Non-Practicing Entity Sued Under RICO for Bringing Allegedly Frivolous Patent Infringement Cases

A company that has filed a series of cases alleging infringement of a patent has found itself named as a defendant sued under the federal Racketeering and Corrupt Organizations Act (RICO). The case, FindTheBest.com, Inc. v. Lumen View Technology LLC, et al., was filed on September 16, 2013 in U.S. District Court for the Southern District of New York (Civil Action No. 13-6521).

Lumen is alleged to be the exclusive licensee of a patent covering the computer-enabled process of matching two-party or multi-party preferences, in which two or more people enter preferences, rank them, and a computer uses an algorithm to find an optimal meeting point based on both preferences. In May, Lumen sued FindTheBest.com (FTB) for infringing the patent in U.S. District Court for the Southern District of New York. Along with the complaint, Lumen allegedly sent FTB a letter that offered to license the patent. FTB refused to settle, however, and filed an answer denying the allegations in the complaint.

FTB struck back by suing Lumen, the co-inventors on the patent, and other entities associated with them for violating RICO as well as abuse of process, malicious prosecution, extortion, and unfair competition under California law. FTB’s complaint alleges that the defendants do not use the patent in any commercial enterprise, but rather “bring serial lawsuits based on alleged infringement of these patents by legitimate businesses, like FTB, that use similar fundamental business-related concepts (but not the same concepts), even though they do not actually infringe” any patent claims. Court records show that Lumen has filed 21 infringement cases since March 2012.

The RICO complaint goes on to allege that the defendants act “together for the common purpose of extorting money from individuals and entities, including FTB, based upon false, objectively unreasonable, and baseless claims of patent infringement. Defendants entered into agreements with one another and formed a series of ‘shell’ entities for the purpose of filing frivolous patent infringement actions and extorting ‘licensing fees’ or settlements from FTB and others, who are the target of those infringement actions. Defendants bring their patent infringement lawsuits without probable cause, without conducting proper due diligence and investigation to have a reasonable belief of infringement, and without a good faith belief that their targets are infringing on the patent.” FTB then asserts that the defendants “use the legal process and the threat of huge legal expenses associated with defending a patent infringement lawsuit, threats of criminal prosecution, threats of disruption to the target’s business, and threats of public embarrassment to extort ‘licensing fees’ or settlements from their victims in exchange for a dismissal of the frivolous patent infringement suit.” 

FTB’s complaint seeks unspecified treble damages and injunctive relief.

Defendants in patent infringement cases often assert that the litigation is a “sham” and assert antitrust counterclaims. Filing a RICO claim against non-practicing entities based on alleged sham infringement claims is a new development, one that others may attempt to duplicate.

A copy of the complaint has been posted here.

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A company that has filed a series of cases alleging infringement of a patent has found itself named as a defendant sued under the federal Racketeering and Corrupt Organizations Act (RICO). The case, FindTheBest.com, Inc. v. Lumen View Technology LLC, et al., was filed on September 16, 2013 in U.S. District Court for the Southern District of New York (Civil Action No. 13-6521).

Lumen is alleged to be the exclusive licensee of a patent covering the computer-enabled process of matching two-party or multi-party preferences, in which two or more people enter preferences, rank them, and a computer uses an algorithm to find an optimal meeting point based on both preferences. In May, Lumen sued FindTheBest.com (FTB) for infringing the patent in U.S. District Court for the Southern District of New York. Along with the complaint, Lumen allegedly sent FTB a letter that offered to license the patent. FTB refused to settle, however, and filed an answer denying the allegations in the complaint.

FTB struck back by suing Lumen, the co-inventors on the patent, and other entities associated with them for violating RICO as well as abuse of process, malicious prosecution, extortion, and unfair competition under California law. FTB’s complaint alleges that the defendants do not use the patent in any commercial enterprise, but rather “bring serial lawsuits based on alleged infringement of these patents by legitimate businesses, like FTB, that use similar fundamental business-related concepts (but not the same concepts), even though they do not actually infringe” any patent claims. Court records show that Lumen has filed 21 infringement cases since March 2012.

The RICO complaint goes on to allege that the defendants act “together for the common purpose of extorting money from individuals and entities, including FTB, based upon false, objectively unreasonable, and baseless claims of patent infringement. Defendants entered into agreements with one another and formed a series of ‘shell’ entities for the purpose of filing frivolous patent infringement actions and extorting ‘licensing fees’ or settlements from FTB and others, who are the target of those infringement actions. Defendants bring their patent infringement lawsuits without probable cause, without conducting proper due diligence and investigation to have a reasonable belief of infringement, and without a good faith belief that their targets are infringing on the patent.” FTB then asserts that the defendants “use the legal process and the threat of huge legal expenses associated with defending a patent infringement lawsuit, threats of criminal prosecution, threats of disruption to the target’s business, and threats of public embarrassment to extort ‘licensing fees’ or settlements from their victims in exchange for a dismissal of the frivolous patent infringement suit.” 

FTB’s complaint seeks unspecified treble damages and injunctive relief.

Defendants in patent infringement cases often assert that the litigation is a “sham” and assert antitrust counterclaims. Filing a RICO claim against non-practicing entities based on alleged sham infringement claims is a new development, one that others may attempt to duplicate.

A copy of the complaint has been posted here.