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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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RE: Not all IP companies are like this
By glennpratt on 6/7/2008 4:05:21 PM , Rating: 2
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
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
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.

"If you mod me down, I will become more insightful than you can possibly imagine." -- Slashdot
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