CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

The NIRC reflects that 19 of the 30 claims made under the 246 Patent have been “confirmed and/or allowable”, while three claims have been cancelled. And the “final rejection” of the 867 Patent reflects that six of the ten claims under that patent have been “confirmed and/or allowable”, while two have been rejected and two have been canceled. As to the resulting status of the patents, we’re fairly certain that: (a) they still exist in some way, shape or form, but (b) they are not broader (and almost definitely are narrower) than when the second reexamination process began.

All of this provides us with a reminder (which we really didn’t need) that we are not patent attorneys. There is obviously much going on here, but we are not now in a position to try to explain it. (We expect to be getting with patent counsel in the near future to review all of these developments so that we can have a better handle on them.) But based on our experiences thus far in the MAD saga, we expect that these developments may cause MAD to begin another high-pressure outreach effort to sign radio stations up to patent license agreements. Because of that, we think it important to provide our readers with access to the underlying documents – the order from the Delaware judge and copies of the USPTO’s actions – so that they can review them first-hand and share them with their own counsel.

As we have repeatedly suggested in previous posts, radio operators would be well-advised to consult with their own patent experts before making any decisions as to how best to proceed. The PTO’s recent decisions will have to be carefully parsed to determine, among other things:  (a) precisely what aspects of MAD’s patents may remain; (b) whether any particular station’s facilities in fact can be said to infringe on what’s left of the patents; and (c) even if there may be some infringement, what the likely exposure would be if MAD were to sue for damages. Again, the area of patent law is complicated, as the March 25 developments plainly demonstrate. Before you try to tiptoe through the minefield, you’d best get yourself some expert advice from patent-savvy folks.

The complaints are rather simple, sparse even.  They identify each respective defendant, describe MAD’s two patents, and note that, in July, 2012, the USPTO issued a “Reexamination Certificate” confirming the validity of certain claims made in each patent.  According to each complaint, the defendant is infringing the patents and, despite DigiMedia’s repeated attempts (by mail, phone and email) to resolve the infringement, none of the defendants has “ taken a license to the ’867 and ’246 patents [or] provided adequate information detailing why no license is required”.   DigiMedia seeks the usual damages, with a request for “trebled” (damages multiplied by three) if appropriate, as well as an injunction preventing the defendants from utilizing the allegedly infringing technology.

You may be asking the same question we are.  Why are these cases being filed against these defendants just now?  As we said, we’re not patent attorneys, so we’re hoping that some actual patent attorneys might offer up their thoughts.

To the non-expert eye, DigiMedia’s timing is curious. When the USPTO issued its second reexamination order regarding the two patents in December, it looked like the end of the line for DigiMedia. Then they moved – again – to lift the stay that has stalled their Delaware lawsuit for more than a year, and the court there scheduled a hearing on that motion for March.  Could it be that there’s still some life in DigiMedia’s claims?

Or is there a reason that these defendants were singled out from all possible candidates around the country that have also refused to sign the licensing agreements that MAD and its cohorts have been pushing?   One theory: might these stations have been chosen because they are all located in an area under the jurisdiction of a federal court reportedly known for fast-track processing of patent cases. (That would be the U.S. District Court for the Eastern District of Texas, Marshall Division.)  Is this simply a last roll of the dice, a double down, an “all in” at the best table it could find?  Is MAD trying to get a quick win to revive its flagging campaign before they have nothing left in their wad? 

It does appear that they’re trying to move fast.  The choice of the Eastern District of Texas, with its reputed “rocket docket”, is one clue. Additionally, it looks like DigiMedia didn’t spent a lot of time on putting these complaints together.  As we said, they’re all pretty bare bones and identical to each other – so identical, in fact that the complaint filed against one defendant referred to that defendant with an abbreviation used for one of the other defendants, which suggests that the complaints may have been just a bunch of cut and paste jobs. 

What’s peculiar about the complaints is that they don’t mention the USPTO’s December, 2012 further reexamination of MAD’s patents. MAD clearly is aware of that reexamination – they have indicated that they intend to respond to it this month – so why DigiMedia would rely in its complaints on the USPTO’s reexamination action from last July but not say diddly about the more recent reexamination in December is something of a mystery. (Of course, the fact that the December action arguably gutted MAD’s claims might be one serious disincentive, but still, does DigiMedia really think that the court isn’t going to find out about that action sooner or later?)

Whether the latest flurry of lawsuits is anything more than a bluff remains to be seen. We may know more on that score when we get the answers to a few more questions, such as:

Will MAD sue anywhere outside the Marshall Division of the U.S. District Court in the Eastern District of Texas?

What will MAD produce in its response to the USPTO in the second reexamination proceeding that might finally convince the USPTO of the validity of MAD’s various patent claims?

Will the United States District Court for the District of Delaware lift the stay in the first lawsuit and, if so, what will it then do?

At a minimum, DigiMedia’s suits have gotten the defendants’ attention, and our attention, and probably the attention of other similarly situated, small- to mid-sized radio stations. Check back here for updates.

In a nutshell, MAD, a patent troll, acquired a couple of patents that had been issued back in the 1990s with respect to using computers to store and retrieve music files for broadcast. MAD then commenced a full-court press against much, if not most, of the radio industry. It claimed (often, it seemed, without any solid factual support) that broadcasters were using gear that relied on MAD’s patents. MAD generously offered to overlook any possible infringement that might have occurred . . . if, that is, the broadcaster would enter into a pricey licensing agreement with MAD.

Litigation ensued, as a number of the targeted broadcasters sued MAD in federal court in Delaware. They claimed that MAD’s patents were invalid. Meanwhile, at least one equipment manufacturer pressed the USPTO, which had issued the original patents, to take another look. The USPTO agreed to do so, at which point the court in Delaware stayed further proceedings in the broadcasters’ suit pending further USPTO action.

The USPTO initially appeared to rule against MAD in the fall of 2011, but MAD sought further review.  Last summer MAD seemed to be claiming victory when the USPTO appeared to un-toss some of MAD’s patent claims that had appeared to have been tossed in the 2011 action. With that new USPTO ruling in hand, MAD launched another round of FedEx-borne licensing offers (along with follow-up telephone sales pitches) to many radio licensees; it also asked the Delaware court to lift the stay.

Not so fast, said the broadcasters. Further USPTO proceedings were going to be sought, so let’s not be acting prematurely. And sure enough, such further proceedings were sought. The end result (at least as of now): the USPTO’s latest “Detailed Actions”, which appear to reject all of MAD’s claims. It seems that the patent examiners identified a number of technologies similar to MAD’s that had been in existence prior to the issuance of the patents MAD holds. In the examiner’s view, many aspects (possibly all) of MAD’s technology were simply obvious extensions of the earlier technology, and were therefore not properly patentable.

This, of course, is what the radio industry has been arguing from Day One. Not surprisingly, MAD has disagreed, claiming in a June, 2012 blog post of its own that its patents were valid. In that post, MAD also pooh-poohed its initial USPTO set-back (in fall, 2011), saying that such reexamination and reissuance of the patents was statistically normal and of little bearing on the patents’ ultimate validity and value.   (Personal note: in its blog post MAD even went out of its way to take issue with statements I had made in earlier posts here on CommLawBlog; I stood by my statements then and I stand by them even more now.) Whether MAD will continue to stick with this story in the wake of the USPTO’s latest action remains to be seen.

Is this the end of the line? Don’t bet on that. For one thing, we understand that MAD has until January 19 to respond to the USPTO’s latest decision. Following that date, the USPTO could either issue a “final action” formally rejecting MAD’s patent claims, or it could once again re-issue the patents. In the latter case, though, any reissued patents would likely be narrower in scope than they are today (which – and this is disputed by MAD in its blog post – are narrower than the original patents). No matter what, the reexamination procedure is likely to go on for some time – this is something no one disputes.  (Another thing that no one disputes -- we here at FHH are not patent lawyers.  We strongly encourage any radio broadcaster to consult with competent patent counsel before doing anything based on the USPTO's latest actions.)

Still, there’s no doubt that the latest development at the USPTO favors the broadcasters more than MAD. The passage of time and likely narrowing of the MAD patents will limit any eventual damage recovery MAD might get via court order or licensing agreement. So while the saga may not yet have come to its final end point, broadcasters can and should enjoy the end-of-2012 holiday season thanks to the early treat left under everyone’s tree by the USPTO – everyone, that is, except MAD.

While the mere raising of questions doesn’t rise to the level of final conclusions, we suspect that it can’t be a good sign for anybody hoping to rely on the patent subject to such questions. We’ll just have to wait and see how the further reexamination proceeding comes out.

When might that be? Not until early 2013, at the soonest – or so it would appear. According to the USPTO’s order, MAD has until October 21 (i.e., two months after the issuance of the order) to file a response, should it so choose. (It’s hard to imagine that MAD would choose not to respond.) And then, should it so choose, the party who requested the reexamination gets another two months after that to respond to anything that MAD lobs in. A quick glance at the calendar indicates that the pleading cycle would thus wrap up a couple of days before Christmas. Once you factor in some time for the USPTO folks to enjoy their holidays, read through the various submissions, and crank out a further order, you’ve got to figure 2013 is the magic number.

The reexamination order could also have an impact on MAD’s lawsuit in the U.S. District Court in Delaware. That litigation has been stayed since last year, when the USPTO announced its first reexamination of the MAD patents. Once the initial reexamination was completed this past spring, MAD promptly asked the court to lift the stay. That request is still pending (at least as of August 22). Now that the USPTO has cranked up the reexamination process relative to one of the MAD patents, the court may be more inclined to leave the stay in place. We shall see.

Check back here for updates.

[d]efendants and their industry appear to have taken a sophisticated and multi-pronged approach to derail [MAD’s] licensing program. Apparently through coordination with state and national broadcaster associations, the Defendants have engineered a licensing blockade, worked with BEI to attack the asserted patents in the PTO, and petitioned this Court to delay the resolution of this litigation pending multiple reexamination requests. Defendants’ conduct represents a calculated effort to prejudice [MAD] by stripping the asserted patents – which expire in less than two years – of their licensing value through delay.

“Sophisticated, multi-pronged approach”? “Calculated effort”? “Coordination”? “Licensing blockade”? Hoo, boy – why not “vast anti-MAD conspiracy”, too?  (Also, how come CommLawBlog wasn’t mentioned? As I have previously observed, MAD has identified us – and this blogger in particular – on its website as a source of “some misconceptions” about MAD’s “licensing program” and “ongoing litigation”.)

So, apparently frustrated by the fact that MAD’s target audience doesn’t seem to be buying what MAD’s selling, MAD ascribes that circumstance to some massive conspiracy. Of course, more obvious, and far less paranoid, explanations exist for the circumstances in which MAD finds itself.  MAD shouldn’t be surprised that parties which MAD has chosen to sue are defending against its claims. Nor should MAD be surprised that equipment manufacturers – who might be on the hook to their customers if MAD’s patents are as broad as MAD claims – are also contesting those patents in an appropriate forum.  And as the Delaware litigation clearly demonstrates, there is considerable disagreement about exactly what MAD’s patents cover and, thus, exactly what MAD has to sell.  Prudent businesspeople tend not to make five-figure commitments when it’s not clear what, if anything, they’ll be getting in return.

But we digress. With the filing of MAD’s reply, the ball is now in the judge’s court. Our understanding is that it could take as long as two-three months for the District Court to decide whether to lift the stay. Check back here for updates.

Among those readers was MAD itself, which has taken me, in particular, to task for supposedly failing to grasp some of the subtleties of its positions. Hey, as we’ve said before, we’re not patent lawyers, and we haven’t pretended to be. And that’s why we’ve tried to provide readers with direct access to various documents relevant to this whole deal, so that readers can make their own determinations.

Like a couple of weeks ago, when MAD asked the Delaware court to lift the stay on the proceeding there. We provided a link to MAD’s pleading. (That link might have come in handy for at least one MAD rep I spoke with, who had been assuring me that the stay had already been lifted. Oops.) And now the broadcast defendants have filed their response to MAD’s request. Here’s a copy for your late-night reading pleasure. We haven’t included the 150 (or so) pages of attachments, but if anyone is interested, we can get them posted, too.

At this point it’s hard to say who’s right and who’s wrong. But the broadcasters’ response sure seems to rebut a number of the points that MAD sales reps have been making (at least they made them to us, in a couple of phone calls we’ve had with them). The response addresses procedures at the U.S. Patent and Trademark Office, the likelihood of further modifications of MAD’s patent claims, the significance of modifications that have already been made by MAD, and MAD’s own conduct in the Delaware litigation. (For example, according to the broadcasters’ response, when asked to clarify its claims of infringement, MAD provided only vague general references to alleged use of computer hard-drive systems in connection with music storage, broadcast, and acquisition at their radio stations.)

Importantly, the broadcasters’ response directly contradicts things MAD states in its “clarifying the dialogue” document and things that MAD’s reps have said to us as they try to get our clients to sign MAD’s licensing agreements. It’s therefore enough to remind us all that we need to continue to learn more about these issues.

Where does this put us? The Delaware litigation remains on hold. MAD will have an opportunity to reply to the broadcasters’ latest pleading, and eventually the court will decide whether to let the case proceed or to keep it in abeyance. Either way there’s a lot of litigation left in that court, not to mention some potentially significant rulings yet to come from the USPTO. 

While the court and USPTO proceedings continue to swirl, individual broadcasters need to do as much as they can to clarify their individual situations. What is your tolerance for risk, given that there are likely to be several ups and downs before a final result? Can you smooth this bumpy ride by clarifying just what it is that MAD owns and, if so, do you need to consult with a patent attorney to do so? What sort of cover do you have in terms of indemnification from your software provider or insurance company? 

These and other questions are not of a one-size-fits-all persuasion. But they can’t be ignored just because they’re difficult, unnerving or even somewhat expensive to answer.

MAD’s motion is unremarkable, simply stating that the court has no reason to leave the stay in place since the USPTO has now effectively ruled on the patents. It asks the court to allow the lawsuit to go forward now, and to replace MAD with DigiMedia in MAD’s place, since MAD sold its interests in the patents to DigiMedia a couple of months ago. A court order is needed for all this because, according to MAD, the broadcaster defendants declined to consent to a lifting of the stay or a substitution of DigiMedia for MAD.

The broadcast defendants (according to MAD’s motion) understand that further steps are going to be taken shortly at the USPTO in an effort to invalidate MAD’s patents again. That’s why the broadcasters don’t think the stay should be lifted. MAD counters by arguing that the likelihood of such invalidation is effectively zero, so there’s no point to further delay. 

MAD’s motion does not go into any detail about its theory of the case. In particular, it does not explain why the defendants (or any other broadcaster, for that matter) should pay patent royalties even if MAD’s patents turn out to be valid.

What insights might we glean from the motion? First, it’s obvious that neither side is going to give any ground. Not that you’d expect either one to roll over at this point. But MAD will have to fight tooth and nail for every dime it might ever win.

More importantly, MAD’s motion reminds us not to get ahead of ourselves, and to try to keep ourselves as updated as possible from reliable sources. Knowing what the actual status of things is continues to be important.

We say this because we recently happened to speak with a MAD rep who was urging us to have one of our clients sign up with MAD. The rep told us that the court in Delaware had already lifted the stay. When we told him that the court’s docket didn’t reflect any such action – in fact, at the time of our conversation MAD hadn’t yet even asked for the stay to be lifted – the MAD rep backtracked pretty quickly and couldn’t get off the phone fast enough.

So to reiterate what we said yesterday, take everything MAD says with a grain of salt. Now is a good time to remember that old journalism adage: “If your mother says she loves you, check it out”.