Rackspace Drops Lawsuit Against 'Most Notorious Patent Troll'
Alan Schoenbaum, the general counsel of Rackspace Hosting Inc., wrote a well-trafficked blog post in April called "Why Rackspace is suing the most notorious patent troll in America." The "troll" Schoenbaum was referring to, Erich Spangenberg, is now claiming victory in the case—at least for now.
In a 4-page motion filed on Sept. 20, Rackspace voluntary dismissed claims that Spangenberg's company, IP Navigation Group, breached a provision of an agreement with Rackspace. Spangenberg quickly trumpeted the filing, and he took some shots at Schoenbaum for suing IPNav in the first place.
"Alan probably thought this would be a good way to get coverage to promote his IP credentials, which are largely lacking," Spangenberg wrote in an email. "As opposed to having the judge just toss the case out and hand a total victory to IPNav—and possibly get sanctioned—Alan tried to quietly dismiss. My guess is Alan will hope that no one writes about this particular litigation abuse concocted by Alan and Rackspace."
In an emailed statement of his own, Schoenbaum said Rackspace has strategic reasons for dropping the suit, and that the litigation may not be over yet. Rackspace's dismissal is without prejudice, so it can choose to one day revive the breach of contract claim. And Rackspace still has an identical claim pending against Parallel Iron, a IPNav partner, though a judge has stayed that part of the case pending the resolution of a separate lawsuit.
For the last decade or so, Spangenberg has taken an ownership stake in hundreds of "trolls," or nonpracticing entities—companies that derive revenue from patent assertion rather than selling products or services. These days, he serves a CEO of IPNav, which advises companies of all types on how to monetize their patent portfolios. Some inventors sing his praises, but tech companies loathe him, as The New York Times explained in a recent profile.
Schoenbaum's blog post touting the Rackspace suit included a sweeping indictment of NPEs, but the lawsuit itself dealt with a specific objection. It all started when IPNav wrote to Rackspace to say "your company makes, uses, or sells products or services that would benefit from a license to certain of our client's patents." That client was Parallel Iron. But IPNav refused to tell Rackspace the name of its client unless Rackspace signed a "forbearance agreement"—a promise not to seek a declaratory judgment that the patents at issue are invalid. The companies eventually agreed on a mutual forbearance agreement. As part of that agreement, Parallel Iron promised to give Rackspace at least 30 days notice before suing Rackspace for patent infringement.
Parallel Iron sued Rackspace and several other companies for patent infringement in Delaware in March. But according to Rackspace, the lawsuit constituted a violation of the 30-day notice agreement by both IPNav and Parallel Iron. Rackspace's lawyers at Haynes & Boone brought suit in April in U.S. district court in San Antonio, where Rackspace is based. Websites like Wired and Gigaom praised Rackspace's complaint, but Spangenberg told us earlier this year that the lawsuit is frivolous and that he's got emails to prove it.
Earlier this month, Rackspace asked to stay its claims against Parallel Iron until the Delaware case is resolved. Rackspace argued that before delving into its contract claim against Parallel Iron, it made sense to get a determination of whether Rackspace infringes Parallel Iron's patents.
Once the stay as to Parallel Iron was granted, Rackspace wrote in Friday's filing, it didn't make sense to proceed just against IPNav.
"Because we believe the issues between all the parties are inextricably intertwined, we don't think it makes sense to proceed against IPNav alone, so we chose to dismiss the lawsuit against IPNav without prejudice," Schoenbaum wrote in his emailed statement.