Cisco, Motorola, Netgear Team Up To Expose Wifi Patent Bully

from the hitting-back-hard dept

Tue, Oct 9th 2012 12:35pm — Mike Masnick

Last year, we wrote about a crazy patent troll, named Innovatio, who had sued a ton of restaurants and hotels, claiming that anyone who used WiFi was violating its patents. It was even claiming that individuals who use WiFi at home infringed too -- but that it wouldn't go after them "at this time." Instead, it preferred to focus on shaking down tons of small businesses, offering to settle for $2,500 to $3,000 -- which is cheaper than hiring a lawyer to fight it, no matter how bogus. We noted at the time that Motorola and Cisco had gone to court to try to get a declaratory judgment to protect its customers.

Well, it seems that the effort to stop these lawsuits has been taken to the next level. Cisco, Motorola and Netgear have now filed an amended complaint which rips Innovatio apart, and doesn't just seek a declaratory judgment of non-infringement, but outlines a parade of lawbreaking by Innovatio, arguing that it's actually involved in racketeering and conspiracy among other things. The full filing, embedded below, is fascinating. The filing reveals some background about Innovatio, which apparently is connected to Noel Whitley, who had been VP of Intellectual Property at Broadcom... but then left to create Innovatio, which just so happens to have acquired most of its patents from... Broadcom. Among the parade of insanity charged against Innovatio:

Motorola, Cisco and Netgear all have licensed the patents in question, meaning that users of that equipment are covered by those patents under the concept of patent exhaustion (basically, if you buy a licensed product, it's licensed). Innovatio conveniently doesn't mention this to the people it sends threat letters to.
The patents in question are part of commitments to IEEE that they'll only be licensed on RAND terms, but the threat letters demand way more than would be considered "reasonable."
Incredibly, Innovatio includes some expired patents in the list of patents it has threatened people over. That's a massive no-no. Once a patent is expired you can't demand a license for it. At all.
Innovatio apparently tells the people it threatens that it'll be cheaper to just settle, rather than to even investigate the claims that it's making -- and has told people that the manufacturers in question aren't defending their customers, which is proven false by the lawsuit, which, again, was filed soon after Innovatio popped up on the scene.
In an attempt to appear more legit, Innovatio claims that the patents in question have "generated in excess of $1 billion in settlements and license fees" to scare small businesses into complying. It leaves out that it appears to be basing this number on the famous broad patent fight settlement between Qualcomm and Broadcom, which was a wide-ranging cross licensing program, that has nothing to do with Innovatio or its specific patents.

There's a lot more in there, but if the allegations by the vendors are accurate, Innovatio's actions are really questionable. Even if people agree that the patents in question are legit, the fact that the vendors have already licensed them makes these actions quite incredible. The lawsuit claims that Innovatio has sent threat letters to an astounding 8,000+ businesses, mostly way too small to be able to understand the details of what's happening.

Defendants prey upon end users that are not involved in the development or supply of the accused technologies, demanding exorbitant licensing amounts that breach numerous obligations on the patents and greatly exceed any notion of reasonableness. In furtherance of their plan, Defendants threaten protracted negotiations with onerous burdens on end users, and offer supposed “discounts” for promptly paying Innovatio without engaging in such negotiations, while making it clear that Innovatio will initiate costly litigation with anyone that does not acquiesce (something it cannot realistically do given the 8000-plus letters sent throughout the U.S.). Under these circumstances, Innovatio circumvents its obligations and illegally obtains and seeks to obtain licensing fees to which it is not entitled, at great detriment to the Plaintiffs in this action, their customers, and the public generally.

Oh yeah, as for that whole "expired patent" thing? That seems especially egregious:

To date, at least ten of the Innovatio Patents have expired, yet those patents continue to be highlighted in Defendants’ threat letters in furtherance of their licensing campaign. Yet Innovatio states to its licensing targets that “Innovatio proposes granting [the licensing target] an upfront, paid-up license for its use under all of 31 of the issued Innovatio Patents,” when those targets have no liability on and therefore no need of such a license to expired patents. For example, on May 9, 2012, almost one year after the ‘771 patent expired and almost six months after the ‘311 patent expired, Innovatio sent a demand letter to [redacted] .... Innovatio did not provide notice of these or its other patents to [redacted] before expiration. Notwithstanding the expiration of these patents and other patents, Innovatio’s May 9, 2012 demand letter stated “[t]he operation and use of any [WLANs that use the IEEE 802.11 communication protocols] by [redacted] constitutes infringement of at least the following Innovatio Patents: . . . U.S. Patent No. 5,940,771 . . . [and] U.S. Patent No. 6,374,311.” .... Yet circumstances here including a failure to comply with 35 U.S.C. §287, confirms that Innovatio cannot assert infringement or recover damages on at least these expired patent claims. On information and belief, Innovatio never disclosed that these patents had expired, or that its remedies were limited, and the purpose behind inclusion of these patents is to inflate the size of Innovatio’s portfolio, instill fear, increase fees and costs to investigate, and force its targets to capitulate promptly to Innovatio’s unlawful demands.

The filing also includes standard claims of non-infringement and invalidity of the patents in question, but the highlighting of these other behaviors by Innovatio are really quite stunning. Even in cases of extreme patent trolling it's pretty rare to see such egregious behavior. Every so often we see RICO claims being used to counter trollish behavior, but they rarely work. However, the details in this case suggest that if a RICO charge is going to stick, this seems like a reasonable case for it to happen.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: patent trolls, patents, racketeering, rico, wifi
Companies: broadcom, cisco, innovatio, motorola, netgear

36 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Pjerky (profile), 9 Oct 2012 @ 12:17pm

Vampires
What a bunch of blood sucking vampires. Can anyone convince some extremists to start a Jihad on companies like this? Of all the problems in this world, it is crap like this that makes Western society look monstrous. Scum like this, should at the very least, spend the rest of their lives in jail. They don't deserve any money from these patents.

This is also a big reason why I think patents should not be transferable. Or at least, have a limited number of transfers available.

Another idea would be to require all companies that have used patent lawsuit threats to extort money from others should be forced to pay back 300% of the money they took (plus legal fees) if any of the patents used in the threat later turn out to be invalid or had expired by the time the extortion occurred.

There should be a lot of limitations put on patents.
[ link to this | view in thread ]
big al, 9 Oct 2012 @ 12:44pm

copybandits
USE IT OR LOSE IT fixes all these problems....
[ link to this | view in thread ]
Ninja (profile), 9 Oct 2012 @ 12:46pm

Now only if we joined forces and started bashing TD trolls. Oh wait...

Ahem, on a more serious note I hope this has massive impact on patent trolling. Hopefully to the point of extinguishing it.
[ link to this | view in thread ]
Anonymous Coward, 9 Oct 2012 @ 1:09pm

Restricting patent liability to equipment manufacturers etc. would prevent this sort of trolling.
[ link to this | view in thread ]
Anonymous Coward, 9 Oct 2012 @ 1:10pm

The statute of limitations associated with patents allows the patent holder to reach back six (6) years from the date the complaint for infringement is filed. A patent expiring today can reach back to 10/9/06. Earlier infringements are outside the limitations period and not subject to the award, if any, of damages.
[ link to this | view in thread ]
Anonymous Coward, 9 Oct 2012 @ 1:19pm

Re: Vampires
Sadly, like vampires, patent trolling companies turn to ash as soon as someone shines some light on them, so there won't be anything of value to recover.
[ link to this | view in thread ]
Anonymous Coward, 9 Oct 2012 @ 1:19pm

Asking for a $3000 "settlement" - where have we seen that number before?

Yes, all those cookie-cutter mass-extortion campaigns that demand a few thousand to make it go away. From DirecTV to RIAA to porn peddlers, a figure proven to be the sweet-spot of monetary demands, where people are likely to pay up without a fight.
[ link to this | view in thread ]
Atkray (profile), 9 Oct 2012 @ 1:22pm

My thought
No product no patent.
[ link to this | view in thread ]
Minimum Wage Shill, 9 Oct 2012 @ 1:27pm

"Cisco, Motorola, Netgear"

Mike, why are you always siding against the little guy? Are these big corporations paying you off?? You don't want to protect the little guy from being bullied by these huge monsters? What about the little guy???
[ link to this | view in thread ]
BentFranklin (profile), 9 Oct 2012 @ 1:31pm

Boy I hope I get one of those letters!
[ link to this | view in thread ]
Anonymous Coward, 9 Oct 2012 @ 1:32pm

Re:
Big Routing has Mike in their clutches.
[ link to this | view in thread ]
Mason Wheeler (profile), 9 Oct 2012 @ 1:36pm

Re: Vampires
How about this? Any time a patent or copyright is transferred for any reason, (including the standard initial transfer of rights from creator to publisher,) the remaining time until said protection expires shall be cut in half.

Throw a bit of game theory into the equation and watch things change for the better.
[ link to this | view in thread ]
You're a Gazelle! (profile), 9 Oct 2012 @ 1:37pm

Oligarchy?
I dunno. Kind of looks like "Big Wifi" interfering with a perfectly good, litigation based business model!

/sarc
[ link to this | view in thread ]
Anonymous Coward, 9 Oct 2012 @ 1:44pm

thats a lot of egregiosnessness ness?
totally agree with item etc.. but what the hell does egregious mean? bad, naughty, legal misbehaviour, deliberate obvious... help me i'm stupid
[ link to this | view in thread ]
Pjerky (profile), 9 Oct 2012 @ 1:49pm

Re: My thought
I agree fully.
[ link to this | view in thread ]
Corby (profile), 9 Oct 2012 @ 2:03pm

If you should happen to pay this settlement then there is nothing to stop the company in question say 6 months down the line to send you another another letter asking for more money and with pointing out them by them that as you have previously paid us we will use this as evidence of guilt that you have settled out of court. Pay up this new amount or fact court action. Extorntionist blackmailer strikes again and will continue to extortinate the same people who pay up over and over again for more and more money because they now have them in trapped in their web.
[ link to this | view in thread ]
Andrew F (profile), 9 Oct 2012 @ 2:04pm

End User Protection
I'd love to see an end-user protection clause added to the patent act. Even if the routers were infringing, only the manufacturer should be liable. It's a bad sign when trolls start going after people who did nothing more than legally purchase a product from Best Buy.
[ link to this | view in thread ]
Indian-owned chain motels with free WiFi for custo, 9 Oct 2012 @ 2:23pm

Stupid patent troll - see email address
inbecile's attorney email address is: mmcandrews@nshn.com

Feel free to send hate emails to him.
[ link to this | view in thread ]
Anonymous Coward, 9 Oct 2012 @ 3:19pm

Re: copybandits
Not really. What is needed is a tort-reform.
Use it or lose it would really make it hard for small businesses to protect their patents. Since they do not have the economic moneybag to defend themself in court, it is advantageous for them to seek economic and judiciary help in a more specialized companies. By use it or lose it you need a way to mitigate the economic obstacles in taking a small case to court. The only way to make it in a way republicans can swallow is through a reform of how tort is calculated and especially who pays what and when.
You could argue for more government-interventionist actions, but that would not really be politically wieldy.
[ link to this | view in thread ]
davnel, 9 Oct 2012 @ 5:27pm

Troll Accountability
Why aren't the trolls, patent and copyright, being charged under RICO? If this isn't a protection and just plain extortion racket, in the finest Cosa Nostra tradition, I'd like to know what is. Where's our procecutorial action? Why are the trolls allowed to continue?
[ link to this | view in thread ]
kramdenhoser, 9 Oct 2012 @ 7:22pm

Snarf Dem Patents...
Here's the remedy:

Anyone who so abuses held patents in such a manner shall immediately forfeit them forever.

End of problem.

Ya kin thank me later. =8*d
[ link to this | view in thread ]
G Thompson (profile), 9 Oct 2012 @ 10:09pm

Re: Re: copybandits
Not really. What is needed is a tort-reform.

THIS!!!! 100000 times!
[ link to this | view in thread ]
Paul Keating, 10 Oct 2012 @ 3:32am

class action correctness
This is one area where it would be nice to see a class action attorney step up and file suit also. I would not care so much that any proceeds were shared amongst the class as much as caring that this troll be pounded without mercy into the sand. It would stand as a lesson to others.

Next up: Patents reform..... a few ideas:

a. Patents are not enforceable unless put into use directly by the inventor within five (5) years. Otherwise they are presumed to have been abandoned - just as with trademarks.

b. Patent rights permit exclusive use for 4 years. This exclusive period starts on the EARLIER of: (a) issuance of the patent or (b) 1 year following the initial filing of the patent application.

c. After the expiration of the 4th year, a compulsory license scheme is put into place (similar to copyright) with royalties to be set by agreement with either party able to seek arbitration. Once a license fee for a patent is set, the license fee may be reduced for future compulsory licenses but not increased.

d. Obviousness test to be truly applied. If the PTO does not have the expertise they need to hire it.

e. Presumption of validity is eliminated. Just because the PTO says something does not mean it is true.
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2012 @ 6:29am

I wonder if anybody patented the wheel yet? If I could just get a patent for that I could sue everyone who uses a wheel.
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2012 @ 7:08am

I never realized that self-serving interests stated in lawsuit complaints are the gosh-honest truth and are to be believed without question. Perhaps it would be wise to wait for any answer and/or counterclaim to be filed by the defendant before jumping on the "this is just terrible what the bully is doing" bandwagon.
[ link to this | view in thread ]
PT (profile), 10 Oct 2012 @ 9:11am

Re: Troll Accountability
Indeed. While I understand that the civil tort case has to be brought by private parties, what we actually need to see is "United States v. Innovatio et al", with a real prospect of those famously disproportionate Federal penalties being handed down (like 1 year on each of 8000 counts, to be served consecutively). I'm sure this would only have to be done once.
[ link to this | view in thread ]
Bob Robertson, 10 Oct 2012 @ 9:16am

Re: Vampires
I suggest that the same abuses existed even when Patents were far more limited in scope and duration than today.

I have become convinced that abolishing Patent would be far more beneficial than the supposed "benefits" that are gained by having Patents in the first place.
[ link to this | view in thread ]
PT (profile), 10 Oct 2012 @ 9:49am

Re:
There's precedent. US 6,280,318 (2001) patents the use of a fan to cool electronic equipment cabinets. US 7,499,276 (2009) also patents the use of a fan to cool electronic equipment cabinets, with the important difference that it sucks instead of blows. I see no reason why you wouldn't be granted a patent for the wheel, but when you file, remember to specify in the claims that it includes wheels turning in both directions, otherwise you may lose the reversing rent to a competitor.
[ link to this | view in thread ]
IrishDaze (profile), 10 Oct 2012 @ 3:43pm

Re: thats a lot of egregiosnessness ness?
Here, let me google that for you:

https://www.google.com/search?q=google&ie=UTF-8&oe=UTF-8&hl=en&client=safari#hl= en&sugexp=les%3B&gs_nf=1&pq=google&cp=11&gs_id=1q&xhr=t&q=define+egregio us&pf=p&sclient=tablet-gws&client=safari&tbo=d&oq=define:+egr&gs_l=&pbx= 1&bav=on.2,or.r_gc.r_pw.&fp=bb695c63d480a1f1&bpcl=35243188&biw=1024&bih=644
[ link to this | view in thread ]
Michael, 11 Oct 2012 @ 12:38pm

Re:
At the risk of sounding like a complete killjoy: you wouldn't be the first to try. The same goes for patenting fire, the lever, the wedge... and so on...
[ link to this | view in thread ]
Derek Kerton (profile), 12 Oct 2012 @ 2:49pm

Re:
When a bully asks a mark for his lunch money, I don't need to see the wimp's reaction to know that the bully deserves a smackdown.
[ link to this | view in thread ]
JimSales, 9 Jan 2013 @ 6:15pm

Ain't it grand?
How does one get into this creative, lucritive, fun business?

If the patent is valid, these brilliant people deserve their fees by legal right!
And who is to say what a reasonable fee is? Seriously, this robery by statuate is as American as Baseball!

Many here are angry only because they weren't smart enough to get rich using similar ideas. I only wish I were!
[ link to this | view in thread ]
Max Geuber, 7 Oct 2013 @ 3:37pm

Turf War
This is just about some turf war about the market. Patents are there to protect their monopoly instead of competing on the merits of their router technology and product.
[ link to this | view in thread ]
George, 12 Jan 2014 @ 2:34pm

I feel sorry for those who paid. Luckily, this won't happen again, at least not in the near future. Unfortunately, more and more individuals try to take credit and money for other people's patents.
[ link to this | view in thread ]
192.168 l 0, 2 Jun 2017 @ 3:06pm

I wonder if anybody patented the wheel yet? If I could just get a patent for that I could sue everyone who uses a wheel.
[ link to this | view in thread ]
192.168.10.1, 17 Jun 2017 @ 6:20am

I dunno. Kind of looks like "Big Wifi" interfering with a perfectly good, litigation based business model!
[ link to this | view in thread ]