Patent Troll’s Misconduct Won’t Kill Day in Court

SAN FRANCISCO (CN) - Despite noting strong evidence of litigation misconduct, a federal judge called for a trial to resolve an apparent patent troll's infringement suit.

"A dismissal for litigation misconduct is a severe sanction," U.S. District Judge William Alsup wrote. "The litigation misconduct is most troubling. But does it warrant outright dismissal? This is a close case."

The complaint by Network Protection Sciences alleges that network security company Fortinet infringed on its patent titled "Apparatus and method for providing a secure gateway for communication and data exchanges between networks."

Though NPS claimed to have been assigned the patent, the acceptance signature by its only employee, Gregory Cuke, is dated four days after NPS sued Fortinet, the court found.

"In the NPS signature block, Cuke's title lists him as NPS's director of business development," Alsup wrote. "Cuke now denies that he genuinely occupied such a role but agreed at his deposition that the signature was his own."

NPS was started by former attorneys Rakesh Ramde and Wilfred Lam. While it claims to be headquartered in Texas, Alsup pointed out that Cuke has admitted its office is "a tiny, windowless, file-cabinet room, without a phone or even chairs," containing only a single computer that Cuke "has never seen turned on."

"Fortinet contends that NPS has stonewalled during discovery in an attempt to obscure the deficiencies of the sale-and-assignment contract," Alsup wrote. "In 2011, NPS misleadingly answered an interrogatory that asked for the history of ownership of the '601 patent by omitting in its pithy response the date that NPS signed the contract. This was a significant omission."

Alsup opened the 14-page ruling by quoting an op-ed by Federal Circuit Chief Judge Randall Rader on rampant abusive patent litigation.

"The onslaught of litigation brought by 'patent trolls' - who typically buy up a slew of patents, then sue anyone and everyone who might be using or selling the claimed inventions - has slowed the development of new products, increased costs for businesses and consumers, and clogged our judicial system," Rader wrote. "Lost in the debate, however, is that judges already have the authority to curtail these practices: they can make trolls pay for abusive litigation. Judges know the routine all too well, and the law gives them the authority to stop it. We urge them to do so."

Finding Ramde and Lam "engaged in an extensive cover-up," Alsup rebuked NPS its omissions and misleading statements.

"First, this order finds that Ramde and Lam (and thus NPS) were aware that NPS might not own the '601 patent back in 2010," the judge wrote (parentheses in original). "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. Ramde was individually aware of these facts because he directed Cuke to sign the agreement through his assistant. Instead of coming clean on this issue, NPS, Ramde and Lam tried to conceal it."

He added: "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."

Alsup concluded that the case should go to trial, but he threatened sanctions if misconduct continues. "At this stage, the court is unwilling to impose a terminating sanction but may be willing to do so if the abuse continues," he wrote. "Attorney's fees caused by and traceable to the misconduct are likely to be imposed but that remedy will be held in abeyance to see how well both sides behave from here on out."

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