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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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Patent campers are no better than domain campers
By Dolphie on 6/7/2008 12:59:22 PM , Rating: 3
Patent campers are no better than domain campers or squatters. Most people have thought up concepts that they later see implemented by someone else. We kick ourselves for not acting upon our ideas -yet we do not go after the companies that did act upon their ideas.
Pharmaceutical companies work in secrecy with many biotech firms working on the same product line (eg: cure for cancer, weight management, liver cancer cure, etc etc). When you go into a biotech firm you are sworn to secrecy and you are not privy to the actual work in progress (you may have an overview yet you do not know the full picture).
The biotech company does not file a patent until the drug is in the test stages. The biotech company does not go after another company who beat them to the draw with a successful product. There are billions of dollars put into the equation that are not recovered immediately. Many biotech companies fail as their product does not make the grade - yet another biotech firm is able to produce the product.
The same in the tech industry - graphic cards, chips, etc - it depends upon who gains success as to who can really claim the credit for the invention.
Da Vinci did not claim to be able to fly - yet he drew out a plan that actually works. Should he be labeled the patent holder for flying?
Also, much of the internet movement was based upon curiousity, an opennness in knowledge sharing and a desire to create. Many of the features used in applications were created by students in colleges - before anything like patent protection was in effect. Should all of these students be able to sue every single software company out there?

By noirsoft on 6/7/2008 4:47:39 PM , Rating: 3
A proper patent system encourages innovation and communication. The examplesyou cite of the biotech industry show only that the current patent system is broken.

Imagine: I have an idea, but am not sure if I can actually make it, since it costs a lot. With the patent-hostile "fix" some people envision, there is no benefit to me patenting the idea early, since it starts a short 5-year timer in which I have to produce a working prototype. Meanwhile, large companies can also begin working on a prototype, and when my short 5-year window ends, they jump on it and I, as the inventor, get nothing for my hard work.

Imagine instead: I get a great idea and immediately patent it. Since I do not need to implement it, I can license the patent out to several companies who are competing with each other to make the best implementation of that idea. I make money, competition is increased, and the consumers win.

"We shipped it on Saturday. Then on Sunday, we rested." -- Steve Jobs on the iPad launch
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