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Global Patent Holdings' Amended Complaint in Florida and Motion to Dismiss in Nevada

By Troll Tracker

In the case in Florida against the Boca Resort, GPH amended its complaint to add the following two passages:

The coinventors of the ?341 patent were Anthony Rozmanith and Dr. Neil Berinson. Anthony Rozmanith is 80 years old; Dr. Berinson is now deceased but is survived by his 70-year-old widow; both live on Social Security payments and minimal royalties from their licenses. Mr. Rozmanith suffers from diabetes and had no taxable income at all in 2006. Dr. Berinson?s widow, who suffers from neuropathy, colitis and arthritis of the hip and spine (as a result of which she is unable to walk without assistance), had a total of $18,100 in taxable income in 2006.

and

Defendant Boca Resort is a Delaware corporation with principal offices at 501 East Camino Real, Boca Raton, Florida 33431. Its ultimate owner, The Blackstone Group LP, 345 Park Avenue, New York, N.Y. 10154, manages funds of hedge funds and real
estate funds, among other activities. Blackstone owns more than 1,400 hotels having a reported value of $24.7 billion, for which it states that it provides in-house operating expertise in every facet of the business, particularly Internet-related functions. In addition to being a financial advisor to Enron, Blackstone has been the promoter of a number of collateralized debt obligations funds (CDO?s) ? the type of security which is at the heart of the subprime mortgage crisis. Blackstone Group has been reported by Forbes as having annual revenues of $8.7 billion on which it makes an annual profit of $2.3 billion. Its annual revenue from real estate such as Boca Resort has been reported as $1.22 billion.

What GPH's amended complaint doesn't allege is that the inventor's widow is getting any money at all from the ongoing litigation. Without that, the statements about her health are just irrelevant. Even if she is sharing in the litigation proceeds, her financial state and state of health are hardly complaint material. Further, how is Boca Resort's parents alleged participation in the Enron scandal and the subprime mortgage crisis relevant to a patent case?

If Vegas had a line on possible responses to this complaint, I'd place my money on Federal Rule of Civil Procedure 12(f):

The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.

A non-scandalous part of the amended complaint, which seems to at least facially address Boca Resort's motion to dismiss, is the description of how Boca Resort is a "joint infringer" because it controls and directs the performance of each of the method steps of claim 17:

Boca Resort is a ?joint infringer? of claim 17 of the ?341 patent (a form of direct infringement) because Boca Resort, through its website (http://www.bocaresort.com/) controls and directs the performance of each of the method steps of claim 17 which are not performed by the Boca Resort website itself. Boca Resort?s website includes Javascript programs and html directives, which are downloaded to the user?s computer and are executed on that computer. Copies of these Javascript programs, html files and other website materials (computer programs) are stored on Boca Resort?s servers, for downloading and use on user?s computers. In order to control the execution of the programs which are executed on the user?s computer, Boca Resort?s website stores a set of computer programs which it then sends to the user?s computer for execution by that computer. Since the programs which the user?s computer eventually executes are all supplied to the user?s computer by Boca Resort?s own website, operating on Boca Resort?s own server, Boca Resort controls and directs the operation of those programs on the user?s computer. Nothing happens at the user?s computer in connection with the method steps of claim 17 that is not a direct result of the execution of programs and website material supplied by Boca Resort?s website.

I haven't considered this substantively, but it was an interesting strategy by Boca Resort to force GPH's hand so early in the litigation, and get the kind of detailed infringement contentions that one usually fights to get a plaintiff to give and usually doesn't get it until well into discovery.

In Nevada, on the other hand, Global Patent Holdings claims the court has no personal jurisdiction over it in the declaratory judgment action brought by Zappos. That's despite the fact it directed threat letters into Nevada at 3 Nevada corporations, and settled with 2 of them. I'm not sure Red Wing Shoe saves GPH or not. Part of GPH's theory is that the previous two licenses were issued by TechSearch, not GPH, and they are not the same company. But aren't they both shells of Anthony O. Brown? He claims GPH has no affiliation with TechSearch, so maybe there's more to that story? Zappos will respond later this month, and I'm sure will have an answer.

What about the fact that GPH has sued not only in Chicago, where it is located, but also in West Palm Beach, Florida? Can a patent licensing entity sit in its offices, firing letters all over the country, suing wherever it feels like it, really not be subject to personal jurisdiction in the judicial districts where it sends its licensing demands? Well, hey, Lauren Gelman over at Stanford blurbed a case where a judge seemed to regrettingly say yes (link). Nice blurb, Lauren.

The key here for Zappos is going to be to establish that TechSearch, the shell company owned by Anthony O. Brown (see here) and GPH, the shell company owned by Anthony O. Brown (per Acacia), are the same for the purposes of examining whether it is "fair play and substantial justice" to make Brown's GPH stand trial in Nevada since the patents it now controls were licensed to Nevada companies, an act that would seem to meet the exception in Red Wing Shoe. The judge should look at analogous circumstances, such as the FTC's recent enforcement against Negotiated Data Solution, making it abide by commitments made by its predecessor-in-interest, who pledged $1,000 licenses to a standards body (interesting analysis here). If standards-body commitments run with the patent, then so should personal jurisdiction based on licensing revenue. In this case, it shouldn't matter, because Zappos might be able to pierce the corporate veil and argue that fairness should not allow Mr. Brown to play corporate shell games to avoid facing declaratory judgment lawsuits. But even if GPH was independently owned, I think there's a fairness argument that personal jurisdiction should run with the patent, and where it has previously been licensed and enforcement activity.

Or am I nuts for thinking that? No, wait, don't answer that.

Full post as published by Patent Troll Tracker on February 07, 2008 (boomark / email).