Fundamental Innovation Systems International LLC v. LG Electronics, Inc. et al CAFC
- Filed: 12/16/2016
- Closed: 10/22/2018
- Latest Docket Entry: 10/23/2018
March 5, 2021
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
Backed by the private equity firm Centerbridge Partners and asserting former BlackBerry patents
Formed in Delaware in 2015, Fundamental Innovation Systems International LLC (FISI) has filed roughly 20 suits since late 2016, hitting Apple, Aukey, BBK Electronics (One Plus), BLU Products, Hon Hai Precision Industry (Belkin), Huawei, Jasco Products, Lenovo, LG Electronics, Samsung, TCL (TCT Mobile), Yulu Computer (Coolpad) and ZTE—and now, Anker Innovations (Fantasia Trading) and Cyber Power Systems.
As in its previous suits, FISI’s March 5 complaints against Fantasia Trading (1:21-cv-00339) and Cyber Power (1:21-cv-00340) assert former BlackBerry patents, this time with infringement allegations focused on the defendants’ provision of USB charging adapters (including wall chargers, car chargers, desktop chargers, and power banks). (Earlier suits have targeted a range of USB charging devices and/or Chromebooks, laptops, smartphones, and tablets, etc., that include such devices.)
FISI acquired its 18 patents-in-campaign from BlackBerry in a November 2015 transaction that included over 55 US assets as well as foreign counterparts in Australia, Europe, and Asia. The terms of that acquisition were not made public at the time, but filings in subsequent lawsuits between IP consulting firm Ocean Tomo, LLC and former Ocean Tomo executive Michael Friedman revealed that the assignment resulted from a multi-million dollar deal between BlackBerry and Centerbridge Partners, a private equity firm with an estimated $1.15B in assets under management. Details concerning that deal are available here.
FISI initially engaged TnT IP LLC—a patent monetization firm managed by Craig Thompson and Ozer Teitelbaum, both former senior IP executives at Alcatel-Lucent—to license its portfolio. However, in 2018 (amid Samsung’s settlement with FISI), IAM Magazine reported that the firm had been replaced by three former senior executives at IPVALUE Management, Kapu Kumar, Paul Seaman, and Paul Riley. (Indeed, Texas public records now identify each of Kumar, Seaman, and Riley as a “governing person” of FISI, along with Eugene Davis, of Livingston, New Jersey.) In April of 2019, Kumar, Seaman, and Riley co-founded New Jersey-based JASPAR – IP Consultants, an apparent patent monetization consultancy. According to IAM, John Desmarais, who partnered with IPVALUE on monetizing the Round Rock Research portfolio, introduced Centerbridge Partners to the JASPAR team.
Also according to IAM, this same team (and again with backing from Centerbridge) last year acquired over “1,400 worldwide patent assets from lighting business Osram” and has since moved the portfolio from one Irish entity (Key Patent Innovations Limited) to another (Pictiva Display International Limited).
Furthermore, USPTO records reflect the recent movement of a large portfolio of patents from HP Enterprise (HPE) to Ocean Tomo (OT Patent Escrow LLC) to Valtrus Innovations Limited, another NPE that Irish corporate records tie to the same group of individuals. More well-funded litigation from this team, again over former operating company patents, looks likely in store for 2021.
Solas OLED Limited
Backed by the hedge fund Magnetar Capital, and litigating patents received from Casio, Microchip Technology (Atmel), or the University of Stuttgart
Formed in Ireland in March 2016, Solas OLED Limited has been waging a multi-front litigation campaign since April 2019, suing its nine total targets Alphabet (Google), Apple, BOE Technology Group, Dell, HP, Lenovo (Motorola Mobility), LG Electronics, Samsung, and Sony in district court with some also targeted in actions brought before the International Trade Commission.
Its first trial underway as of the publication date of this article*, against Samsung in the Eastern District of Texas (2:19-cv-00152), Solas OLED has filed a third suit against Samsung (Samsung Display), asserting in a February 26 complaint a former Casio patent and targeting OLED display modules incorporated in certain Apple products (e.g., iPhones and Mac Books) (6:21-cv-00185).
*Since this article’s publication, a verdict has been handed down in Solas OLED’s trial against Samsung. For RPX coverage, see “Texas Jury Returns $62.7M Infringement Verdict in Solas OLED Trial Against Samsung” (March 2021).
Solas OLED is backed by Magnetar Capital, a hedge fund with approximately $12.3B in assets under management, and the NPE’s managers have ties to a growing web of Irish NPEs litigating former operating company patents, including Arigna Technology Limited (asserting a former Mitsubishi patent), Data Scape Limited (litigating patents originating with Sony), Neodrón Limited (asserting patents received from Microchip or subsidiary Atmel) and Sonraí Memory Limited (litigating patents originating with HPE). For a closer look at these NPEs’ corporate ties, campaigns, and patents-in-suit, start with “More Hedge Fund-Backed Irish NPEs Launch US Litigation” (February 2021).
Meanwhile, yet more litigation from this group of Irish NPEs appears on the horizon; as recently reported by RPX, sister NPE Scramoge Technology Limited received over 120 US patent assets from LG Innotek last month.
The increasingly popular trifecta of operating company patents, nonrecourse funding, and more due diligence
The sale of patents by operating companies fueled yet more NPE litigation in 2020—a trend that may accelerate as more businesses turn to their patent portfolios for revenue due to economic pressure caused by the pandemic. Current economic conditions have also played a part in litigation finance’s explosive growth.
Litigation funding is typically provided on a nonrecourse basis, with the funder collecting a return on its investment only in the event of a successful outcome. If a funded plaintiff fails to recover in litigation, that plaintiff is generally not obligated to repay the funds advanced for the litigation.
Given that a nonrecourse funding arrangement comes with the risk of a total loss for the investor, litigation funders are spending substantial time and effort evaluating patents for assertion. As litigation finance continues to permeate the patent space, the character of the assets asserted by third-party funded NPEs may reflect additional due diligence and portfolio selection.
The IP market flush with former operating company patents, and with third-party funding increasingly widespread, the economic risk of NPE litigation may be the same as it was when filings were at peak levels—or even higher. See “What 15 Years of US Patent Litigation Data Reveal About the IP Market” (January 2021), and this RPX Community webinar, for more details.
April 25, 2020
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.
2019 Marketplace Trends: As Private Equity’s Interest in Patent Litigation Grows, a Better-Capitalized Breed of NPEs Has EmergedOctober 12, 2019
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.
Access to the full article is currently available to RPX members only. Please contact us if you need further information.
Fundamental Innovations Systems International Responds to Apple’s California DJ Action by Affirmatively Suing It in TexasFebruary 16, 2019
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).
February 9, 2019
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.
March 25, 2018
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).
March 16, 2018
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).
January 2018 PTAB Activity Spans Several Market Sectors and Includes Challenges Against Frequent LitigantsFebruary 2, 2018
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.
October PTAB Activity Includes Petitions Against Repeat Players and Cancellation of Claims from Realtime Data PatentNovember 2, 2017
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.
February 24, 2017
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.
February 17, 2017
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.
December 22, 2016
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.