Nimitz Technologies LLC v. Reddit, Inc. DC

This past week the full Federal Circuit turned away an appeal of a panel denial of a petition for a writ of mandamus filed by Nimitz Technologies LLC, a plaintiff with links to formerly prolific patent monetization firm IP Edge LLC. Nimitz had asked the Federal Circuit to vacate an order, handed down by District of Delaware Chief Judge Colm F. Conolly, that would require Nimitz to produce to the district court a wide-ranging set of information concerning ownership/control, assets, and legal representation. A Federal Circuit panel denied the petition, prompting Nimitz to file an appeal with the full appellate court. On January 31, 2023, that appeal was also denied. Now, Nimitz—represented throughout by George Pazuniak of O’Kelly & O’Rourke, LLC—has asked the Federal Circuit to stay the associated mandate so that it can appeal further, this time to the US Supreme Court. In its motion, Nimitz sharpens its assessment of the situation, calling Judge Connolly “the adversary in this case”, to whom the production order would require it to deliver materials covered by the attorney-client privilege “not for the purpose of determining whether privilege applies, but for purposes of using the attorney[-]client communications in an investigation of Nimitz”. Per Nimitz, its further appeal is “raising a substantial question, and, indeed, raising an issue which has never been addressed by any court”.

Nimitz Technologies LLC, a plaintiff with links to prolific patent monetization firm IP Edge LLC, has responded to two adverse turns among the recent “Series of Extraordinary Events” unfolding before Delaware Chief Judge Colm F. Connolly. First, Nimitz has appealed the rejection of its petition for a writ of mandamus to the full Federal Circuit. Nimitz argues that the panel (and the district court) both failed to properly apply the principle that a court should avoid considering issues that are not presented to it by the parties and improperly considered an uninvited, legally erroneous memorandum penned by Judge Connolly. Nimitz argues that full court consideration is necessary to “answer to a precedent-setting question of exceptional importance: whether the district court may require that a litigant provide attorney-client privileged documents to the judge that is investigating the party, where the crime-fraud exception to the attorney-client privilege has not been, and could not be, invoked”. Back before Judge Connolly, Nimitz has also responded to an order to show cause why it should not be sanctioned, there arguing that the court has jumped the gun and that Nimitz cannot be required to produce to the court documents that would moot the appeal underway before the full Federal Circuit.

Litigants have been closely watching the “Series of Extraordinary Events” that have been playing out in Delaware as the result of a pair of standing orders issued by Chief Judge Colm F. Connolly in April, which require the disclosure of details on funding and corporate control for parties in his courtroom. Recent weeks have seen a group of related plaintiffs taken to task by Judge Connolly for their noncompliance with these orders, including their failure to disclose links to monetization firm IP Edge LLC and purported consulting firm MAVEXAR LLC—subjecting the NPEs to a series of revelatory evidentiary hearings and imposing a set of sweeping orders requiring some of those plaintiffs to produce a wide-ranging ream of information on their ownership/control, assets, and legal representation. Judge Connolly has now denied a motion to withdraw one of those production orders from one of those plaintiffs, Nimitz Technologies LLC—rejecting it as “devoid of merit”, and ordering it to show cause why he should not sanction the entity for failure to provide the required evidence, as a parallel fight over his probing plays out before the Federal Circuit.

In April of this year, Delaware Chief Judge Colm F. Connolly posted two standing orders imposing heightened disclosure requirements—regarding party ownership and any third-party litigation funding—on litigants in his courtroom. The responsive disclosures from certain plaintiffs, associated with various notable patent monetization players, have spawned intense scrutiny from the court, including a series of evidentiary hearings followed by an order requiring the production to the court of documents governing the relationships between those plaintiffs and those monetization outfits, together with related communications. Four of the plaintiffs then filed separate petitions for writs of mandamus with the Federal Circuit, prompting Judge Connolly to take certain additional hearings off calendar, to stay some of these cases, and to submit a memorandum to the appeals court, “explain[ing] more fulsomely and in writing” the reasons for this series of extraordinary events. This past week, (1) the Federal Circuit denied two of those petitions, (2) a denied petitioner filed a motion before Judge Connolly seeking the withdrawal of his explanatory memorandum (as well as recusal from its cases going forward), (3) defendants and amici filed responses to the other two petitions still pending before the appeals court, and (4) VLSI Technology LLC and Intel provided their answers to four related questions that Judge Connolly posed in the Delaware case between the two, in advance of a December 14 hearing.

For years, RPX has reported on the intelligence that can be culled from public records about the approach to patent monetization by the large collection of patent plaintiffs linked to IP Edge LLC. That Texas monetization firm has never filed suit itself but has, through its associated LLCs, been the top filer by volume of NPE litigation, both for several years running and by an order of magnitude. The “Series of Extraordinary Events” currently underway—first before Delaware Chief Judge Colm F. Connolly, but now also the Federal Circuit—appears to have confirmed that body of reporting, based solely on public records, that the founders of IP Edge, through sister entity MAVEXAR LLC, have constructed a business model by which individuals with no prior, cognizable connection to patent monetization take ownership of patents, the assertion of which MAVEXAR manages—all for a small percentage of the proceeds paid back to those individuals.

Three plaintiffs with apparent links to Texas monetization firm IP Edge LLC recently filed separate petitions for writs of mandamus, asking the Federal Circuit in the short term to order Delaware Chief Judge Colm F. Connolly to cancel evidentiary hearings that had been scheduled for December 10 to consider whether those plaintiffs have complied with the court’s April 2022 standing orders addressing disclosure of comprehensive ownership information, as well as certain third-party litigation funding. Judge Connolly, separately, canceled that evidentiary hearing, and the Federal Circuit has quickly denied one of those petitions. Meanwhile, the same three plaintiffs have continued to file cases in their respective campaigns, Creekview IP LLC hitting RadioShack Online (3:22-cv-02653); Swirlate IP LLC, RAB Lighting (1:22-cv-06660) and Schweitzer Engineering Labs (2:22-cv-00300); and Waverly Licensing LLC, Aukey (2:22-cv-08642) and Impero Electronics (VisionTek Products) (2:22-cv-08642), all outside Delaware. Each of those campaigns has included prior cases filed in other districts as well—districts that require the disclosure of nonparties having an interest in the outcome of the litigation. In the Aukey case, litigation counsel (Garteiser Honea, PLLC) has already (on November 30) had to update Waverly’s disclosure to the Central District of California because the prior version (filed two days earlier) omitted MAVEXAR LLC from the list of parties with a pecuniary interest there. MAVEXAR will by now be well known to those following the “Series of Extraordinary Events” arising out of Delaware. As those events unfold, other counsel for Creekview IP, Swirlate IP, and Waverly may have more due diligence—and cleanup—ahead.

In a November 30 memorandum, Delaware Chief Judge Colm F. Connolly has “explain[ed] more fulsomely and in writing” the reasons that he ordered patent plaintiff Nimitz Technologies LLC to produce to the court agreements and communications related to the conduct of its litigation. Nimitz had filed a petition for a writ of mandamus, using extraordinary language to describe the inquiries underway in Judge Connolly’s courtroom and prompting the Federal Circuit to stay the district court’s disclosure order “pending further action” from the appellate court. As amici have begun weighing in on that petition, Judge Connolly has—over the course of a 78-page memorandum that his chambers has now submitted via letter to the Federal Circuit in the mandamus proceeding—recounted the course of events that led the parties to this point, addressing the court’s authority to engage in its recent inquiries, noting that the earlier order requiring the production of materials did so only to the court (not to the opposition or public), and suggesting that the assignment of patents to Nimitz may even be invalid—all against a backdrop of concerns about “counsel’s professionalism and potential role in the abuse of the Court”. Nimitz has filed a reply brief in which it argues that it had no obligation to comply with Judge Connolly’s standing orders in the first place, raising the specter of due process and equal protection problems under the US Constitution by virtue of alleged discrimination against a “disfavored class of plaintiffs”. Meanwhile, three other entities before Judge Connolly—Creekview IP LLC, Swirlate IP LLC, and Waverly Licensing LLC—filed petitions for writs of mandamus of their own that raise new issues, including whether the court had the authority to post its April 2022 standing orders at all. The Federal Circuit has now denied one of those petitions. In other words, the series of extraordinary events in Delaware stretches on.

So far in November, Delaware Chief Judge Colm F. Connolly has held two extraordinary evidentiary hearings, to evaluate the compliance of patent plaintiffs Backertop Licensing LLC, Lamplight Licensing LLC, Mellaconic IP LLC, and Nimitz Technologies LLC with standing orders, new this past April, regarding corporate and third-party litigation funding disclosures. Thereafter, Judge Connolly handed down a set of orders requiring extraordinarily sweeping production to the court of materials related to, for example, communications between the plaintiffs, its “consultant” handling litigation, and various attorneys. Nimitz filed a petition for a writ of mandamus from the Federal Circuit to intervene, using extraordinary language to describe the district court’s actions, as, for example, conducting “perverse prying into the innards of [Nimitz’s] finances, business, and prosecution”. The Federal Circuit stayed Judge Connolly’s order in the Nimitz case, triggering stays in the other suits, with all this extraordinary activity continuing to ripple through other Delaware cases over Thanksgiving week.

The rapidly escalating battle over disclosures in Delaware has suddenly hit a wall. In April 2022, Chief Judge Colm F. Connolly issued two new standing orders that required parties before him to reveal information related to funding arrangements and corporate control, thereby pushing many plaintiffs to file new or updated disclosures. Among those plaintiffs were entities associated with Texas monetization firm IP Edge LLC, which have frequently named individuals with no discernible connections to patent monetization as managers or managing members. Yet those relationships soon came under the microscope after Judge Connolly flagged several of its plaintiffs’ disclosures as insufficient and forced a variety of individuals linked to those NPEs to testify in person on November 4 and 10. Those hearings left Judge Connolly with “concern[s]” over the “accuracy of statements” made in the filed disclosures from three of the plaintiffs, and over “whether the real parties of interest are before the Court”—leading him to order those NPEs to disclose a range of information related to their legal representation, corporate ownership and control, assets, and potential liabilities. However, the Federal Circuit has now stayed one of those orders while it considers a mandamus petition from one of the impacted plaintiffs, Nimitz Technologies LLC, leading to stays in cases from the other two.

Earlier this month, Delaware Chief Judge Colm F. Connolly held two hearings to consider whether patent plaintiffs Lamplight Licensing LLC, Mellaconic IP LLC, and Nimitz Technologies LLC (on November 4) and Backertop Licensing LLC (on November 10) have fully complied with new standing orders regarding corporate and third-party litigation funding disclosures. These two hearings are the first in a string of similar hearings scheduled before Judge Connolly through December, although after the Federal Circuit's recent related stay, it is unclear if the additional hearings will proceed. A review of the transcripts suggests that parties and counsel headed toward coming appearances should be prepared for an in-depth examination directed toward a wide range of related issues, including ethical considerations surrounding engagement with a party that litigation counsel has never met, concerns about the corporate form where an LLC maintains no bank account and its sole member receives payments directly deposited into a personal account, the differences between a post office box in Texas and a suite in Delaware, the involvement of third party consultants—here, MAVEXAR LLC, an entity associated with prolific patent monetization firm IP Edge LLC—in running litigation campaigns, and the appearance (in documents reviewed) of unexpected acronyms, like the perhaps not-so-mysterious “NWM”.

Nimitz Technologies LLC has added Delaware cases against Buzzfeed (1:21-cv-01362), Conde Nast (1:21-cv-01360), Skillshare (1:21-cv-01363), and Twitter (1:21-cv-01364) to the four suits that the apparent IP Edge LLC plaintiff filed to kick this campaign off at the end of August in the same district. The plaintiff targets support for the HLS streaming protocol in the defendants’ respective websites with a single patent received from France Brevets SAS this past March. One of the four prior defendants has already filed a motion to dismiss challenging that patent under Alice, as patent-ineligibly drawn to the abstract idea of “assigning values to identify data streams corresponding to different versions of content”.

IP Edge LLC has added a third new August campaign to the two that it began in the middle of the month. Nimitz Technologies LLC has sued Advance Publications (Reddit) (1:21-cv-01249), AT&T (Bleacher Report) (1:21-cv-01246), Pinterest (1:21-cv-01248), and Red Ventures (CNET) (1:21-cv-01247) over a patent that the Texas firm received from public-private monetization firm France Brevets SAS this past March. The patent generally relates to “encapsulating” multiple versions of a data stream in a “stream of packets”, with infringement allegations targeting the support for either the HLS (Bleacher Report, CNET, and Pinterest) or MPEG-DASH (Reddit) streaming protocol in the defendants’ respective platforms. One of the other two IP Edge campaigns new in August also concerned patents from that former France Brevets portfolio, while the third is yet more litigation over patents acquired in June 2020 from UK-based telecommunications company Ghost Telecom.