Why Softbank Patent Troll's Promise Of 'Royalty Free' License On Theranos Patents For COVID-19 Is Bullshit

from the an-offer-everyone-should-refuse dept

As noted earlier this week, a Softbank-owned patent troll, Fortress Investment Group, spun up a shell company Labrador Diagnostics this month, and days after the company came into existence, it sued a company working on COVID-19 diagnostics, claiming that the technology it used for those tests violated the patents it had bought from Theranos -- the sham of a company that went down in flames, and whose founders are still facing federal charges for fraud. Oh, and Fortress/Labrador/Softbank was using the law firm Irell & Manella, the same law firm that once sued on behalf of a monkey over copyright. On a related note, the current head of the US Patent Office, Andrei Iancu, used to be the managing director of that law firm, and to this day insists that there's no such thing as a patent troll. He should perhaps talk to his former partner, Morgan Chu.

As you probably heard (because Irell & Manella made sure to reach out to everyone mocking them for this lawsuit), within hours of my post going viral, "Labrador Diagnostics" (again, a company that literally did not exist a few weeks ago) put out a press release saying that (1) it didn't know that BioFire was working on a COVID-19 test (which is questionable, given that the Wall Street Journal and other publications had mentioned it, but I guess Labrador didn't even exist when that article came out, so...), and (2) that it had "offered" a royalty-free license on COVID-19 tests once it realized. As we pointed out, the details and conditions of that "offer" still have not been made clear.

However, as Josh Landau at Patent Progress notes, even if Labrador/Fortress/Softbank is actually offering such a license, it's completely worthless, because the lawsuit is still claiming patent infringement on the machine BioFire is using to run the diagnostic:

While we can acknowledge that Labrador has made this commitment, it’s difficult to credit the commitment given that the commitment doesn’t seem to be a meaningful one. Suing a company that makes (extremely complicated) “razor handles” and “razor blades”, Labrador has essentially offered to freely license COVID-19 blades—but it’s still trying to block sales of the razor the blades require....

That’s the thing—Labrador’s offer isn’t meaningful in practice.  BioFire’s product, FilmArray, uses a technology called PCR (polymerase chain reaction).  And their product is pretty cool.  Essentially, FilmArray is a two-piece system—a durable test device and a consumable test pouch containing test-specific reagents.  You take the pouch, inject the sample to be tested into the chamber, and stick the pouch into the test device. The test device does some complex mechanical and biomolecular magic—PCR—and delivers a test result for the doctor.  (And as Mike noted, the patent isn’t on the biomolecular magic—it’s on using a barcode on the test pouch to trigger the PCR reaction.)

But in BioFire’s system, no matter what disease you’re testing for, you use the same test device.  The test-specific aspects are entirely contained in the pouch—a respiratory pouch, a gastrointestinal pouch, etc.  Each one tests for a couple dozen diseases. A respiratory pouch might check for COVID-19, common flu strains, and pneumonia all at once.  And what Labrador is seeking to block is the whole system, not just the pouches.

So an offer to allow a royalty-free license for the COVID-19 test appears to be meaningless—they’re still trying to block the technology that’s needed to run the COVID-19 test. A razor blade without a handle to hold it isn’t much use. The offer would seem to be made purely for the sake of making Labrador look less like ghouls trying to benefit from a pandemic—in practice, Labrador’s injunction request would still effectively shut down COVID-19 testing or make it more expensive. Even though it’s theoretically offering a royalty-free license to test for COVID-19.

Got that? Saying that you'll grant a royalty-free license on one part of the system, but not the part needed to make that "royalty-free" part work, is still seeking to block the use of COVID-19 tests. The lawsuit still seeks an injunction on the testing device, even if it will let COVID-19 pouches operate royalty free. Even worse, we don't know (and Labrador has so far refused to reveal the details of the "offer") what the terms of the offer are, and you can almost guarantee that if BioFire "accepts" the deal that would be used against them, as "evidence" that they admit the patents are valid, since they agreed to a "license" for one product. It's sham deal.

As Landau further notes, this is still likely to create a real chilling effect on other test developers as well:

Second, the offer of a license in one instance doesn’t require the patent owner to offer that license to others.  (And as we’ve seen with Qualcomm, even a legal commitment won’t stop a determined patent holder from trying to avoid offering licenses they’ve committed to offer.)  If you’re a medical startup thinking about developing a COVID-19 test, you could invest in that—and hope that Labrador licenses you royalty-free—or you could spend your money somewhere without the risk of a well-financed patent troll coming after you.  That risk will chill investment in public health and innovation, even though this particular case might be licensed.

Separately, Landau highlights another detail in all of this: how Fortress/Softbank got the patents in the first place. It wasn't a straight up "oh we'll buy your patents," but rather a more complicated deal in which Fortress lent money to Theranos, and when the company defaulted, took the patents:

As reported in John Carreyrou’s Bad Blood, Fortress loaned Theranos money to help them wind down, securing the loan by stating that if Theranos failed to make specified payments, then Fortress would take ownership of the patents.

Unsurprisingly, the medical device company which didn’t have a functional medical device failed to make those payments, and Fortress took the patents.

So, no, Morgan Chu and Irell & Manella should not be off the hook for this blatant pandemic profiteering. They're engaging in the worst kind of patent trolling: ones that will create a real chilling effect and potentially block the ability to create COVID-19 tests at a time when millions of lives literally depend on those tests.

Filed Under: covid-19, diagnostics, patent troll, patents, tests
Companies: biofire, fortress investment group, irell & manella, labrador diagnostics, softbank

Softbank-Owned Patent Troll Now Promises To Grant Royalty-Free License For Covid-19 Tests; Details Lacking

from the let's-see-the-details dept

Yesterday I wrote up a fairly insane story about how a Softbank-owned patent troll, Fortress Investment Group, through a shell company subsidiary, Labrador Diagnostics (which, despite its name, does not seem to do any diagnostics), using patents that it had bought up from the sham medical testing company Theranos during its fire sale, had sued BioFire Diagnostics/BioMerieux, one of the few companies making a Covid-19 diagnostics test, claiming patent infringement. The patent infringement claims were on all of its diagnostics created using BioFire's FilmArray 2.0, FilmArray EZ, and FilmArray Torch devices -- and the company's Covid-19 tests were based on that technology. Even worse, the company asked the court to issue an injunction, blocking BioFire from using the tests. As we pointed out, this was not just tone deaf, but destructive and dangerous.

This morning, hours after our article went viral, Labrador Diagnostics issued a press release claiming that once it became aware that BioFire was working on Covid-19 tests, it had offered the company a royalty-free license on those tests (and only those tests):

-Labrador Diagnostics LLC (“Labrador”) today announced that it will offer to grant royalty-free licenses to third parties to use its patented diagnostics technology for use in tests directed to COVID-19. Labrador fully supports efforts to assess and ultimately end this pandemic and hopes that more tests will be created, disseminated, and used to quickly and effectively protect our communities through its offer of a royalty-free license during the current crisis.

On March 9, 2020, Labrador, an entity owned by investment funds managed by Fortress Investment Group LLC, filed a patent infringement lawsuit in the District of Delaware to protect its intellectual property. Labrador wants to make clear that the lawsuit was not directed to testing for COVID-19. The lawsuit focuses on activities over the past six years that are not in any way related to COVID-19 testing.

Two days after the lawsuit was filed on March 11, 2020, the defendants issued a press release announcing that they were developing tests for COVID-19. Labrador had no prior knowledge of these activities by the defendants. When Labrador learned of this, it promptly wrote to the defendants offering to grant them a royalty-free license for such tests.

There are still many open questions regarding all of this. It is unclear when Labrador actually sent this letter or what it actually says in the details. It's notable that it says that it "will offer to grant royalty-free licenses, rather than just flat out waiving any rights it might hold for such tests. The latter would suggest good faith. The former makes you wonder if there are conditions associated with the "offer" (such as needing to license the patents for other uses, or a recognition of the patents as valid or some such). Labrador and its lawyers at Irell & Manella could clear up this confusion by releasing the letter -- including the time stamp when it was actually sent.

Even this bit of last minute ass covering doesn't change the overall sketchiness of the original lawsuit. Again, we're talking about questionable patents from Theranos, a firm that was shown to be a sham, with technology that never worked. The patents themselves seem excessively, perhaps ridiculously, broad. Look over the claims in patent 8,283,155 and explain to me how that adds anything new or novel to diagnostic testing machines. Here's the 1st claim:

1. A two-way communication system for detecting an analyte in a bodily fluid from a subject, comprising:

a) a reader assembly comprising a programmable processor that is operably linked to a communication assembly;
b) an external device configured to transmit a protocol to the communication assembly;
c) a test device configured to be inserted into the reader assembly, said test device comprising:

i) a sample collection unit configured for collecting a sample of bodily fluid suspected to contain an analyte;
ii) an assay assembly containing reactants that react with said sample of bodily fluid based on the protocol transmitted from said external device to yield a detectable signal indicative of the presence and/or concentration of said analyte; and
iii) an identifier that is configured to provide the identity of said test device and is also configured to trigger the transmission of said protocol that is selected based on said identifier;

wherein the programmable processor of the reader assembly is configured to receive said protocol from said external device, wherein said protocol in turn effects (1) a reaction in said assay assembly for generating said signal, and (2) selection of a detection method for detecting said signal, and wherein said reader further comprises a detection assembly for detecting said signal which is transmitted via said communication assembly to said external device.

It basically seems to describe a mobile testing unit that can collect data from a sample, and send what it finds over a network to a computer system to analyze. I'm certainly not an expert in the field, but it seems to me that if you were to ask basically any one with any knowledge of how these things work "how would you build a mobile medical diagnostics tool" they'd more or less describe exactly this system. This is not some big breakthrough. This seems to be a broad an obvious idea that never should have received a patent in the first place.

So, sure, it's great that after Irell & Manella started getting lots of shit for this kind of gross pandemic profiteering, it suddenly got the shell company to issue a press release "offering" (not promising) royalty-free licenses, but that doesn't clear up what appears to be a fairly gross effort at patent trolling off of a sham company's questionable patents -- and doing so in the midst of a pandemic. While the company claims it didn't now that BioFire was working on a Covid-19 test, that's laughable. Pretty much everyone in the space seemed to expect BioFire to be among the diagnostics firms creating a test. Indeed, even the Wall Street Journal wrote about BioFire working on this a full week before the lawsuit was filed. On top of that, this lawsuit was filed when it was already blatantly clear that we were in the midst of a pandemic, where BioFire's diagnostics would be useful.

So, yes, it's great that after the terribleness of this decision became clear, the company made it public that it wouldn't seek to stop Covid-19 testing, but that doesn't excuse all of the other awful behavior at play here -- and, again, the company still has not revealed the details and conditions of its "offer."

Filed Under: covid-19, diagnostics, license, patent troll, patents, testing
Companies: biofire, biomerieux, fortress investment group, irell & manella, labrador diagnostics, softbank

SoftBank Owned Patent Troll, Using Monkey Selfie Law Firm, Sues To Block Covid-19 Testing, Using Theranos Patents

from the and-that's-not-even-all-the-insane-parts dept

Honestly, I wasn't sure how to begin this story or how to fit all the insanity into the title. It's a story involving patents, patent trolling, Covid-19, Theranos, and even the company that brought us all WeWork: SoftBank. Oh, and also Irell & Manella, the same law firm that once claimed it could represent a monkey in a copyright infringement dispute. You see, Irell & Manella has now filed one of the most utterly bullshit patent infringement lawsuits you'll ever see. They are representing "Labrador Diagnostics LLC" a patent troll which does not seem to exist other than to file this lawsuit, and which claims to hold the rights to two patents (US Patents 8,283,155 and 10,533,994) which, you'll note, were originally granted to Elizabeth Holmes and Theranos -- the firm that shut down in scandal over medical testing equipment that appears to have been oversold and never actually worked. Holmes is still facing federal charges of wire fraud over the whole Theranos debacle.

However, back in 2018, the remains of Theranos sold its patents to Fortress Investment Group. Fortress Investment Group is a SoftBank-funded massive patent troll. You may remember the name from the time last fall when Apple and Intel sued the firm, laying out how Fortress is a sort of uber-patent troll, gathering up a bunch of patents and then shaking down basically everyone. Lovely, right?

So, this SoftBank-owned patent troll, Fortress, bought up Theranos patents, and then set up this shell company, "Labrador Diagnostics," which decided that right in the midst of the Covid-19 pandemic it was going to sue one of the companies making Covid-19 tests, saying that its test violates those Theranos patents, and literally demanding that the court bar the firm from making those Covid-19 tests.

A bit more background here: the company they're suing, BioFire, recently launched three Covid-19 tests built off of the company's FilmArray technology. And that's what "Labrador" (read: SoftBank) is now suing over. From the lawsuit:

The Accused Products embody at least claim 1 of the '155 Patent, literally or under the doctrine of equivalents, as set forth below. The further descriptions below, which are based on publicly available information, are preliminary examples and are non-limiting. On information and belief, the FilmArray 2.0, FilmArray EZ, and FilmArray Torch devices operate, together with the FilmArray pouches and software, similarly as pertinent to the non-limiting examples set forth below. On information and belief, the FilmArray EZ operates in substantially the same manner as the FilmArray 2.0, and as such is not separately addressed below. For the purposes of infringement, Plaintiff Labrador's non-limiting examples relating to the FilmArray 2.0 are equally applicable to the FilmArray EZ, albeit with use of at least the RP EZ Panel designed for use with the FilmArray EZ. See BioFire Diagnostics Website, https://www.biofiredx.com/products/the-filmarraypanels/ filmarray-respiratory-panel-ez/.

So, let's summarize: The firm that basically created the mess that is WeWork by dumping billions of dollars into the company, also owns a patent troll that bought up the patents from the sham medical testing firm Theranos, and is now using those patents to sue one of the few diagnostics companies that is actually making a Covid-19 test... in the middle of a pandemic. And, demanding the use of those tests be blocked:

That Defendants be enjoined from infringing the Asserted Patents, or if their infringement is not enjoined, that Defendants be ordered to pay ongoing royalties to Labrador for any post-judgment infringement of the Asserted Patents;

Honestly, I'm used to all sorts of awfulness, but this one piles awfulness upon awfulness, and takes it to a level of pure evil. The lawyers filing this lawsuit on behalf of "Labrador" should remember what they've done -- filing a bullshit patent trolling lawsuit, on behalf of a shell company for a notorious giant patent troll, using patents from a sham company, and using them to try to block the use of Covid-19 diagnostic tests in the middle of a pandemic. I wonder how they sleep at night. For the record, there are two law firms behind this filing. Irell & Manella is the big one, and they list out 7 different lawyers on this complaint: Morgan Chu, Alan Heinrich, Keith Orso, Adina Stohl, Dennis Courtney, Brian Weissenberg and Chaplin Carmichael. Their local firm is Farnan LLP, and the lawyers there are Brian and Michael Farnan. Morgan Chu is the big shot at Irell and runs its litigation group. He should take on much of the responsibility for this awful, awful lawsuit. Farnan LLP was formed by a former federal district court judge, Joseph Farnan, and I'll just note that 4 out of its 6 attorneys, including the two on this case have the same last name.

I understand the need for zealous representation of a client in court, but this seems even more despicable than your every day patent trolling, and people should associate these lawyers names with the truly despicable behavior on display here. Similarly, it should be a reminder of why its a good thing that the Supreme Court decided a decade and a half ago that injunctions are often inappropriate in patent cases. I know that there's an effort underway to have Congress change the law to overrule the Supreme Court decision on that point, but imagine how that would play out in this scenario, in which necessary diagnostic testing might get blocked due to some patent troll with deep pockets.

Filed Under: coronavirus, covid-19, diagnostics, elizabeth holmes, filmarray, injunctions, patent trolling, patents
Companies: biofire, biomerieux, farnan llp, fortress investment group, irell & manella, labrador diagnostics, softbank