Eighteen years ago, inventor Daniel Abelow received a patent for technology that allows for “accessing, assembling and using bodies of information” via computer.
That patent has changed hands twice and is now owned by a Texas company that has sued dozens of companies across the U.S. for allegedly infringement on their websites.
Webvention LLC claims the patent it purchased in November 2009 covers such common website technologies as pop-up menus and “tooltips,” which bring up a window with additional information when a cursor hovers over an item.
“That is Webvention’s claim,” said Peter J. Brann, the Lewiston, Maine, lawyer who represents L.L. Bean, Nordstrom and J. Crew in the Webvention litigation. “But in these types of patent cases, the devil’s in the details.”
Brann’s clients are seeking to have the patent declared invalid. And, while Webvention wanted to litigate in Texas and Brann wanted the cases heard in Delaware, they will all be coming to Maryland.
On Dec. 15, the U.S. Judicial Panel on Multidistrict Litigation moved all the active cases — more than two dozen — to U.S. District Court in Baltimore to be heard by Judge Catherine C. Blake.
Calls to Webvention and its attorneys in Texas and Delaware were not returned by press time.
License or litigate
Webvention is what’s known in some patent circles as a non-practicing entity and in others by a catchier name: Patent trolls.
In a nutshell, it is a company whose business model consists of buying patents and enforcing them through licensing or litigation.
In Webvention’s case, the business model is solely licensing of Abelow’s original patent number 5,251,294, known as “294” for short.
On the licensing end, Webvention claims that 339 companies, including Google, Nokia and Orbitz, have paid the one-time licensing fee of $80,000.
Lawyers familiar with patent infringement litigation say it is not unusual for a non-practicing entity to come up with a licensing fee that is far below what it would cost a company to fight a protracted legal fight.
“Companies that are patent trolls have survived because if they sue a company it will cost so much to defend, it’s just easier to pay,” said Francis J. Gorman, a patent lawyer with Gorman & Williams in Baltimore, who is not involved in the Webvention litigation.
James Yang, an Orange County, Calif., patent lawyer and blogger, agreed that companies often try to figure out what it would cost a company to fight and then come in with a figure, assuming the patent has some merit, where the company would just pay a licensing fee.
“In this kind of litigation, companies would go through $80,000 in a couple of [court] filings,” Yang said.
That’s what worried Brann and counsel for the other companies who balked at paying the licensing fee, such as Abercrombie and Fitch, Adidas, Novartis and even DirecTV.
“What we didn’t want is a situation where the price for patent usage was so low that it was never challenged,” Brann said. “If it’s cheaper to pay the piper than take it to court, it will never matter if the patent is valid, it will never go to trial.”
By consolidating the cases, the companies can work together rather than face thousands of dollars in legal fees fighting the patent in individual cases.
Brann said his clients originally sought to have the cases heard in Delaware but were pleased with the MDL panel’s choice.
“We’re quite happy with it being in Maryland,” Brann said. “Our primary concern was to get these cases consolidated so people could work together and look at this patent.”
Another likely reason the companies are happy is simply that they are out of East Texas.
Webvention hails from Marshall, Texas, home to the U.S. District Court for the Eastern District of Texas, which is widely regarded as one of the best venues for suing to enforce a patent.
“East Texas is definitely very plaintiff-friendly,” Yang said. “That’s really why everyone wants to go there.”
According to a 2010 study of patent litigation by PriceWaterhouseCoopers LLP, the Eastern District of Texas was second only to the U.S. District Court for Middle Florida in terms of plaintiff success.
The Texas court tied the District Court for Northern Illinois in handling the most patent litigation involving non-practicing entities.
All of Webvention’s lawsuits were filed in Eastern Texas. Companies like pharmaceutical giant Novartis filed pre-emptive lawsuits against Webvention in Delaware, where Webvention’s parent company, Webvention Holdings LLC, is incorporated.
The MDL panel said in December that it chose Maryland to handle the consolidated pretrial proceedings instead of Delaware, despite the fact none of the constituents in any of the cases were based there. The panel said Maryland was near Delaware, docket conditions were more favorable in Maryland and Blake was “well-versed” in handling multidistrict litigation.
While Blake had hoped to hold an organizational meeting as early as last week, she decided that would be “premature” given the cases that are still being transferred to the Maryland court.
Instead, the next step will come on Feb. 3, when Blake advised counsel to file a status report “addressing when counsel believe it would be appropriate to set such a meeting.”
Accountants, not inventors
By whatever name, companies that buy up patents and then sue alleged infringers have garnered a lot of heat from the online community and were even targeted in the America Invents Act of 2011 as a source of study for possible future legislation.
As Webvention’s business model is solely licensing of the ‘294’ patent, the patent troll label is likely to arise if the cases ever do get to trial.
Gorman said the label could strike the wrong chord for Webvention if the case were to go before a jury. He said juries tend to view inventors in a favorable light, but not as much companies who sold.
“Labeling someone as a patent troll does something to a case,” Gorman said. “Juries generally do not like patent trolls if it can be shown they do nothing besides suing companies and people. Juries appreciate the hard work inventors do, but just the opposite could be said of someone who doesn’t and just has lawyers and accountants.”