Delaware company Innovatio IP Ventures, LLC is scaling up its patent litigation assault against businesses that offer wireless Internet to customers, filing six infringement lawsuits this month against individual branches of some of the country’s largest hotel chains. It’s a new tack for the company, which began filing patent claims in March against coffee shops and restaurant chains, including Caribou Coffee, Cosí and Panera Bread Co., and department stores.
Contemplating the company’s approach – suing the users of the technology rather than its manufacturers – a logical question emerges: Will the onslaught reach the front doors of average, WiFi-using, American households?
At least not “at this stage” of Innovatio’s “systematic campaign,” said Matthew McAndrews, a partner at Chicago-based law firm Niro, Haller & Niro, and the lead litigator for Innovatio in its infringement lawsuits. McAndrews’ firm specializes in patent enforcement work for small plaintiffs. Since March, McAndrews has filed 13 infringement suits in all on behalf of Innovatio, according to PACER, the federal lawsuit database.
“Innovatio has made a strategic and business judgment at this stage that it doesn’t intend to pursue [lawsuits on the basis of] residential use of WiFi,” McAndrews said during a phone conversation last week. (Niro’s offices in downtown Chicago are located about five blocks away from Innovatio’s office. The U.S. Patent and Trademark Office shows another address for Innovatio, in a house at the end of a cul-de-sac in Ladera Ranch, Calif.)
As if to assure anyone who owns a laptop, smartphone or tablet that they’re not in danger of finding themselves in the company’s cross hairs, McAndrews added that he doesn’t “perceive” Innovatio’s litigation strategy changing. McAndrews did not respond to queries about who is behind Innovatio.
The company is demanding a one-time lump sum licensing payment between $2,300 and $5,000 from each of the several hundred defendants targeted in its lawsuits, McAndrews said. Some of the defendants have already settled, he added.
“We want you to continue to use this technology, we just want our client to get his due share,” McAndrews said. “This is not a seat-of-the-pants, fly-by-night shakedown.”
In casting such a wide net, Innovatio (it means “innovation” in Latin, McAndrews said) displays a new approach in patent enforcement. In a field where patent-holding companies often demand six- or seven-figure dollar amounts for damages, five-figure settlements are considered basement-low. By demanding a few thousand dollars, Innovatio ensures that, for many small business owners, taking up a legal defense won’t make financial sense.
Asserting The Standard
This month, Innovatio set its sights on national and international hotel companies Hyatt Corporation, Marriott Hotels, Wyndham Hotels and Resorts, Ramada Inn, Best Western, Days Inn, Super 8 Hotels, Travelodge, and several others, filing five lawsuits in five days, from Sept. 15 to Sept. 19, against more than 220 individual hotels in Illinois. The company is suing for royalties it says each location owes for unlicensed use of wireless local area network (WLAN) technology features covered under a portfolio of 31 patents the company holds. In suits reviewed for this story, Innovatio is asserting 17 of its 31 patents.
“We’re talking about patents that have come to cover a basic building block of commerce,” said Dave Donoghue, a partner at Holland & Knight’s Intellectual Property Group, in Chicago. The group represents Meijer, Inc. a department-grocery store chain in the Midwest that is a defendant in an infringement suit Innovatio filed March 8. When small, non-technical businesses use widely adopted technology, they don’t suspect it will open them up to a patent lawsuit, Donoghue explained. “When you use the industry standard, you assume it’s free of patent infringement.”
McAndrews acknowledged the ubiquity of wireless Internet – likening it to a fundamental utility like gas or electricity – but offered a different perspective on the terms of its use. Ultimately, he said, Innovatio’s “plan is to license this portfolio to the fullest extent possible. That would include anyone who’s wireless networking.”
Most of the patents Innovatio is asserting in its latest volley of lawsuits were invented in the 1990s and early 2000s, in part or solely by Robert Meier and the late Ronald Mahany, developers who worked for companies subsequently acquired by Broadcom Corporation, an international semiconductor manufacturer. The patents changed owners several times as Broadcom gobbled up competitor companies – but they all landed in Innovatio’s hands on Feb. 28, about one week before Innovatio began asserting them in litigation.
Common former owners include Norand Corporation, which then became Intermec Technologies Corp, and Bank of America, N.A. Some went straight from Broadcom to Innovatio.
A spokeswoman for Broadcom wouldn’t answer questions about what use the company had for those patents or why they transferred them to Innovatio, nor did she relinquish whether Broadcom has any financial stake in the patents or Innovatio’s lawsuits.
“This is not a story we’re going to comment on,” said Jennifer Baumgartner, the spokeswoman. “We don’t comment on our intellectual property or legal matters.”
A frequent number of transfers might indicate a patent’s likelihood to be asserted in litigation, writes Colleen Chien, an assistant professor at Santa Clara University School of Law specializing in patent prosecution and intellectual property counseling, in her recent article, “Predicting Patent Litigation,” published in Texas Law Review in August. The article is based on the notion that, upon deeper analysis, “the riskiest patents can be identified ahead of time.”
Further, the number of transfers “appears to be growing,” Chien writes. There were 2,000 transfers in 1980; in 2003, there were nearly 90,000, according to the article.
Innovatio’s first infringement suit, filed March 8 against Caribou Coffee Co., Cosí, and other small business chains, triggered retaliation from wireless communications giants Motorola Solutions, Inc. and Cisco Systems.
In May, Motorola and Cisco fired back with a complaint asking for declaratory judgment, calling for the Delaware federal court to rule that their products don’t infringe, and declare Innovatio’s patents invalid.
“Innovatio is in the business of enforcing and licensing patents,” Motorola and Cisco allege in their complaint. “Innovatio does not sell or offer for sale any products.”
More on the lawsuits mentioned above:
- Innovatio IP Ventures v. Madison Marriott West et al, Sept. 19, 2011
- Innovatio IP Ventures v. Arrowhead Best Western Lodge & Suites et al, Sept. 19, 2011
- Innovatio IP Ventures v. Comfort Inn O’Hare et al, Sept. 16, 2011
- Innovatio IP Ventures v. Wingate by Wyndham Schaumburg/Convention Center et al, Sept. 15, 2011
- Innovatio IP Ventures v. JW Marriott Chicago et al, Sept. 15, 2011
- Motorola Solutions & Cisco Systems v. Innovatio IP Ventures, May 13, 2011