Bloomberg News

Cascades, Apple, Megaupload, Hexbug:Intellectual Property

January 31, 2013

Cascades Computer Innovation, an Illinois company with the right to own 38 patents, lost its antitrust suit against a group of companies that refused to take a license to the patents.

In a Jan. 24 ruling, U.S. District Judge Yvonne Gonzalez Rogers granted the defendants’ motions to dismiss the case. Among the defendant companies are Samsung Electronics Co., HTC Corp. (2498) and Dell Inc. (DELL:US)

Cascades filed suit in federal court in Oakland, California, in March 2012, alleging that the companies and RPX Corp. (RPXC:US), a patent risk-management company, had conspired to oppose licensing and enforcement of its patents, with the ultimate aim of forcing Cascades to go out of business or accept a below- market offer for the licenses.

Rogers said the suit may have been “nothing more than a tactical ploy to regain economic advantage” that Cascades lost in licensing negotiations. She also said that Cascades failed to provide sufficient facts to demonstrate the harm it claims to have suffered is the result of a conspiracy.

The judge gave the Illinois-based company an opportunity to amend its claims and re-file its complaint.

The case is Cascades Computer Innovation LLC v. RPX Corp., 4:12-cv-01143-YGR, U.S. District Court, Northern District of California (Oakland).

Delaware Needs a Fifth Federal Judge, U.S. Judicial Panel Says

Delaware, home to courts that specialize in business cases and a popular venue for patent cases, needs a fifth federal judge to help the district court keep up with increasing corporate litigation, a panel of judges concluded.

If the recommendation by a subcommittee of the Judicial Conference of the U.S. is accepted in March, Congress will be asked to create a position as the number of U.S. patent suits is rising.

“It makes sense to add capacity for dealing with this situation, which most of us expect to persist,” Frank Scherkenbach, a patent attorney whose clients included Microsoft Corp. (MSFT:US), said in an e-mail. “It makes sense to add that capacity in one of the courts most affected by these recent trends.”

Delaware handles more patent cases per judge than any of the other 93 federal districts, with 179 cases filed for each of the four judges from September 2011 to June 2012, according to the Judicial Conference. During the same period, all types of cases climbed in the state, putting the load at 1,077 cases per judge, second-highest in the U.S.

The subcommittee met in December and issued a memorandum outlining its recommendation earlier this month.

Business costs rose more than fourfold since 2005 over royalty demands filed by patent owners seeking quick profits, according to a study by Boston University School of Law.

Companies face $29 billion in expenses from 5,842 claims of infringement filed in 2011 by so-called non-practicing entities, patent owners collecting license fees instead of making products. That’s up from 1,401 claims and $6.6 billion in costs in 2005, according to the study, published in June.

The court in Delaware was considered the second-most favorable to patent owners from 1995 to 2011, based on a 42 percent success rate and a median damage award of $20.6 million, according to an October 2011 report by PricewaterhouseCoopers LLP. The Eastern District of Virginia, which also is considered the fastest for getting cases to trial, ranked first.

Delaware is tied with New Jersey courts for the busiest when it comes to litigation over generic drugs, according to PriceWaterHouseCoopers.

It also vies with the Eastern District of Texas as the busiest courthouse when it comes to new patent-infringement filings, according to an April 2012 study by James Pistorino, a lawyer with Seattle-based Perkins Coie LLP.

Congress last created a federal judgeship in Delaware in 1984. Senate confirmation is required to fill a post, and there are currently 85 judicial vacancies and 33 nominees awaiting approval.

For more patent news, click here.

Trademark

Apple Loses New Trial Bid Against Samsung on Trade Dress

Apple Inc. (AAPL:US) lost its bid for a new trial over trade-dress claims against Samsung Electronics Co. (005930) for its iPad and iPad 2 in a ruling stemming from the patent-infringement case it won in San Jose, California, last year.

U.S. District Judge Lucy Koh, who oversaw the infringement trial, yesterday denied Apple’s argument that jurors erred by finding Apple’s trade dress, or how a product looks, for the iPad and iPad 2 wasn’t protectable. Trade dress is protected by U.S. trademark law.

The judge also denied Apple’s request that she overrule jurors’ conclusion that Samsung’s Galaxy Tab 10.1 didn’t infringe one patent covering the design of Apple’s iPad tablet computer.

Apple’s bid to increase the $1.05 billion in damages it won against Samsung was rejected by Koh. The judge denied all of Apple’s post-trial requests in her ruling except one. She found that two claims, or elements, of Samsung’s patent covering data transmission over wireless systems are invalid.

The jury didn’t find Apple infringed any of Samsung’s patents, and Koh didn’t say yesterday in her ruling how Apple might benefit from her decision invalidating the claims. Koh ruled that Samsung’s acts of patent infringement weren’t willful.

Jurors decided Aug. 24 at the end of a trial that Samsung should pay the $1.05 billion for infringing six Apple patents (AAPL:US). Apple, which lost its bid to block U.S. sales on 26 of the Galaxy maker’s devices, failed to establish that consumer demand for Samsung products was driven by technology it stole, Koh ruled earlier.

Adam Yates, a spokesman for Suwon, South Korea-based Samsung, declined to comment on Koh’s rulings. Kristin Huguet, a spokeswoman for Cupertino, California-based Apple, also declined to comment on the rulings.

The San Jose case is Apple Inc. v. Samsung Electronics Co. Ltd., 11-cv-01846, U.S. District Court, Northern District of California (San Jose).

For more trademark news, click here.

Copyright

Megaupload Urges U.S. Judge to Dismiss ‘Mega-Conspiracy’ Charges

Megaupload.com, the file-sharing website that was shut down last year on copyright infringement charges, urged a U.S. judge to throw out the indictment to make up for what it called a lack of “due process” in the case.

The U.S. Justice Department failed to give the company legal notice that it was charged, froze its assets and left servers containing content owned by customers “gathering dust and in danger of deteriorating,” Megaupload’s lawyer Ira Rothken wrote in a filing in federal court in Alexandria, Virginia.

“More than a year has now passed since Megaupload was branded a criminal, with no opportunity to date to clear its name or challenge the charges against it,” Rothken wrote. The government’s conduct in the case raises “grave questions about whether the government is intent on being judge, jury, executioner and asset collector,” he wrote.

Kim Dotcom, the founder of Megaupload, was indicted in what was dubbed a “mega conspiracy” by U.S. prosecutors, who accused his website of generating more than $175 million in criminal proceeds from the exchange of pirated film, music, book and software files. On Jan. 20, Dotcom began running a successor website called Mega from his home in New Zealand.

The U.S. is seeking Dotcom’s extradition, with a hearing scheduled for August in Auckland.

Peter Carr, a spokesman for U.S. Attorney Neil H. MacBride, referred questions about the seizures of the websites and Dotcom’s assets to the government’s court filings.

In a Jan. 13 affidavit, referred to by Carr, an investigator whose name is blacked out in the document cited a U.S. law that allows seizure of property when an injunction wouldn’t guarantee the property would be available for seizure upon conviction.

The domain names had to be seized to prevent Megaupload’s supporters, or others, from redirecting content to servers elsewhere in the world, the investigator said. Injunctions wouldn’t prevent that, according to the investigator.

The U.S. won the court order and shut down Megaupload.com without notice after the charges against seven individuals, including Dotcom, were unsealed in federal court in Alexandria on Jan. 19, 2012. Dotcom spent a month in jail before winning his release on bail.

The New Zealand case is Between Kim Dotcom and Attorney General. CIV2012-404-001928. High Court of New Zealand (Auckland). The U.S. case is USA v. Dotcom. 12-cr-00003. U.S. District Court, Eastern District of Virginia (Alexandria).

Google’s Lobbying Boost Belies Decline in Total Spending

Google Inc. (GOOG:US), the subject of a U.S. antitrust investigation, increased its lobbying costs by 88 percent to move into the top 10 of spenders seeking to influence the federal government on a wide range of IP and other issues even as the total price of persuasion declined for the second straight year.

“Technology issues are a large part of the policy discussion in Washington these days,” said Samantha Smith, a Google spokeswoman. “It is important to help people understand our business and the work we do to keep the Internet open and encourage economic opportunity.”

The company helped scuttle anti-piracy legislation in the last Congress, and is organizing an effort to limit government access to digital communications. Early last year, Google hired as its chief lobbyist former Representative Susan Molinari of New York, the keynote speaker at the 1996 Republican National Convention.

Mountain View, California-based Google spent $18.2 million last year, including $1.7 million by its Motorola Mobility subsidiary acquired in May. That was up from $9.7 million in 2011, according to the Center for Responsive Politics, a Washington-based group that tracks lobbying expenditures aimed at lawmakers, the White House and federal agencies.

The Federal Trade Commission voted Jan. 3 to close a 20- month investigation into whether Google favored its own services in results provided by its search engine, the world’s largest. Google also settled FTC allegations it misused patents owned by Motorola Mobility to thwart competitors in smartphone technology.

Google bought Motorola Mobility Holdings for $12.4 billion. The company is embroiled in patent-infringement litigation with iPhone maker Apple Inc. over features in smartphones.

For more copyright news, click here.

Trade Secrets/Industrial Espionage

Hexbug Wants to Hook Chinese Robo Fish at U.S. Trade Agency

At the Dallas Toy Fair in October 2011, the makers of Hexbug robotic toys spotted a swimming mechanized fish they say incorporates their company’s research on making waterproof battery-operated gadgets.

Innovation First International Inc. sued, claiming a former employee stole its trade secrets and went to work for the fish’s Chinese manufacturer. A federal judge told the company to take its complaint to China, where much of the evidence and most principal witnesses are located.

“For fairly obvious reasons, we’re not excited about going to China to sue a Chinese engineer,” Vince Mouer, general counsel for Greenville, Texas-based Innovation First, whose Hexbug Nano Hive Habitat Set was named specialty toy of the year by the Toy Industry Association in 2011 and 2012, said in an interview.

Innovation First instead decided if it couldn’t stop the products from being made, it would try to stop them from being sold. The company took its complaint to the U.S. International Trade Commission in Washington which, because it can block imports of products that violate U.S. intellectual-property rights, is becoming an attractive forum for companies alleging trade-secret theft overseas.

Innovation First filed its case Jan. 4, naming CVS Caremark Inc. (CVS:US)’s CVS Pharmacy unit as a retailer selling Zuru Robo Fish. Zuru Inc., the Guangzhou-based manufacturer, denied stealing trade secrets and said the engineer’s idea for the fish predated his time at Innovation First.

Mouer said Zuru wasn’t named in the ITC complaint for strategic reasons he declined to explain. Carolyn Castel, a spokeswoman for CVS, didn’t return messages seeking comment.

Innovation First initially persuaded a Texas state judge to temporarily halt sales of Zuru Robo Fish at the Dallas Toy Fair. The case was then transferred to federal court, where District Judge Jane Boyle in Dallas ruled China was the more convenient forum.

Innovation First is appealing. Arguments are scheduled for Feb. 5 in New Orleans.

Hexbug is a line of robotic inchworms, scarabs and spiders that move realistically and sell for less than $20 each.

Zuru sells its fish for about $15. Zuru President Nick Mowbray, who started the toy company with his brother in New Zealand eight years ago, said the engineer worked on the technology in his home for 13 years and left Innovation First after being rebuffed three times over two years in efforts to build a robotic fish.

“They realize they made the wrong move by not licensing this technology,” Mowbray said. “They can’t make it work, so put out press releases saying that we copied them.”

To contact the reporter on this story: Victoria Slind-Flor in Oakland, California, at vslindflor@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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