Apple has agreed to pay $24.9 million to a "patent troll" to end a lawsuit over its Siri voice system, according to documents filed yesterday with the Securities and Exchange Commission. Publicly traded Marathon Patent Group, whose business is focused on patent licensing and lawsuits, will split the settlement cash with Rensselaer Polytechnic Institute (RPI), the New York technical university that provided the patents.
It's a big payment. Patent trolls, also called non-practicing entities or patent assertion entities, have lost power in recent years due to changes in case-law and new ways to challenge patents at the US Patent and Trademark Office. This recent settlement is a reminder that the era of the patent troll is far from over. And it's a reminder that the lure of big money from patent lawsuits continues to be a tempting draw for universities.
The two asserted claims of US Patent No. 7,177,798 describe a "method for processing natural language input," and was invented by Drs. Cheng Hsu and Veera Boonjing. At the time of invention, in 2000, Hsu was a professor of decision sciences and engineering at RPI, while Boonjing was a doctoral candidate at the institution. The patent's first claim describes processing language queries by using databases filled with "case information, keywords, information models, and database values." The inventors assigned it to the university, which is common, since many universities have rules requiring that faculty assign patents and dictate splits of any licensing revenues.
The lawsuit (PDF) claims that Apple's personal assistant feature, Siri, infringes the '798 patent because it "processes natural language" in a way described in the patent.
"Apple encourages consumers to use Siri as claimed in the ’798 Patent and, in fact, has entire webpages devoted to teaching consumers the benefits of using Siri to process natural language inputs, how to use Siri to process natural language inputs, and encouraging them to buy Apple products so they can use Siri to process natural language inputs," the complaint states.
RPI's tech transfer office decided to monetize the '798 patent, and it turned to one of the most successful, and controversial, names in the patent-trolling industry—Erich Spangenberg. Together with his wife Audrey, the couple controlled Dynamic Advances, a shell company they set up in Tyler, Texas. Dynamic sued Apple in 2012 in federal court, in the Northern District of New York. So far, Apple has been Dynamic's only target.
At some point, Dynamic Advances became part of Marathon Patent Group. Throughout 2013 and 2014, Spangenberg sold various patent-holding companies to Marathon, according to Marathon's 10-K filed in 2014. The deals entitled Spangenberg to cash as well as a cut of settlement proceeds. In 2014, the Spangenbergs owned 17.7 percent of Marathon's common stock.
Apple didn't respond to a request for comment about the settlement. For its payment, Apple will get a license to the '798 patent and a three-year covenant not to sue from Dynamic Advances.
Marathon's SEC filing says that about 50 percent of the settlement monies will go to RPI, the lawyers who prosecuted the case, and an unidentified earlier exclusive licensee, which could be another patent-assertion company like Marathon.
The notice also suggests there's continuing tension over the case between the university and the patent-assertion company it hired over the settlement. "Dynamic Advances believes RPI has unreasonably withheld its consent to the reasonable royalty rate set forth in the settlement agreement between Dynamic Advances and Apple, and that issue may have to be resolved in arbitration," the company states.
That could mean that the university wanted to hold out for more money, while the professional trolling company was perfectly happy with the $25 million.
The SEC statement also makes clear that Dynamic Advances is going to find other targets, as the company states that it "believes that other voice recognition products infringe the ‘798 patent."