Just sending out batches of letters claiming infringement and demanding money may no longer be a workable business plan:

Based in the British Virgin Islands, Eon-Net is run by an evangelical minister-cum-inventor, who holds several patents (including one on a device for collecting “canine waste”). In March 2005 the company filed a patent suit in New Jersey against Flagstar, a $16 billion savings bank based in Michigan. The bank was one of 32 companies sued separately by Eon-Net for infringing a patent that, the company claims, covers technology that allows online shoppers to enter information into Web sites and have it transferred to the Web retailer’s computer. Eon-Net, which also has pending litigation against JetBlue Airways and Liz Claiborne Inc., had successfully extracted settlement money from ING Bank and Sony Corp. over the same patent.

Eon-Net’s enforcement method involved filing a complaint followed by a letter offering a settlement ranging from $25,000 to $75,000.

Flagstar decided to fight the suit, and its attorney, Melissa Baily of Quinn Emanuel, noticed that Eon-Net’s lawyers “had used nearly identical complaints and demand letters in all 32 suits,” suggesting a lack of careful advance investigation. Although Rule 11 sanctions are especially hard to obtain in the Ninth Circuit, Western District of Washington Judge Marsha Pechman agreed that the suit was both baseless and made without reasonable inquiry and, after ruling in favor of Flagstar on summary judgment in the case itself, ordered Eon-Net and its attorney, Jean-Marc Zimmerman, to pay the bank’s defense costs, estimated at more than $100,000. (Xenia P. Kobylarz, “Patent Trolls Put on Notice Over Generic Infringement Letters”, IP Law & Business, Dec. 14).

Filed under: Michigan, New Jersey, patent trolls, sanctions, technology