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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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Mulling Over?
By BMFPitt on 6/7/2008 9:57:48 AM , Rating: 3
quote:
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 only thing to contemplate here a witty way to tell them that?

Why doesn't the patent office do a review of all patents owned by anything associated with this company for validity?




RE: Mulling Over?
By soxfan on 6/8/2008 12:24:36 AM , Rating: 4
"Why doesn't the patent office do a review of all patents owned by anything associated with this company for validity? "

The patent office will not review the validity of a patent unless asked to do so by a third party under specific circumstances. Currently, it is possible to seek patent office review of an issued patent via inter partes reexamnination and inter partes reexamination.

In ex parte reexamination, the requestor (which can be the patentee) can remain anonymous, and essentially asks the PTO to review the patent in question in view of references that are submitted together with their request for reexamination. The PTO will grant a reexamination if the requestor convinces the parties that be in the USPTO that the cited references raise a "substantial new question of patentability."

In inter partes reexamination, the burden on the requestor is the same as in ex parte reexamination. That is, they must submit references and convince the USPTO that those references raise a substantial new question of patentability. The differece between ex parte and inter partes reexamination is three fold. First, the requestor in inter partes re-exam cannot remain anonymous. Second, unlike ex parte reexamination, the requestor of an inter partes reexamination can participate directly in the reexamination proceeding, if it is granted by the USPTO. And third, the requestor of an inter partes re-examination is estopped from seeking judicial review of any issue considered by the PTO during the reexamination proceeding.

Reexamination proceedings are not initiated by the PTO because less than 3% of all issued patents are enforced, and only 1% are litigated. Given the relatively low enforcement rate and the fact that the PTO is horrendously backlogged, the office cannot afford to reexamine patents sua sponte that have already been examined.


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