Since late last year, Delaware Chief Judge Colm F. Connolly has expressed increasing concerns over the activities of multiple litigating plaintiffs linked to IP Edge LLC and a related consulting firm, MAVEXAR LLC: namely, that by failing to disclose those relationships as required in his courtroom, those entities had possibly committed fraud. However, he has stopped short of detailing the possible ramifications of those actions—until now. On November 27, in a blistering, 105-page order, Judge Connolly found that IP Edge had been the “de facto” owner of the patents asserted by its litigating affiliates and held that the entity and its principals should face “consequences” for their improper attempt to “use separate LLCs to insulate themselves” from liability: He has now called upon the Department of Justice (DOJ) and the USPTO to potentially investigate these misrepresentations. Judge Connolly has also teed up potential punishment for some of the individuals involved: He has referred certain attorneys employed by IP Edge (which is not a law firm) to a Texas disciplinary body for the unauthorized practice of law and has referred the LLCs’ local and lead counsel to state disciplinary bodies for improperly treating IP Edge as their true client.

IP Edge’s indirect dispute with Judge Connolly arose as a result of two standing orders that he imposed in his courtroom in April 2022, respectively requiring the comprehensive disclosure of information on a party’s corporate control and the presence of certain third-party litigation funding relationships (and where present, comprehensive disclosure of the nature of the that relationship). As RPX has extensively reported, after Judge Connolly learned that several IP Edge plaintiffs—including Lamplight Licensing LLC, Mellaconic IP LLC, and Nimitz Technologies LLC—had initially failed to make sufficient disclosures under those new rules, he ordered their individual owners, and some of their attorneys, to attend a pair of evidentiary hearings in early November 2022.

Those two hearings, referenced in greater detail below, laid bare IP Edge’s historical monetization model: It has frequently hired individuals with no prior connection to patent monetization as the owners/managers of its litigating LLCs in exchange for the promise of passive income from any litigation proceeds. That practice, per Judge Connolly, suggested that by assigning patents to those LLCs without disclosing connections to IP Edge and MAVEXAR, which is controlled by IP Edge’s principals (Illinois attorney Gautham (“Gau”) Bodepudi and Texas attorneys Sanjay Pant and Lillian Woung), those two entities had perpetrated a fraud on the USPTO and/or the district court. Those hearings also left the court with expressed “concern[s]” over the “accuracy of statements” made in the plaintiffs’ filed disclosures, in addition to concerns over “whether the real parties of interest are before the Court”—leading Judge Connolly to hand down a series of extraordinarily sweeping orders requiring production to the court of a range of documents related to the plaintiffs’ legal representation, corporate ownership and control, assets, and potential liabilities.

Plaintiff challenges to the propriety of those production orders as well as to Judge Connolly’s underlying standing orders themselves failed, including a series of district court motions rejected by Judge Connolly and a set of mandamus petitions rejected by the Federal Circuit. Yet while each of those entities ultimately produced the requested materials, issues remained. Judge Connolly later remarked after a review of the produced material that some of it was incomplete, for example by including emails referring to attachments not themselves produced, or in some instances by omitting documents from one LLC that were produced for the other.

Yet the substantive issues revealed by Judge Connolly’s review of the produced materials and the November 2022 testimony, as recounted in his November 27, 2023 order, were far more significant—and led the court to make three key findings:

(1) [C]ounsel of record for the LLC plaintiffs violated numerous rules of professional conduct by actions they took and failed to take; (2) lawyers at IP Edge engaged in the unauthorized practice of law in Texas; and (3) real parties in interest in the patents in these cases, including a foreign government, were not disclosed to the PTO, defendants, or the Court.

Nimitz: Emails Suggest Blurred Lines Between Plaintiff, IP Edge, and MAVEXAR—and a Foreign Government’s Retained Interest in Litigation Proceeds

Judge Connolly then proceeded to detail the basis for these findings, starting with Nimitz—for which he noted that the entity has been represented in these cases solely by George Pazuniak of O’Kelly & O’Rourke, LLC; that its address corresponds to a FedEx dropbox; and that its sole owner, Mark Hall (who is otherwise a fulltime account manager and salesman for “energy analytic software” company Enverus), had testified that its asserted patent (7,848,328) was the entity’s only asset. Here, Judge Connolly highlighted Hall’s testimony at the November 4, 2022 hearing, observing that he “was unable . . . to describe anything about the patent or how Nimitz came into possession of it”.

Q. Do you know what the name of th[e] [#328] patent is?

A. I do not.

* * * *

Q. What technology is covered by the [#]328 patent?

A. I haven’t reviewed it enough to know.

* * * *

Q. How did you pay for the [#328] patent?

A. There was an agreement between Mavexar and myself where I would assume liability.

Q. What does that mean?

A. No money exchanged hands from my end.

Q. You have to—I’m not a financial guy, so you have to explain it to me. So you own the patent, but no money—you didn’t exchange any money for it?

A. No.

Q. So is that what you’re saying?

A. Yes.

Q. So how do you come to own something if you never paid for it with money?

A. I wouldn’t be able to explain it very well. That would be a better question for Mavexar.

Q. Well, you’re the owner?

A. Correct.

Q. How do you know you’re the owner if you didn’t pay anything for the patent?

A. Because I have the paperwork that says I’m the owner.

(Emphasis added by the court.)

The origins of that patent—and, in particular, a financial interest held by its prior owner—would prove significant to Judge Connolly’s conclusions here, Hall’s lack of knowledge on these points notwithstanding. Specifically, as noted by Judge Connolly, the ‘328 patent originated with Nokia but was assigned in 2013 to France Brevets SAS, a public-private monetization firm characterized by the court as “a so-called ‘sovereign state fund’ owned by the French government”. The patent was then assigned to Burley Licensing LLC, another IP Edge-linked entity, in March 2021, with the accompanying USPTO assignment cover sheet listing its submitter as Hau Bui (the owner of a food truck as well as a “fried chicken joint”, and also the sole owner of Mellaconic). That same assignment sheet also listed, for the submitter’s email address, that of IP Edge office manager Linh Deitz, who had been Bui’s “primary communication with Mavexar” according to his November 4, 2022 testimony.

When a patent assignment is recorded with the USPTO, the submitter is required to attach documentary evidence that the assignment actually occurred. That attachment is often not the full assignment agreement between the transferor and the recipient of rights. Often there may be terms in that full assignment agreement that the parties to the transfer would like to keep confidential (as recordation is a public event). Thus, an assignment of rights is routinely attached to a full assignment agreement (typically, as “Exhibit A” to it) so that it is separable—i.e., so that it can be separated from the full assignment agreement with ease and then submitted to the USPTO. However, as will become clear below, any discrepancies between the proof of assignment submitted to the USPTO and the entire set of terms in the full assignment agreement between the parties can be treacherous. 

Even more was revealed in the full assignment agreement that Nimitz produced to the court: France Brevets was in fact entitled to a 35% cut of the gross revenue that resulted from “monetizing and enforcement” of the transferred patents, apparently contradicting language elsewhere in the agreement providing that the assignment to Burley encompassed “all income, royalties, damages and payments now or hereafter due or payable with respect” to the ‘328 patent (and the others assigned). Moreover, the full assignment agreement required Burley to transfer the patents back to France Brevets if it had failed to file suit over the patents within two years, and/or if it failed to generate at least $100K in gross revenue, while Burley lacked the ability to transfer the patents without France Brevets’s consent—seemingly, contradicting language in the proof of assignment representing that the transfer included “all right, title, and interest that exist today and may exist in the future in and to” the covered patents (emphasis by the court).

Other produced materials, per Judge Connolly, further suggest that the lines between Nimitz, IP Edge, and MAVEXAR were at least blurred, and possibly even fictional. On August 16, 2021, before Nimitz was even formed, Texas attorney Duy Tran—then an IP Edge director—emailed Pazuniak a set of claim charts detailing infringement by the defendants later sued by Nimitz, copying IP Edge’s Deitz and Brandon LaPray, an attorney then employed by IP Edge (and now deceased). In response to a question the following day about whether France Brevets was still the owner of the ‘328 patent, LaPray responded as follows: “Hi George - It is not. We bought the patents from France Brevets. Below is the Plaintiff info. We will get the assignment recorded” (emphasis by the court), disclosing the entity name “Nimitz Technologies LLC”, listing an address, and naming Hall as its managing member. Yet at that point, Nimitz had yet to be formed, and that formation did not finally occur until hours after that email was sent.

This back-and-forth was troublesome, suggested Judge Connolly, because while “[t]he fact that Mr. Hall is Nimitz’s managing member does not preclude there from being other members of the LLC, and it could be reasonably inferred from Mr. LaPray’s use of ‘we’ in his email to Mr. Pazuniak that IP Edge (or an affiliate like Mavexar) had an ownership interest in Nimitz”, Pazuniak had testified at the November 4 hearing that Nimitz was solely owned by Hall—and that Deitz had been merely representing Nimitz as its agent. Per Judge Connolly, this squarely contradicts the facts laid out in the aforementioned emails:

As the email exchanges make clear, Mr. Pazuniak could not have “understood” when he was first contacted by Ms. Deitz (or anyone else from IP Edge or Mavexar) that Ms. Deitz (or anyone else) was an agent for or “was representing” Nimitz because Mr. Pazuniak did not learn of Nimitz’s existence until after he had already begun his review (at IP Edge’s request) of the claim charts for four potential litigation “targets” and after Mr. Pazuinak himself had asked IP Edge who “the proposed Plaintiff” would be in the #328 patent infringement actions contemplated by IP Edge.

Moreover, Judge Connolly flagged additional material as suggesting that Hall’s involvement in the assignment of the ‘328 patent from Burley to Nimitz had been little more than a retroactive rubber-stamp: That assignment was filed with the USPTO on August 20, 2021 and was purportedly signed electronically by Bui (for Burley) and Hall (for Nimitz), but a document produced by Nimitz showed that Deitz did not ask Hall to sign the agreement until August 24, four days later.

The contents of that assignment from Burley to Nimitz made it clear that Nimitz had inherited Burley’s issue with respect to France Brevets, Judge Connolly also found. Since Nimitz had agreed to assume all of Burley’s obligations as part of its consideration for the assignment, Nimitz was thus obligated to provide France Brevets the same 35% of the gross revenue from its assertion of the ’328 patent, and was bound by the same reversionary interest. Again, the court had already both explained that this was problematic, as the proof of assignment otherwise represented that the transfer to Burley (and, thus, to Nimitz) included the right to all income related to the ’328 patent and all rights and title to the patent as well. (Judge Connolly also found that the French government dissolved France Brevets in October 2022, after Nimitz had “settled 11 cases in this court”, but noted that nothing in the produced materials indicates that France Brevets “ever relinquished or transferred its interest in the settlement proceeds” from the ’328 patent.)

In addition, Judge Connolly found that the full assignment agreement contradicted another agreement produced to the court: a “Consulting Services” agreement between Nimitz and MAVEXAR, executed the day after the assignment, with IP Edge principal Pant (one of the firm’s two managing partners, per the court) signing for the latter. In exchange for MAVEXAR’s help with monetizing any patents owned by Nimitz, Nimitz agreed to provide a certain percentage of all “Net Proceeds”, defined as “Gross Recovery” (itself the gross amount of all monetization proceeds) minus “Costs and Expenses”, to MAVEXAR. While neither that agreement, nor any other produced documents, specified the percentage to be received by MAVEXAR, Hall had testified that he believed Nimitz received just 10% of the proceeds. Thus, Judge Connolly posited, while the full assignment agreement provided that IP Edge (via Burley) had conveyed the right to all income from the ‘328 patent to Nimitz, “it appears that at the time the Burley/Nimitz Patent Assignment was filed with the PTO Mavexar was contractually entitled to 90% of the profits generated from licensing and litigating the #328 patent”.

Nor, for that matter, did Hall—again, the disclosed sole owner of Nimitz—appear to play any role in selecting the LLC’s litigation counsel. While the produced documents do not confirm the precise circumstances by which this selection was finalized, Judge Connolly explained, the common thread was once more Deitz, who sent Hall an engagement letter with Pazuniak’s firm that somehow made its way back to Pazuniak in executed form. That letter set a variety of terms regarding the firm’s representation of Nimitz, including the firm’s right to recover between 25-40% of the litigation proceeds depending on timing. Yet while Pazuniak proceeded to file litigation on behalf of Nimitz, and file 13 motions to dismiss on behalf of the plaintiff, at no point was Hall advised of these actions (nor was his consent sought), per the materials reviewed by the court. Those materials further indicate that Pazuniak and Hall had no contact whatsoever until he was invited to a series of meetings to discuss Judge Connolly’s ordering of the evidentiary hearings.

The communications about those meetings also apparently revealed the involvement of two other key figures in this story: Bodepudi, IP Edge’s other managing partner; and attorney Papool Chaudhari. Judge Connolly remarked that Chaudhari’s “role at IP Edge and Mavexar is not entirely clear”: While he used an IP Edge email and email signature in relevant communications, the court observed that he never identified a title. In testimony at the November 4, 2022 evidentiary hearing, Jimmy Chong of Chong Law Firm PA, Delaware counsel for Lamplight and Mellaconic IP, identified Chaudhari as the person he would “typically” speak with at MAVEXAR.

Regardless of the nature of Chaudhari’s role at IP Edge or MAVEXAR, Judge Connolly found that the “document productions make clear that he, more than any other individual, directed LLC plaintiffs’ counsel of record in these cases about how to respond to my orders and he oversaw the prepping of Messrs. Bui and Hall for their testimony at the November 4, 2022 hearing”. Those materials also explicitly confirm that “Chaudhari very much wanted Mavexar to be hidden from the Court”, Judge Connolly found, citing an email sent to one of Mellaconic’s lawyers in the wake of the first of his production orders: “Again we reiterate that we do not want to disclose Mavexar by name, but rather just disclose that recourse funding exists” (emphasis in original). (This email was marked “Common interest Attorney-Client Privilege”, but Judge Connolly rejected this attempt to assert privilege—noting that the email copied Bodepudi and Pant, an IP Edge assistant, and the counsel for three IP Edge-linked LLCs, but that it did not disclose a communication to or from a client, as “[c]ounsel have consistently maintained in these actions that IP Edge and Mavexar are not their clients”—so the materials so marked are thus not privileged.)

Mellaconic: Owner’s Confusion over Liability; Similar Problems with Undisclosed Retained Interests

Judge Connolly then turned to Mellaconic, remarking that the relevant circumstances were similar to those of Nimitz: Its litigation counsel, including Chong and co-counsel, filed numerous cases on its behalf, while its sole owner and member Bui (who “makes his daily living as the proprietor of a food truck and restaurant”) knew nothing about the substance or provenance of Mellaconic’s only assets (its asserted patent, 9,986,435, and other patent assets), trusting MAVEXAR to direct him in whether to sign off on their activity. Bui agreed to do so, again, in exchange for a percentage of Mellaconic’s litigation proceeds, here 5%.

The court highlighted Bui’s confusion, at the November 4 evidentiary hearing, over the extent of the obligations he had assumed in exchange for this “passive income”: When the court questioned Bui over what liability he had taken on, Bui indicated that he did not understand the term “liability” in the first place: “It was clear from the substance of Mr. Bui’s testimony and his facial expressions and body language that he was not familiar with the word ‘liability’”, despite the fact that the agreement assigning the ‘435 patent to Mellaconic, and the entity’s consulting agreement with MAVEXAR, both “expose him to potential financial liability” as characterized by the court.

That assignment agreement, which conveyed the ‘435 patent from Empire Technology Development LLC to Mellaconic, had problems similar to the ones relevant to the Nimitz cases. Like the Nimitz assignment agreement, a shorter proof of assignment for this conveyance was filed with the USPTO, indicating that the transfer included the right to all income from the patent, while the full assignment agreement produced to the court again revealed that the prior assignee, Empire, had retained an interest, here 50%, in the litigation proceeds, contradicting the proof of assignment. Additionally, the court observed that Mellaconic also had a consulting agreement with MAVEXAR that was “identical” to the one between MAVEXAR and Nimitz. Since Bui had testified that he received 5% of Mellaconic’s proceeds, the court thus observed that MAVEXAR was “contractually entitled to 95% of the profits generated from licensing or litigating those assets”.

While the order does not mention a similar “chicken or the egg” problem as with Nimitz (i.e., regarding actions being taken by IP Edge and MAVEXAR on the entity’s behalf before it was even formed), another parallel was that for an extended period of time, Bui had no contact with his counsel: local counsel Chong, and Ohio attorneys Howard Wernow and Andrew Curfman of law firm Sand, Sebolt & Wernow, LP that served as lead counsel. Although Mellaconic produced no materials related to its engagement with Chong’s firm apart from its engagement letter, its production related to Sand, Sebolt revealed further issues. In addition to establishing that the firm would be entitled to a contingency fee of 15%-45% of Mellaconic’s litigation proceeds, that firm’s agreement gave the firm the broad authority to discuss the case with any third parties, including consultants, engaged by the plaintiff (at least including IP Edge and MAVEXAR). The engagement agreement also makes just a passing mention of conflicts of interest and none whatsoever about the risks associated with patent litigation (such as liability for attorney fees under Section 285)—all the while absolving the firm of any liability incurred by third parties.

None of those attorneys appeared to have had any contact with Mellaconic until after its cases had been filed and settled, when Judge Connolly’s investigations were in full swing. Chong’s first direct contact with Bui appears to have been an email around that time asking Bui to confirm that he wanted Chong to communicate directly with MAVEXAR. As for the attorneys from Sand, Sebolt, their first communication with Bui was a meeting that, again, included Bodepudi and Pant. The court also batted away a series of claims of privilege for a string of relevant communications, including for the above email with Chong (rejected because it only discussed the general terms of their engagement) and emails with Sand, Sebolt (rejecting as improper a claim for “Common Interest Attorney-Client Privilege”, for reasons similar to the Nimitz cases).

Judge Connolly further states that he came away from his questioning of Bui with skepticism that Bui actually reviewed any of the substance of the proposed lawsuits put before him, concluding “that his ‘review of litigations’ filed on behalf of his LLCs consisted of signing off on attorney engagement letters”. This interpretation, the court explains, is borne out in produced documents, which detail communications regarding proposed settlements between IP Edge’s LaPray and Mellaconic’s counsel, but none on that topic that were sent to Bui.

Lamplight: Key Questions Remain Unanswered; Retainer Agreement Names Mystery Party; Informed Consent Issues

Judge Connolly next proceeded to lay out the issues with respect to Lamplight—once again, noting that the plaintiff is an LLC with a disclosed sole owner, Sally Pugal, who is not an IP industry professional (working as a manager for a medical office); and that its sole asset is its asserted patent (9,716,393) and another patent application. As was the case with Nimitz, Lamplight acquired those assets through another IP Edge-linked intermediary: The assets passed from Thomson Licensing to IP Edge’s Magnolia Licensing LLC in July 2020 as part of a larger transaction, and from Magnolia to Lamplight in November 2021.

While the proof of assignment filed with the USPTO for the latter transaction refers to a prior agreement between Thomson and Magnolia, one stating that Magnolia or “prior owners may have granted licenses, covenants not to sue, releases and other encumbrances with respect to the” transferred assets, Lamplight failed to produce any relevant documents. As a result, Judge Connolly stated, “I do not know the terms of the contingency payment Lamplight owed to Thomson Licensing at the time it filed the Patent Assignment with the PTO or the particulars of the ‘other encumbrances’ Lamplight ‘underst[ood] and acknowledge[d] that [Magnolia] or prior owners may have granted’”. Nonetheless, Judge Connolly underscored that the fact that the unproduced full assignment agreement contemplates a “preexisting contingency payment obligation” stands, once again, in direct contrast to the proof of assignment, which otherwise purports to transfer all income, etc. related to the assigned patent assets.

Additionally, while Pugal also signed a consulting agreement on behalf of Lamplight with MAVEXAR, the court again had less information to go on than the other entities, as she did not appear at either of the November 2022 evidentiary hearings due to a medical issue (as detailed further below). Accordingly, Judge Connolly stated, “I do not know the percentage of licensing revenues Mavexar retains under its agreement with Lamplight”.

However, Judge Connolly’s questioning of Chong revealed that in some key respects, his attorney-client relationship with Lamplight had some deep flaws. For one, the court observed that “it is unclear that that relationship existed at the time Mr. Chong filed” the LLC’s first three cases, as his firm’s retention letter with Lamplight was not executed until at least one month later. Moreover, Chong negotiated that letter not with Pugal, but with MAVEXAR—prompting Judge Connolly to ask Chong how (i.e., on the basis of which ethical rules) he could have possibly entered into an attorney-client relationship based solely on communications with a third party and how one would possibly perform a conflicts check under the circumstances. (Chong’s answers, perhaps not surprisingly, were brief and equivocal.)

Judge Connolly also highlighted several examples of how the retainer agreement was substantively “noteworthy”: that the agreement’s purpose explicitly related to litigation and licensing over the ‘393 patent, and that Lamplight had represented that it owned free and clear title to the patent, including the right to all litigation proceeds—again, in apparent conflict with the USPTO full assignment agreement. Additionally, it established that Chong needed Lamplight’s consent and approval to file litigation and its written approval to settle cases, and that Chong would earn a 15% contingency fee, minus expenses.

Another mystery stemmed from the agreement’s language addressing which entity would trigger those expenses—an otherwise unidentified “NWM”: “NWM will obtain written pre-approval from [Lamplight] for any Litigation Expense expected to exceed $500. NWM will exercise its reasonable judgment and best efforts to limit the Litigation Expenses to only those expenses that it considers appropriate and necessary under the circumstances”.

When Judge Connolly questioned Chong about that sentence, Chong responded that he remembered negotiations over it and that the language had been a “sticking point for [him]”. Yet while Chong asserted that NWM was not MAVEXAR, he appeared not to recall who or what NWM was—and, per the court, produced records include no other mention of that entity. (Perhaps of some relevance, as RPX has previously noted, is that a frequent plaintiff-side patent law firm, often representing NPEs in both transactions and in litigation, is Ni, Wang and Massand PLLC.)

Another issue concerned language establishing that Chong’s firm would represent only Lamplight with respect to licensing negotiations and litigation, and that any disputes would be subject to arbitration. This language was accompanied by a provision in which Lamplight (and, by extension, sole owner Pugal) affirmed that it had been advised to retain independent counsel for the purpose of the engagement agreement due to a conflict of interest for Chong’s firm, in which Lamplight acknowledged that it had been given the option for the firm to represent it at its normal hourly fee rather than under this agreement, and acknowledged the waiver of rights that typically accompanies an arbitration clause. Yet since the record shows that Chong was the only attorney from the firm who worked on Lamplight matters, and that he had never communicated with Pugal prior to the relevant March 2022 date, the court found that the firm had in fact not advised Pugal on the need to retain independent counsel, any conflicts of interest, the option of retaining the firm at an hourly rate, or the waiver of rights resulting from arbitration.

When Chong finally did communicate with Pugal, it was once again in response to Judge Connolly’s impending evidentiary hearing. Here, the court noted that when Deitz calendared a meeting to discuss that hearing, she sent the invite to Pugal, copying IP Edge’s Chaudhari and Bodepudi; and then sent the same invite separately to Chong and his legal assistant, copying Chaudhari and Bodepudi but not Pugal. This piecemeal communication was no accident, the court found: “Sending separate emails appears to have been IP Edge’s general practice. It is readily apparent from the emails and texts produced in response to the November 10 Memorandum Order that IP Edge strove to maintain a separation between the nominal owners of the plaintiff LLCs and the lawyers who filed cases on behalf of those LLCs”.

However, an increasingly frantic series of communications between Deitz and Pugal, the former’s tone alternating between friendly and ominous, suggest that Pugal was becoming increasingly terrified of testifying before Judge Connolly. For instance, in a text message conversation from early October 2022, Pugal tried to pull out—to which Deitz responded that Pugal could become personally liable for sanctions if she failed to appear:

Deitz: Can you talk? I want to talk to you before your call with our team. . . . I know this is inconvenient for you but this is very important.

Pugal: Hi Linh. I don’t think I will do it. I will have to cancel. I’m so sorry.

Deitz: Sally this not only affects you but also our company. There are fees that can be charged to you from the court. We are try[ing] to make it work with your schedule but you have to work with us. This is not something to take lightly. This is an order from a federal judge. Sally please call me back.

(Emphasis by the court.) While Pugal appeared to be reassured by a subsequent phone call (for which the record does not identify the participants), and promised to pick a date for her testimony, she went silent for a week—prompting more texts from Deitz that relayed pressure from Chaudhari and her counsel, followed by an email directly from Chong (which, as noted above, appeared to be his first communication with her).

Pugal apparently agreed to be added to the November 4, 2022 hearing in a subsequent conversation with Chong, but she began ducking the requested weekly meetings with the IP Edge team and her counsel—citing work commitments, a series of medical appointments related to certain unspecified health issues, and the increasing strain on her mental health triggered by the prospect of testifying. At multiple points, Pugal told her team she could not participate, including one text to Deitz on October 19, 2022: “I hate to do this but let me just [be] honest with you[.] I don’t think I am comfortable of doing this trial[.] I have nightmares almost every night thinking about it and so stressed[.] . . . Already so stressed at work and all of this [sic] Doctors appointments my [Primary Care Physician] order X-rays MRI and CT[.] Sorry Linh[,] I cannot do it”.

Deitz’s response expressed some sympathy for Pugal’s predicament, but Deitz’s concern for IP Edge appeared to outweigh those concerns: The following day, she asked Pugal for an update, and relayed another warning from Chaudhari about sanctions: “This judge isn’t going to rest until Sally appears in his courtroom in Delaware. [A]nd if she doesn’t appear on 11/4, a date she requested, there’s probably going to be sanctions”. Driving the point further home, Deitz reminded Pugal that “[s]anction means fees that you will be charged to pay (I mentioned that to you last night)”—suggesting that the referenced conversation was at least one of the first times that sanctions were fully explained to Pugal.

Deitz also took the opportunity to badmouth Judge Connolly in delivering a further warning, apparently unaware that her written conversation could (and did) end up being produced for his review: “Unfortunately the judge is a prick and there is not telling how much fees there could be. We[’ve] paid fees before and I promise you it’s a lot. Don't want to scare you but you need to be fully aware” (emphasis by the court). Pugal again attempted to withdraw in response, stating that however much those fees would be, she would not have the money to pay—reminding Deitz that she “do[es]n’t even make money on any of the compan[ies] including this”. (This reminder could be a reference to the fact that Pugal has been associated with several other apparent IP Edge NPEs, based on RPX’s review of Texas public records: at least Crave Licensing LLC, Deshodax LLC, Inspire Licensing LLC, Optical Licensing LLC, Mentone Solutions LLC, and Parkside IP LLC.) Yet Deitz responded with an even more ominous warning: “Sally[] I’m sorry but you can’t do that. You put not only fees that you will have to pay but you put my company at risk. You are putting me in a really tight spot” (emphasis by the court).

After one more refusal to participate, Pugal went silent again—prompting an apparent shift, by her attorneys, toward using her apparent health issues as an excuse not to testify. For instance, Chaudhari sent her a conspicuously cheerful email days after she ignored another meeting request:

Good morning Sally! How are you? We missed you on the Lamplight call this week. Is everything ok? Linh mentioned you are having some health issues. So sorry to hear that! We need to talk with you about that and how that might affect you not going. You might be able to be excused for the Nov 4 hearing next week, but we need to talk with you about to figure that all out.

Can you please text or call Linh and she can set up a time for you to talk with us?

Thank you! Have a nice day!! :)

Papool

Chong chimed in as well, albeit with somewhat more urgency: “I’m so sorry that you are not well. Is there anything that I can do for you? We should really talk sooner than later”.

At this point, Chong informed Judge Connolly for the first time that Pugal might not be able to attend the hearing due to a health issue, despite the fact that he had “still [received] no word from Ms. Pugal”. Deitz then began to pressure her to sign a declaration regarding her health issues, with Chaudhari—in a considerably saltier, November 2 email copying Chong and his paralegal, LaPray, Deitz, and Bodepudi, but not Pugal—stating that obtaining a doctor’s note was unlikely given Pugal’s radio silence:

Jimmy,

As you know, Sally finally got back to Linh with the text that was sent to you. I understand you want a doctor’s note, but given that we just finally heard back from Sally after being ghosted for quite some time and the hearing being on Friday, it isn’t likely or feasible that we’ll have one by the hearing. Hence, we are preparing a declaration that Linh will take to her tonight for her to sign. We will also have Linh ask Sally to get a doctor’s note asap that states that her doctor will not permit her to fly.

Given the circumstances and timing for Friday, that’s the best we can do.

Papool

That declaration—apparently not drafted by Chong, Judge Connolly found based on produced materials—was sent to Pugal, signed by her, and filed with the court that same day.

Later that month, and weeks after the hearing, Chong sent a pair of emails to Pugal asking her to confirm for the record that he had her consent to communicate with MAVEXAR directly. Pugal responded in the affirmative, though not until weeks had gone by—during which time “Chong had filed and settled six lawsuits in Lamplight’s name”.

Ethical Violations by Plaintiffs’ Counsel: Shortcuts and Conflicts of Interest, Oh My

Having thus extensively detailed the unusual circumstances surrounding these plaintiffs’ legal representation, Judge Connolly then proceeded to spell out just how many ethical rules he believes these attorneys have broken. Most broadly, he explained that regardless of where they practice, attorneys always owe their clients a fiduciary duty: one that “includes undivided loyalty, candor, and provision [to the client] of material information” (citation omitted). As he notes the Third Circuit has held, this is “not a matter to be taken lightly”—as bar membership depends on the ethical requirement that attorneys give their “clients full and meaningful disclosure of conflicts of interest so that the client may decide if the representation is in his or her best interest and of the terms of proposed settlement agreements, as it is the client's, not the attorney’s, decision whether to settle a case”. A court may “countenance no shortcuts”, per the Third Circuit: such disclosures must be “meaningful” for clients to give truly informed consent.

Judge Connolly found that the attorneys here under scrutiny—Pazuniak, Chong, Wernow, and Curfman—fell well short of that standard as codified in the American Bar Association’s Model Rules of Professional Conduct, which binds attorneys practicing before the District of Delaware. Among the Model Rules he found to be violated here are Rule 1.2(a), requiring a lawyer to “abide by a client’s decision whether to settle a matter”; and Rule 1.4, which establishes a duty to “promptly inform” the client of matters that require the client’s “informed consent”, including settlements—as counsel here had “fail[ed] to have any communication with their clients before filing, settling, and dismissing the clients’ cases”. Here, Pazuniak had filed and moved to dismiss 11 cases on Nimitz’s behalf without consulting Hall, the sole natural person associated with it. Chong had done the same for the two others: as sole counsel on record for Lamplight’s six cases, which he filed and settled without consulting owner Pugal; as co-counsel with Wernow in 12 Mellaconic cases filed and settled without consulting with owner Bui; and as co-counsel with Curfman for six more Mellaconic cases similarly filed and settled without such consent.

In addition, he found that those attorneys had also violated Model Rules 1.7, which in part prevents attorneys from representing clients where they have a concurrent conflict of interest involving a third party; and 1.8(f), which bars someone other than the client from compensating an attorney except where the “client gives informed consent”, and where “there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship”. Rule 1.7 is implicated here, the court explained, because the attorneys’ failure to communicate with their clients prevented them from ascertaining whether actual or potential conflicts existed. Such actual or potential conflicts were possibly established with by the MAVEXAR consulting agreements: “Because of those potential conflicts, counsel's blind adherence to Mavexar’s directions to file and settle cases in the clients’ names created a significant risk that counsel’s actions materially limited their representations of their client”.

This risk was illustrated by the lopsided financial relationship between MAVEXAR and Nimitz, Judge Connolly explained. MAVEXAR got 90% of the profits with virtually nothing to lose (just the possibility that Nimitz would fail to reimburse it for fees and costs in excess of recoveries), while Nimitz’s 10% cut (“a tiny fraction of the litigation gains”) was far outweighed by the potential for liability on both its own behalf and that of Hall (including attorney fees and sanctions) in the event of an adverse decision, plus the aforementioned obligation to further reimburse MAVEXAR. “In light of these vastly different profit and risk profiles, it cannot be said that Mavexar’s and Nimitz’s interests were the same when it came to deciding to file or to settle the lawsuits Mr. Pazuniak brought in this Court in Nimitz’s name”, the court found.

The situation was much the same for Lamplight and Mellaconic, given that both had identical consulting agreements with MAVEXAR—with the exception that Mellaconic’s cut is even smaller, at just 5%. This “even more lopsided” arrangement “makes it even more likely that Mellaconic’s interests conflict with Mavexar’s interests with respect to the filing and settling of cases”. As detailed above, though, Lamplight’s cut is unknown due to that plaintiff’s incomplete production on the subject. That said, Judge Connolly noted that Pugal’s text messages with Deitz suggest that her cut of the proceeds is similarly small.

As a general matter, attorneys may not delegate their fiduciary duties to clients, Judge Connolly held—especially the duty of loyalty. Yet that was exactly what had happened here: the court found that counsel here had “either ignored or delegated to Mavexar (i.e., IP Edge) their fiduciary duties”, even though MAVEXAR’s consulting agreements explicitly establish that the firm is “not a fiduciary of” the clients at issue. Judge Connolly rejected counsels’ apparent “view that a client can delegate to a third party all litigation decisions, including the decision to settle a case, and that an attorney can conduct all communications with a client through that third party”, citing for example Pazuniak’s argument (in his Federal Circuit brief) that “section 134(2) of the Restatement 3d of the Law Governing Lawyers” allows him to “authorize Mavexar to act as its consulting agent to act on [Nimitz’s] behalf as if it was the client”. Not so under these circumstances, countered Judge Connolly—as that provision requires that a client consent to a third party providing direction to the attorney. That clearly did not happen here, given that Pazuniak did not communicate with the client at all during the time in which he both filed and settled seven of Nimitz’s cases.

The court reached the same position for Mellaconic: While Wernow and Curfman argued that its owner Bui had consented by signing their engagement agreement, the fact that this agreement was a mere form letter, while they had also failed to communicate with the client, meant that this was the sort of “illusory” consent rejected by the Third Circuit.

Moreover, Judge Connolly found the attorneys’ relationship with IP Edge and MAVEXAR, and their failure to satisfy their fiduciary duties, particularly troubling due to “the obvious disparity in the sophistication of the LLC plaintiffs as opposed to Mavexar and IP Edge”. This point was made especially clear by Bui’s testimony at the November 4, 2022 hearing (i.e., his confusion as to the meaning of “liability”) and the text messages between Deitz and Hall, as well as the “the lopsided terms of the consulting servicing agreements”, the court found. Those agreements and the attorneys’ actions, Judge Connolly held, “deprived the LLC plaintiffs of the benefit of independent counsel”.

Because the attorneys “here failed to satisfy their ‘ethical obligations of giving [their] clients full and meaningful disclosure of conflicts of interest so that the client[s] [could] decide if the representation [wa]s in his or her best interest and of the terms of proposed settlement agreements” (citation omitted), Judge Connolly decided as a result to refer them “to their respective offices of disciplinary counsel”.

MAVEXAR: Consulting Firm’s Attorneys Engaged in Unauthorized Practice of Law

Judge Connolly then turned to MAVEXAR and the outsized role that it had played in the plaintiffs’ litigation. While the supposed consulting firm’s agreement with the plaintiffs described its “services” as “non-legal”, and specifically states that it is “not a law firm”, Judge Connolly found that the materials produced by the parties “make clear that numerous Mavexar and IP Edge actors engaged in the practice of law on behalf of Nimitz, Mellaconic, and Lamplight”. In particular, he explained that those materials show that “Chaudhari, Bodepudi, and Tran each acted as a lawyer for one or more of the three LLC plaintiffs”:

The lawyer tasks they performed varied by individual and LLC and included providing patent infringement claim charts, drafting and editing legal filings, conducting legal research, summarizing and analyzing legal research, crafting legal arguments, preparing a declaration for Ms. Pugal, and prepping Mr. Bui and Mr. Hall for their testimony at the November 4, 2022 hearing.

(Internal citations omitted.) Under Texas state law, Judge Connolly found, such tasks clearly constitute the practice of law—and observed that individuals may be criminally prosecuted for the unauthorized practice of law, having already found that MAVEXAR and IP Edge are Texas entities. Moreover, he held that under Texas state law, a corporation’s in-house attorneys cannot perform legal work for clients with interests different from their employer’s—and reiterated his earlier finding that MAVEXAR and IP Edge indeed had different interests from those of the plaintiffs.

Since, as a result, “it appears that . . . Chaudhari, Bodepudi, and Tran engaged in the unauthorized practice of law”, Judge Connolly ruled that he “will refer them to the Texas Supreme Court’s Unauthorized Practice of Law Committee”.

IP Edge’s Problematic USPTO Assignment Filings: Referral to DOJ and USPTO

Lastly, Judge Connolly turned his attention to the USPTO proofs of assignment filed by IP Edge through various entities—filings that, in this and previous orders, he had characterized as potentially part of a “fraud upon the court” designed to obscure those entities’ connections to IP Edge, and that he had also described as “fictitious patent assignments”. Here he found that federal law requires that such assignments recorded with the USPTO be accurate, further noting that to submit an assignment agreement, one must (by clicking an onscreen button) attest to the accuracy of the information—through which the user also acknowledges that “providing false or spurious information” in recorded assignments and agreements is a “misrepresentation to the federal government” that “is prohibited and subject to criminal and civil penalties”, as codified in USPTO regulations. In relevant part, one of those regulations provides that such penalties fall under 18 USC § 1001, which “makes it a crime to knowingly submit to a federal agency a ‘materially false, fictitious, or fraudulent statement or representation’”.

While he stopped short of asserting that such violations had occurred, Judge Connolly held that it was appropriate to refer the matter to both the DOJ and USPTO—both to further inquire whether the Patent Office’s rules or Section 1001 were violated, and in case the DOJ decides to “investigate whether the strategy employed by IP Edge to hide from the defendants in these cases and the Court real parties in interest, including France Brevets, violated any federal laws”.

IP Edge at the Center of the Web: Use of Shell LLCs “Has Consequences”

Judge Connolly then concluded by stating his findings on the IP Edge enterprise more directly and unequivocally than he has at any other point to date: “The reality in these cases is that the de facto owner of the asserted patents—that is, the party that truly controls and profits from their assertion—is IP Edge”. IP Edge’s attorney LaPray, he indicated, confirmed as much by using the first-person plural in an email about Nimitz—stating that “we”, meaning IP Edge, “bought the patents”. “IP Edge, however, has gone to great lengths to hide the ‘we’ from the world”, Judge Connolly underscored.

Rather than having the asserted patents assigned to itself or to its own LLCs, IP Edge arranged for the patents to be assigned to LLCs it formed under the names of relatively unsophisticated individuals recruited by Linh Deitz. The LLCs were empty vessels with no assets until IP Edge arranged for the assignment of the patents to those LLCs.

“The housing of assets in a separate LLC has consequences”, Judge Connolly continued, as LLCs can neither appear in court nor file patent infringement cases without counsel—which IP Edge and MAVEXAR had effectively done by improperly performing the function of those LLCs’ legal counsel:

And because IP Edge and Mavexar do not wholly own the LLC plaintiffs and because IP Edge and Mavexar are not law firms, Texas law prohibits them from acting as the LLC plaintiffs’ lawyers. Messrs. Chaudhari, Pant, Bodepudi, and Tran chose to use separate LLCs to insulate themselves, IP Edge, and/or Mavexar from the potential liabilities of patent litigation. They must accept the consequences that flow from that strategy.

Such consequences must also be faced by the counsel that acted on behalf of IP Edge and MAVEXAR, he added, since those two entities were really their “de facto clients”. Rather than giving their nominal LLC clients their undivided loyalty and “providing [them] with sufficient information and unconflicted advice . . . to make informed decisions about whether to bring and settle any proposed lawsuits”, they treated those LLCs as “mere inventory”: “Their loyalty was not to their clients, but rather to IP Edge”.

Judge Connolly has wasted no time in the wake of this order, sending letters for the above referrals within two days of its issuance (see here for the letter to the DOJ; and here, here, and here, respectively, for those sent to the applicable disciplinary bodies in Delaware, Ohio, and Texas). He addressed the USPTO referral letter to Director Kathi Vidal herself, a potentially notable step given that the proper sanctions for misconduct before the Patent Office, and in particular before the Patent Trial and Appeal Board (PTAB), has been a topic of interest for Vidal this past year.

For more on other aspects of this extraordinary saga—including the contentious battle over the attempts of another IP Edge LLC’s owner, a Texas paralegal, to avoid testifying before Judge Connolly—see “Owner of IP Edge-Linked Plaintiff Seeks Federal Circuit Relief from Contempt Order (October 2023).