Authored by Michelle Carniaux and Michael E. Sander
Yet another novel business model focused on IPR petitions appears to have emerged in the patent litigation industry. We previously discussed IPR petitions filed by New Bay Capital LLC, which were speculated to have been filed on behalf of a hedge fund to shift the stock price of a publicly traded patent assertion entity.
More recently, in a civil lawsuit, Chinook Licensing DE, LLC (“Chinook”) accuses Iron Dome LLC and its affiliates (“Iron Dome”) of attempting to “coerce a license” to a patent that Chinook is actively asserting against several third parties. See Chinook Licensing DE LLC v. RozMed LLC et al, 1:14-cv-00598, No. 9 (D.Del. Jun. 13, 2014). According to the Amended Complaint, in March 2014, Iron Dome threatened to file an IPR petition against Chinook’s patent unless Chinook granted Iron Dome three free retroactive and transferable licenses, presumably to resell those licenses to defendants in the district court litigations. Id. Less than one month after Chinook turned down the offer, Iron Dome launched an IPR missile against Chinook’s patent. Iron Dome’s IPR petition, is currently pending. See IPR2014-00674.
Chinook further alleged that Iron Dome is “engaged in a pattern and practice of submitting frivolous petitions for IPR on its targets’ valid and enforceable patents.” According to Chinook, Iron Dome also attempted to extort e-Watch, Inc., another company engaged in patent disputes with third-parties. On January 17, 2014, Iron Dome threatened to file petitions for IPR seeking to invalidate e-Watch’s patents unless e-Watch immediately granted Iron Dome eight retroactive, royalty-free, non-exclusive licenses to each patent. On February 18, 2014, Iron Dome launched an IPR missile against one of e-Watch’s patents. See IPR2014-00439, No. 1 Petition (Apr. 22, 2014). According to Chinook, Iron Dome then “shifted [its] scheme to attempt to extract money directly from the owner of the [e-Watch] patent.” 1:14-cv-00598, No. 9. Iron Dome allegedly demanded “an initial payment . . . of $428,000 and potential subsequent payments of between $875,000 and $971,000 . . . in exchange for its withdrawal of the Petition” against the e-Watch patent. Id.
Chinook’s civil lawsuit against Iron Dome includes a variety of claims, including tortious interference with business relations, violations of the RICO Act, mail fraud, wire fraud, and conspiracy. In response, Iron Dome filed a motion to dismiss the complaint for failure to state a claim, which is currently pending. See 1:14-cv-00598, No. 11 (D.Del. Jun. 25, 2014). The PTAB recently granted Iron Dome’s IPR petition challenging e-Watch’s patent, undercutting Chinook’s allegations that Iron Dome’s IPR petitions are “frivolous.” 1:14-cv-00598, No. 9; IPR2014-00439, No. 16 Institution Decision (Aug. 4, 2014).
Chinook also brought the fight directly to the PTAB. On September 3, 2014, Chinook asked the PTAB for authorization to file a motion for sanctions against Iron Dome in connection with the IPR petition filed against Chinook’s patent. See IPR2014-00674, No. 9 Notice (Sep. 10, 2014). Chinook argued it was entitled to sanctions including dismissal of the IPR proceeding because Iron Dome’s “business model is to circumvent the [one year] statutory bar . . . and the efficiencies created by estoppel.” See id. The PTAB denied Chinook’s request because it “fail[ed] to cite any conduct by [Iron Dome] that constitutes misconduct as delineated in [the PTAB regulations].” Id.; see also 37 C.F.R. § 42.12(a).
According to Iron Dome’s website:
Many innovation-oriented companies are caught in this mess and need a solution. We have formulated an alternative patent licensing strategy to defend against these anti-competitive forces. In the long-term, we hope to have played a part in eradicating these meritless lawsuits and restoring the health of the U.S. patent system.
See Iron Dome, What We Do. It will be interesting to see whether Iron Dome, whose tag-line is “rapid-response patent interception,” will ultimately be successful with its business model.