Iris Connex, LLC v. Dell Inc. DC CAFC

The Patent Trial and Appeal Board (PTAB) saw activity in August 2018 involving a variety of frequent litigants. This included petitions for inter partes review (IPR) filed against two NPEs controlled by Fortress Investment Group LLC, INVT SPE LLC and Uniloc 2017 LLC, the latter of which has in recent months cofiled a barrage of lawsuits with subsidiaries of Australian NPE Uniloc Corporation Pty. Limited (Uniloc). The PTAB also instituted trial in August for IPRs against Uniloc 2017 and some of its campaign coplaintiffs, and in an IPR against an NPE controlled by patent attorney Brian Yates, whose US litigation has waned as he pursues a new patent licensing initiative through his company iPEL, Inc. Finally, the PTAB issued final decisions in August for IPRs against Uniloc, Empire IP LLC, and Quarterhill Inc.

Three shareholders of Texas-based NPE Allcare Health Management System, Inc. have moved to dismiss a lawsuit filed by Highmark, which seeks to pierce the corporate veil and hold them personally liable for a $5.2M attorney fee award. In a complaint filed in January, Highmark asserts that Allcare principals W. Halden Conner, Thomas G. Plaskett, and Robert H. Shelton purposefully operated the NPE as a “nearly insolvent shell entity” in a fraudulent attempt to avoid paying fees, while the three shareholders now deny any breach of fiduciary duty and allege pleading deficiencies. The underlying fee dispute in Highmark v. Allcare (4:03-cv-01384) made it to the US Supreme Court, leading to an April 2014 holding that attorney fee awards can be reviewed only for abuse of discretion (2012-1163). That same day, the Court held in companion case Octane Fitness v. Icon Health & Fitness that a patent suit may be found to be “exceptional” under Section 285 by considering the “totality of the circumstances” (2012-1184).

A Texas judge has invalidated a pair of medical records patents (5,682,526; 5,715,451) asserted by Uniloc Luxembourg S.A. and Uniloc USA, Inc. (collectively, “Uniloc”). In an order issued on March 30, District Judge Robert Schroeder III granted multiple motions to dismiss filed by Harris Computer, Netsmart Technologies, Picis, Practice Fusion, and QuadraMed in a consolidated action against Medical Information Technology (d/b/a Meditech) (6:16-cv-00463), ruling that the ‘526 and ‘451 patents are invalid under Alice as impermissibly directed to the abstract ideas of “organizing medical data in a hierarchy” and “creating and storing user-constructed formulas”, respectively. This is the second and final blow dealt to the campaign under Alice, with a single claim from each patent previously found ineligible in an August 2015 decision by Judge Schroeder.

Nuance Communications (2:17-cv-00890) is the first defendant in a new campaign started by Eloqui Voice Systems, LLC, a California-based NPE managed by multiple entities controlled by attorney Daniel C. Cotman. The new complaint accuses Nuance of infringing four voice assistant patents apparently acquired from an Intellectual Ventures LLC (IV) subsidiary through its Nina virtual assistant platform.

District Judge Rodney Gilstrap has imposed $355K in attorney fees and costs on Iris Connex, LLC, ruling that the Texas-based NPE had pursued such an objectively meritless case against defendant Dell (2:15-cv-01915) that the lawsuit was exceptional under Octane. In a 57-page opinion issued on January 25, Judge Gilstrap also ordered attorney Brian Yates to pay Dell $152K in sanctions, ruling that he had abused the corporate form by controlling the Iris Connex campaign through shell company Q Patents, Inc., failed to disclose that entity as the NPE’s parent, and then acted in bad faith in his further attempts at concealing that relationship. Finally, Judge Gilstrap imposed sanctions on Craig Tadlock, Iris Connex’s counsel, requiring him to pay $25K to the court for advancing a wholly implausible claim construction argument.

District Judge Rodney Gilstrap has issued summary judgments of non-infringement in the numerous suits filed by Iris Connex, LLC, finding that the mobile device makers targeted by the plaintiff—including Apple, Dell, Huawei, LG Electronics (LGE), Microsoft, and Samsung—have not infringed a single patent (6,177,950) generally related to a portable phone with a multi-position and multi-function camera. Iris Connex, a Texas-based NPE managed by attorney Nicolas J. Labbit, had argued that the ‘950 patent should be read to include a “unified” camera system with front and rear cameras, as found in the accused smartphones and tablets. However, in multiple, identical orders issued on September 2, Judge Gilstrap ruled that the defendants have not infringed after holding that the ‘950 patent required a single, multi-position camera.

Motile Optics, LLC, Iris Connex, LLC, and Fun Slide, LLC are the ninth, tenth, and eleventh Texas entities formed and managed by attorney Nicolas J. Labbit to have launched a litigation campaign in 2015. These latest three entities all filed at least some of the cases in their new campaigns on November 30, 2015, the day before amendments to the Federal Rules of Civil Procedure took effect.