Apple Pushes Back Against Patent Trolls in Their Favorite Court


The Origin

For decades, the preferred venue for patent holders and patent trolls—entities whose main asset is their large patent portfolio—to sue a big company was the Eastern District of Texas. With good reason. Apple Inc., for instance, was hit with a $439 million judgment in one case brought by VirnetX Holding Corp., and it’s appealing a $503 million verdict in a second case. So it was only natural, when Seven Networks LLC wanted to file a patent suit against Apple in 2019, that it went straight to the Eastern District.

The Case

Seven Networks alleged that every iPhone since the iPhone 4, every iteration of the Apple operation system since OS 9, and every iPad, Apple Watch, and MacBook violated a dozen or more of its patents. It also noted that Apple sold these products in the Eastern District. This mattered because in 2017 the Supreme Court had ruled that patent holders had to file their suit in a place where the defendant conducted business.

The Countersuit

Seven Networks is a unit of the giant investment firm Fortress Investment Group LLC, which controls other “patent assertion entities.” Seven months after being sued by Seven Networks, Apple joined forces with Intel Corp. to file a lawsuit in California against Fortress. Noting that one of Fortress’s trolls had filed more than 130 infringement lawsuits in the space of two years, Intel and Apple alleged that Fortress was funding an “anticompetitive patent aggregation scheme.” Fortress staunchly denies the charges.

The Settlement

Apple closed the two stores it had in the Eastern District. That meant it would be much harder to sue Apple for patent infringement there. Then, earlier this month, it settled with Seven Networks. But that’s hardly the end of the litigation. Apple is now banking on its California lawsuit against Fortress to push back against patent trolling. It will be an uphill battle, as Apple and Intel are using novel legal theories, and the U.S. Department of Justice is siding with Fortress. But at least it won’t be decided in the Eastern District of Texas.
Seven Networks LLC v. Apple Inc.
Case #2:19-cv-00115 U.S. District Court

• Speaking of Fortress: Theranos Inc. (yes, Theranos) had valid patents that Fortress bought in 2018. This year one of its trolls sued BioFire Diagnostics LLC. But BioFire was about to release three Covid-19 tests featuring the technology. Oops! Fortress now lets companies use the patents in Covid tests for free.
• “Efficient Infringement”: Because of a 2006 Supreme Court ruling, small companies rarely get infringing products off the market. Big companies such as Google—and Apple— routinely infringe on patents because the worst that’s likely to happen is that they’ll have to pay damages. That’s called “efficient infringement.”
Nocera is a columnist for Bloomberg Opinion.
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