Tuesday, January 23, 2018
Business

Miami company on a litigation spree using expired patent

TAMPA — Atlas IP is a Miami company incorporated in 2013 with just one asset on its books — Patent 5,371,734, nicknamed Patent 734.

The patent was issued in 1994 and describes one of the ways wireless networks communicate.

Here's the thing about Patent 734: It expired a month before Atlas' corporate birth.

What followed Atlas' acquisition of this patent was a litigation storm. In 2013, Atlas began suing medical device makers whose products used wireless technology, including cardiac monitors and insulin pumps. Atlas acquired the patent for $50,000, then sought $1.2 billion in damages from one medical device maker.

After no success suing those companies, Atlas launched a second wave of litigation, this time suing power companies, claiming their smart meter technology infringed on its patent. In January, Atlas sued TECO Energy subsidiary Tampa Electric, a suit that is still pending.

So far, Atlas has filed a total of about two dozen lawsuits in Florida and several other states, none successful yet.

Few will comment publicly about the cases, including TECO (which is now part of Emera Inc.), Atlas IP and Atlas' manager, Matthew Pasulka. But in court documents filed in several states, defendants have vigorously battled the patent infringement claims with some attorneys calling into question Atlas' decision to pursue what they consider frivolous litigation. In turn, Atlas vigorously argues its lawsuits are proper and that it is simply defending a valuable asset.

But a federal judge in Illinois said in a 2016 opinion dismissing an Atlas lawsuit against Commonwealth Edison, "In short, Atlas has brought a hopeless lawsuit of precisely the sort that the last decade's interpretation" of court rulings and federal rules "were intended to dispose of quickly and even to deter outright."

But Atlas is undaunted.

•••

Patent 734's father is Michael A. Fischer, one of the pioneers who helped lay the groundwork for the wireless revolution. Fischer, who could not be reached to comment, has up to 40 patents.

The title of the 43-page patent is rather prosaic: "Medium access control protocol for wireless network."

But when the patent was filed on Jan. 29, 1993, it described a new way for a wireless hub to connect and transmit information to additional "communicators," or devices so that they would not interfere with one another, while dramatically increasing battery life.

Apple used the patent in the 1990s, and several other companies licensed it.

Ultimately, inventors apparently found other ways allowing devices to communicate and Patent 734 languished. Eventually, it would be acquired by WiLAN Inc, a Canadian firm that licenses patents to more than 250 companies worldwide. Attorney Matthew Pasulka was the firm's president.

In late 2012 or early 2013, Pasulka decided to leave WiLAN, according to court records. To cover a $50,000 debt the firm owed Pasulka, he suggested a trade — a patent, rather than cash. WiLAN suggested Patent 734.

WiLAN had determined that the patent didn't justify litigation, according to testimony from one of its executives, so it was willing to part with it.

Pasulka testified that he did little prep work to evaluate Patent 734 before acquiring it.

"I really didn't do a lot of due diligence," he testified in 2016 in a case against Medtronic, a medical-device manufacturer with offices in South Florida. "I saw it as an undervalued asset."

Pasulka, who lists an Alabama address, declined comment to the Tampa Bay Times. "I think the universal comment from the company would be no comment," he said.

Just days after Atlas was incorporated in February 2013, it acquired the patent, which by then had expired. Soon, the company started filing patent infringement suits.

•••

A patent infringement lawsuit can be filed even on an expired patent,

"If people were using the patent while it was still in force, thy can still sue even if some years later and the patent's expired," said Jim Bessen, a lecturer at Boston University's law school who studies the economics of innovation and patents.

It's been a bumpy road for Atlas' litigation.

In 2012, the firm sued Medtronics in South Florida federal court after discovering a press release online that noted the medical company used a wireless chipset that would have used Patent 734's communications protocol.

Problem was, the deal to acquire those microchips fell through and no Medtronics product used them. But Atlas said it soon discovered an alternative infringement theory once it viewed evidence from Medtronics revealing more technical detail about how its products worked.

A judge in this case rejected the claim by an Atlas expert who estimated a damage figure of $1.2 billion, calling the number "plucked out of thin air." The judge later dismissed the case.

Other lawsuits have been no less successful, though appeals on some are pending. The manner in which the defendant's wireless devices communicate, lawyers have argued, is different from what the suits describe and the Patent 734 infringement theory is faulty. Atlas then began suing power companies, the suits often containing nearly identical language.

Lawyers for Centerpoint Energy Houston Electric called the suit against the utility "in substance a cut-and-paste job."

Lawsuits have been filed against the Denton County Electric Cooperative in Texas, Florida Power & Light in South Florida, the city of Naperville in Illinois, Texas-New Mexico Power, among others.

Atlas has argued in litigation that it has a good faith basis for believing its patent was infringed and that it has the right to legal remedies.

Bessen, the Boston University economist, acknowledged he knows nothing about Atlas IP and cannot speak to the merits of its litigation. In general terms, though, he said patent litigation costs U.S. companies billions annually.

While many patent infringement suits are valid, he said, there is nonetheless a growing concern in some industries about the costs of defending such litigation. Some, Bessen said, prefer paying a modest licensing fee rather than accumulate tens or even hundreds of thousands of dollars in litigation costs.

And the public, he said, pays the price.

"Patent litigation drives up prices and creates uncertainty on products. It can especially have a devastating impact on small businesses or startups."

Times researcher John Martin contributed to this report. Contact William R. Levesque at [email protected] Follow @Times_Levesque.

 
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