Microsoft and Nokia sue Apple for Patent Infringement (via a Holding Company)

by Dennis Crouch

Luxembourg based Core Wireless Licensing S.a.r.l. has sued Apple for patent infringement in the Eastern District of Texas. The recently filed complaint alleges that Apple’s communication devices such as iPads and iPhones infringe eight different Core Wireless patents.  The Core Wireless family of patents focus primarily on communication protocols and the patent owner claims that the patents are infringed by any device that communicates using 2G, 3G, or 4G standards.

Core Wireless obtained its portfolio of 2,000 patents and pending applications from Nokia and (apparently) Microsoft. In 2011, the patent licensing entity MOSAID purchased Core Wireless.  MOSAID itself is owned by the US private equity firm Sterling Partners.

The reported purchase price for Core Wireless (including its patents) was just under $20,000 — seemingly a very low price.  However, there is a kicker, the sale requires that the new owner enforce the patents and 2/3 of any licensing revenue must be sent to Microsoft and Nokia. Further, the patent ownership rights are subject to a condition subsequent — if Core Wireless fails to meet minimum performance thresholds then the patent rights revert to the grantors (Nokia and Microsoft). The following comes from a 2011 press release by MOSAID:

Core Wireless will retain approximately one-third of gross royalties from future licensing and enforcement of the patents and will bear all of the costs associated with their administration, licensing, enforcement and monetization. Core Wireless’ ongoing ownership of the portfolio is subject to minimum future royalty milestones. The remaining 2/3 of gross royalties will be paid to Nokia and Microsoft Corporation (NASDAQ: MSFT).

One way to look at this is that MOSAID is essentially working as on a property management contract. With patents, title must shift in order to facilitate the necessary lawsuits. The complaint lists the following patents as infringed: 6,792,277, 7,606,910, 6,697,347, 7,447,181, 6,788,959, 7,529,271, 6,266,321, 6,978,143.

This case is also interesting in the context of Professor Schwartz’s article on Contingent Fee Patent Litigation.  In a round-about way, Nokia and Microsoft have hired MOSAID on contingency fee to enforce their patent rights.  The complaint itself was filed by Henry Bunsow of Dewey Leboeuf in San Francisco with Johnny Ward Jr. serving as local counsel in E.D. Texas. True to its role as hopeful licensor, the plaintiff has only asked for money damages and not injunctive relief to stop ongoing infringement.

Google Buys More Patents: Last fall, MOSAID sold a set of 18 patents and patent applications to Google for a reported $11 million. Recently, the pair recorded a new transaction of about 200 patents and applications from MOSAID to Google.  Those patents were previously owned by the Italian tire manufacturer Pirelli and a spinoff company PGT-Photonics.  Google also recently purchased one eCommerce patent from the tiny firm Alpine-in-Motion.

26 thoughts on “Microsoft and Nokia sue Apple for Patent Infringement (via a Holding Company)

  1. Very impressive, sockie: you use bold, italics and all caps and still you don’t make any sense.

    I’ll just repeat what I wrote again and you can digest it. Try your best to understand, sockie, because you’re looking at the future. Again.

    For estoppel purposes, at least, what difference should it make whether the aggregator had “involvement or interest” at the time of prosecution? It is now the owner of the patents. As a matter of law, it now owns the file histories. As a matter of law, it is aware of all the statements in all of the file histories. Co-owned patents comprising file histories which disparage asserted patents should either be disclaimed or dedicated to the public before the lawsuit involving the asserted patent is allowed to move forward. Why should an aggregator be allowed to have it both ways, simply because it did not “have an interest in the patents at the time”? It’s unfair and it turns the patent system into an even bigger joke than it already is.

  2. Sure. 

    But things have change since theirs sense.  As well, I have never seen a case where a BFP was held to have committed IC.

    Sent from iPhone

  3. Ned–

    That’s what the warranties and representations section of the transfer instrument is for–i.e. warranty that patent rights transferred were not obtained through inequitable conduct, etc…

    Surely you’ve drafted one of these things, or customized some boilerplate to this effect.

  4. Leo, if the claims are VALID over the non disclosed art and we are dealing with a BFP who is just as innocent as the infringer, what policy is promoted by declaring the patent unenforceable because of someone's else's IC?

    Regarding Fraud in real property, there is a difference.  The Fraud was against the property holder.  In the case of IC, the infringer is not harmed if the patent is valid.

  5. Leo, You post seems to assume the BFP is not a BFP.

    No it doesn’t, Ned. It does, however, assume that the reason for holding a patent unenforceable for IC is not just (or even primarily) to punish the offender, but to protect the rest of us from fraudulently obtained patent grants.

    I think you’re in California – if you innocently purchase a vacant lot from someone who fraudulently obtained title to it, do you get to keep it?

  6. Leo, You post seems to assume the BFP is not a BFP.

    Regardless, my position, often expressed, is that for IC to occur the patent has to be invalid over the reference.  Therasense all but approved this standard.  I would think, therefor, that the contaminated claims will be invalid over the withheld or falsified information.  

    So the question obtains, whether other valid claims should be impeached because of the original IC?  Even the Federal Circuit does not go so far as even with respect to the malefactor under Therasense.  Why should it go that far with a BFP.

    I think IC is a form of unclean hands and should not affect a BFP.

  7. As a matter of law, it is aware of all the statements in all of the file histories.

    Aware of… as a matter of law? Cite please.

    Are you aware of the equitable nature (and thus the tie to prosecution)? Merely concluding that the conflux of ownership, post grant, should do what the Office should have done during prosecution MOVES the duty of examination to the patent holder, post issuance. You are going to have a major problem with that stance, as a matter of law.

    GFY, sockie

    Classic (and meaningless) MM answer. Note to Ned, this is not “pith.” As for “swagger”… breathalyzer FAILLURE.

  8. Ned, your approach suggests a business model where an “inventor” acquires a patent using any means necessary, including IC, and then sells the patent to a BFP to cleanse it. Is that really good public policy?

  9. Malcolm, I think a purchaser takes subject to the prosecution history of record.

    But, I think also, that a BFP should not be subject to a defense of IC.

  10. Paul, could an acquiring firm avoid IC by claiming to be a BFP with respect to the IC, particularly if it is of the variety involving non disclosure? What good would it do to punish a BFP? The real question should be, I think, is whether the patent is valid or not.

  11. “Sounds like a quintessential example of a non-answer to me.”

    Trust us, no one knows how to make a “non-answer” like MM.

  12. Asked and answered.

    LOL. That’s an answer? Sounds like a quintessential example of a non-answer to me.

    It strikes me as highly problematic to bind a later purchaser to statements by party Y in prosecuting patent Y about patent X to party X, either by estoppel or inequitable conduct, unless the purchaser had some involvement or interest in the prosecution at the time the statement was made.

    It strikes me as highly problematic to allow a patent aggregator to assert patents that were granted based, at least in part, on statements that are contradicted by prosecution histories in other patents in the same portfolio (I recognize this is not necessarily true, but it seems unavoidable when the aggregator owns hundreds or thousands of patents in the same technical area).

    For estoppel purposes, at least, what difference should it make whether the aggregator had “involvement or interest” at the time of prosecution? It is now the owner of the patents. As a matter of law, it now owns the file histories. As a matter of law, it is aware of all the statements in all of the file histories. Co-owned patents comprising file histories which disparage asserted patents should either be disclaimed or dedicated to the public before the lawsuit involving the asserted patent is allowed to move forward. Why should an aggregator be allowed to have it both ways, simply because it did not “have an interest in the patents at the time”? It’s unfair and it turns the patent system into an even bigger joke than it already is.

  13. Yes indeed, nor is it limited to statements made under oath. It applies to any statements made in the PTO file histroy by the prosecuting attorney or agent. Nor does the NPE acquiring the patent have any requirement to protect or defend your personal professional reputation from attacks by the defendants as to your handling of the prosecution or allegations of disclosure failures.

  14. Is an owner of multiple patents “bound by” statements made under oath during the prosecution of those patents, even if those statements were made prior to the acquisition of the patents by the owner?

    Asked and answered.

    See: link to patentlyo.com

    The best answer from that thread:

    “It strikes me as highly problematic to bind a later purchaser to statements by party Y in prosecuting patent Y about patent X to party X, either by estoppel or inequitable conduct, unless the purchaser had some involvement or interest in the prosecution at the time the statement was made.

    It would be reasonable, I think, to make the acquirer choose between the two patents when a shortcoming of one is the basis for allowing the other”

    Close – but not as interesting as might happen with a true aggregator who does not process any patents. What if there are no links between the two (or more) patents (and the attainment [as in granting] of the second (or more) linked to the first (or any)).

    Or to rephrase the post:

    It strikes me as highly problematic to bind a later purchaser Z to EITHER statements by party Y in prosecuting patent Y about patent X to party X, either by estoppel or inequitable conduct, OR statements by party A in prosecuting patent A about patent B to party B, either by estoppel or inequitable conduct unless the purchaser Z had some involvement or interest in the prosecution of patent Y or patent A at the time the statements (by party Y or party A) were made. In essence, without such involvement or interest, the estoppel becomes in rem.

    It would be reasonable, I think, to let the acquirer not be punished at all if there was no basis of one to allowing the other(s).

  15. I suspect, but I do not know, that there could be a clause that prevents a reversion with respect to any patent in suit, or any patent that is required for suit to be maintained (common ownership of patents that have terminal disclaimers).

    If such a clause is not there, title could revert mid trial. Such a possibility may require that MS and Nokia be joined.

  16. Is an owner of multiple patents “bound by” statements made under oath during the prosecution of those patents, even if those statements were made prior to the acquisition of the patents by the owner?

  17. Interesting standing question indeed.
    [I wonder if it could be contractually avoided by preventing such reversion of ownership until after complete final judgment on any ongoing litigation of the patent? An otherwise potential change of patent ownership in the middle a trial does not seem likely to be judicially favored?]
    Furthermore, this assignment is not going to avoid any prior actual or implied licenses created by participation of the prior owners in “standards settings” for which standards the subject patents are essential.
    Nor does this technique prevent most of the discovery still going against original patent owners and inventors, and I wonder if the original owners have also agreed to pay for that?

  18. Constitutional standing – I don’t think so. Prudential standing – possibly, which would mean that Nokia and Microsoft must be joined.

  19. This looks like a conditional grant of ownership with a right of remainder. Will this impact MOSAID’s standing?

  20. “Further, the patent ownership rights are subject to a condition subsequent — if Core Wireless fails to meet minimum performance thresholds then the patent rights revert to the grantors (Nokia and Microsoft).”

    Is anyone else wondering whether this causes a standing issue? (I don’t know the answer.)

  21. An even cheaper way is to publicly dedicate the material.

    That way you wouldn’t even have to pursue a lawsuit or pay court fees or lawyers (which I can guarantee you cost more than that $20k purchase price).

    Now we just have to figure a way to knock out potentially bothersome patent blog responders.

  22. Interesting terms for the sale: what would happen if the purchaser were to deliberately “assert” the patents in a manner that elicited judgments of invalidity? $20K is a cheap way to knock out potentially bothersome patents.

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