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Cascades Alleges Conspiracy Among Smart Phone Makers in Licensing Spat

Jan Wolfe | Excerpt from The Recorder

Big tech companies make no secret of their distaste for "patent trolls," or nonpracticing entities. Some pride themselves on refusing to settle meritless NPE cases, even if fighting costs more money. Now two godfathers of NPE litigation are accusing five leading tech companies of taking the war on NPEs a step too far.

An NPE called Cascades Computer Innovation filed a complaint in San Francisco federal district on Wednesday alleging that it's been illegally boycotted by five mobile device manufactures that use Google's Android operating system: HTC Corporation, LG Electronics, Motorola Mobility, Samsung Electronics, and Dell. The complaint, filed by Niro, Haller & Niro and Davis Wright Tremaine, also names RPX Corporation as a defendant. As we previously reported, RPX is an unusual patent-holding company that, in exchange for membership fees, gives companies access to a shared pool of patents they can use to defend against NPE suits.

According to Cascade's complaint, RPX hoped to license Cascades' patent portfolio on behalf of its 110 members, including the five Android partners named as defendants. RPX offered Cascades a "high seven-figure payment," the complaint alleges, but then terminated negotiations when at least one of its members supposedly refused to fund the deal. "After negotiations with Cascades ended, RPX and the other defendants conspired and agreed that none of them would separately negotiate with Cascades for a license and that all would act together to oppose Cascades' efforts," the complaint alleges.

As we reported last year, Cascades is the brainchild of Anthony Brown, a one-time Jenner & Block partner who pioneered the art of NPE litigation a decade ago through his company TechSearch. Lore has it an Intel Corporation in-house lawyer first coined "patent troll" to refer to Brown and his longtime lawyer, Raymond Niro Sr. of Niro Haller.

Since founding Cascades, Brown has been seeking licensing deals for about 35 patents he acquired from prolific inventor Boris Babaian, chief technologist at Elbrus International. Cascades alleges in its complaint that the five Android device manufacturers not only infringe on the Babaian patents, but also use their considerable market influence to deter others from doing business with Cascades. "My job is to help inventors, and this conspiracy is keeping me from doing my job," Brown told us.

"It would be an antitrust violation if the heads of these companies sat down together in a room and agreed not to deal with [Cascades]," added Brown. "Is it any different that they achieved the same result through RPX? We don't think so. That's really what this case is about."

Cascades alleges that, after RPX broke off negotiations, it tried approaching the individual device manufacturers with favorable licensing deals and got no response. "If they were really acting in their own self-interest, they would have taken those offers," says Niro, who brought the complaint along with three lawyers at his firm and Martin Fineman of Davis Wright Tremaine in San Francisco.

Cascade's complaint suggests Google had an interest in furthering the alleged boycott. "Google, who is also a member of RPX, benefits from the group boycott as well because it lessens the royalty burden on its Android operating system," the complaint alleges. "Google, like RPX, encourages others not to accept licenses under patents owned by NPEs."

RPX said in a statement that it can't comment on pending litigation.