Professional Documents
Culture Documents
9
INTEL CORPORATION and APPLE INC.,
10 Case No. 3:19-cv-07651-EMC
Plaintiffs,
11 AMICUS CURIAE BRIEF OF
v. UNIFIED PATENTS, LLC,
12 CABLELABS,
Northern District of California
PATREON, AND
United States District Court
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1 Table of Contents
I. Interests of Amici Curiae ............................................................................................................... 1
2
II. PAEs Tax Innovation and Harm Competition .............................................................................. 2
3
A. PAE Litigation Is Ensconced in the Patent System ............................................................... 3
4 B. The PAE Business Model ...................................................................................................... 4
5 C. The New PAE Business Model: Mass Aggregation.............................................................. 6
D. Litigation Financing and Hidden Funding Sources Drive Mass Aggregation ...................... 8
6
III. Anticompetitive Patent Acquisition Schemes That Include Assertion of Intellectual
7 Property Are Subject to Antitrust Scrutiny ......................................................................... 12
8 IV. Defendants Have Combined the Mass Aggregation of Patents with Serial Enforcement
Campaigns to Harm Competition ........................................................................................ 14
9
A. Defendants Are Unquestionably Mass Aggregators ........................................................... 14
10
B. Defendants Have Asserted Patents in Nuisance Suits ......................................................... 15
11 C. Defendants Have Asserted Patents in Serial Suits .............................................................. 15
12 V. Conclusion .................................................................................................................................. 16
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1 Table of Authorities
2 Cases
Alice Corp. Pty. v. CLS Bank Int’l, 573 U.S. 208 (2014) .............................................................. 7, 8
3
4 Automatic Radio Mfg. Co. v. Hazeltine Research, 339 U.S. 827 (1950) ........................................ 13
6 Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989) ........................................... 12
7
ChargePoint, Inc. v. SemaConnect, Inc., 920 F.3d 759 (Fed. Cir. 2019), cert.
8 denied, No. 19-521, 2020 WL 411896 (Jan. 27, 2020) ............................................................... 7
9 City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365 (1991) .......................................... 13
10
Commil USA, LLC v. Cisco Sys., Inc., 135 S. Ct. 1920 (2015) ......................................................... 4
11
eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) ................................................................ 7
12
Eon–Net LP v. Flagstar Bancorp, 653 F.3d 1314 (Fed. Cir. 2011) .............................................. 5, 6
13
15 Iris Connex, LLC v. Dell, Inc., Civ. No. 15-cv-01915 (E.D. Tex.) ................................................... 6
16 Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc., 548 U.S. 124 (2006) .................................... 3
17 Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502 (1917) ................................ 2
18
Pope Mfg. Co. v. Gormully, 144 U.S. 224 (1892) ............................................................................. 3
19
Primetime 24 Joint Venture v. Nat’ l Broad., Co., 219 F.3d 92 (2d Cir. 2000) .............................. 14
20
Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49 (1993) ............. 12, 13
21
22 Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008) .............................................. 2
23 Unified Patents Inc. v. Uniloc 2017 LLC, IPR 2019-01126 (PTAB filed May 28, 2019) ................ 1
24 Unified Patents, LLC. v. Uniloc USA, Inc. et al., IPR2018-00199 (PTAB May 31, 2019) .............. 1
25
Uniloc USA, Inc. v. Apple Inc., 784 F. App’x 763 (Fed. Cir. 2019) ............................................... 14
26
Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011) ............................................. 7
27
Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172 (1965) ....................... 12
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2 Other Authorities
Alan Devlin, Antitrust Limits on Targeted Patent Aggregation, 67 Fla. L. Rev. 775 (2016) ..... 8, 13
3
11 Fed. Trade Comm’n, The Evolving IP Marketplace: Aligning Patent Notice And Remedies
12 With Competition (2011) (“2011 FTC Report”) .......................................................................... 4
13 Fortress Inv. Grp. LLC, Subsidiaries of the Registrant (Exhibit 21.1) available at
https://www.sec.gov/Archives/edgar/data/1380393/000119312511051919/dex211.htm......... 14
14
H.R. Rep. No. 112-98, Pt. 1 (2011) ................................................................................................... 6
15
17 James Bessen and Michael J. Meurer, The Direct Costs from NPE Disputes, 99 Cornell L.
Rev. 387 (2014) ........................................................................................................................... 3
18
19 John R. Allison, Mark A. Lemley & David L. Schwartz, How Often Do Non-Practicing
Entities Win Patent Suits?, 70 Berkeley 235 (2017) ................................................................... 5
20
Jonathan Stroud, Miles to Go Before We Sleep, 41 Regulation 48 (Spring 2018) ............................ 8
21
22 Jonathan Stroud, Pulling Back the Curtain on Complex Funding of Patent Assertion
Entities, 12.2 Landslide 20 (Nov./Dec. 2019) (“Landslide”) ................................................ 1, 10
23
Josh Kosman, Softbank unit launches $400M ‘patent troll’ fund, N.Y. Post (May 21, 2018)........ 10
24
25 Kim Eun-jin, Patent Infringement Suit Filed Against Samsung Electronics’ Galaxy Fold,
Business Korea (Apr. 30, 2019) ................................................................................................ 15
26
Letter From James Madison to Congress, April 11, 1816 ................................................................. 3
27
28 Letter from Lisa A. Rickard, President, U.S. Chamber Institute for Legal Reform, to
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Rebecca A. Womeldorf, Sec’y, Committee on Rules and Prac. and Proc. of the Admin.
1
Office of the U.S. Courts (Jun. 1, 2017) .................................................................................... 11
2
Marathon Patent Group Inc., Annual Report (Form 10-K) (Mar. 31, 2014) .................................... 9
3
Marathon Patent Group Inc., Annual Report (Form 10-K) (Apr. 16, 2018) ..................................... 9
4
5 Marathon Patent Group Inc., Annual Report (Form 10-K) (Mar. 26, 2015) ..................................... 9
6 Marathon Patent Group Inc., Annual Report (Form 10-K), (Mar. 25, 2019) .................................... 9
7 Mark Paul, Dublin tech firm Data Scape sues Amazon and Dropbox, The Irish Times (Feb.
8 15, 2019) .................................................................................................................................... 10
9 N.Y.C. Bar, Report to the President by the N.Y.C. Bar Assoc. Working Group on Litigation
Funding (Feb. 28, 2020) ............................................................................................................ 11
10
11 Patent Security Agreement, U.S. Patent & Trademark Assignment records, Reel: 044839,
Frames: 0568–0695 ..................................................................................................................... 9
12
Richard Lloyd, Theranos back to the fore with Fortress assertion campaign against
13 diagnostics business, IAM (Mar. 10, 2020) ................................................................................ 9
14
Standing Order for all Judges of the Northern District of California, Contents of Joint Case
15 Management Statement (Nov. 2018) ......................................................................................... 11
16 Steve Brachman, Marathon Patent restructuring will put Fortress subsidiary in charge of
17 patent monetization, IP Watchdog .............................................................................................. 9
18 Timothy Au, US patent litigation on decline while PTAB breaks records and NPE
settlement amounts fall, Lexology ............................................................................................... 8
19
20 U.S. Congressional Research Service, An Overview of the “Patent Trolls” Debate (Apr.
16, 2013) (“CRS Report”) ....................................................................................................... 4, 5
21
Unified Patents, 2019 Litigation Annual Report ........................................................................... 1, 4
22
23 Constitutional Provisions
24 U.S. Constitution, Art. I, Section 8, clause 8........................................................................... 2, 3, 12
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1 are now controlled by Defendants, and (3) Divx LLC, a Fortress affiliate. Further, it may be fair
2 to say that Unified has been adverse to Fortress, given its control of the Uniloc Defendants and
5 Research and Production Act. CableLabs has over 60 member companies worldwide, including
6 members who represent approximately 85% of U.S. cable subscribers. The cable industry
7 supports over 2.9 million jobs and contributes $421 billion to the U.S. economy.
8 CableLabs’ members have faced numerous PAE suits. They understand PAE litigation,
9 the evolving PAE business model, and the uncertainty caused by the opaque use of third-party
11 Patreon is a membership platform that helps artists and creators get paid by their fans.
12 Since being founded in 2013, Patreon has sent over $1 billion in payments to over 150,000
13 creators. During that time, Patreon has been sued, or threatened with suit, by PAEs.
14 Bitmovin, Inc. is a private, venture-backed company, which develops best in class video
15 solutions that enable its customers to create memorable digital experiences. Over the past two
16 years, Bitmovin has faced numerous low-quality PAE claims. In response, the company has
18 Amici are concerned with the increasingly prominent role mass patent aggregators, and
19 litigation funders like Fortress have taken in bolstering the PAE model and in driving the
20 widespread assertion of low-quality patents under dubious infringement theories. Amici will
21 detail the evolving business models, capitalization sources, and strategies of PAEs like
1 This bedrock principle is turned on its head by PAEs that purchase and assert patents
2 while taking no part in creating the underlying invention or the development or production of
3 new products. PAEs “deter innovation by raising costs without making a technological
4 contribution.” 2011 FTC Report at 51. The collective cost of PAE litigation creates a significant
5 “tax on innovation.” See James Bessen and Michael J. Meurer, The Direct Costs from NPE
6 Disputes, 99 Cornell L. Rev. 387, 416 (2014) (estimating a multi-billion dollar tax on innovation
7 in 2011 from all non-practicing entity (“NPE”) suits); Cf. Lab. Corp. of Am. Holdings v.
8 Metabolite Labs., Inc., 548 U.S. 124, 126 (2006) (Breyer, J., dissenting from dismissal)
9 (“[S]ometimes too much patent protection can impede rather than ‘promote the Progress of
10 Science and useful Arts.’”) (quoting U.S. Const., Art. I, § 8, cl. 8) (emphasis in original). “Not
11 much of this [tax payment] goes to inventors or innovators.” Bessen and Meurer at 416. Most of
12 the money goes to the assertion entities and the lawyers. Id. at 416-17. Today, the financiers—
14 Competition drives the U.S. economy, and it is protected from patent overreach. “It is as
15 important to the public that competition should not be repressed by worthless patents, as that the
16 patentee of a really valuable invention should be protected in his monopoly.” Pope Mfg. Co. v.
17 Gormully, 144 U.S. 224, 234 (1892). PAEs harm competition when anticompetitive practices
18 drive patent valuation well above the price available in a functioning technology market. See
19 Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidelines for the Licensing of Intellectual
20 Property § 3.2.2 (2017); see also F.T.C. v. Actavis, Inc., 570 U.S. 136, 141 (2013) (patent
2 they grew into a substantial share of patent cases around the turn of the 21st century. See U.S.
3 Congressional Research Service, An Overview of the “Patent Trolls” Debate 1, 4 (Apr. 16, 2013)
4 (“CRS Report”).
5 To better understand PAEs, Unified prepares annual patent litigation reports. See Unified
8 compile district court patent suits by party and distinguish between practicing companies, PAEs,
10 patent inventions but do not market products. Id.; see also CRS Report at 4 n.28.
11 PAE complaints peaked as a percentage of overall cases in 2015. See 2019 Litigation
12 Report. But they remain historically high. The last two years have seen an equilibrium. In 2018,
13 of the 3,657 patent suits filed in the district courts, 1,179 were brought by PAEs; in 2019, it was
14 3,573 patent and 1,212, respectively. PAE assertions remain about one-third of U.S. patent suits.
15 PAE (and overall) activity is still near historic highs, despite new PTO procedures designed to
16 reassess patents.
2 But far too often PAE suits are of little or no merit—either the patent is invalid, or the
3 asserted infringement theory expansively misreads the asserted claims. Professors Allison,
4 Lemley, and Schwartz reviewed a large sample of concluded patent cases and found that PAEs
5 that take their cases to conclusion win less than 10% of the time. See John R. Allison, Mark A.
6 Lemley & David L. Schwartz, How Often Do Non-Practicing Entities Win Patent Suits?, 70
7 Berkeley 235, 270 (2017). PAEs were three times less successful than product-producing
8 companies and universities; and less successful than other non-practicing entities. Id. Simply
10 So why do PAEs sue? The high cost of defense makes assertions profitable, regardless of
11 merit
12 The “vast majority” of PAE suits end in settlement often for nuisance value, i.e., an
13 amount just below the cost of defense. CRS Report at 1. As paper pass-throughs, PAEs have
15 Eon–Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1327 (Fed. Cir. 2011). And with zero at risk,
16 little prevents them from leveraging even the most questionable claim. The Federal Trade
17 Commission pegged the nuisance litigation threshold at roughly $300,000—i.e., the low-end
18 estimate for defending a patent case through discovery. Fed. Trade Comm’n, Patent Assertion
19 Entity Activity: An FTC Study 43 (Oct. 2016) (“2016 FTC Study”). Perhaps only in patent
20 litigation is $300,000 considered a nuisance. And the FTC’s numbers only consider attorney’s
22 preventing or delaying product development. 2016 FTC Study at 20. Defending a suit may
23 require multiple depositions of engineers and supervisors; occasionally, patent suits may lead to
24 investor panic, cancellation of contracts, or loss of investments. When timed shrewdly, suits can
25 affect IPO valuation or block mergers that depend on prompt due diligence. In contrast, PAEs
26 suffer no harm from suing. Quite the opposite—lawsuits are their business.
27 When poor-quality patents are asserted, defendants are forced to settle for less than the
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1 cost of vindication—a cash payment is the rational response, regardless of patent quality. The
2 same calculus holds true when PAEs allege patent infringement by asserting claim constructions
3 outside the reasonable scope of the invention. In Eon–Net, for example, the Federal Circuit
4 understood that the difference between defendant-appellee’s cost of litigation and plaintiff’s
5 settlement offers drove almost every other defendant to settle the 100+ lawsuits filed by plaintiff
6 and related entities. 653 F.3d at 1327. Given that difference, it was “apparent why the vast
7 majority of those that Eon–Net accused of infringement chose to settle early in the litigation
8 rather than expend the resources required to demonstrate to a court that the asserted patents are
10 Finally, PAEs are often purposefully cash-poor corporate shells (typically LLCs),
11 effectively immune to monetary sanctions. See 2016 FTC Study at 4. For example, in Iris
12 Connex, LLC v. Dell, Inc., the court took the rare step of piercing the corporate veil revealing that
13 the plaintiff Iris was “the first level of two shell corporations which were intended to shield the
14 real actor … from personal liability.” Civ. No. 15-cv-01915, Dkt. No. 149 (E.D. Tex. Jan. 25,
15 2017). The responsible individual, the court held, “exploited the corporate form to operate
16 largely in secret and to insulate the true party in interest from the risk associated with dubious
17 infringement suits.” Id. at 4. This only came to light after costly postjudgment discovery and
18 after Iris and its parent shell company both declared bankruptcy in an attempt to stall
1 v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006); see also id. at 396–97 (Kennedy, J.
2 concurring) (“[I]n many instances the nature of the patent being enforced and the economic
3 function of the patent holder present considerations quite unlike earlier cases. An industry has
4 developed in which firms use patents not as a basis for producing and selling goods but,
5 instead, primarily for obtaining licensing fees.”) (emphasis added). The Federal Circuit scaled
6 back some outsized damage awards by, for example, rejecting a “25 percent rule of thumb” as
7 “fundamentally flawed.” Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1315 (Fed. Cir.
8 2011).
9 Most recently, the Supreme Court held that claims to performing a traditional method of
10 doing business on a computer are not eligible for patenting. Alice Corp. Pty. v. CLS Bank Int’l,
11 573 U.S. 208, 226 (2014). Patent eligibility can be determined on motion to dismiss. See, e.g.,
12 ChargePoint, Inc. v. SemaConnect, Inc., 920 F.3d 759, 765 (Fed. Cir. 2019), cert.
13 denied, No. 19-521, 2020 WL 411896 (Jan. 27, 2020). Early dismissals have lowered the cost of
15 The data bear this out; eBay and Alice have helped reduce the sheer volume and overall
16 litigation costs of meritless (or long-shot) patent litigation brought by PAEs. And inter partes
17 review forced PAEs—for the first time—to spend some money defending their questionable
18 assets in exchange for inflicting enormous costs on accused infringers. The early review
19 provided by PTO judges has helped counter some of the imbalance in litigation costs PAEs
21 So PAEs adapted. Once flush with cash, they now lacked the imbalances in litigation that
22 had for years fed their coffers in individual suits. Without that asymmetry, they could no longer
23 earn such large windfalls in every suit. One response, available to well-heeled PAEs, has simply
24 been to commoditize those smaller gains—i.e., mass aggregation. There is no dearth of patent
25 assets available, with over 3 million U.S. patents in force (a 1-million-patent increase since
26 2010). See World Intellectual Property Organization, Statistical Country Profiles, United States
27 of America available at
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1 https://www.wipo.int/ipstats/en/statistics/country_profile/profile.jsp?code=US.
2 Some successful PAEs grew into mass aggregators by accumulating hundreds or even
3 thousands of patents and using the combined threat of the purchased assets to threaten or file
4 serial suits seeking supracompetitive settlements—or has simply ground out the same gains
5 across a phalanx of subsidiaries. For example, IP Edge has dozens of subsidiaries and affiliate
6 assertion entities and is responsible for hundreds of litigations every year. See Jonathan Stroud,
8 https://www.cato.org/sites/cato.org/files/serials/files/regulation/2018/3/regulation-v41n1-3.pdf
9 (identifying 30+ IP Edge subsidiaries or affiliate litigation-vehicles); see also Timothy Au, US
10 patent litigation on decline while PTAB breaks records and NPE settlement amounts fall,
12 984d-b6344083bad6 (noting that “IP Edge is still by far the most prolific plaintiff,” having sued
14 These large PAEs rely on the threat of virtually endless litigation and retaliatory
15 assertions to extract supracompetitive rates for patent licenses. While individual nuisance suits
16 are worth less than they once were, serial assertions of nuisance suits compound the PAE’s
17 profits and drive the cost of asserted patents up artificially. And given this deluge of complaints,
18 if forced to trial, the asserter only has to get lucky once. Devlin uses a statistical model to show
19 that the serial assertion of low-quality patents on dubious infringement theories—those with only
21 Limits on Targeted Patent Aggregation, 67 Fla. L. Rev. 775, 821 (2016). If they lose one, they
22 have dozens, hundreds, sometimes thousands more. And given operating companies never know
1 defendants at year-end 2013. Marathon Patent Group Inc., Annual Report (Form 10-K), at 1, 5
2 (Mar. 31, 2014). It had naturally “not expended funds for research and development” but wanted
3 to “add more patents and patent applications for the purpose of generating licensing revenues.”
4 Id. at 2, 5. By the end of 2014, Marathon had expanded its holdings to 378 patents and was in
5 enforcement actions against 77 defendants. Marathon Patent Group Inc., Annual Report (Form
6 10-K), at 2, 5 (Mar. 26, 2015). But expansion is costly, and sometimes an illiquid entity takes on
8 Enter the financiers. In January 2015, Marathon signed a series of agreements with
9 Defendant Fortress, including a “Fortress Purchase Agreement” and “Fortress Notes,” which
10 provided an influx of cash, with Marathon’s patents as collateral in case of default. Marathon
11 Patent Group Inc., Annual Report (Form 10-K), at F27-28 (Apr. 16, 2018). Over 2017-18,
12 business was nott good, and thus Marathon the PAE failed; they are now in the Bitcoin business.
13 See, e.g., id. at 5 (Apr. 16, 2018) (five subsidiaries; four lawsuits); Marathon Patent Group Inc.,
14 Annual Report (Form 10-K), at 4 (Mar. 25, 2019) (“As of December 31, 2018, we were not
15 involved in any active patent enforcement litigation.”). Marathon transferred the bulk of its
16 portfolio to Fortress to satisfy its debts. See id. at 32; Steve Brachman, Marathon Patent
17 restructuring will put Fortress subsidiary in charge of patent monetization, IP Watchdog (Aug.
20 portfolios previously controlled by other Defendants. See, e.g., Cmplt. ¶¶ 51-56 (Uniloc); 61-69
21 (Inventergy). More recently, Fortress has acquired over 1000 patent assets from the troubled
23 already asserted two of those patents (listing Elizabeth Holmes as an inventor). See Richard
24 Lloyd, Theranos back to the fore with Fortress assertion campaign against diagnostics business,
25 IAM (Mar. 10, 2020); see also Patent Security Agreement, U.S. Patent & Trademark Assignment
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2 The aggregation of giant patent portfolios and the concomitant lawsuits come on the back
3 of a massive injection of capital from outside sources. Defendant Fortress, for example, has $40
5 Property Fund in 2017 and raised $400 million to invest specifically in patent acquisition and
6 assertions. Josh Kosman, Softbank unit launches $400M ‘patent troll’ fund, N.Y. Post (May 21,
8 companies in deals that often result in acquiring patent assets for much less than they might
9 otherwise fetch. Id. Fortress was acquired by and appears to have drawn funding for these
11 To be sure, Softbank and Defendant Fortress are not the only Wall Street firms funding
12 patent aggregation and litigation. Money has poured in from well-known sources like Burford
13 Capital, Westfleet Advisors, Bentham IMF, Palladium, Pravati Capital, Woodsford Litigation
14 Funding, and Verum Funding and newer entrants, foreign governmental funds, or older entities
15 hungry for investments not correlated with stock market volatility. See, e.g., Buford Capital,
17 Magnetar Capital, known for questionable investments in credit default swaps during the
18 financial crisis, has recently emerged as the backer of multiple high-profile PAEs based in
19 Ireland, including SOLAS OLED, Neodron Limited, and Data Scape. See, e.g., D. Dowd Muska,
20 Dark Star: A Hedge Fund Transitions From Subprime Villain to Patent Troll, InsideSources.com
22 from-subprime-villain-to-patent-troll/; Mark Paul, Dublin tech firm Data Scape sues Amazon and
24 https://www.irishtimes.com/business/agribusiness-and-food/dublin-tech-firm-data-scape-sues-
25 amazon-and-dropbox-1.3794361.
26 Third-party litigation funding was once disfavored or outright prohibited by U.S. courts,
27 though accepted in Europe (in part because of loser-pay economics). But today, U.S. litigation
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1 financing has gone mainstream. It is also widely publicized, at least to investors; there are annual
2 conferences with speakers from Burford Capital, Westfleet Advisors, and a host of others. See
8 Private capital often funds litigation while keeping its interests hidden from accused
9 infringers and district court judges. This has led to repeated suggestions from the Chamber of
10 Commerce and dozens of other organizations that Rule 26 (1) be amended to require initial
11 disclosure of litigation funding. See, e.g., Letter from Lisa A. Rickard, President, U.S. Chamber
12 Institute for Legal Reform, to Rebecca A. Womeldorf, Sec’y, Committee on Rules and Prac. and
15 side, a working group of the New York City Bar recommended against making any change, but
16 even they recognized that “certain types of investment in patent litigation may raise standing
17 issues that require disclosure to resolve.” N.Y.C. Bar, Report to the President by the N.Y.C. Bar
19 http://documents.nycbar.org/files/Report_to_the_President_by_Litigation_Funding_Working_Gr
20 oup.pdf.
21 It does not suffice that such information might be available in discovery—PAEs have
22 naturally fought such discovery. There is no principled reason to not simply require such
23 disclosure. Amici note that this court requires disclosure of any person funding the prosecution
25 Order for all Judges of the Northern District of California, Contents of Joint Case Management
26 Statement, § 19 (Nov. 2018). Extending that to include patent cases would seem prudent. And
27 some district court judges, when aware a suit is financed, require the financier to attend
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2 * * * * *
3 In sum, PAE litigation today includes mass aggregations of patents assembled through
4 webs of confidential agreements designed to increase the aggregate value of patent settlements
5 and licensing through imposed litigation costs. These arrangements use serial litigation and the
6 threat of it to drive licensing royalties beyond what each patent merits. Are schemes of this type
7 immune to the antitrust laws? Defendants’ motion says yes, categorically. Amici disagree.
1 market monopoly by acquiring patents from outside inventors, or perhaps by acquiring firms
2 holding large patent portfolios.” See Hovenkamp at 66. Such acquisitions “may be assessed
3 under section 7 of the Clayton Act, section 1 and 2 of the Sherman Act, and section 5 of the
5 PAEs harm competition when they create new, outsized market power through the
6 aggregation and anticompetitive assertion of patents. Mass aggregation of patents can create a
7 market where the product is litigation peace—i.e., freedom from the threat of serial assertion.
8 This “straw-into-gold alchemy” turns patent assets of little intrinsic value into a very valuable
9 part of inflicting continuing costs on operating companies through serial suits. See Devlin, 67
10 Fla. L. Rev. at 818. It allows the mass aggregator to charge supracompetitive rates for what
13 Defendants argue there is nothing inherently wrong with owning many patents or
14 obtaining patents through commercial acquisition. Mot. to Dismiss at 22. This principle,
15 however, is not without limits. The Supreme Court enunciated it in Hazeltine but was careful to
16 note that the record there did not support “charges that respondent uses its accumulation of
17 patents ‘for the exaction of tribute’ and collects royalties ‘by means of the overpowering threat of
18 disastrous litigation.’” Automatic Radio Mfg. Co. v. Hazeltine Research, 339 U.S. 827, 834
19 (1950), overruled on other grounds by Lear, Inc. v. Adkins, 395 U.S. 653 (1969). Here, the
22 protects legitimate individual patent suits from antitrust nullification. See PRE v. Columbia
23 Pictures, 508 U.S. at 51. But it does not protect anticompetitive behavior that is part of a scheme
24 that includes litigation. See City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 384
25 (1991). The Second Circuit addressed this in the copyright context, holding that a concerted
26 refusal to deal that would, “absent litigation, violate the Sherman Act … cannot be immunized by
27 the existence of a common lawsuit.” Primetime 24 Joint Venture v. Nat’ l Broad., Co., 219 F.3d
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1 92, 103 (2d Cir. 2000). The antitrust immunity given a single genuine patent suit cannot
3 IV. Defendants Have Combined the Mass Aggregation of Patents with Serial Enforcement
Campaigns to Harm Competition
4
In considering a motion to dismiss, the court must take as true the factual allegations
5
contained in the complaint. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 572 (2007). Under that
6
standard, plaintiffs have shown a violation of the antitrust laws.
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1 It is only now that the relationship between Fortress’s funding and hundreds of U.S.
2 district court litigations against U.S. companies have come to light. See generally Landslide.
3 But the full extent of Fortress’s control is not yet known. From what is known, amici
4 conservatively estimate that Fortress and its associates are responsible for at least 3 percent of all
5 patent litigation in the district courts and at least 8 percent of all PAE litigation over the past
7 sharing control of roughly 1500 known patents under the Fortress umbrella (not including the
8 assets recently acquired from Theranos). Cmplt. ¶¶ 54, 59, 61-63, 70, and 79. With these,
1 non-practicing entity (NPE) that has strengths in patents on computer electronics and mobile
4 Similarly, VLSI engaged in a serial assertion campaign against Intel. Between 2017 and
5 2019, VLSI filed six suits across three jurisdictions against Intel. Id. ¶ 98-104. Fortress
7 Defendant Inventergy also threatened additional suits against one accused infringer by
8 invoking Defendant Fortress. Id. ¶ 66. Fortress and Inventergy had a Revenue Sharing and Note
10 These actions are most consistent with patent owners that believe their combined
11 portfolio is worth more for its serial nuisance value—as a constant threat of individual
13 V. Conclusion
14 At a minimum, Defendants’ patent aggregation and assertion scheme should be fully
15 examined under the Sherman and Clayton Acts. The court should deny Defendants’ Motion to
16 Dismiss.
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Respectfully submitted,
18 /s/__William Jenks_________
March 19, 2020 William Jenks (SBN 212,609)
19 JENKS IP LAW PLLC
1629 K St NW, Suite 300
20 Washington DC 20016
Telephone: (202) 412-7964
21
Attorney for Amici Curiae
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Amicus Brief of Unified et al. Supporting Pls’ Opp. to Mot. to Dismiss (3:19-cv-07651-EMC)