Fundamental Innovation Systems International LLC

Multiple litigation finance players announced large fundraises during the third quarter, signaling a continued interest in the asset class by institutional investors. Also during Q3, several NPEs began new campaigns financed by third parties, including an established litigation finance firm as well as a hedge fund.

Until recently, private equity-backed NPE Fundamental Innovation Systems International LLC (FISI) had squarely focused its USB charging campaign on device makers, hitting roughly 15 such companies over former BlackBerry patents since late 2016. FISI may now be shifting gears. This past week, the NPE sued a group of car makers and parts suppliers over the provision of USB media ports and vehicles equipped with such devices.

RPX data and analysis indicate that while approximately 85% of the patent litigation filed each year since 2005 has involved patents that originated with operating companies, the vast majority of defendants in those cases were sued by NPEs. This trend persisted through the first quarter of 2021, with new cases brought by a range of NPEs, including serial filers, a publicly traded NPE, and multiple third-party backed plaintiffs.

Signs abound that wealthy investors are doubling down on patent litigation. Take for example the new suits recently filed by two NPEs holding large portfolios of former operating company patents, each backed by a private equity firm or hedge fund. As a recent RPX analysis shows, the economic risk posed by these types of NPEs is significant—and may be increasing.

Fundamental Innovation Systems International LLC has filed a new round of cases in its sole litigation campaign, suing Aukey (2:20-cv-00116), BBK Electronics (OnePlus) (2:20-cv-00119), Jasco Products (2:20-cv-00118), and Yulong Computer (Coolpad) (2:20-cv-00117) in the Eastern District of Texas; Hon Hai Precision Industry (Belkin) (1:20-cv-00550), Lenovo (1:20-cv-00551), and TCL (TCT Mobile) (1:20-cv-00552) in the District of Delaware; and BLU Products (1:20-cv-21721) in the Southern District of Florida. The NPE has targeted, with patents acquired from BlackBerry, the provision of USB charging devices (e.g., charging adapters, battery packs, electrical outlets equipped with USB ports, etc.), as well as mobile devices that include USB charging devices (e.g., Chromebooks, laptops, smartphones, and tablets), throughout this campaign, which began back in December 2016.

Litigation finance firms have experienced record fundraising in recent years, with private equity firms and hedge funds looking for opportunities to invest in uncorrelated assets that can withstand, or even perform well in, the next economic downturn. With large amounts of capital on hand, and therefore fewer concerns about diversifying their investments, multi-strategy funds are proving to be attractive investment partners for standalone litigation funders. Through such partnerships, a new breed of NPEs has emerged—one backed by more copious and patient capital than those of years past. This article, the first in a series covering the evolving sources of capital for NPEs today, takes a look at two private equity firms and a hedge fund backing notable NPE campaigns.

A week following Apple’s early February declaratory judgment (DJ) complaint against Fundamental Innovation Systems International LLC (FISI) in the Northern District of California, the NPE has brought a separate infringement suit (2:19-cv-00048), asserting five of the 12 patents-in-suit in Apple’s DJ. FISI’s complaint, filed in the Eastern District of Texas on February 11, targets a similar list of products, including certain charging adapters, mobile devices, wireless earbuds, Bluetooth speakers, and wearables, but also adding certain Mac laptops (the “Macbook Pro 4th Gen, Macbook 8, Macbook 9, Macbook 10 and Macbook Air 8”). The patents asserted are a subset of hundreds acquired from BlackBerry in late 2015 and include patents previously litigated by FISI in cases against Huawei, LG Electronics (LGE), and Samsung (each of which subsequently took licenses to the FISI patents, according to the NPE), as well as ZTE (which was sued in early 2017 and remains active in litigation).

Apple has brought a declaratory judgment (DJ) action against Fundamental Innovation Systems International LLC, an NPE with active campaigns in the US and Europe, and its corporate parent, Fundamental Innovation Systems International Holdings LLC (collectively, “FISI”). Apple’s DJ complaint (3:19-cv-00638), filed on February 5 in the Northern District of California, seeks a judgment of noninfringement for three categories of products that include certain adapters, mobile devices, and wearables. The 12 patents-in-suit originated with BlackBerry and include a group of USB charging patents that FISI has asserted in a campaign hitting Huawei, LG Electronics (LGE), Samsung, and ZTE. They were among the roughly 200 patent assets that BlackBerry assigned to FISI in a late 2015 transaction—a multi-million dollar deal, according to public records, that was embroiled in strife and gamesmanship.

In December 2016, Fundamental Innovation Systems International LLC (FISI) began targeting mobile device manufacturers with a series of Texas lawsuits asserting USB charging patents acquired from BlackBerry in late 2015. As FISI’s litigation proceeds in the US, documents recently filed in the District Court of Mannheim now indicate that the German leg of the NPE’s campaign also remains active, with hearings held earlier this month in cases against Samsung and electronics retailers Cyberport GmbH and notebooksbilliger.de AG. Other filings show that the asserted patents have been targeted in a variety of invalidity proceedings, both in Germany and before the European Patent Office (EPO).

The Patent Trial and Appeal Board (PTAB) saw activity in a variety of notable campaigns throughout February 2018, with petitions for inter partes review (IPR) filed against publicly traded Quarterhill Inc. as well as Fundamental Innovation Systems International LLC, Intellectual Ventures LLC, Realtime Data LLC, and Uniloc Corporation Pty. Limited. The Board also instituted trial in February for IPRs against General Patent Corporation, Oyster Optics, LLC, and Uniloc. In addition, the PTAB issued final decisions throughout February in IPRs against a range of different patent owners, including publicly traded NPEs (Acacia Research Corporation; InterDigital, Inc.; and VirnetX Inc.), an individual inventor (Daniel L. Flamm), and privately held plaintiffs (ChanBond, LLC; Makor Issues & Rights Ltd.; Papst Licensing GmbH & Company Kg; and Personalized Media Communications, LLC).

The Patent Trial and Appeal Board (PTAB) saw petitions for inter partes review (IPR) filed in large campaigns affecting a variety of market sectors in January, including the automotive campaign waged by Intellectual Ventures LLC; frequent plaintiff Realtime Data LLC’s long-running data compression and media streaming campaign; the USB device charging campaign brought by Fundamental Innovation Systems International LLC; and the mobile device campaign run by IPA Technologies Inc., a subsidiary of publicly traded Quarterhill Inc. The Board instituted trial in January for petitions against Realtime Data and in the sprawling, 12-year anti-malware campaign still being litigated by publicly traded Finjan Holdings, Inc. The PTAB also issued final decisions in January in IPRs against Realtime Data; ChriMar Systems, Inc.; and IP Bridge, Inc.

In October 2017, the Patent Trial and Appeal Board (PTAB) saw the filing of petitions for inter partes review (IPR) against a variety of frequent litigants, including publicly traded NPEs Acacia Research Corporation and Xperi Corporation, as well as privately held Monument Patent Holdings, LLC and Uniloc Corporation Pty. Limited. The Board also instituted trial in October for IPRs against multiple Acacia subsidiaries, Uniloc, and Papst Licensing GmbH & Company Kg. In addition, the PTAB issued an IPR final decision cancelling multiple claims from a data compression patent held by prolific plaintiff Realtime Data LLC, including the single claim that Riverbed Technology (one of the petitioners for the IPR) was found to infringe in a $4.3M verdict in May, with other final decisions issued in campaigns waged by TQ Delta LLC and publicly traded Quarterhill Inc. IPRs against IP Bridge, Inc. and Mobile Telecommunications Technologies, LLC also ended in termination in October after the patent owners requested adverse judgments.

In its litigation campaign over former BlackBerry patents, Fundamental Innovation Systems International LLC (FISI) has upped the number of defendants from three to four and the number of patents-at-issue from five to eight. FISI’s new complaint against Samsung (2:17-cv-00145) asserts all five patents (7,239,111; 7,834,586; 7,893,655; 8,232,766; 8,624,550) already in campaign as well as three patents (6,936,936; 7,791,319; 8,541,983) new to the litigation. Rights in all of the patents, which generally relate to charging the battery of a mobile device (most of them explicitly by using a USB connection to “fast charge” it) were received from BlackBerry as part of a November 2015 transaction involving over 50 patent assets. In its complaints, FISI characterizes itself as “responsible for protecting and licensing seminal BlackBerry innovations in the field of USB charging”, and the accused products are mobile, charging, and other devices that allegedly make such use of a USB connection.

Fundamental Innovation Systems International LLC (FISI) has added a third case, this one against ZTE (2:17-cv-00124), to the campaign that it initiated late last year. As in the complaints filed in December 2016 against Huawei (2:16-cv-01424) and LG Electronics (LGE) (2:16-cv-01425), FISI’s new complaint asserts four former BlackBerry patents (7,239,111; 7,834,586; 8,232,766; 8,624,550), targeting devices that offer USB fast charging, which allows connected devices (mobile devices, monitors, chargers) to draw more power than the USB specification typically allows.

Fundamental Innovation Systems International LLC (FISI) has filed its first litigation, asserting a group of USB charging patents, acquired from BlackBerry late last year, against Huawei (2:16-cv-01424) and LG Electronics (LGE) (2:16-cv-01425). Each defendant is accused of infringement through the provision of devices that offer USB fast charging, which allows connected devices to draw more power than the USB specification typically allows. LGE is alleged to infringe four of the patents in FISI’s portfolio (7,239,111; 7,834,586; 8,232,766; 8,624,550) through the provision of mobile devices, monitors, and chargers offering such features, while Huawei is accused of infringing those same patents plus a fifth (7,893,655) through its own mobile devices and chargers.