Federal Circuit Upholds Uniloc PTAB Loss as NPE Fights Standing and Sealing Orders

  • December 3, 2021
  • Category: Top Insight

Uniloc 2017 LLC was a notably prolific litigant around three years ago, but the NPE has since ceased the active filing of litigation as it fights appellate battles on multiple fronts. Late last month, one of those appeals ended adversely for the Fortress Investment Group LLC subsidiary, when the Federal Circuit affirmed a consolidated Patent Trial and Appeal Board (PTAB) decision for Apple, Facebook and WhatsApp, Huawei, and LG Electronics (LGE) that invalidated claims from a Uniloc patent and ordered the PTAB to reconsider two additional claims previously upheld. Meanwhile, that same court is weighing Uniloc’s challenges of two rulings with an already sweeping impact: an order finding that Uniloc lacked standing when it sued Alphabet (Google) based on a provision from its funding agreements with Fortress, and another in litigation against Apple that forced the NPE to unseal a swath of documents detailing its licensing activity.

Facebook filed two of the IPRs at issue (IPR2017-01667, IPR2017-01668) in July 2018, later joined to petitions filed by Apple, Huawei, and LGE, collectively challenging claims 3-8, 10-35, and 38-39 from a widely litigated patent broadly related to server-side databases in instant voice message systems (8,724,622). (Including the petitioners, Uniloc has asserted the patent against over 30 defendants since 2016.) In January 2019, the PTAB issued a consolidated final written decision invalidating all but claims 4 and 5, holding that Facebook had failed to show that the “action field” limitation of claim 4 (and thus claim 5) was taught by the cited prior art. Specifically, the Board found that one cited reference did not teach the required “instant voice message” from claim 3, upon which claim 4 depends, because under the asserted combination of prior art, the “action field” limitation was distinct from an “instant voice message”.

However, while the Federal Circuit affirmed as to the other claims in its November 19 ruling on appeal (2019-2162), it noted that the PTAB “did not consider whether the HTTP message, which undisputedly included an action field, could be considered the claimed ‘instant voice message,’ as the Board evidently did not see Facebook as having made such a contention for claim 4”. The Federal Circuit held that “in overlooking, and therefore not considering, Facebook’s argument about the teaching of the HTTP message as a whole”, as articulated in one of its petitions and reinforced in a reply brief, the PTAB had abused its discretion. After detailing why Facebook had been correct that the “HTTP message” was the “instant voice message” from claims 4 and 5, the Federal Circuit concluded by vacating and remanding as to those claims: “Because the Board’s misunderstanding of Facebook’s submissions infected its assessment of claims 4 and 5, we must set aside the Board’s determination regarding those claims”.

Complexities of Fortress-Uniloc Relationship Trigger Prolonged Standing Dispute

As recounted in RPX’s previous coverage, Uniloc 2017 is essentially the successor to Uniloc Corporation Pty. Limited, an Australian operating company-turned-NPE. That earlier Uniloc entity has been financially backed by Fortress for years—at least as far back as December 2014, when public records reveal that Fortress provided Uniloc with $10M in funding, with the NPE’s patent portfolio serving as collateral. The Fortress-Uniloc relationship between Fortress and Uniloc then deepened around May 2018, when Fortress appears to have taken over Uniloc’s monetization efforts outright. That month, Uniloc subsidiary Uniloc Luxembourg S.à r.l. (f/k/a Uniloc Luxembourg S.A.) transferred its entire patent portfolio to Uniloc 2017, which then filed a wave of new litigation in the wake of that transaction.

The disclosure of the May 2018 assignment then set in motion a battle over standing in a group of cases originally filed by subsidiaries of the Australian Uniloc against Apple, which moved for dismissal after learning about an earlier set of agreements between Uniloc and Fortress. As Apple argued in an October 2018 motion to dismiss, those agreements contained a provision establishing that Uniloc would default if it fell short of certain revenue targets, and another stating that rights in the asserted patents would revert to Fortress in the event of a default. Apple asserted that Uniloc had missed those revenue targets prior to filing suit and had not cured the resulting default, meaning that it had lost sufficient rights in the patents-in-suit and thus lacked standing to sue.

While District Judge William Alsup denied that initial motion, concluding that Uniloc had not defaulted based on a factual record later revealed to be incomplete, he subsequently granted additional discovery on the NPE’s relationship with Fortress. That discovery uncovered several key facts that undercut the basis for his earlier rulings. As summarized by Judge Alsup in a ruling granting another, related standing challenge from Apple, “the Unilocs took no action to remedy any default and no one even discussed what steps the parties might take to cure a default” (emphasis in original). The result, Judge Alsup ruled, was that “the Unilocs did default, never cured [it], and when they sued here, Fortress enjoyed a wide right to license the ‘203 patent which divested the Unilocs of standing to sue” (emphasis in original). The ensuing appeal was ultimately dismissed due to settlement.

Later that year, the impact of that ruling spilled over into Uniloc 2017’s litigation against Google. In December 2020, after Google notified the court of Judge Alsup’s ruling, District Judge Yvonne Gonzalez Rogers granted the defendant’s motion and dismissed 11 of the NPE’s cases against it—ruling that Uniloc lacked standing for many of the same overall reasons as the Apple decision, citing some of Judge Alsup’s findings as to several overlapping issues. Significantly, Judge Gonzalez Rogers called out Judge Alsup’s finding that Uniloc had failed to cure its default and that Fortress had not waived that default, stating that his analysis was “persuasive” and adopting it for her decision. Also notable was an additional argument from Uniloc, raised here but not in the Apple ruling, that the termination of the relevant agreements also terminated Fortress’s license to the patents. Judge Gonzalez Rogers rejected that contention, finding that it failed under the plain meaning of a contract term establishing that the license was “irrevocable”, and that at any rate Uniloc would have lacked standing even if it were correct on this point.

Among other issues contested in the ensuing appeal (2021-1498), Uniloc 2017 has pushed back on Judge Gonzalez Rogers’ interpretation of that term, arguing instead that the court construed it too narrowly: “‘irrevocable’ means only that a right cannot be unilaterally rescinded by one party; it does not mean the right cannot be terminated by mutual agreement” (emphasis in original). Under such a reading, the NPE asserted that under the terms of the relevant license agreement, the parties “could agree to terminate Fortress’s license”, and that as a result the Fortress license central to the standing issue had ended before the Google cases were filed. “The district court’s contrary conclusion rests on inapposite authority involving unilateral efforts to revoke”, asserted Uniloc (emphasis in original).

The parties have also sparred over the impact of the settlement in the Apple appeal. Google argues that because the settlement left the Apple standing decision “in force”, and thus “final and binding”, further litigation of the standing issue is barred due to issue preclusion. As a result, Google argues that the only issue remaining is whether the 2018 termination of the license agreement terminated Fortress’s sublicensing rights (and thus gave Uniloc standing). Uniloc, for its part, asserts that Google waived its issue preclusion argument by failing to timely raise it before the district court, asserting that “[t]he Apple judgment’s preclusive effect, if any, arose when that decision issued on December 4, 2020”.

Oral arguments do not yet appear to have been scheduled.

Resulting Confidentiality Fight over Licensing Details Still Simmering

The aforementioned battle over standing in the Apple case also let to a parallel fight over Uniloc’s attempt to withhold various types of information, as relevant motions and briefing included a significant number of redactions—apparently because the NPE had designated large swaths of the relevant facts surrounding its relationship with Fortress as confidential. Like the standing dispute, this issue is also on its second trip to the Federal Circuit.

In January 2019, the breath of these redactions led the Electronic Frontier Foundation (EFF) to file a motion to intervene in order to oppose Uniloc’s underlying motions to seal, in defense of the public’s common law and First Amendment rights of access. Judge Alsup granted that request and subsequently denied Uniloc’s sealing motion, ruling that any “generalized assertion of potential competitive harm” from the plaintiff would be outweighed by “the public’s right to learn of the ownership of the patents-in-suit”. That May, Judge Alsup then declined to reconsider that ruling in light of that same public right of access, criticizing Uniloc—now seeking more limited redactions—for wasting the court’s time and not making that narrower request in the first place. In addition, Judge Alsup found that the NPE had failed to adequately justify most of its requested redactions related to its own information, which did not bear on the motion to seal. While Judge Alsup found that the sealing of information pertaining to third-party licensees was a closer call, he ultimately found that any resulting harms were also not outweighed by the “public’s interest in accessing this information”.

Ruling on appeal in July 2020, the Federal Circuit largely upheld Judge Alsup’s decision, affirming his sealing order as to material relating directly to Uniloc and its affiliated entities and holding that he had not abused his discretion under the applicable local rules—one of which requires narrowly tailored motions to seal. Yet the appellate court reversed and remanded as to the third-party licensing information, citing confidentiality provisions in those licenses and declarations from some third parties asking that their information remain confidential.

However, Judge Alsup doubled down in his ruling on remand, rejecting Uniloc’s argument that the third-party details should be sealed by virtue of falling into particular categories, explaining that it is the basis for sealing and not the type of information that determines whether information is sealable. As for the specific declarations submitted by Uniloc on behalf of third party licensees, Judge Alsup determined both that they are hearsay and that they are unconvincingly self-serving—also highlighting the fact that those third parties had not submitted new declarations in support of Uniloc. Judge Alsup additionally granted a second EFF motion to intervene, again in order to oppose the sealing motion.

Uniloc appealed that decision in January 2021 (2021-1568), arguing partly that the Federal Circuit should maintain the confidentiality of information pertaining to third-party licensees—citing additional, subsequently filed declarations from some of those parties seeking to keep information under seal. To do otherwise, warned the NPE, would allow other companies to use that information against the licensees during negotiations, leading to an “information asymmetry [that] would put these third-parties at a permanent disadvantage”. Uniloc also objected to the unsealing orders as inconsistent with other decisions in the same district that kept financial terms confidential under purportedly comparable circumstances: “[s]ealing the financial terms in the earlier cases, but not these cases, is not an exercise in discretion; it is an abrogation of precedent and practice”. Apple, which did not oppose Uniloc’s original sealing motion, filed a brief arguing in favor of maintaining the confidentiality of the third-party licensing information.

In contrast, EFF’s brief in intervention in part underscored the importance of affirming the unsealing orders as a broader deterrent, arguing that were Uniloc to prevail on appeal, “its success will inspire other litigants to do the same. If there is no downside to submitting excessive and unsupported sealing requests, there will be no reason not to do so. Like Uniloc here, patent litigants will try to seal as much as they can, regardless of what the law allows, and fight every step of the way to maintain their position”. The result would be a loss of transparency and a “massive increase of the burden on courts” tasked with gatekeeping confidential information, EFF warns.

Oral arguments in the appeal are scheduled for December 6.

For more on Judge Alsup’s rulings on confidentiality, see “Uniloc Ordered to Unseal Licensing Info as Ruling on Standing Triggers New Dismissals” (December 2020). A more detailed overview of the standing dispute can be found here: “Apple Wins Long-Simmering Battle with Fortress and Uniloc over Standing” (December 2020).


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