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Google Unmasks Patent Accuser in Tangled Goldman Link

March 13, 2014

Google Unmasks Patent Accuser in Tangled Goldman Connection

The Google cultural hub in Paris. Photographer: Joel Saget/AFP via Getty Images

Google Inc. (GOOG:US) wanted to find out who was behind a company called Suffolk Technologies LLC that accused the world’s largest search engine’s owner of using its Internet-search technology without permission.

Turns out, the tangled ownership history included big names: Goldman Sachs Group Inc. and BT Group Plc’s British Telecom.

Tired of fighting sometimes frivolous patent-infringement suits that cost millions of dollars in legal fees, companies such as Google and Apple Inc. (AAPL:US) are using ownership questions to help their court cases. Unveiling litigants can get a suit dismissed, disclose the real entity behind a case or identify a target for revenge. Even before Suffolk lost its case, Google retaliated last year by filing a patent-infringement suit against British Telecom.

“You would think that determining who owns a patent is a pretty straightforward process,” said Stephen Korniczky, co-chairman of the intellectual property practice of Sheppard Mullin in Del Mar, California. “If a patent is assigned to a company, then it’s recorded with the patent office. The problem really lies in who owns the company or entity to whom the patents have been assigned.”

Google, Cisco Systems Inc. (CSCO:US) and other technology companies have persuaded Congress to consider legislation requiring patent owners to disclose the “real party in interest.” The U.S. Patent and Trademark Office is considering rules to make public the “attributable ownership” of a patent. It will hold hearings on the proposal today in Alexandria, Virginia, and March 26 in San Francisco. The challenge may be figuring out what those terms mean and what information must be disclosed.

Cloaked Control

Revealing who controls a patent is becoming a key issue in more infringement lawsuits as the market to buy and sell patents grows and ownership issues get murkier. Big companies hide behind little-known firms to avoid countersuits. Investment companies don’t want it to be known that they’re involved in patent litigation. And some patent owners keep portfolios separate to file multiple lawsuits against a company over different technology.

Suffolk claimed Google’s AdSense program used patented inventions related to how an Internet server responds to requests for files from web pages without paying it royalties.

According to court papers, Suffolk is owned by Corporate Research Partners, which is owned by IPValue, formed in 2001 by a joint venture of Goldman Sachs, General Atlantic Partners and Boston Consulting Group. British Telecom obtained the patents in 1997, then transfered them to IPValue in 2011 for licensing or suing infringers -- with BT getting a cut of any proceeds.

Windowless Office

Andrea Raphael, a spokeswoman for Goldman Sachs, said the company has a minority, non-controlling stake in iFormation Group, the parent of IPValue. Officials with British Telecom and Google had no immediate comment.

Fortinet Inc. (FTNT:US), a Sunnyvale, California-based network security company, didn’t find a large corporation when it sought to determine who was really behind a patent suit filed by Network Protection Services LLC.

The owners were a couple of lawyers who rented a windowless office in Longview, Texas, for $325 a month and filed patent suits against dozens of companies under the names of various shell corporations.

A judge in California said the company had engaged in litigation misconduct by not disclosing that information and ruled a jury should know it was just “a file closet;” a month later the case was dismissed. Fortinet paid no royalties.

“If you’re going to avail yourself of the protection of the courts, you should be honest in who are,” said John Neukom of Quinn Emanuel in San Francisco, who represented Fortinet.

Public Disclosure

Federal law requires corporate disclosure statements in all lawsuits, so publicly traded companies have to reveal when they own an entity that’s filed a lawsuit.

The disclosure rules don’t apply to private companies.

Judges also want to know the right parties in a case.

One reason to question ownership is to make sure the company filing the suit has clear rights to the patents. In 2011, Google transferred patents to HTC Corp. to bolster its case in a patent battle with Apple over smartphone technology.

The strategy didn’t work. The International Trade Commission ruled that the agreement didn’t give HTC the right to file an infringement complaint, and threw those patents out of the case. HTC and Apple later settled their dispute.

Companies say learning that multiple shell companies all have a common owner could help defendants know to negotiate comprehensive agreements that would limit future suits.

‘Repeat Victim’

“You do want to know if you’re being hit by the same entity over and over again,” said Charlene Morrow, a Mountain View, California, patent lawyer with Fenwick & West, which represents some of Silicon Valley’s biggest businesses. “You don’t want a situation where you’re a repeat victim.”

CopyTele Inc., a Melville, New York-based company that buys patents, said it sets up different units because the inventor or original patent owner for each portfolio gets part of any proceeds. It discloses its ownership in each suit it files.

“We have large, well-known companies wanting us to assert their patents for them,” said CopyTele Chief Executive Officer Rob Berman. “Should that have to be disclosed? I have no problem but they wouldn’t necessarily like it in some cases.”

Berman said that, in most instances, defendants can easily learn who will be profiting from a patent suit, so there’s no real need for legislative changes.

‘Assert Pressure’

“Sometimes, people want to know the information so they can assert pressure and affect the case,” Berman said. “The real point of inflection is they want revenge. They want to file their own suits and put pressure on. They can’t do that unless they know who to sue.”

Figuring out who’s behind a patent suit can affect how the case is handled, Morrow said. In one case, she said, she tried to figure out the ownership of some patents and met a stone wall of Cayman Islands incorporation rules.

“We never found out who the owners were,” she said. “It was rumored to be so-and-so who was a prominent business person. We negotiated assuming they had that kind of backing.”

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net Elizabeth Wasserman, Romaine Bostick


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