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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 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.


"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997

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