In recent months, Delaware-based U.S. District Court Judge Colm Connolly started an inquiry into some patent trolling companies that have filed dozens of lawsuits in his court. Last month, lawyers for the patent troll companies appealed to the U.S. Court of Appeals for the Federal Circuit, seeking to shut down the investigation.
Those events led EFF to file an amicus brief, in which we stood up for the public’s “right … to know who is controlling and benefiting from litigation in publicly-funded courts.” We filed this brief together with two other organizations that work with us on patent transparency issues, Engine Advocacy and Public Interest Patent Law Institute.
Today, the Federal Circuit accepted our brief, and denied the petition filed by patent troll Nimitz Technologies that sought to halt the investigation. The Federal Circuit panel called out strong language in Judge Connolly’s Memorandum explaining the concerns that led to his investigation (see p. 4):
The records sought are all manifestly relevant to addressing the concerns I raised during the November 4 hearing. Lest there be any doubt, those concerns are: Did counsel comply with the Rules of Professional Conduct? Did counsel and Nimitz comply with the orders of this Court? Are there real parties in interest other than Nimitz, such as Mavexar and IP Edge, that have been hidden from the Court and the defendants? Have those real parties in interest perpetrated a fraud on the court by fraudulently conveying to a shell LLC the [patent-in-suit] and filing a fictitious patent assignment with the [United States Patent and Trademark Office] designed to shield those parties from the potential liability they would otherwise face in asserting the . . . patent in litigation?
Later in its order, the Federal Circuit pointed about that these concerns are all within Judge Connolly’s purview and responsibility.
Unfortunately, the Federal Circuit made no comment about the critical issue of funding transparency. The question of where shell companies like Nimitz Technologies LLC get their money is critical—it’s at the heart of Judge Connolly’s inquiry, and similar concerns affect the thousands of defendants who get hit with patent infringement accusations every month. However, in not commenting on standing orders regarding third-party funding, the Federal Circuit also left untouched this positive and growing trend: federal courts are increasingly demanding litigation funding disclosures in patent cases.
We will keep EFF supporters informed about what comes out of the investigation in Judge Connolly’s court, as well as this issue more broadly.