Washington State Sues the “New” Landmark Technology over “Predatory ‘Patent Troll’ Practices” Targeting Small Businesses
- May 24, 2021
Category: Patent Market, Patent WatchMarket Sector: E-Commerce and Software
Washington Attorney General Bob Ferguson has filed a lawsuit against Landmark Technology A, LLC (“Landmark·A”), asserting that the NPE, which began filing litigation in early 2019, is in violation of his state’s Patent Troll Protection Act (PTPA)—a bill prohibiting bad faith assertions of patent infringement. According to the complaint—reportedly the first to seek enforcement of the act—Landmark·A has sent more than 1,800 demand letters in recent years to myriad companies, demanding $65K to license, under the threat of litigation, a patent “related to loan processing and credit reporting”. With infringement allegations primarily targeting customer log-in pages on company websites, argues Ferguson’s complaint, “any business with a web presence is a potential target” for Landmark·A. Over 130 unique defendants have been sued over the same patent by an apparently unrelated NPE from 2008 to 2018, so this is a familiar story—one that warrants the attention of current and future Landmark·A targets.
The Washington State complaint
The attorney general’s complaint accuses Landmark·A of adopting a bad faith business model, sending standard form demand letters that make false, misleading, or deceptive statements; contain identical infringement allegations; and assert an “invalid” patent (7,010,508). The ‘508 patent, which issued to its sole named inventor, Lawrence B. Lockwood, in March 2006, “claims to patent the abstract idea of automated data processing of business transactions between remote computer terminals”, according to the complaint, which also states that “Lockwood’s application for the ‘508 patent was twice rejected by PTO patent examiners”.
To date, the ‘508 patent has been challenged in a single petition for covered business method (CBM) review, filed by eBay in 2014 (CBM2014-00025) (at which time the patent was being litigated by Landmark Technology, LLC, a Lockwood-controlled NPE). Within six months of the Patent Trial and Appeal Board granting CBM review of claims 1-17 of the patent—on indefiniteness grounds—the parties sought a joint termination of the proceedings, citing a settlement agreement.
According to the state’s complaint, the ‘508 patent “relates specifically to online loan processing and credit reporting technologies”, yet Landmark·A’s assertion letters primarily target customer login pages on company websites, at times demanding license fees for “webpages containing privacy practices, shopping carts, products for sale and company home pages”.
Rather than setting its sights on “financial institutions that might be expected to make use of loan processing technologies”, says the attorney general, Landmark·A has targeted a wide range of companies—and seemingly at random:
For example, in just one month (July 2020), [Landmark·A] sent demand letters to businesses in the following industries: air and oil filters; apparel; appliances; automotive supplies; building supplies; candy; college housing supplies; consumer electronics; custom vehicles; department stores; event ticketing; fabrics; florist; fluid connectors; food service; furniture; grocery; hardware; headsets; health and beauty; HVAC; industrial supplies; inventory management; jewelry; kitchen products; manufactured housing; material handling; mattress; paper; pet products; petroleum; pharmacy services; pipe distributor; printers; sales and marketing; salon supplies; scientific laboratory supplies; seeds; shoes; sporting goods; steam cleaners; and, water supplies.
According to the complaint, the NPE’s letters are usually identical in substance and demand $65K for a license to the ‘508 patent—with Landmark·A repeatedly holding that sum out as a “substantial discount to the historic licensing price” of its portfolio and threatening a higher fee in the event of litigation. Landmark·A is accused of specifically targeting “smaller businesses that cannot afford lengthy patent litigation”.
In a May 14 press release announcing the lawsuit against Landmark·A, Attorney General Ferguson’s office stated that four Washington-based companies—a bottle maker, an electrical supplies company, a bakery, and a bookseller—have reported paying the NPE between $15K and $20K “to avoid hefty legal costs from litigation”.
In addition to injunctive relief enjoining Landmark·A from enforcing the ‘508 patent, the attorney general’s complaint seeks restitution of all money and/or property acquired by Landmark·A as a result of its allegedly unlawful acts, as well as “restitution of all amounts paid to [Landmark·A] by target companies, and all amounts incurred by target companies responding to, or defending against, [Landmark·A’s] unlawful demands”.
The “more things change”
As discussed below, the ‘508 patent has been previously asserted in a sprawling campaign run by Landmark Technology, LLC, an NPE under inventor Lockwood’s control that appears to have assigned rights under that patent to Landmark·A.
The current plaintiff, Landmark·A, has denied being owned or controlled by Lockwood; has certified that no non-party holds a financial interest in its litigation; and has confirmed that it is the exclusive licensee of the ‘508 patent (e.g., see NPE’s statements here regarding its exclusive license to the patent-in-suit and denying ownership by Lockwood and a certificate of interested parties filed in the same matter).
Landmark·A was formed in North Carolina in December 2018, with that state’s public records identifying Raymond Mercato, of Cary, North Carolina, as the NPE’s member. A Raymond Mercado, Ph.D., of Cary, North Carolina, describes himself on social media as a professor of “political science & patent law” (but without identifying any current positions). He appears to be the author of this IP Law & Business Magazine article covering litigation between NPE NTP, Inc. and BlackBerry; the article, published in 2008, described Mercato as a graduate student at Duke University who “has acted as a consultant on both sides of patent infringement cases”.
Additionally, the most recently filed annual report for Landmark·A identifies Patrick Ames as the NPE’s “assistant secretary”; it also provides a business address for Landmark·A—that of a virtual office space in Durham, North Carolina.
Landmark·A launched its campaign in early 2019 and has since filed at least 14 patent infringement suits asserting the ‘508 patent, with only one of those cases active as of publication date of this article—a case filed earlier this month against pet food supplier Life’s Abundance (9:21-cv-80852). Most of the NPE’s affirmative patent infringement suits have been quickly dismissed, with court filings referencing a settlement.
Additionally, 13 of Landmark·A’s targets have filed complaints for declaratory judgment (DJ) of noninfringement—and in some cases, invalidity—of the ‘508 patent as well as related patent 6,289,319 (a patent widely asserted by Lockwood in his personal capacity and through Landmark Technology, but not yet litigated by Landmark·A). The DJ plaintiffs span a wide range of businesses, including a restaurant, a tool distributor, a PVC pipe manufacturer, a manufactured house supplier, and a jeweler.
Some of those DJ complaints (e.g., here and here) point to the NPE’s apparent strategy of agreeing to quick settlements to avoid substantive litigation—which they say could lead to, for example, “potentially damaging” rulings on dispositive motions that may negatively impact Landmark·A’s ability to extract licensing fees from future targets.
The DJs also take aim at the NPE’s frequent and repeated demands for a $65K licensing and settlement fee—a tactic that some believe is designed to extract payment from recipients of assertion letters, with Landmark·A knowing that such a payment would be significantly lower than the cost of defending against litigation in federal court.
However, the average license and settlement fee paid may be much lower, argues V. Sattui Winery, a California winemaker that filed a DJ against Landmark·A in late 2019 (3:19-cv-05207). Without specifying the basis for its claim, V. Sattui alleges in a November 2019 amended complaint that the “average settlement amount for a license to the ‘508 patent is less than one hundred dollars”.
V. Sattui’s suit is one out of just four currently active DJ actions filed against Landmark·A, with most having settled following a few months of relatively uneventful litigation.
The other three currently active DJ actions were filed by Canadian underwear maker Knix Wear (1:21-cv-00344); Chicago-based hardware store B.E. Atlas (1:21-cv-02274), which has accused Landmark·A of violating Illinois’s Consumer Fraud and Deceptive Business Practices Act; and specialty packaging provider NAPCO (1:21-cv-00025), which has accused Landmark·A of violating the North Carolina Abusive Patent Assertion Act. In the NAPCO DJ, Acushnet Company, Garmin International, the North Carolina Chamber Legal Institute, the North Carolina Retail Merchants Association, the North Carolina Technology Association, RED HAT, SAS Institute, and Symmetry LLC have moved to file an amicus curiae brief in support of NAPCO.
Consistent with the claims made by AG Ferguson’s complaint, Knix Wear, B.E. Atlas, and NAPCO each received a form assertion letter from Landmark·A demanding, under the threat of litigation, that they pay a $65K licensing fee for the ‘508 patent; copies of the letters lodged as exhibits confirm that their language and demands are substantively identical.
As noted, several of the DJs plaintiffs also seek judgments of invalidity of the ‘508 patent, pointing to the PTAB’s 2014 institution of a CBM review of the patent. In addition to emphasizing the 2017 reexamination results, Landmark·A counters that the Board’s decision to review of the patent was made at a “preliminary stage” of the relatively short proceeding “under a different claim construction standard than the one that governs this Court, was based on an incomplete record, and lacked evidence of the perspective of the person of ordinary skill of the art”.
The “old” Landmark Technology
Knix Wear’s complaint makes reference to “the old Landmark”, i.e., Landmark Technology LLC, a California-based NPE formed by Lockwood—a travel agent-turned inventor and prolific patent plaintiff.
Lockwood formed Landmark Technology in Delaware in 2008 and registered to do business in Texas the following year. Lockwood sued the campaign’s first defendant, American Airlines, in his personal capacity, but he later, in March 2002, formed PanIP, LLC in California to bring a second wave of patent litigation. PanIP was eventually suspended, with Landmark taking over its enforcement activities, both by letter and litigation. Jonathan Hangartner, a San Diego attorney, defended some of the PanIP defendants, later allegedly establishing the anti-Lockwood website, YouMayBeNext.com, joining Sheppard Mullin, and triggering multiple re-exam proceedings.
Profiled by the Los Angeles Times (here) and the Electronic Frontier Foundation (here), among others, Lockwood gained notoriety over the years for his many assertion letters and lawsuits, which, like Landmark·A, targeted small businesses, but also a number of large retailers and technology companies. Between 2008-2018, Landmark Technology filed approximately 130 complaints asserting the ‘508 patent and/or patents from the same family, typically litigating in a file-and-settle fashion. According to RPX data, most cases filed by Landmark Technology appear to have been settled or dismissed between six to eight months after the original complaint.
With infringement allegations focused on “sales and distribution via electronic transactions” and/or use of an automated system “for processing business and financial transactions”, Landmark’s assertion letters typically demanded licensing fees in the range of $10K-$75K (according to letters made public by various recipients, including companies that have filed DJs against Landmark).
Other AG actions against “patent trolling”
As noted, AG Ferguson’s complaint asserts that Landmark·A has violated Washington State’s PTPA—legislation sought by Ferguson in 2015 with sponsorship by Senator David Frockt (D-Seattle) and Representative Laurie Jinkins (D-Tacoma). While Ferguson’s lawsuit is the first enforcement of the PTPA, this is not the first time an NPE has been sued by an attorney general.
In 2013-2015, the attorneys general of Minnesota, Nebraska, New York, and Vermont filed lawsuits to halt the sprawling assertion letter campaign waged by MPHJ Technology Investments, LLC, an NPE that sent thousands of demand letters to small businesses targeting their use of scan-to-email technology. The NPE was accused of sending patent assertion letters comprising baseless or misleading infringement allegations in violation of state consumer protection laws.
Days after New York’s attorney general announced a settlement with MPHJ—which required the NPE to repay all fees received from New York licensees—MPHJ sued the Federal Trade Commission (FTC), alleging “unlawful interference and threats” in connection with its enforcement campaign. The FTC fired back with an administrative complaint revealing, among other things, that MPHJ had sent assertion letters to over 16,400 small businesses nationwide.
According to the FTC’s complaint, MPHJ sent more than 4,800 letters with draft complaints attached, giving letter recipients two weeks to respond—or else be sued. The NPE subjected thousands of small businesses to the imminent threat of patent litigation—but ultimately, MPHJ filed only half a dozen patent infringement suits.
MPHJ and the FTC entered into a settlement agreement in 2014, with the NPE, its owner, Jay Mac Rust, and its law firm, Farney Daniels, agreeing to “refrain from making certain deceptive representations when asserting patent rights, such as false or unsubstantiated representations that a patent has been licensed in substantial numbers or has been licensed at particular prices”. The agreement also barred the respondents from making “misrepresentations that a lawsuit will be initiated and about the imminence of such a lawsuit”.