PublishedAugust 22, 2018

NPE Resurrects Canceled Patent To Go After Restaurants

A few years ago, a company called MacroSolve stopped creating products and started creating patent litigation.  Its tool was a patent that claimed to cover mobile questionnaires.  But after several of their targets decided to fight back, filing an ex parte reexamination request that wound up cancelling all of the claims of its patent, MacroSolve dropped their litigation campaign.  

That should have been the end of the story—a poor-quality patent is issued, a company asserts the patent, and the patent gets invalidated.  But as of last week, a new patent claiming the same basic idea is being used to go after a wide variety of restaurants under a new company name—Fall Line.

Questionable Patent #1

MacroSolve’s original patent on a “System and method for data management”—the ‘816 patent—claimed to cover taking a questionnaire, turning the questionnaire into tokens, wirelessly sending the tokens to a remote computer, using the tokens to collect a survey response from a user, and sending the results back.  

In other words, the same online web survey using HTML forms that I filled out when I registered for college classes, years before MacroSolve “invented” the idea.

Say Goodbye To Questionable Patent #1

MacroSolve took the ‘816 patent and sued over 60 different companies, ranging from airlines to retailers to hotels.  They filed their suits in the Eastern District of Texas.  Rather than face the expense of litigation, a number of companies took inexpensive licenses, but eventually MacroSolve sued Newegg and Geico.  They chose to fight, rather than settle, filing a request for ex parte reexamination.

The USPTO took a look at the ‘816 patent and agreed that it should never have issued—they cancelled all of the claims of the ‘816 patent.

And Hello To Questionable Patent #2

That should have been the end of the story.  It wasn’t.

MacroSolve had filed a continuation application, which creates a separate patent application unaffected by the first patent being invalidated.  After the ‘816 patent was invalidated, MacroSolve transferred the patents to a new company, Ediche, which continued to try to patent the same basic idea.[1.  Ediche’s principal,  James McGill, was previously MacroSolve’s CEO, and the two companies share the same address, which makes this appear to be moving the patents to a shell company, rather than selling them to a new entity in a hands-off transaction.  According to the statement of ADDvantage Technologies Group, another company Ediche’s owner was involved with, Ediche was “an importer of women’s clothing from South America to the United States.”]

In 2016—13 years after they had filed their original patent application—the Patent Office gave Ediche a new patent, the ‘748 patent.  

The ‘748 patent claims the same basic questionnaire as the ‘816 patent, but this time, it has to include a question about location and to automatically use GPS to fill in the location information.  Of course, automatically detecting location and triggering an action based on it was already well-known.  And the idea of providing location to a questionnaire like a web form was so well known that there were patents on privacy settings for it.  It’s not really clear why the Patent Office granted the ‘748 patent.  Maybe, after 13 years of being unable to reject a well-known idea once and for all, the examiner simply gave up.[2.  The Patent Office, unlike many other patent offices around the world, is unable to issue a terminal rejection ending prosecution of a patent application.  An applicant who wishes to continue to pursue an application at the USPTO can do so for as long as the applicant wishes.]

But at the end of the day, the examiner issued the ‘748 patent.  A little while later, Ediche transferred the patent to Fall Line[3.  Fall Line appears to be another shell company, headquartered at the same address as Ediche and MacroSolve and using the same lawyers as Ediche.  I could not confirm whether they have the same CEO.], which promptly sued a variety of companies, ranging from an American Airlines to Choice Hotels to Uber.

Goodbye To Questionable Patent #2?

After Fall Line sued Uber, Uber filed an inter partes review (IPR) against the ‘748 patent.  Rather than face that review, Fall Line settled with the defendants and dismissed their cases.  But that didn’t solve the entire problem for Fall Line—another petition was pending, this one from Unified Patents.  The USPTO determined that there is a reasonable likelihood that the challenged claims of the patent are invalid.  

But even after the USPTO made that determination, Fall Line charged ahead, filing new lawsuits against a number of restaurants and two more movie theater chains.

Fall Line Fell Down On Something Basic

There’s a very basic problem with Fall Line’s claims.  As part of obtaining the ‘748 patent, Fall Line’s predecessors agreed that the ‘748 patent wouldn’t be enforceable during any period of time when the ‘748 patent and the ‘816 patent weren’t owned by the same entity.

And, at least according to the records provided to the USPTO [1][2],[4.  Patent owners are under no obligation to keep the PTO’s records up to date, so it’s possible the ‘816 patent was transferred.  The lack of an accurate ownership registry makes it difficult to license patents, even if a company was aware of a patent and wished to license it.] Fall Line doesn’t currently own the ‘816 patent—when they acquired the ‘748 patent, the ’816 patent wasn’t included as part of the deal.  Without the ‘816 patent, Fall Line is legally unable to enforce the ‘748 patent. Nevertheless, multiple cases seeking to do so are now pending.

Fall Line Illustrates Need For Heightened Pleading Standards

Beyond the apparent lack of a right to enforce to enforce the ‘748 patent, the content of Fall Line’s complaint shows that courts simply haven’t done enough to ensure that patent plaintiffs provide meaningful allegations in their complaints.  In theory, at the complaint stage a patent owner should identify a specific infringing product, specific claims, and explain how the elements of the claim are met by the product with some level of evidence for their allegations. Obviously, they won’t be able to prove every last detail at this stage, but a plausible case supported by factual allegations is what the Supreme Court requires.

Unfortunately, Fall Line only provides conclusory statements that the accused product meets each element of the claim.  Some of these conclusory statements don’t even meet the threshold of plausibility—for example, Fall Line asserts that the Papa John’s app creates a questionnaire, tokenizes it, and transmits it to a remote computing device.  I haven’t seen the source code for the Papa John app, but I feel fairly confident in asserting that it does not create any questionnaires. And none of them include any factual support.

It’s possible to file a motion to dismiss for failure to state a claim when faced with this kind of complaint, but that’s hardly free.  Without some kind of penalty for this kind of filing, plaintiffs can easily file insufficient complaints just to impose costs on defendants and try to generate settlement pressure.

This Could Go On For Another 10 Years

The second major flaw in the patent system that the Fall Line case lays clear is the abuse of continuations.  The original application that all of these patents derive from was filed way back in 2002. The current asserted patent was issued in 2016.  That’s 14 years of industry developing products which Fall Line now claims infringe a patent that didn’t even exist when they began developing those products.  

Fall Line has been able to tailor their claims to try to target successful industries that developed long after the original idea—a concern recognized in a GAO report several years ago.  At some point, it should be impossible for a patent applicant to keep pursuing new applications and adjusting their claims to encompass industries they never dreamed of.

That concern is still alive in this case, for that matter.  Fall Line has a continuation application pending. So even if the ‘748 patent, like the ‘816 patent, is held invalid, we can expect to do this all over again if Fall Line’s continuation patent is granted.  Patent owners complain that defendants can take “multiple bites at the apple” using IPR, even though the reality is that that almost never happens.  How many times should a patent owner be able to try and assert the same obvious idea?

Josh Landau

Patent Counsel, CCIA

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

Follow @PatentJosh on Twitter.

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