Some IP Attorneys Look to Make Their Mark as Patent-Holders

Looking at a patent recently asserted against a client, Silicon Valley patent litigator Chris Graham had a moment of disbelief. The Dechert attorney saw that the named inventor on the patent, which was being used to sue online resume-posting sites like his client Monster.com, was an attorney he knew -- San Jose, Calif., lawyer Michael Powell, now an associate at Quinn Emanuel Urquhart Oliver & Hedges.

"When I saw the patent," Graham says, "I said, 'Michael D. Powell -- well, that's probably just a coincidence.'"

It wasn't. Powell is "following in the honorable footsteps of that guy at Fish," says Weil, Gotshal & Manges patent litigator Matt Powers, his voice low and sarcastic. Powers knows Powell because the younger lawyer had worked as a litigator at Weil before joining Quinn Emanuel. "[Powell] certainly never mentioned [the patent] to me," Powers adds.

"That guy at Fish," of course, is who was Inc.

But Harris is not alone. Other lawyers are also inventors who, having seen the fortunes earned by small patent-holding companies, have decided to play the patent litigation game as a principal, not just an adviser. At least 10 law firm lawyers have filed lawsuits to protect their own "inventions" in the past few years, even as critics denounce active patent enforcers as "patent trolls." The plaintiffs' claims are broad, and several have sued entire industries; some have done so as they continue to work at top-name law firms. Law firms seem to have been caught flat-footed by this turn of events: They have systems in place to avoid conflicts of interest or even the appearance of such conflicts when it comes to client matters, but they have not routinely required IP attorneys to disclose any patents they own or litigation they are pursuing as individuals.

Dechert's Graham, for one, holds no grudges against Powell for running a side business. "He's a bright guy, and a nice guy," says Graham. "The patent is interestingly written." His client, he adds, doesn't infringe it.

Powell's patent application was filed in December 1999, one month after he was admitted to the California Bar and about six months after his graduation from both University of California at Berkeley's Boalt Hall School of Law and the Stanford Graduate School of Business. The 69-page patent application describes an online marketplace for selling ideas, in breathless terms. "The present invention allows what no previous commercial system has ever achieved -- instantaneous access to the collective innovation of the global community," Powell wrote. Powell started an Internet business called PitchWare Inc. By the end of 2001, PitchWare's Web site disappeared, as the company, like hundreds of others, succumbed to the dot-com bust.

But while e-commerce companies often died quietly that year, their patents were made of hardier stock. Powell continued his back-and-forth with the Patent and Trademark Office for years, ultimately receiving a patent in May 2006. Two months after getting the patent, he left Weil Gotshal.

In April 2008, while working at Quinn Emanuel, Powell had PitchWare file a lawsuit against seven defendants that is currently pending in the U.S. District Court in Oakland, Calif. In addition to Graham's client Monster.com, Powell sued Career Marketplace Inc., CareerBuilder.com and three of CareerBuilder's four parent companies: Microsoft Corp., Gannett Co. and McClatchy Co. Notably absent from the list is the fourth owner, Tribune Co., another newspaper heavyweight that happens to be a Quinn client. One of Powell's current targets, Microsoft Corp., is a premier client of his former employer, Weil Gotshal. The firm confirmed that Powell worked there from 2004 until the middle of 2006, but declined to elaborate on the nature of his departure.

Powell's litigation is low-cost. The signature on the PitchWare complaint is that of Kirsten Powell, Michael Powell's wife and the part-time attorney of Monte Sereno, a tiny San Jose suburb.

While Powell was proud of his online marketplace when it was a dot-com hopeful, today he's got nothing to say about it, at least in public. Both Powell and his firm declined to answer any questions regarding Powell's patent, the PitchWare lawsuit, firm policies concerning lawyers with patents or potential conflicts.

Powell's "online idea marketplace" was alive for only a year. But other lawyers asserting their own patents haven't attempted to bring any product or idea to market at all; instead, after setting up a company to hold the patent, they either file lawsuits immediately or send out letters demanding license fees from their targets.

An electrical engineer with a master's degree from Case Western Reserve University, Irah Donner is now a partner at Wilmer Cutler Pickering Hale and Dorr. Shortly after getting his law degree at Case Western, Donner began building a group of patents with claims covering car entertainment arrangements with different systems in the front and rear: for example, a radio in front with DVD video in back.

Donner was struck by inspiration when his young child stuck gum into the family's car stereo, breaking the CD player, explains Nicholas Patton, a lawyer with Texarkana, Texas-based Patton Tidwell & Schroeder, who has litigated to enforce Donner's inventions. "He thought to himself, wouldn't it be neat if I could set up a separate system that played simultaneously in the rear of the vehicle?" says Patton. "There were other systems in cars, but they weren't apparently prior art to what he came up with." When Patton first heard that the named inventor on the patent was an IP lawyer, he says, "I thought, 'what in the hell is this?' But by God, he knows what he was talking about."

Beginning in 2002, while at Hale and Dorr before it merged with Wilmer, Cutler & Pickering, Donner sued several car companies, car dealerships, Delta Airlines Inc. and Target Corp. In the Delta case, the airline paid Donner an undisclosed sum to settle his allegations that its in-flight magazine had induced infringement of his patent.

By late 2004, Donner said during a deposition that he had earned $400,000 to $500,000 by asserting his patents; that was before settling with industry heavyweights like Honda Motor Co. and Bentley Motors Ltd. Court documents show Donner also sold licenses to Ford Motor Co., DaimlerChrysler AG, Toyota Motor Corp., auto parts maker Delphi Corp., and car electronics manufacturers Visteon Corp. and Clarion Corp. He also sued several car dealerships in Texas and Georgia, possibly to solidify his claims to sue in his chosen venues, the Northern District of Georgia and the popular Eastern District of Texas.

. It wasn't until the following year that Donner revealed his patents to the firm, after the firm received a subpoena; by then he was three years into his licensing campaign. Firm leaders quickly saw the potential for problems, says patent litigator William Lee, head of the firm's IP practice. "It was not a good situation for him or us to be in," says Lee. "We just decided that having him owning patents he was trying to license wasn't an ideal."

In the fall of 2005, after Wilmer learned of his activities, Donner sold his patents to Mobile Micromedia Solutions LLC, a company controlled by his Atlanta-based attorney Scott Wharton, a name partner at Atlanta-based Hill, Kretscher, and Wharton, the firm that had filed the infringement suits when Donner owned the patent. Mobile Micromedia continued to litigate over Donner's inventions, working with Nicholas Patton to sue General Motors Corp. and Nissan Corp. in East Texas. Those cases settled in June.

Before Delphi settled, it alleged in a counterclaim filed in 2003 that two diagrams and several columns of text in one of Donner's patents appear to be plagiarized from an earlier patent acquired by Bell Atlantic Network Services -- a client of the law firm where Donner was at that time, Lowe, Price, LeBlanc & Becker. Donner's partner Lee calls that counterclaim "quite weak," noting that the patent examiner was aware of the Bell Atlantic patent.

The possibility of being accused of copying is one reason that lawyers will find it "fraught with peril" to obtain patents on their own inventions, says . "There's a risk that you're taking what is really client information." Even if that's not happening, there's a risk of being perceived that way, he adds. "If you're copying the description of your invention from somebody else's invention, it suggests you're copying the idea too."

Wilmer has done work at various times for some of the same companies Donner sued, including Delphi, which settled with Donner in September 2004 -- just after the newly merged Wilmer got a contract to do an internal investigation for the auto parts company. DaimlerChrysler, a company that chose to accept a license to Donner's patents, was an IP litigation client of Hale and Dorr when Donner worked there.

Donner didn't respond to questions for this story. But he hasn't participated in any enforcement actions since 2005, and he has no financial interest in the Mobile Micromedia lawsuits, according to Lee.

But Donner, who has authored a major treatise on patent prosecution, continues to prosecute and win his own patents; he has a group of patents that make claims on instant-messaging, and received his newest patent this April.

Creating a blanket policy for lawyers and their personal patents is difficult for a firm heavy with IP lawyers who hold science degrees, Lee says: "We have 120 scientists throughout the firm, many of whom have postdocs and Ph.D.'s."

John Caracappa, a Steptoe & Johnson patent lawyer who defended car companies against both Donner's own company and its successor, declined to comment on Donner's inventions or litigation, but did note that the number of patent lawyers using their own patents for profit is on the rise. "We've all seen it develop as a trend," says Caracappa. "More and more patent attorneys are filing applications. They see that these patent trolls are making a lot of money, and they're missing out."

While some lawyers choose to leave their patents to stay in big-firm life, others have left their firm. Paul Hickman was a partner at Perkins Coie when he filed a lawsuit against ICON Health & Fitness, the giant fitness company that sells home exercise equipment under the NordicTrack and Reebok brands. Hickman, working out of Perkins Coie's Menlo Park, Calif., office, created a company called Cybergym which filed a suit against Utah-based ICON in November 2005 in the Eastern District of Texas, claiming ICON infringed a patent Hickman had won for a computerized personal trainer.

In February 2006 ICON filed a motion to transfer to either Utah or California, and identified Hickman as Cybergym's principal and a Perkins Coie lawyer. Two weeks after that motion was filed, Hickman was gone from the firm. Several days later, Hickman wrote in a declaration opposing the venue transfer that he left Perkins Coie "so that I could devote more time to building companies based on my inventions."

Hickman and his lawyers described the Cybergym lawsuit as the result of a business development deal gone sour; ICON attorneys characterized it as a simple matter of one more do-nothing company asking a big company to pay settlement money.

The East Texas federal judge didn't let ICON out of the district. Hickman added on other defendants who sold ICON exercise equipment, including Costco Wholesale Corp., Dick's Sporting Goods Inc., Sears Roebuck and Co. and The Sports Authority Inc.

The Cybergym case went to trial in October. Cybergym's lawyers, from Palo Alto, Calif.-based IP boutique Russo & Hale, asked the judge to bar the defendant's attorneys from using the term "patent troll" during the trial, and Judge David Folsom, one of three judges who handles most of the Eastern District's patent cases, agreed. On the fourth day of trial, the parties settled.

Now, Hickman runs his own IP-based legal shop, the San Jose-based TIPS Group. Perkins Coie declined to comment on Hickman's inventions, litigation, or the nature of his departure; nor would the firm allow his former colleagues in Menlo Park to be interviewed for the story.

Since then, Hickman has litigated his own patents against software makers who make programs allowing remote access of computers under the name Accolade Systems LLC, also in East Texas. Those patents have been asserted against Symantec Corp. and Citrix Systems Inc., and several smaller players.

Will there be growing pressure for law firms to at least monitor the personal IP litigation of their partners and associates? Chris Graham, the Dechert attorney defending Monster.com against Quinn's Michael Powell, won't criticize Powell for bringing the case, but admits that lawyers litigating their own patents "sounds kind of weird." Graham says he is mindful of the impression that can be made on the public when lawyers turn up behind shell companies that exist only to file lawsuits. "Lawyers have a trusted and special role in society," Graham says. "We have a responsibility to restrict our own activities."