Mellaconic IP LLC v. GT Gettaxi Ltd. DC

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.

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”.

Mellaconic IP LLC, an IP Edge LLC plaintiff, has initiated another campaign over a patent picked up from Empire Technology Development LLC. The patent generally relates to communicating requests between separate devices based on the devices’ geographic location. The NPE plaintiff accuses five defendants—GT GetTaxi (d/b/a Gett) (1:20-cv-07091), Lyft (6:20-cv-00786), Uber (6:20-cv-00785), VeriFone (Curb Mobility) (1:20-cv-07089), and Via Transportation (3:20-cv-02543)—of infringement through matching drivers to clients in their respective ridesharing services.