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

http://arstechnica.com/tech-policy/2014/09/lumen-view-gives-up-on-matchmaking-patent-cant-defend-it-under-new-law/

by kjhughes • 12 years ago

126 20 12 years ago

dthal• 12 years 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• 12 years 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• 12 years ago

But LLC's can be pierced under some circumstances. Why isn't this one of those circumstances?

JoshTriplett• 12 years 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.

darkarmani• 12 years 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.

dragonwriter2• 12 years 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

teachingaway• 12 years ago

If its a "fraudulent transfer" its a crime (or at least a "civil wrong").

- http://en.wikipedia.org/wiki/Fraudulent_conveyance

- 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.

dragonwriter2• 12 years 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• 12 years 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.

shmerl3• 12 years ago

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

jimiwen• 12 years ago

wasnt this one of the points the defendant wasted to make?

jeffdavis2• 12 years 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.

shmerl3• 12 years ago

But it wasn't legal, since the patent was fake. So it was racket.

reallycurious• 12 years 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• 12 years 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.

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

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