose some income on the other the generic ones will increase theirs and the consumer will get the benefit of it.


By soxfan on 6/8/2008 12:04:17 AM , Rating: 2
"Public" disclosure is easier than you think. That is why most pharma companies (and several are my clients) seek patent protection for compounds of intetest, i.e., target compounds which show better activity for doing a specific thing (i.e., binding to a particular receptor in the body) than others.

Further, it should be noted that most pharmaceutical companies are entitled to patent term extension. That is, under certain aspects of the law, they can reques that their patent term be extended to account for the time they could not market their drug because it was awaiting FDA or other government approval.


By fic2 on 6/9/2008 11:42:41 PM , Rating: 2
You forgot to mention that Big Pharma spends at least 2x on marketing than they do on research:
http://www.dddmag.com/news-marketing-expenses-twic...


RE: Not all IP companies are like this
By cscpianoman on 6/7/2008 12:33:56 PM , Rating: 2
The drug companies already have a working prototype. They are working on getting it to market, therefore the validation of a prototype in 5-10 years still holds out. Personally, I agree with the statement, if it isn't being worked on, or a plan in place to put it to market, then it never will and leave it to someone who can.


RE: Not all IP companies are like this
By Reclaimer77 on 6/7/2008 1:04:00 PM , Rating: 3
20 years is too long in my opinion. Give me a break, it took us less time to get us to the moon.

In my opinion if a patent honestly can't come to a realization of prototype or product in less then 20 years, its probably a patent that shouldn't have been granted in the first place.

And since someone brought up medical research, the patent industry ( sadly its an industry now ) is actually stifling medical research. Research firms are actually being granted patents on human genomes preventing others from working on them. Can you imagine !?? Human genomes, that exist in every single man woman child, being sold off like property ?

http://www.geneticage.org/sept24.htm
http://www.genome.gov/19016590

The entire patent process needs to be cleaned up, leaned up, and in some cases stopped all together. Lets stop feeding the trolls ok.


RE: Not all IP companies are like this
By Strunf on 6/7/2008 6:58:48 PM , Rating: 2
Look into "Monsanto", this company patents seeds and others and now the farmers have contracts restricting the usage of their seeds, you can not for instance give your seeds to someone else, you can not save the seeds from one season to another... once they have replaced effectively the "open source" seeds we will pay whatever they want for theirs.


By soxfan on 6/8/2008 12:11:18 AM , Rating: 2
Genetically modified organisms are considered "touched by the hand of man" and are thus patentable. Google "Diamond v. Chakrabarty." Honestly, shouldn;t we give an incentive for a company to develop genetically engineered organisms, such as plants, if they are superior in some way to their natural form for a given purpose? It seems fair to me to give someone the ability to profit from their discovery fi, after 20 years, everyone gets to use it for nothing!

Asfor Monsanto limiting the distribution of their seeds, that is part of the rights afforded by patent protection. Specifically, a patent allows the patentee to prevent others from making, using, selling, offering for sale, importing or exporting the claimed invention. If the seeds are the claimed invention, then Monsanto should rightfully have the ability to limit their distibutiion over the patent term.


RE: Not all IP companies are like this
By soxfan on 6/8/2008 12:06:09 AM , Rating: 2
You cannot patent the human genome. You can patent ISOLATED DNA strands, ISOLATE proteins, etc. You cannot patent something as it exists in nature.


By Reclaimer77 on 6/8/2008 12:25:11 PM , Rating: 3
Pretty evasive language if you ask me. Those isolated strands and proteins DO exist in nature. They are simply exploiting a gray area or loophole seems to me.

Can I patent a frogs leg ? I mean after all, I " isolated " the leg from the frog right ?


By soxfan on 6/7/2008 11:53:46 PM , Rating: 2
Article I, section 8 of the constitution states that Congress shall have the power "[t]o promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and DISCOVERIES."

Thus, the literal language of the constitution indicates that Congress has the power to protect discoveries, which are of course not limited to physical products. Thus, a fairly strong argument could be made that a Congressional act to limit the scope of patent protection to real world products, as you suggest, would be unconstitiutional.

Moreoever, you rather limited view of the value of the patent system overlooks its biggest benefit, namely the public disclosure of information that, but for the patent system, would not be disclosed. Indeed, it could reasonably be argued that the U.S. and world patent databases are the largest sources of public information in the world. It doesn't take much brains to see that the public disclosure of information is of enormous value. But if you can't see that, just go ask a research scientist how they use patent databases.

As for me, I think the solution to certain problems such as patent trolls may lie in the modification of property law, not the reformation of the patent system per se (such as limiting the scope of patentable subject matter, as you propose). Though unlikely, one solution is to limit the ability of inventors to assign their applications to third parties. Indeed, if patents could only be assigned (owned) by the inventors or their immediate employer at the time of filing, then the parties who invested in the research behind the patent still gain the benefits of patent protection (the exclusive right to make, use, sell, offer for sale, import or export the claimed invention), but cannot transfer those rights to a party who might abuse them (i.e., a patent troll). Of course, property rights in this country have been set in stone for a very long time, so I doubt this solution would be amenable to anyone.


RE: Not all IP companies are like this
By Keeir on 6/7/2008 2:38:29 AM , Rating: 2
quote:
It is the wave of the future.


And the wave of the past.

There have been companies whose sole/primary purpose has been invention and IP management since the patent system started.

I think the real issue is the speed at which the "technology" industry is moving at... where something that seems unique and patentable 15 or 20 years ago is something that today a high schooler might do as an extra credit project. Patent examiners can not see into the future of course, but I think most of the anger over the patent trolls is that many of the worst trolls also have vague and non-specific patents.


RE: Not all IP companies are like this
By noirsoft on 6/7/2008 6:37:40 AM , Rating: 1
I agree completely. Henri Gouraud got a PhD and achieved immortality in the computer graphics world by "inventing" the idea to linearly interpolate color across the face of a triangle in order to approximate per-pixel lighting. Today, you won't even get a passing grade in a basic graphics programming class by implementing it.

My point was (and is) that the way to fix the patent system is not that we should do away with software/pure IP patents, or force patent holders to produce a working implementation.


RE: Not all IP companies are like this
By glennpratt on 6/7/2008 4:05:21 PM , Rating: 2
quote:
My point was (and is) that the way to fix the patent system is not that we should do away with software/pure IP patents, or force patent holders to produce a working implementation.


It doesn't really sound like you have a solution.

Why would we grant patents to pure software and pure ideas? That seams plainly pro big business and anti innovaton to me.

The reality is that system only benifits those companies with the most money. Anyone can come up with ideas, so the company with the most money builds the biggest IP warchest and will be able to dictate terms to just about any smaller IP holder or even those of us who want nothing to do with software patents!

Remember, software is just math, math is not patentable and rightly so. Anyone with enough education in this field can come up with millions of solutions.


RE: Not all IP companies are like this
By noirsoft on 6/7/2008 4:41:08 PM , Rating: 2
quote:
That seams plainly pro big business and anti innovaton to me.


In fact, it is the exact opposite. If you force patent holders to produce an implementation, then only big businesses will have the money to do so, thus only big businesses will hold patents. Since the patent owner is counting on making money solely through the implementation, they will not license the patent IP out to other companies, which reduces competition and keeps prices high.

If you allow patent holders to license patents without themselves producing an implementation, then they are encouraged to license to multiple sources, which increases competition, since the producetion of the idea is not tied to the IP protection of the patent. This helps consumers and innovation.

Also, I don't need to have a perfect solution to know that a widely-held view is dead wrong.


By glennpratt on 6/8/2008 5:16:33 PM , Rating: 2
quote:
If you allow patent holders to license patents without themselves producing an implementation, then they are encouraged to license to multiple sources, which increases competition


No, granting ideas no protection would be best for competition and consumers. Why on earth should we allow software patents? This really isn't rocket science, it's a slow and steady progression of knowledge, built on the backs of everyone in the field, past and present.

I don't feel software or IP should be patentable period. End of story. It's pro nothing. Ideas should be free, math and knowledge should be free. I want censor my ideas to some arrogant patent holder.


By soxfan on 6/8/2008 12:13:55 AM , Rating: 3
I'm fine with doing away with software patents, because software is currently protected by BOTH copyright and patent. This dual protection is not afforded to any other technology area that I am aware of.


By OMGBS LIES on 6/7/2008 11:07:48 PM , Rating: 2
"Is the answer to cripple anyone who has great ideas but no ability to build a prototype? (i.e. no more pure IP patents) No."

actually i believe that is a yes!

build it and they will come... not think it and sit back and wait until someone else steps on your fat lazy toes...


By mvisconte on 6/9/2008 6:31:31 PM , Rating: 2
Not all, but if there are "enough", then what? What about holding a patent to prevent someone from using technology, even tho' they'd be willing to license it?

I know it's a sad, old saw, but...
http://en.wikipedia.org/wiki/Nickel-metal_hydride_...

Patenting a "multi-cell battery"? Doesn't sound very convincing, reading the patent.
http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PT...

A $30M lawsuit to prevent companies from making what they licensed?

Oh, what a jaundiced view I have.


“And I don't know why [Apple is] acting like it’s superior. I don't even get it. What are they trying to say?” -- Bill Gates on the Mac ads

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