PublishedJune 25, 2019

NPEs at the ITC Illustrate Flaws in U.S. Trade Court

This week, an Irish non-practicing entity (NPE)’s lawsuit against multiple U.S. companies got the go-ahead from a U.S. trade court designed to protect U.S. companies from unfair foreign competition.  No, that sentence isn’t backwards. That’s exactly what the United States International Trade Commission (ITC) has done in the Neodrón investigation.

Should the NPE win, the ITC could ban importation of 80% of Android tablets, 86% of Windows tablets, more than 50% of Android smartphones, and 97% of premium Android smartphones.  All for the benefit of an Irish NPE.

Who is Neodrón?

Neodrón, according to its own filing, is “an Irish company, having its principal place of business at Unit 4-5, Burton Hall Road, Sandyford, Dublin.”[1. Unsurprisingly, these appear to be nothing more than small rental offices. This is typical for NPEs.]  That same address is also home to Data Scape Limited, another Irish NPE suing American companies in the ITC.  That’s not a coincidence—both Data Scape and Neodrón share the same management team and investors, including Gerald Padian.  

Padian isn’t new to the NPE game.  He started out as an IP litigator before forming his first NPE, Realtime Data, in 1998.  Since then, Realtime and its affiliated shell companies have filed over 140 lawsuits against a variety of technology companies of all sizes.  Data Scape and Neodrón have added another 50 or so to the total number of lawsuits filed by Padian’s companies.  Those 200 lawsuits aren’t the end of the story—Padian is also the director of Solas OLED, an NPE centered around organic LED (OLED) technology, which is just kicking off its own litigation campaigns.

(Aside from Neodrón being founded and run by a long-standing NPE owner, both Data Scape and Neodrón also claim a Magnetar Capital affiliate as a significant investor.  Some credit Magnetar, a hedge fund, with significantly worsening the 2008 financial crisis by aggressive use of mortgage-backed securities.  With mortgage-backed securities no longer a viable investment avenue, it seems like Magnetar may be rolling a portion of its assets into financialization of patent litigation.)

What’s the Invention?

In its own words, Neodrón admits that it didn’t invent anything.  According to its filing, the “patented improvements at issue in this action were made by highly regarded engineers from two U.S. companies: Atmel Corporation (‘Atmel’) and Microchip.”  

The patents are all focused on touchscreen technology.  One appears to cover sensing movement of a finger along a linear or circular touch-sensitive strip—in fact, it looks a lot like the iPod Mini capacitive click-wheel which predates Neodrón’s patent by several years.  Another describes a capacitive sensing technique in a keypad with separate capacitive areas.  And a third covers a system for distinguishing between multiple keys, where a key might be a surface such as a touchscreen.  [2. Reading the patent specification, the “key” with respect to touchscreens is defined as the entirety of a touchscreen, not as an area on the touchscreen.  The claim to multiple keys thus appears to be directed to multiple touchscreens used in parallel, not to touch keyboards and the like.]

Who’s Getting Sued?

Neodrón’s complaint names a group of U.S. companies including Amazon, Dell, HP, Microsoft, and Motorola, as well as both foreign and U.S. affiliates of Samsung and Lenovo.  Neodrón alleges that devices ranging from Amazon’s Fire tablets to Microsoft’s Surface Books to a variety of HP touchscreen devices, as well as Samsung tablets and phones, infringe their patents.  The accused devices represent a huge proportion of U.S. touchscreen devices of all shapes and sizes.

And if Neodrón wins, they don’t get financial compensation.  They get to keep those products out of the U.S. until the companies in question pay whatever Neodrón asks them to pay.  It doesn’t matter that the touchscreen patents, if infringed, would only represent a small portion of the value of the product, or that the products might incorporate hundreds of thousands of patents.  Neodrón could effectively ask for as much as the entire profit the companies make on the device, far more than the value of their technology.

So we have an Irish company that makes nothing and admits it never invented a thing, run by a patent lawyer and backed by money from a hedge fund, suing U.S. companies.  All in a trade court that’s designed to protect U.S. companies from unfair foreign competition, but is being used to help a foreign company take all the profit away on a product it contributed nothing to.

That’s not what the ITC was designed for, and it’s not good for the U.S. economy.  It’s time to fix the ITC.

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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