Racketeering claims against patent troll rejected

A federal judge has dismissed legal claims filed by a trio of networking companies against a licensing company they accused of illegally demanding Wi-Fi patent licensing fees from bakeries, hotels, cafes, and other businesses.

Cisco Systems, Motorola Solutions, and Netgear filed a complaint last year against Innovatio IP Ventures, which has sued about 20 businesses for alleged patent infringement because they had purchased and were using Wi-Fi equipment made by the plaintiffs. The complaint alleged that the patent assertion entity (PAE) sent 8,000 threatening letters to business in all 50 states in an effort "to defraud and extort illegal fees" and thus violated federal antiracketeering laws.

Also known as patent trolls, PAEs are created to extract licensing fees from other companies rather than make products based on the patents they hold.

However, in a ruling issued late Monday, U.S. District Judge James Holderman in Chicago held that Innovatio's petitioning activity was protected by the First Amendment.

"It is enough for now to determine that Innovatio at least has a plausible argument that its infringement claims are still viable," Holderman wrote in a 34-page ruling. "The licensing campaign is therefore not a sham."

The judge left intact claims against Innovatio that allege breach of contract in regards to agreements the companies made with previous holders of the patents.

The percentage of patent infringement lawsuits filed PAEs has increased dramatically in the past few years. According to a study conducted last year by a patent law professor in California, about 62 percent of all patent lawsuits filed in 2012 up to December 1 were brought by PAEs. In 2011, about 45 percent of patent lawsuits were filed by patent trolls, while in 2010, about 29 percent of all patent infringement lawsuits were filed by PAEs.