VOIP-PAL.COM, INC. v. Facebook, Inc. et al

March 2019 saw District Judge Lucy H. Koh of the Northern District of California invalidate under Alice the asserted claims of two patents asserted by publicly traded NPE VoIP-Pal.com Inc. in cases against Apple, AT&T, Twitter, and Verizon. VoIP-Pal rejected a takeover bid the next month, and then, last November, Judge Koh invalidated the asserted claims of four more patents from the same family, also under Alice. That order ended a suit against Amazon, as well as a second case against Apple. The decision has been appealed to the Federal Circuit, which just last month affirmed Judge Koh’s first Alice order. Undeterred, the NPE has filed four new suits, asserting the most recent patent to issue in the same family in a telling venue—the Western District of Texas—against both new and previous defendants; however, two of those previous defendants have taken steps that may put litigation over the new patent back in front of Judge Koh.

On April 8, prior defendant Twitter (5:20-cv-02397) sued VoIP-Pal, asking the Northern District of California for a declaratory judgment of noninfringement of the newly asserted patent (10,218,606). Its complaint notes last week’s affirmative suits filed against returning defendants Amazon (6:20-cv-00272) and Apple (6:20-cv-00275) and new defendants Alphabet (Google) (6:20-cv-00269) and Facebook (WhatsApp) (6:20-cv-00267) in that new venue—the Western District of Texas. Twitter also cites VoIP-Pal’s April 8 press release, announcing that, after a recent Federal Circuit decision affirming Alice invalidations in VoIP-Pal’s earlier cases, “VoIP-Pal is considering taking further action and ‘planning their next moves’”. “Our legal team is assessing our next moves regarding this Alice decision”, indicates VoIP-Pal’s CEO in that release, “and we expect to announce our intentions soon. I can tell you; we are not finished”.

Late last week, Apple also filed a declaratory judgment action against VoIP-Pal in the Northern District of California (5:20-cv-02460), this one seeking both a declaratory judgment of noninfringement of the ‘606 patent and a declaratory judgment of invalidity of the patent, in particular under Alice.

All of this district court activity has been arguably eclipsed by the twists and turns attending various inter partes review (IPR) proceedings concerning the two VoIP-Pal patents (8,542,815; 9,179,005) that Judge Koh invalidated last March. Apple challenged each patent in a set of two petitions filed back in June 2016. Dr. Thomas E. Sawyer, VoIP-Pal’s former CEO and chairman, sent a series of letters to the Patent Trial and Appeal Board (PTAB) (also copying various other government officials), letters that the Board, after much motion practice and a short trip up to the Federal Circuit, agreed were improper ex parte communications. Apple was permitted, as a “sanction” for VoIP-Pal’s prior conduct, to request a rehearing of a replacement panel’s final written decisions sustaining all of the claims that Apple had challenged.

Those final written decisions, as well as the procedural route to their issuance, are the subject of a separate appeal to the Federal Circuit, in which USPTO Director Andrew Iancu has intervened. In its opening papers, among other things, Apple has argued that the Board violated the Administrative Procedure Act by “departing from the sanctions authorized in advance by regulation” and that through its failure to order a new “constitutionally correct proceeding”, the Board violated the Due Process Clause of the US Constitution.

Apple contends that VoIP-Pal “embarked on a campaign of intimidation designed to influence the outcome of the IPR proceedings” in response to which the right to request a rehearing before a new panel—a right that Apple already enjoyed—was an inadequate sanction not permitted under operative regulations. Apple seeks judgment in its favor as the only authorized sanction. In its responsive brief, VoIP-Pal, and in its intervenor brief, Director Iancu, both disagree, arguing, among other things, that the Board has the discretion to impose appropriate sanctions in individual proceedings. A date for oral argument has yet to be set.

The VoIP-Pal patent now in litigation—the ‘606 patent—issued in February 2019 as the most recent member of the family that includes the ‘815 and ‘005 patents, as well as the four patents that Judge Koh subsequently also invalidated under Alice (9,537,762; 9,813,330; 9,826,002; 9,948,549). The family shares an estimated priority date in November 2006, with prosecution of additional related applications continuing before the USPTO.

The original development for VoIP-Pal’s patents was conducted by Digifonica, a Canadian VoIP services provider that VoIP-Pal acquired in 2013. Emil Malak, VoIP-Pal’s current CEO (and sole employee), was one of Digifonica’s cofounders. VoIP-Pal itself was formed in Nevada in December 1997. Its current chairman is Dr. Colin Tucker, formerly an executive at telecommunications companies Hutchison 3G and Orange plc. In 2018, in the wake of the issuance of two of its patents, Malak commented that “[t]he meter is still running on our patents with the possibility of increased damages owed to the Company as a result of willful infringement”. Any increase would not have applied to a conservative assessment of alleged damages, as VoIP-Pal has not been shy about identifying figures ranging into the billions, at least in relation to the now dismissed cases against Apple, AT&T, Twitter, and Verizon. In a press release roughly one year ago, after Judge Koh’s first Alice order, Malak stated, “We are currently focused on our legal appeal to the recent Alice 101 decision as well as finalizing our strategy to move forward in Europe . . . In the meantime we are working diligently to add to our patent portfolio with patent continuation applications. Patience is a virtue.”

A much more detailed background concerning VoIP-Pal, this campaign, and its lofty damages figures, as well as the unique twists and turns of its time before the PTAB, can be reviewed at “Apple Seeks Rehearing from a Third PTAB Panel After Partial Grant of Sanctions over Improper Ex Parte Communications” (January 2019).

Judge Koh entered judgment in response to a consolidated set of Rule 12 motions brought by the first set of defendants—Apple, AT&T, Twitter, and Verizon—and a consolidated set of Rule 12 motions brought by the second set—Amazon and Apple. The new cases against Amazon, Apple, Facebook/WhatsApp, and Google have been assigned in the Western District of Texas to District Judge Alan D. Albright. Judge Albright has expressed a heavy skepticism of the kind of early motions that prompted Judge Koh’s Alice opinions.

In a January 2020 order denying such a motion, Judge Albright summarized his approach as follows: “. . . because an issued patent enjoys the presumption of validity which requires clear and convincing evidence to prove otherwise, because claim construction and fact discovery can completely change the Court’s § 101 analysis, and because the Court gains a greater understanding of the patents and the technology by delaying the resolution of eligibility, the Court believes that delaying the determination of a patents § 101 eligibility is the wisest course of action”. Further details about that decision can be reviewed at “Recent Alice Order in Delaware Invites Comparison with the Western District of Texas” (April 2020).

In its new complaints now before Judge Albright, VoIP-Pal has targeted the defendants over communication systems; for Amazon, over its “calling and messaging system”—provided through the Amazon Alexa virtual assistant—and Amazon Echo devices, Amazon Fire devices with Alexa support, and Google Android and Apple iOS mobile devices with the Alexa app; for Apple, over Facetime and its messaging platform; for Google, over the Duo and Hangouts messaging platforms, Google Home system, and related Google Home and Google Nest-branded devices; and for Facebook, over the WhatsApp messaging service. Twitter seeks a declaratory judgment that communications within its social media platform do not infringe the ‘606 patent.

In its 10-Q for the quarter ended December 31, 2019, VOIP-Pal disclosed cash of $390K. During that same quarter, the company used $570K of cash in its operations. At its recent price of $0.0125 per share, VOIP-Pal’s market value is approximately $25M. 4/2, Facebook (WhatsApp) 4/3, Google, 4/6 Amazon, 4/7, VoIP-Pal v. Apple, Western District of Texas; 4/8, Twitter, 4/10, Apple v. VoIP-Pal, Northern District of California.