Here’s how a law designed to fight the Mafia could stop abusive patent lawsuits

September 17, 2013
(Paramount pictures)
(Paramount Pictures)

When you're targeted by a patent troll, the rational thing to do is to capitulate. Defending a patent infringement lawsuit can cost millions of dollars, and trolls carefully calibrate their settlement demands so that it will always cost more to fight than to settle.

But the antics of one patent troll so infuriated Kevin O'Connor that he decided to fight anyway. O'Connor made his fortune as a co-founder of DoubleClick, the advertising company that was sold to Google for $3.1 billion. When his new startup, FindTheBest.com, was threatened by a troll called Lumen View Technology, he pledged $1 million of his personal fortune — significantly more than the cost of settling — to fight the lawsuit.

On Monday, O'Connor went on the offensive, filing a lawsuit under the federal Racketeer Influenced Corrupt Organization (RICO) statute. The statute was originally intended to fight organized crime, but O'Connor contends that Lumen View is essentially a patent extortion racket. The complaint charges that the firm has no interest in litigating the merits of its patent claims, but rather is trying to use the high cost of litigation to coerce defendants who did not infringe into paying nuisance settlements.

"Everything was about 'we're going to make your life so miserable, so painful, cost you so much money,'" O'Connor says. "I don't like bullies. So I made it personal and said 'I'm going to fund the defense of this. I'll invest a million bucks to take this on.'"

O'Connor says that when he received the original demand letter, he tried to contact Lumen View to explain that his firm didn't infringe the patent. Patent 8,069,073 claims the concept of using a computer to engage in match-making between two groups of people. FindTheBest says its site only helps users find online information, not other users. So Lumen View's patents don't apply.

O'Connor says he called one of the patent's two investors, Eileen Shapiro, to try to explain this point, with little success. Shortly after that call, O'Connor says, Lumen View attorney Damian Wasserbaur called FTB's lawyer to complain about O'Connor's call. According to FTB's complaint, Wasserbaur stated that "calling someone a 'patent troll' constituted a 'hate crime' under 'Ninth Circuit precedent.'" Wasserbaur allegedly threatened to "pursue criminal charges" if FindTheBest didn't apologize and pay up before the end of the day.

We tried to contact both Shapiro and Wasserbaur for comment on Monday but our calls have not been returned.

Congress passed the RICO Act in 1970 to help fight the Mafia, but its use has expanded over time. FindTheBest isn't the first defendant to invoke RICO against patent trolls. One academic paper found an example of RICO being used against a patent plaintiff back in 1994. In that case, the judge refused to dismiss the RICO claim, and the case settled soon afterwards. It's not clear if the RICO claim would have ultimately succeeded had the case reached the merits.

Several defendants have invoked RICO in recent years. Earlier this year, a judge threw out RICO charges against a patent troll that has threatened thousands of businesses for offering WiFi access to their customers.

But the New Jersey luggage manufacturer Tumi had more luck using a RICO suit against a patent troll. A company called ArrivalStar claims to own the concept of tracking vehicle locations electronically. Tumi responded to ArrivalStar's lawsuit by filing RICO charges against the company and its lawyers, and the tactic stopped the original lawsuit cold. ArrivalStar agreed to drop the case without Tumi paying a dime.

"This entity went around suing over 340 companies in a five-year period," says John Fallon, an attorney who represented Tumi in the case. "They base their business model on the fact that it's cheaper to pay us a small settlement fee than it is to even file a motion to dismiss."

Trolling, he argues, is "a form of extortion," exactly the problem RICO was designed to address. "When you have a commercial entity established to commit a criminal act, a RICO defense becomes available."

Of course, once ArrivalStar dropped the patent lawsuit, Tumi no longer had any reason to pursue the RICO claim. Which means we don't get to find out whether the firm's RICO claims would have stood up in court.

But O'Connor may not be so easily deterred. He doesn't just want to save his own firm from a troll, he wants to set a precedent that will help all troll victims in the future. And he may have the resources and determination to do it.

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Andrea Peterson · September 17, 2013