Recent Case Reveals Effective Strategy for Responding to NPE Suits

A recent decision from the United States District Court of the District of Hawaii reveals an effective strategy for responding to non-practicing entity (NPE) suits and obtaining leverage early on in the litigation. This strategy takes into account the business model of some NPEs to name many (unconnected) industry players in one lawsuit and plead only bare allegations of patent infringement.

NPE Plaintiff Broadband iTV, Inc. named Oceanic Time Warner Cable, LLC, Time Warner Cable, Inc., Time Warner Entertainment Company, LP (“TWC”) and Hawaiian Telecom Inc. (HTI) as defendants in a single complaint, alleging that all four entities infringe U.S. Patent 7,631,336 (“the ‘336 patent”). The ‘336 patent is directed to the delivery of video-on-demand content over the Internet. The defendants took several actions in response to this suit.

First, TWC moved to dismiss Broadband’s inducement claim on the ground that it was insufficiently pled. In the decision, the court granted the motion, noting the complaint did not identify who the alleged direct infringers were. In addition, the complaint failed to include allegations that defendants knowingly induced others to infringe or specifically intended to encourage infringement by third parties.

Second, TWC moved to sever the claims against it from those against defendant HTI, arguing that the American Invent’s Act’s (AIA’s) misjoinder provision precludes naming in one complaint unrelated entities working independently to service different customers. The court granted the motion, reasoning that TWC and HTI were competitors and plaintiff had not alleged that they were either conspiring or acting in concert.

Finally, HTI filed a petition in the U.S. Patent & Trademark Office seeking Covered Business Method (CBM) review of the patent-in-suit, and moved to stay the case pending that proceeding. The stay motion will be heard in January 2015, and Broadband has 30 days to amend its complaint if it wishes to do so.

Gibbons will continue to monitor patent decisions of federal district courts to identify and report on effective strategies for defending against claims brought by NPEs.