Phone Makers Must Face 'Original Patent Troll' Lawsuits

, The Litigation Daily

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A group of major smartphone manufacturers have lost a bid to knock out a series of patent lawsuits brought by Cascades Computer Innovation LLC, a non-practicing entity (a.k.a. patent troll) with a pedigree. Cascades's CEO was fired up by the decision, telling us that defense counsel has engaged in "aggravating" and "frivolous" motion practice in hopes of delaying a trial on the merits.

In a 13-page ruling issued on Friday, U.S. District Judge Matthew Kennelly in Chicago ruled that Cascades has standing to assert one of its key patents, U.S. patent number 7,065,750, which covers a process of preserving exceptions in binary code. Eight of Cascades's targets — Dell Inc., Motorola Mobility Holdings Inc., Pantech Wireless Inc., Sharp Electronics Corp., Sony-Ericsson Mobile Communications Inc., Samsung Electronics Co., Acer America Corp., and HTC Corp. — jointly argued that Cascades never acquired the right to sue over the patent when the company agreed to monetize it on behalf of its inventor, Boris Babaian.

Babaian is a Russian engineer credited with helping to invent the supercomputer. Over his career, he registered many than 30 patents through his company, Elbrus International. In early 2011, Elbrus sold to Cascades the exclusive right to license and monetize his patent portfolio.

Cascades is the latest venture from Anthony Brown, a former Jenner & Block partner who helped pioneer modern-day patent monetization. IP Law & Business once called Brown "the original patent troll," noting that an Intel Corp lawyer apparently coined the term to refer to Brown's original venture, TechSearch LLC, and its longtime lawyer Ray Niro. Brown sold TechSearch to the massive patent licensing group Acacia Research Corp in 2005, as Corporate Counsel explained when it profiled him in September 2012.

The '750 patent is a key part of Babaian's portfolio, and Cascades has asserted it against a long list of gadget-makers. In addition to suing the tech companies for infringement, Cascades has separately accused several of them of conspiring with the defensive patent aggregator RPX Corp to jointly boycott Cascades's licensing efforts in violation of antitrust law. A U.S. district judge in Oakland dismissed that unusual antitrust case without prejudice in January. Cascades has filed an amended complaint, which is pending.

The defendants have moved to dismiss Cascades's cases relating to the '750 patent on various grounds. In one of their motions to dismiss, filed February, Dell's lawyers at Winston & Strawn, who also represent Sony and Motorola, argued that "Cascades does not have the necessary bundle of rights in order to bring its claim, and therefore lacks standing." According to Dell's lawyers, Babaian's company Elbrus retained substantial rights in patent, and it's possible that third-parties like Intel Corp (Babaian's former employer) also have rights in the '750 patent through a 2004 licensing agreement that hasn't yet been produced. The seven other defendants filed a joint motion signing onto Dell's argument.

Kennelly rejected those arguments on Friday, writing that "the agreement between the Elbrus entities and Cascades is sufficient to confer all substantial rights to the '750 patent and thus amounts to an assignment, enabling Cascades to sue in its own name."

"In my opinion, this was a frivolous motion," Brown told us Monday. "The defendants are just serving up one motion after another to see if anything sticks." Brown also complained that amid increasing debate over sanctioning and shifting legal fees onto patent trolls, nobody seems to notice that "it's a common defense tactic to just go through extensive motion practice to try to delay the thing and make it costly and deny us our day in court."

"[T]he judge said that the defendants misrepresented the facts (called them liars) three times in his decision," Brown added in an e-mail. "Who's unethical?"

Winston & Strawn partner Imron Aly declined to comment. Other defense counsel in the litigation includes Kirkland & Ellis (for Samsung); H.C. Park & Associates (for Pantech); DLA Piper (for Sharp); Wilson Sonsini Goodrich & Rosati (for HTC); Andrews Kurth (for Sony); and Frietas Tseng & Kaufman (for Acer).

UPDATE: After we published our story, Brown e-mailed us to clarify that Judge Kennelly never called the defense lawyers in the case liars. "[A]nyone can read the opinion, which is published, and know exactly what the judge said. He obviously did not call them liars — that was my characterization," Brown wrote.

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