A federal-state legal tussle is brewing in Omaha, after a Florida company filed court papers saying the Nebraska Attorney General's Office has no business interfering with patent lawsuits in U.S. District Court.
In a filing last week, Activision TV asked a judge in U.S. District Court in Omaha to prevent Nebraska Attorney General Jon Bruning from barring a Texas law firm from a patent lawsuit against Lincoln-based Pinnacle Bank. Activision TV sued Pinnacle this year, saying the bank operates digital display signs that infringe on its patents.
The Pinnacle suit is one of a series of patent actions in the past year by Activision TV against businesses that use digital display signs; it was filed by Omaha's Kutak Rock law firm. Later court papers say Activision TV also wants to retain the Farney Daniels law firm, one of the nation's top patent protection firms.
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But the Nebraska attorney general has issued a cease-and-desist order barring Farney Daniels, saying the firm was notorious for representing “patent trolls.”
Those are companies that specialize in buying patents from inventors. Critics say they are opportunistic, suing when someone unintentionally infringes because he bought a fax machine or printer containing an obscure computer process someone else patented long ago.
The state's top legal officer said in the cease-and-desist letter sent to Farney Daniels that his action was needed to protect Nebraska businesses from deceptive and unfair trade practices and legal threats designed to coerce out-of-court settlements to avoid costly patent lawsuits.
“The protection of Nebraska consumers and businesses from baseless harassment, particularly that which bears the potential for costly and destructive litigation, is a top priority for this office,” reads the letter. “We view as especially egregious threats which serve to advance no valid legal purpose, but rather, seek only to extract quick settlements from those otherwise committed to building their businesses and providing positive value to society.”
The cease-and-desist letter is what triggered Activision TV's current legal objection, which says the Nebraska attorney general doesn't have the authority to regulate what law firm represents what client. Activision TV also says it is a real company that created technological innovations that merit legal protection from infringement, not a so-called “patent troll.”
The company also says it has done nothing unfair or deceptive, and that Farney Daniels should be free to proceed as part of the litigation team in the patent lawsuit against Pinnacle Bank.
Now, the matter sits before a federal judge in Omaha, who has been asked to decide how far the attorney general's authority extends in such disputes.
Pinnacle Bank, the third-largest bank based in Nebraska, had no comment on the matter, said Michael Hilgers, the company's attorney with the Gober Hilgers law firm.
As for the Nebraska Attorney General's Office, there is no backing down, said spokeswoman Shannon Kingery.
“We will not be deterred from protecting Nebraska business from patent-trolling law firms or their clients,” Kingery said.
The subject of so-called “patent trolls” is a controversial one. Businesses complain that the practice subjects them to unfair litigation.
Bellevue, Wash.-based Intellectual Ventures is often cited as the archetype. Started by a former Microsoft Corp. executive, the company has bought thousands of patents from inventors, mostly in the field of computer technology.
This year, the company sued First National Bank of Omaha, saying various aspects of its Internet banking, cybersecurity and other computer and Internet functions infringed upon patents owned by Intellectual Ventures.
It is that aspect — the purchase of technology from a vendor containing seemingly innocuous lines of computer code only to be followed by a lawsuit out of nowhere — that has U.S. businesses frustrated, said Christal Sheppard, a professor at the University of Nebraska College of Law.
“The system is broken, pure and simple,” Sheppard said. “The Congress, the president and the Patent and Trademark Office are actively pursuing ways to solve the problem. The effort is not proceeding fast enough for the public or the states, but it is moving.”
Sheppard said there are seven bills currently in Congress that would reform at least some aspect of patent litigation.
Companies owning patents say the complaints amount to whining and hair-splitting. In the eyes of the law, said Brett Johnson, an attorney at Farney Daniels, it doesn't matter if the patent owner is the original inventor, such as a large company with hundreds of employees and products, or a financial investor who bought the rights to a speculative idea from a backyard tinkerer.
“The character of the patent owner has nothing to do with the legality of the patent or attempts to protect it from unauthorized use,” Johnson said.
He said Activision TV founder Dave Gothard devised a number of innovations for remote-controlled digital display screens and patented them. His company once employed about 30 people developing the technology, Johnson said.
And nothing, Johnson said, excuses an end-user from buying and operating a device without compensating Activision for its intellectual property.
“Activision TV is not a patent troll,” Johnson said. “The Nebraska attorney general, with its actions, has assumed that it is.”