4 ms·

Patent troll gives up, can’t defend “matchmaking” patent under new law

126 points by kjhughes 12y ago

dthal 12y ago
"We imagine they siphoned off any remaining cash to investors, so they can declare bankruptcy and not pay the court-ordered legal fees." Is that a crime? If it isn't, it seems like it should be. The creditor already has a legal claim to the funds at that point. That's at least economically equivalent to stealing their money.
- ChuckMcM 12y ago
  Sadly no, it is not a crime. And it is nearly entirely the reason that one creates a legal entity (and LLC in this case) to "hold" the liability. The flip side is that it is also not a crime for someone to take a million dollars of someone elses money and spend it paying themselves and some friends a salary while building a web site devoted to cat pictures while buying a bunch of hardware on credit. Only to have the web site go bust. In both situations, monetary judgements can be levied only to have the entity "die" and take with it the liability it was holding. The "win" here is that "do it on a computer" patents are being invalidated left and right by the courts and that is crimping the revenue stream of trolls and having them re-evaluate their portfolios.
  - ohashi 12y ago
    But LLC's can be pierced under some circumstances. Why isn't this one of those circumstances?
  - JoshTriplett 12y ago
    > Sadly no, it is not a crime. That depends; it can be, if the owners of the LLC act in sufficiently bad faith. That's what "piercing the corporate veil" is about: when the owners of a company abuse the liability shield badly enough that they should be personally liable. Pulling money out in anticipation of a bankruptcy (as opposed to spending it in good faith as part of doing business) could potentially qualify for that.
    - rdudek 12y ago
      That only applies if they still do something illegal. This generally applies to cases of money-laundering, drugs, criminal intentions. There would have to be a separate case initiated by the legal system.
      - jgable 12y ago
        Not the case. Piercing the corporate veil depends on a number of factors that do not involve grossly illegal actions like you describe. https://en.wikipedia.org/wiki/Piercing_the_corporate_veil#United_States https://en.wikipedia.org/wiki/Piercing_the_corporate_veil#Un...
- darkarmani 12y ago
  > The creditor already has a legal claim to the funds at that point. You don't think they did this on the eve of the judgement when they realized the outcome? I imagine most people would plan for various outcomes even if in this case those people are patent terrori...i mean, patent trolls.
- dragonwriter 12y ago
  > Is that a crime? It doesn't seem likely to be any crime that I am aware of (though it might be), it's more likely to be a tort, and even if its neither a crime nor a tort it may still be, in the context of bankruptcy, subject to disgorgement as a preference [1]. [1] http://en.wikipedia.org/wiki/Unfair_preference http://en.wikipedia.org/wiki/Unfair_preference
- teachingaway 12y ago
  If its a "fraudulent transfer" its a crime (or at least a "civil wrong"). - http://en.wikipedia.org/wiki/Fraudulent_conveyance http://en.wikipedia.org/wiki/Fraudulent_conveyance - http://www.law.cornell.edu/uscode/text/11/548 http://www.law.cornell.edu/uscode/text/11/548 If a company pays its investors in an attempt to avoid a debt, the investors may have to return the cash in bankruptcy court. "Piercing the corporate veil" isn't necessary. (Caveat: I am a lawyer, but not a bankruptcy lawyer, and I don't really know what I'm talking about here). edit: dragonwriter nailed it with "unfair preference"... "fraudulent conveyance" must be something else.
  - dragonwriter 12y ago
    > edit: dragonwriter nailed it with "unfair preference"... "fraudulent conveyance" must be something else. Well, "fraudulent conveyance" would seem to be the right tort if it is a tort; "unfair preference" would be a possible grounds for disgorgement even if the elements of fraudulent conveyance weren't met. Either would seem possible in the scenario described.
- bushido 12y ago
  Depends on how the alleged siphoning occurred. Something like a dividend payout is most likely not a crime and in my humble opinion it should not be a crime, because it may set a very dangerous presidence. Not saying that the panent troll may have not been in the wrong. The correct legal way of doing this would be to get an injunction and get the court to freeze the companies assets. Then if the patent troll did what the OP says, it would be a crime.
shmerl 12y ago
Why can't it be classified as RICO? It's such a classic racket / shakedown scheme.
- jimiwen 12y ago
  wasnt this one of the points the defendant wasted to make?
- jeffdavis 12y ago
  Not a lawyer, but RICO has to do more with conspiracies that try to hide crimes by assigning the individual acts to underlings. And it's not a racket if what you're threatening is legal, which this kind of abuse of patent law unfortunately is.
  - shmerl 12y ago
    But it wasn't legal, since the patent was fake. So it was racket.
    - jeffdavis 12y ago
      What law does it break to threaten legal action to enforce a patent granted to you by the USPTO? It sounds like you don't like what you see, and you want to find something in the law to use against them. But lots of smart people have looked and nobody has found anything, so it's probably not there. The correct solution is to change the law, not to use overly broad interpretations.
      - shmerl 12y ago
        So, USPTO grants an invalid patent, and patent troll uses it to shake down whoever they wish? I surely think it's illegal. If there is no law which makes it so, there should be one. I'd say even if the patent is valid, one can't use shakedown methods like "pay up or else". Patent trolls even big ones like Microsoft for example use intimidation to squeeze money. Their tactic is clearly to use high cost of litigation to force everyone to settle outside of court. I.e. it can go like this. A troll comes to some company and says: "Nice business you have here, it would be a pity if anything happens to it. Pay up or else". Company answers: "We'll fight to invalidate your patents". Troll says: "So what, we have tons more we can pull out, you don't have money to fight to invalidate them all, so better pay up". Whether they are valid or not such practice should be illegal because it's not any different than criminal shakedown. >It sounds like you don't like what you see, and you want to find something in the law to use against them. Indeed. I'd prefer them to be persecuted as racketeers, because they are such. I agree that if the law doesn't cover such case it should be fixed.
reallycurious 12y ago
This feels like the scene in Godfather where Michael Corleone walks into the restaurant washroom, comes out with a gun and gets his vengeance.
cbasoftware 12y ago
I hope one of these companies takes the troll to the very end and gets their money back from the scum bags (excuse me attorneys) at the head of the troll. That will stop this very quickly and completely. Then this embarrassing history of patenting software can come to its logical end. If any piece of software should've/could've been patented it was the original OS. And, Bell Labs took care of that when they gave Unix to the public domain. Ditto for the original BIOS. When IBM didn't bother to defend it that option was over too.

126 points by kjhughes 12y ago

dthal 12y ago

"We imagine they siphoned off any remaining cash to investors, so they can declare bankruptcy and not pay the court-ordered legal fees." Is that a crime? If it isn't, it seems like it should be. The creditor already has a legal claim to the funds at that point. That's at least economically equivalent to stealing their money.

ChuckMcM 12y ago
Sadly no, it is not a crime. And it is nearly entirely the reason that one creates a legal entity (and LLC in this case) to "hold" the liability. The flip side is that it is also not a crime for someone to take a million dollars of someone elses money and spend it paying themselves and some friends a salary while building a web site devoted to cat pictures while buying a bunch of hardware on credit. Only to have the web site go bust. In both situations, monetary judgements can be levied only to have the entity "die" and take with it the liability it was holding. The "win" here is that "do it on a computer" patents are being invalidated left and right by the courts and that is crimping the revenue stream of trolls and having them re-evaluate their portfolios.
- ohashi 12y ago
  But LLC's can be pierced under some circumstances. Why isn't this one of those circumstances?
- JoshTriplett 12y ago
  > Sadly no, it is not a crime. That depends; it can be, if the owners of the LLC act in sufficiently bad faith. That's what "piercing the corporate veil" is about: when the owners of a company abuse the liability shield badly enough that they should be personally liable. Pulling money out in anticipation of a bankruptcy (as opposed to spending it in good faith as part of doing business) could potentially qualify for that.
  - rdudek 12y ago
    That only applies if they still do something illegal. This generally applies to cases of money-laundering, drugs, criminal intentions. There would have to be a separate case initiated by the legal system.
    - jgable 12y ago
      Not the case. Piercing the corporate veil depends on a number of factors that do not involve grossly illegal actions like you describe. https://en.wikipedia.org/wiki/Piercing_the_corporate_veil#United_States https://en.wikipedia.org/wiki/Piercing_the_corporate_veil#Un...
darkarmani 12y ago
> The creditor already has a legal claim to the funds at that point. You don't think they did this on the eve of the judgement when they realized the outcome? I imagine most people would plan for various outcomes even if in this case those people are patent terrori...i mean, patent trolls.
dragonwriter 12y ago
> Is that a crime? It doesn't seem likely to be any crime that I am aware of (though it might be), it's more likely to be a tort, and even if its neither a crime nor a tort it may still be, in the context of bankruptcy, subject to disgorgement as a preference [1]. [1] http://en.wikipedia.org/wiki/Unfair_preference http://en.wikipedia.org/wiki/Unfair_preference
teachingaway 12y ago
If its a "fraudulent transfer" its a crime (or at least a "civil wrong"). - http://en.wikipedia.org/wiki/Fraudulent_conveyance http://en.wikipedia.org/wiki/Fraudulent_conveyance - http://www.law.cornell.edu/uscode/text/11/548 http://www.law.cornell.edu/uscode/text/11/548 If a company pays its investors in an attempt to avoid a debt, the investors may have to return the cash in bankruptcy court. "Piercing the corporate veil" isn't necessary. (Caveat: I am a lawyer, but not a bankruptcy lawyer, and I don't really know what I'm talking about here). edit: dragonwriter nailed it with "unfair preference"... "fraudulent conveyance" must be something else.
- dragonwriter 12y ago
  > edit: dragonwriter nailed it with "unfair preference"... "fraudulent conveyance" must be something else. Well, "fraudulent conveyance" would seem to be the right tort if it is a tort; "unfair preference" would be a possible grounds for disgorgement even if the elements of fraudulent conveyance weren't met. Either would seem possible in the scenario described.
bushido 12y ago
Depends on how the alleged siphoning occurred. Something like a dividend payout is most likely not a crime and in my humble opinion it should not be a crime, because it may set a very dangerous presidence. Not saying that the panent troll may have not been in the wrong. The correct legal way of doing this would be to get an injunction and get the court to freeze the companies assets. Then if the patent troll did what the OP says, it would be a crime.

shmerl 12y ago

Why can't it be classified as RICO? It's such a classic racket / shakedown scheme.

jimiwen 12y ago
wasnt this one of the points the defendant wasted to make?
jeffdavis 12y ago
Not a lawyer, but RICO has to do more with conspiracies that try to hide crimes by assigning the individual acts to underlings. And it's not a racket if what you're threatening is legal, which this kind of abuse of patent law unfortunately is.
- shmerl 12y ago
  But it wasn't legal, since the patent was fake. So it was racket.
  - jeffdavis 12y ago
    What law does it break to threaten legal action to enforce a patent granted to you by the USPTO? It sounds like you don't like what you see, and you want to find something in the law to use against them. But lots of smart people have looked and nobody has found anything, so it's probably not there. The correct solution is to change the law, not to use overly broad interpretations.
    - shmerl 12y ago
      So, USPTO grants an invalid patent, and patent troll uses it to shake down whoever they wish? I surely think it's illegal. If there is no law which makes it so, there should be one. I'd say even if the patent is valid, one can't use shakedown methods like "pay up or else". Patent trolls even big ones like Microsoft for example use intimidation to squeeze money. Their tactic is clearly to use high cost of litigation to force everyone to settle outside of court. I.e. it can go like this. A troll comes to some company and says: "Nice business you have here, it would be a pity if anything happens to it. Pay up or else". Company answers: "We'll fight to invalidate your patents". Troll says: "So what, we have tons more we can pull out, you don't have money to fight to invalidate them all, so better pay up". Whether they are valid or not such practice should be illegal because it's not any different than criminal shakedown. >It sounds like you don't like what you see, and you want to find something in the law to use against them. Indeed. I'd prefer them to be persecuted as racketeers, because they are such. I agree that if the law doesn't cover such case it should be fixed.

reallycurious 12y ago

This feels like the scene in Godfather where Michael Corleone walks into the restaurant washroom, comes out with a gun and gets his vengeance.

cbasoftware 12y ago

I hope one of these companies takes the troll to the very end and gets their money back from the scum bags (excuse me attorneys) at the head of the troll. That will stop this very quickly and completely. Then this embarrassing history of patenting software can come to its logical end. If any piece of software should've/could've been patented it was the original OS. And, Bell Labs took care of that when they gave Unix to the public domain. Ditto for the original BIOS. When IBM didn't bother to defend it that option was over too.