updated 01:25 pm EDT, Wed August 10, 2011
Eon-Net loss may hurt Lodsys too
A recent decision in a patent lawsuit from Eon-Net against Flagstar Bancorp might pose trouble for Lodsys in its own attempts to skim royalties. Discovered today, a ruling late last month hit Eon-Net with Rule 11 sanctions for conducting what was cast as "extortion" through its practices. The company had submitted over 100 infringement lawsuits but each time gave the targets a settlement that would be cheaper than defending the case, effectively forcing companies to pay.
Eon-Net had "acted in bad faith," even apart from what was found to be an "objectively baseless" case, the court ruled. It dismissed the idea that the settlements proved the patents were valid, since Flagstar had to spend $600,000 to defend the case but had been offered a settlement if it paid $25,000 to $75,000. The tenfold increase in cost guaranteed that few if any would ever challenge whether or not the patents were valid.
As a non-practicing entity, or a company that doesn't make meaningful products, Eon-Net was also immune to countersuits that would challenge its activities. It had to pay a total of $631,135 for the case, three quarters of which were Flagstar's court costs.
Lodsys may face trouble as its own approach has been very similar. It has been sending out blanket patent infringement notices and, in each case, has been making patent license offers with direct hints that the value would be much cheaper than defending against a lawsuit. When it ultimately decided to sue, Lodsys deliberately chose developers that were too small to fight back and only included bigger developers like EA and Rovio to try and reduce the weight of Apple's arguments that it needed to intervene for a proper defense.
The Lodsys case won't necessarily go the same direction. Lodsys already has licenses with Apple and Google, and it may point to these as evidence that its patents have merit. With individual app writers banding together, though, they may still show collective evidence of violations that would merit sanctions and could damage Lodsys more if they win the case. [via TechDirt]