Occasionally, having read a legal brief and agreed therewith, we subsequently read the Court’s decision in the matter and find that our initial view was entirely wrong. Sometimes this change of position is due to the Court’s clear legal analysis. Sometimes it is the result of critical facts cited by the Court but somehow omitted from the brief. Sometimes both. (Lawrence B. Lockwood et al. v. Sheppard, Mullin, Richter & Hampton, LLP et al.)
Lockwood is the owner of two patents directed to interactive e-commerce systems for finding and ordering goods or services online. He formed a company, PanIP, to enforce these patents and embarked on a campaign involving dozens of lawsuits against accused infringers.
Sheppard, Mullin is a law firm which represented 20 of the defendants in these lawsuits. As part of their defense strategy, these defendants formed an entity, PanIP Group Defense Fund, Inc. (“PGDF”) to coordinate their defense and to solicit donations to pay defense costs. (Patentees are well advised to keep this tactic in mind before simultaneously suing a large number of accused infringers.)
At any rate, the Sheppard, Mullin firm filed requests for reexamination of both of the patents-in-suit and then moved for a stay of the lawsuits, pending the outcome of the reexamination proceedings. Lockwood entered into a stipulation agreeing to the stay, which the Court then granted. Thereafter, the parties entered into a settlement which provided, inter alia, that the defendants were released from all claims, known and unknown, as of the effective date of the agreement and that Lockwood would not file any further suits with respect to the two subject patents.
Shortly thereafter, the Patent Office issued Certificates of Reexamination confirming all of the claims of both of the patents. Overcome by seller’s remorse, greed, downright stupidity or a combination of all three, Lockwood thereupon sued Sheppard, Mullin and two of its member attorneys (the “et al.”) in state court, alleging interference with prospective economic advantage. In essence, Lockwood was alleging that Sheppard, Mullin et al. “fraudulently mischaracterized the patents and publications submitted to the PTO with the requests for reexamination.” The defendants moved to dismiss this action and the Court granted their motion.
Undaunted, Lockwood sued again – this time in federal court – repeating the allegation of malicious interference with economic advantage and adding allegations of malicious prosecution in connection with United States patent, fraud and violation of the RICO (Racketeering Influenced and Corrupt Organizations) statute.
Once again, Sheppard, Mullin et al. moved to dismiss. The federal court showed Lockwood even less sympathy than had the state court, dismissing each of the counts of the complaint on the separate grounds that they were barred by federal pre-emption, the statute of limitations, and California state law. The federal judge further noted that the PTO conducts – we sometimes doubt this – an independent investigation before initiating a reexamination proceeding and this investigation (the “independent investigation doctrine”) precludes any claim of malicious prosecution under California state law. Finally – and much to the relief of Sheppard, Mullin et al. – he concluded that the law firm and its lawyers were not racketeers.
Never a quitter, Lockwood appealed to the C.A.F.C. This is where we encounter the aforementioned legal brief. The TPL Group, which bills itself as “a purpose-built boutique that specializes in the development, commercialization, and management of intellectual property assets as well as the leveraging of those assets to drive advanced product development,” filed an amicus curiae (legalspeak for “self-serving” or, more commonly, “pain in the butt”) brief in support of Lockwood. TPL, which avers that it “closely monitors the legal issues that affect the entire industry,” went to great length – 20 pages – to espouse its belief that unjustified requests for reexamination of patents-in-suit – which it termed “sham” requests – were a plague on the patent system and were not pre-empted by the federal patent law. Their brief seemingly raised a valid point. It did not, however, mention the fact that Lockwood had agreed to the stay of his initial suit, or disclose the agreement of which this stipulation was a part.
In any event, the C.A.F.C. gave short shrift to the appeal, denying it per curiam (courtspeak for “without bothering to explain its reasons”).
In closing, we express our disappointment that a fine organization like TPL chose such an unsympathetic case on which to take its stand.
THE LESSON TO BE LEARNED: Reexamination remains a potent weapon in the accused infringer’s arsenal.