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

from the hitting-back-hard dept

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.

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