Uniloc’s financing cope with setbacks in litigation with fortress spurs
Uniloc Luxembourg SA has suffered a number of losses in patent infringement cases after U.S. district courts ruled that a loan from a Fortress Investment Group subsidiary was in default – money Uniloc used to pay claims against Apple Inc. and other companies .
Uniloc’s most recent setback came last week when Justice Colm Connolly of the US District Court for the Delaware District dismissed an infringement suit against Motorola Mobility LLC.
Connolly noted that Uniloc was in default on the loan when it missed a revenue target imposed by Fortress. Since Uniloc had assigned rights to the patents to Fortress in the event of a default under loan terms, it had no legal position in the lawsuit, the judge said.
Neither “Uniloc Luxembourg nor Uniloc USA had any exclusion rights to the asserted patent at the time the action was brought,” wrote Connolly. “Accordingly, they lacked the reputation, and this court lacks substantive jurisdiction under Article III.”
Two judges in the U.S. District for the Northern District of California passed similar rulings last month, ending Uniloc’s claims against Apple and Google LLC. Uniloc has indicated in court files that it plans to appeal these decisions.
If the rulings persist, they could give fresh ammunition to other companies defending Uniloc’s infringement suits, lawyers said.
“I would be very surprised if we didn’t keep seeing these persistent arguments,” said Matt Warren, the founding partner of Warren Lex LLP in San Francisco, which represents technology companies in IP disputes.
Uniloc has been one of the most active filing patents in recent years. According to Bloomberg Law, it has been named as plaintiff in nearly 350 patent cases since early 2017.
Representatives from Uniloc and Fortress did not immediately respond to requests for comment.
The documents filed on the cases also shed light on the multi-million dollar funding agreement between Uniloc and Fortress Credit Co. LLC. Their partnership dates back several years, but many details were previously unknown.
As of December 2014, Fortress agreed to lend Uniloc up to US $ 26 million and acquire shares in Uniloc Luxembourg in order to receive a portion of future license revenues from Uniloc patents, court records show.
For security reasons, Uniloc granted Fortress a license in its patent portfolio with which Fortress could sub-license the patents. Fortress agreed not to use the license unless Uniloc defaulted on the loan, according to court documents.
A Fortress executive said in a statement to Apple’s attorneys that he understood the agreement, which was amended several times when Fortress loaned Uniloc additional money to include Uniloc’s entire patent portfolio.
Uniloc had to generate settlements, license fees and other patent payments of USD 20 million in the twelve months prior to March 2017 under loan terms. According to court records, Uniloc missed that target by $ 6 million.
Motorola and the other tech companies argued that Uniloc was behind schedule. Uniloc claimed that Fortress was happy with the monetization efforts and did not take the deficit as the standard.
“I never believed they were in default,” said James Palmer, director of the IP Finance Group at Fortress Investment Group, in a statement Uniloc filed with court files.
“But if for some crazy reason someone thinks they are late,” Palmer said in the statement, “I think I am pleased that we are actually implementing an additional amendment and giving them additional capital.”
Connolly said in his decision that the argument was not convincing.
“Fortress’ subsequent subjective beliefs regarding the Unilocs are of no moment;” The clear and unambiguous language of the agreement determines the outcome here, Connolly wrote in his decision.
Motorola had referred to a decision by Judge William Alsup on December 4 in the US District Court for the Northern District of California. He also noted that Uniloc was in default on the loan and said the default was not resolved when a lawsuit was filed against Apple.
Another northern district judge of California, Yvonne Gonzalez Rogers, dumped nearly a dozen cases on December 22 that Uniloc filed against Google after discovering that Uniloc had defaulted for failing to meet a sales requirement . Rogers also said Uniloc broke the agreement by not disclosing any challenges to the validity of certain patents.
Tools to use
The negative decisions could “massively disrupt Uniloc’s current litigation campaign,” said Jonathan Stroud, chief IP counsel at Unified Patents, a membership group that seeks to deter patent claims from non-practicing companies like Uniloc.
While Uniloc could try to fix the persistent problem and refine the suits, it has already “wasted a considerable amount of time and they could be hooked for a significant amount of money,” Warren said.
Warren noted that in a patent case, if a case is “exceptional” and stands out, the winning side may receive legal fees.
Companies that have patent validity issues with the US Patent and Trademark Office must identify other companies interested in the process. According to records, Fortress has not been named in patent litigation in the Apple, Google and Motorola cases.
There could be questions about patent licenses that Uniloc has concluded, Stroud said.
“In many of these cases, it gives the defense attorney many tools to use to challenge the structure and ownership of the patents that have existed,” Stroud said.
Uniloc has fought to block the publication of many documents in litigation. Last summer, the US Federal Circuit Court of Appeals upheld a ruling that denied the company the ability to edit certain documents in its cases against Apple.
On December 22, Alsup ordered the disclosure of additional documents, including documents with the names of dozens of Uniloc licensees and the dates and dollar amounts of the deals.
Uniloc had argued that disclosing this information would “cause great and unreasonable harm”. The documents remain sealed so that Uniloc has time to appeal the judge’s decision.