Judge orders patent troll to explain its ‘Mr. Sham’ to jury

Jurors to hear about ‘sham’ Texas company with one ‘sham’ employee

Patent troll Network Protection Sciences (NPS) first wanted to sue security vendor Fortinet in Texas because such litigants are as welcome there as the oil industry, yet even Texas wanted no part of this particular stinker so the case got booted to the United States District Court for the Northern District of California.

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And that's where District Court Judge William Alsup - he of Oracle v. Google fame -- rendered a decision that was likely less palatable to NPS than had he dismissed the suit outright: He ordered NPS to essentially teach the jury a course in Patent Trolling 101 by defending the dirty tricks that got the case tossed out of Texas.

Here are excerpts from the section of Judge Alsup's decision labeled "litigation misconduct," with the first passage referring to the fact that NPS may not have even owned the patent it was claiming Fortinet infringed upon until after NPS filed its lawsuit (a no-no, it seems).

First, this order finds that (NPS founders Rakesh) Ramde and (Wilfred) Lam and thus NPS were aware that NPS might not own the '601 patent back in 2010. NPS attempted to conceal evidence of the incomplete transfer through discovery stonewalling and obfuscation. NPS knew that it had signed the acceptance only 22 days after it filed suit against Fortinet. ... Instead of coming clean on this issue, NPS, Ramde and Lam tried to conceal it. ...

Second, this order finds that NPS manufactured venue in Texas via a sham. Ramde and Lam rented a windowless file-cabinet room with no employees in Texas and held it out as an ongoing business concern to the Texas judge. They also held out (building landlord Gregory) Cuke as its "director of business development" but this too was a sham, a contrivance to manufacture venue in the Eastern District of Texas.

To create the impression that NPS is something other than a patent troll, NPS and its principals have repeatedly made misleading statements to Fortinet and to the Court. ...

Third, two prior orders herein have already found that NPS has engaged in unreasonable and improper litigation behavior. One found that NPS asserted an unreasonable number of patent claims with the effect of multiplying the burden of litigation. It held that asserting more than 50 patent claims against Fortinet was "an unreasonable burden for NPS to place on its adversary." Despite this admonition, this behavior by NPS has continued in the form of sandbagging with newly-produced documents and infringement contentions that attack over 70 Fortinet products without supplying claim charts.

Despite this lengthy rap sheet - and a host of other issues -- Judge Alsup denied Fortinet's motion to dismiss the lawsuit. Instead he ruled that the jury should get to hear NPS defend the tactics it has employed.

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Here's a wildly entertaining excerpt from a subsequent hearing that was published in a blog post on the law news site JD Supra:

THE COURT (Judge Alsup): You're on the verge of losing this entire motion, and going to the Federal Circuit, with a lot of money against you. So if you want this to live to fight another day, you ought to listen to me for a moment. The best you can hope for is that the jury's going to decide this; but for the jury to decide the sham nature of this closet in Texas, they're going to have to understand why somebody would want to do this. So an expert is somebody you need to have explain it. This is going to be part of your case.


[COUNSEL]: No, Your Honor, it's not.

THE COURT: Well, then, it will be part of their case.

[COUNSEL]: Why is that relevant to the issue of patent infringement?

THE COURT: If we're going to try ownership here, and all of these issues about whether or not this guy was a sham, or not, the jury's got to understand the background of why it was or was not a sham.

[COUNSEL]: Well, Your Honor --

THE COURT: You're not going to be able to skate by, with -- beat this motion, and then get it somehow excluded at trial. For goodness' sakes.

[COUNSEL]: Well, how is it relevant to the issues that are at trial?

THE COURT: You've got to prove ownership. It's your burden.

[COUNSEL]: And you prove ownership by an assignment; not by -- not by showing --

THE COURT: It may not be valid, Counsel.

[COUNSEL]: But that will be resolved.

THE COURT: No, it's not going to be resolved. You're asking that it be resolved by the jury. I heard you say it a moment ago.

[COUNSEL]: No, Your Honor. I'm sorry.

THE COURT: Well, maybe now you're taking it back. It's on the record. I heard it. So on appeal you can make that point; but this jury is going to hear all of this stuff about the closet. And you're going to have to explain why "Mr. Sham" was signing these documents.

What does Fortinet think of the judge's decision? A spokesman tells me the company's legal team would have no comment, most likely because they haven't been able to stop laughing.

(Update, Oct. 2: Troll drops lawsuit rather than explain "Mr. Sham.")

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