The Northern District of California has tossed a Finnish inventor’s suit against Netflix for lack of standing. On January 8, District Judge Jon S. Tigar held that plaintiff Lauri Valjakka did not own the asserted patent at the time of suit, as he had assigned the preceding application to a company of his that later went bankrupt—applying a Finnish decision that rejected Valjakka’s subsequent attempt to claw back rights to that asset. Judge Tigar also rejected an unusual argument by the plaintiff that urged the court to apply Finnish common law concerning the appropriation of abandoned shipwrecks and piles of discarded leather scraps. The ruling is one of multiple recent setbacks for lead counsel William P. Ramey III, a Texas litigator behind numerous other NPE suits: That very same day, the US Supreme Court both declined to revisit a fee award against another NPE represented by Ramey and rejected his attempt to overturn a ruling that his firm had defaulted on a COVID-19 Payment Protection Program (PPP) loan because he failed to acknowledge a criminal complaint and subsequent arrest in his application.

Valjakka filed his case against Netflix in the Western District of Texas (6:21-cv-00947) in September 2021, asserting two patents related to content delivery network architectures (8,495,167) and digital rights management (10,726,102), as part of an initial wave of litigation that also hit Akamai Technologies, Amazon, and Cisco. After Netflix filed a motion to dismiss for improper venue, or in the alternative for transfer to the Northern District of California, the parties jointly stipulated to transfer the case to that venue in March 2022 (4:22-cv-01490). There, the case proceeded before Judge Tigar, who in October 2022 granted Netflix’s motion to dismiss claims of pre-suit and post-suit willfulness as to the ‘167 patent with leave to amend (though Valjakka does not appear to have added back any willfulness allegations in subsequent complaints). On August 22, 2023, Judge Tigar then invalidated the ‘102 patent under Alice as unpatentably “directed to the abstract idea of providing restricted access to resources”, but the court also found that the ’167 patent contained an inventive concept (here, improved network functionality) sufficient to save its claims.

The ownership history of the asserted patent would not be the only unusual issue at play in this case. On August 21, 2023, the day before the Alice ruling, Netflix moved for a preliminary injunction to prevent Valjakka, “pending trial, from using, moving, concealing, transferring, or otherwise disposing of any licensing or settlement asset in his possession, custody, or control”. The company alleged that two months after Valjakka filed suit, he began “secretly moving assets” to CDN Licensing, a Finnish entity under his control—in particular, allegedly assigning that entity “the sole rights to any damages, litigation, or licensing revenue”, all the while allegedly hiding these transfers from Netflix for two years. Even more strangely, in “that tellingly circular transaction, the express beneficiaries of the CDN licenses are Valjakka and a company he owns, IPRA Technologies”, Netflix alleged—further contending that it had learned that IPRA, CDN, and Valjakka “may be near bankruptcy” and that the transaction was an attempt to avoid liability for attorney fees. One month later, the court granted the preliminary injunction from the bench at the hearing (a transcript of which is available here). Judge Tigar expressed skepticism during the hearing toward Ramey’s assertion that Valjakka needed the money in part to pay his living expenses. Ramey admitted, after some prodding, that this argument was not even present in Valjakka’s opposition, conceding, “No, sir, it does not say that explicitly”. “Okay. I don’t think it says it implicitly either”, responded Judge Tigar.

On September 15, Netflix filed the motion for summary judgment just granted, alleging in part that Valjakka had manipulated the chain of title for the ‘167 patent as it passed among various ventures under his control. As later also found by the court, that chain of title initially included a period of divided ownership: The preceding application named coinventors Valjakka, then CEO of e-3 Solutions; and e-3 employee Iiro Karesniemi: While the latter assigned his rights in the application to e-3 under an employee assignment agreement in 2001, Valjakka held onto his 50% for years after. During that period of divided ownership, Valjakka reorganized e-3 Solutions into e-3 Systems, in 2003; on November 16, 2005, he sold all of the assets of e-3 Systems to Suomen Biisi Oy (SBO), a company he co-owned. On December 20, 2005, he then entered into an agreement covering the claimed “DMTS” technology (the “DMTS agreement” or “utilization agreement”) with SBO under which SBO would reassign the application to Valjakka and SBO coowners Pekka Pakarinen and Juha Setala if SBO stopped using the technology, went bankrupt, or “d[id] not continue the patent application”. It was not until 2007 that Valjakka retroactively filed nunc pro tunc assignments in an attempt to correct the chain of title, establishing that he had transferred his personal interest to e-3 Solutions in 2002, then to e-3 Systems in 2003, and then to SBO on November 16, 2005. The three coowners stated that SBO stopped using the patent by August 2007 and that it went bankrupt in May 2008.

Yet as the court also noted in its January 8 order on the motion, when Valjakka and SBO’s coowners filed suit in the Helsinki District Court later in May 2008 seeking a judgment that the application had reverted to them, the court ruled that the DMTS agreement was ineffective because all rights in the application had already been transferred to SBO in November 2005, so by the time of the December 2005 DMTS agreement, Valjakka could not make any commitments regarding the IP because it was at that point held by SBO alone. Valjakka later admitted that the opinion, which was subsequently upheld on appeal, established that by the time SBO abandoned the application before the USPTO, it was the application’s sole owner under Finnish law.

However, Judge Tigar found that despite that ruling, Valjakka filed a petition for revival with the USPTO, representing that “he had unintentionally abandoned” the application (emphasis added). Moreover, Valjakka filed the utilization agreement with the USPTO as evidence that SBO had assigned the patents back to the inventors, not disclosing that the Finnish court had found the agreement to be ineffective, and subsequently executed an assignment in which the two former SBO coowners purportedly conveyed their shares in the application to Valjakka. The resulting ‘167 patent then issued to Valjakka alone in 2013.

Despite the patent owner’s argument in part that the court should disregard the Finnish opinion in favor of an application of federal and California law, Judge Tigar determined that the court must apply Finnish law, since Federal Circuit precedent requires the court to apply the law of the country of “residency of the patent owner or the state where the assignment took place” (all of which pointed to Finland). The court found that under the applicable US state law (that of California, as the state where the patent is being enforced), the Finnish judgment may be enforced under the principle of comity (governing the recognition of foreign judgments). Having then determined that the Finnish court had already presented a “well-reasoned analysis of this issue” (citation omitted), Judge Tigar found “that under Finnish law, Valjakka was not the legal title holder to the ’685 Application—or, by extension, the ’167 Patent”.

The court also rejected Valjakka’s two other bases for claiming ownership. First, Judge Tigar found that Valjakka could not rely on the utilization agreement as filed with the USPTO, noting that such a filing merely creates a rebuttable presumption that an assignment is valid—and that the Finnish decision effectively rebutted that presumption. Second, Judge Tigar rejected the argument that the Finnish court decisions were “incomplete” because they failed to consider the nunc pro tunc assignments, which he alleged would have “allowed the DMTS Agreement to effect transfer”. Not only was this irrelevant to the question of whether the Finnish courts’ judgment was binding, the court found, “the retroactive assignments were in front of the Helsinki District Court—and Valjakka and SBO made arguments about them to that court, so the argument is not grounded in reality”.

The court further rejected Valjakka’s argument that he had regained title to the abandoned ’685 patent application under Finnish common law: According to a Finnish law professor, he argued, “a patent application/patent can be an object of abandonment and appropriation on the basis of the Finnish legal system and legal literature”. The court expressed skepticism that Valjakka had correctly summarized Finnish law:

As an initial matter, the Court doubts very strongly whether Valjakka has accurately stated Finnish law as it applies to the revival of patent applications. The cases his expert cites all involve physical property, including one regarding a shipwreck and the Antiquities Act in Finland, another concerning an unclaimed schooner, and a third about a pile of chrome leather in a waste pile. The expert cites no examples of the Finnish patent office following Finnish common law regarding physical property to determine questions of patent ownership.

(Internal citations omitted.) Regardless, the court held that Finnish common law does not apply here: it governs only issues of patent ownership, whereas US federal patent law controls for issues of patent abandonment or revival.

The court then concluded that “that Valjakka does not have title to, or any exclusionary right in, the ’167 Patent, determining as a result that “he lacks standing to bring this lawsuit”.

Supreme Court Rejects Ramey Plaintiff’s Attempt to Avoid Fee Order

This ruling is not the latest setback for Valjakka’s counsel, Ramey, and his firm Ramey LLP, as noted above. Indeed, Ramey has frequently been in the news in recent months for allegations of litigation misconduct by patent plaintiffs under his representation. In one such case, Apple argued in a later-denied November 2023 motion seeking $740.5K in attorney fees from Ramey-repped ALD Social LLC that the firm should be held jointly and severally liable for that amount in part because “of a pattern of vexatious litigation”. The defendant asserted that the firm “is frequently complicit in improper litigation tactics: its clients have been sanctioned or ordered to pay fees or costs at least 15 times”. Apple cited a variety of examples, among other cases: Verna IP Holdings, LLC v. Alert Media, Inc. (granting fees motion in part; $48,076.50); EscapeX v. Google (granting fees motion; $191,302); ZT IP, LLC v. VMware (granting fees motion; $92,130.35); Traxcell Techs. v. AT&T Corp. (granting Verizon’s fees motion; $489,710); Traxcell Techs. v. AT&T Corp. (granting Sprint’s fees motion; $784,529.16); NetSoc, LLC v. Oath Inc. (ordering NetSoc to pay $22,106 in fees); WPEM, LLC v. SOTI Inc. (granting fees motion; $179,622) (affirmed in WPEM, LLC v. SOTI Inc. (Fed. Cir. 2020)); and EMED Techs. Corp. v. Repro-Med Sys., Inc. (report and recommendation to grant fees motion; $992,431.35).

The Ramey-represented plaintiff in two of the cases listed above—Traxcell Technologies, LLC—has just fully exhausted one of its avenues for appeal. Years ago, the Eastern District of Texas granted summary judgment against Traxcell, awarding Verizon (Verizon Wireless) and Deutsche Telekom (Sprint) attorney fees after declaring those suits exceptional. This past June, the Federal Circuit summarily affirmed those fee orders, for which Traxcell had challenged both the substance of the court’s exceptionality finding and the court’s conclusion that Traxcell should have known its position was meritless based on a magistrate judge’s nonfinal reports and recommendations on certain substantive issues. Traxcell’s last-ditch Supreme Court appeal, filed in late November, focused solely on that second issue—in particular, whether a nonfinal report and recommendation should have put it on “notice” that its positions were unreasonable—in its certiorari petition. The Court denied its petition on January 8.

With that appeal having run its course, the remaining focus of the litigation has become Traxcell’s latest efforts, under Ramey’s representation, to avoid paying those attorney fees, following a dizzying set of attempts to do so this past year. In February 2023, Verizon Wireless turned to Texas state courts to have the federal court judgment enforced. In briefing as to whether a related Traxcell patent case in the Western District of Texas should be dismissed for lack of Traxcell’s standing to pursue it any further because its patents had been turned over to a state receiver for sale, Traxcell stated in early April that the state court had set a $0 bond, thereby staying enforcement of the receivership order pending appeal. However, it came to light that Traxcell had only won that $0 bond because it misrepresented to the state court that Verizon had agreed to this request. The state court, having been advised of this in a Verizon motion to reconsider, reset the bond at $100K after taking Ramey to task for the events that led to the prior order. Traxcell has since paid that $100K bond. In August, with fees still yet to be paid, Verizon filed a motion for a “writ of execution” and for a “turnover order” in the Eastern District of Texas to require Traxcell to surrender its only assets, its patents, for sale in satisfaction of the attorney fees judgments against it.

However, a pending Chapter 11 bankruptcy petition that Traxcell filed in the Western District of Texas on September 19, 2023 has gummed up the works—in part, by leading the Texas State Tenth Court of Appeals to stay Traxcell’s appeal of the state receivership order (during which time, as a result of its bond, the plaintiff has yet to turn over its patents). Magistrate Judge Roy S. Payne has also stayed the Eastern District of Texas action, directing the defendants to either dismiss their claims against Traxcell without prejudice in favor of litigating them in the bankruptcy action, or asking the bankruptcy court to lift the stay against Traxcell “for the limited purpose of pursuing the claim to judgment in this Court”. Verizon and Sprint have asked for more time to assess the propriety of Traxcell’s bankruptcy filing. On December 27, they notified the Eastern District that on November 27, they “moved to dismiss Traxcell’s bankruptcy case in its entirety on various grounds, including that the petition was brought in bad faith qualifying as ‘cause’ to dismiss pursuant to 11 U.S.C. § 1112(b), or alternatively because the interests of creditors would better be served by dismissal pursuant to 11 U.S.C. § 305(a)(1)”. The court heard the motion on December 12 and has taken it “under advisement”, per the defendants.

In the meantime, the monthly operating reports filed by Traxcell in the bankruptcy action paint a grim picture of its financial situation—a January report stating that the company had a total account balance of less than $3K as of the end of December.

High Court Also Denies Ramey’s Appeal of PPP Loan Default Judgment

The new year also brought Ramey some bad news of a different sort, this time concerning a PPP loan—a pandemic-era private loan backed by the government, and fully forgivable if used for the specified purpose. In April 2020, Ramey completed an application on behalf of his law firm, then known as Ramey & Schwaller, L.L.P., answering “No” to a question (Question 5) asking whether “any individual owning 20% or more of the equity of the Applicant [was] subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation or parole” (with a “Yes” answer establishing ineligibility). Based on this answer, Zions Bancorporation (d/b/a Amegy Bank) approved a $249.3K loan.

However, the bank subsequently learned that in September 2019, “a criminal complaint was filed against [Ramey] in state court in Harris County, Texas, accusing him of attempted sexual assault of a female employee” (as summarized on appeal), based on which a county magistrate judge “[found] probable cause” and arrested him the next day. After posting bail, Ramey’s arraignment was postponed multiple times, and “[e]ventually, in October 2021, a grand jury failed to return a bill of indictment against Ramey”. The bank then notified Ramey’s firm that it believed a default had occurred because he had made a “false statement in the loan application” by answering Question 5 in the negative.

After this led to a different PPP loan being denied, Ramey’s firm sued the bank in state court, an action removed to federal court in the Southern District of Texas. That court granted summary judgment for the bank, “conclud[ing] that Ramey was subject to ‘other means by which formal criminal charges are brought,’ a ‘catch-all phrase’ in Question 5 that required ‘complete candor from the Applicant’”. In June 2023, the Fifth Circuit affirmed, agreeing with the district court’s reading of this “catch-all phrase” based on “[p]lain meaning, the use of the word ‘charge’ in the state court records from Ramey’s case, and Texas law”.

On January 8, the Supreme Court denied the certiorari petition challenging that ruling that had been filed by Ramey’s firm—the same day as the Valjakka standing ruling and the denial of Traxcell’s own certiorari petition.

For more on the rocky history of Ramey LLP representations, see “There’s Something About Ramey” (September 2023), “West Texas Judges Seem to Agree, There IS Something About Ramey” (November 2023), and “When It Rameys, It Pours” (November 2023).