Wednesday, May 16, 2012

Facebook exposes Yahoo allegation of fraudulent patent application as bogus

I normally don't report on Yahoo v. Facebook on this blog, with only one exception so far. This post is a second exception because something that just happened in that case is nothing short of astonishing from the point of view of a patent litigation watcher and represents a major embarrassment not only for Yahoo but to an even greater extent for Quinn Emanuel, a top-notch law firm that Google and leading Android device makers (Samsung, Motorola, HTC) rely on all the time. I have repeatedly expressed my admiration for the work QE does for the Android camp in the United States and in Germany, though I disagree with its approach to standard-essential patents (which has already resulted in formal EU antitrust investigations of two of its clients). But what I just learned about looks like a big-time blunder.

Yahoo claimed that two of the ten patents over which Facebook brought counterclaims against Yahoo were unenforceable due to "inequitable conduct" (i.e., fraud) in connection with a patent application from which those two patents were derived.

The short version, in one paragraph, is this: Yahoo alleged that the inventor and his patent attorney deceived the patent office by saying they provided, without ever actually providing, a sworn declaration by someone who should either have been named as another inventor or have declared under oath that he wasn't an inventor, even though he was erroneously listed as one at an early stage of the application process. But the fact of the matter is that this declaration was provided, and it had been in the record all the time -- Yahoo's lawyers alleged deception when they simply failed to do their job. Facebook obtained the record and provided it to the court, and in the process found out that nobody had even accessed (!) the record before.

Here are the details:

The relevant patents-in-suit are U.S. Patent No. 8,005,896 and U.S. Patent No. 8,150,913. Both cover a "system for controlled distribution of user profiles over a network and are continuations of U.S. Patent No. 7,003,546 on a "method and system for controlled distribution of contact information over a network". Facebook acquired the '896 and '913 patents as per an agreement dated February 1, 2012 (according to the assignment records).

The first of two elements of Yahoo's fraud theory is that the named inventor of those patents, Chris Chea, and/or his patent attorney, C. Douglass Thomas, intentionally failed to disclose a second inventor, Joseph Liauw. Yahoo's lawyers found out that Mr. Liauw was named as a second "independent inventor" in U.S. Provisional Patent Application No. 60/104311, but not in the subsequent patent application that resulted in in the grant of the '546 patent, from which the '896 and '913 patents were derived.

Yahoo's April 27 counter-counterclaims (counterclaims to Facebook's counterclaims) cite applicable statutory law, according to which an inventor's name can be dropped only on the basis of an affidavit (a sworn statement in writing, which in this case basically has to say that someone was originally named as an inventor due to an error), and state that "without an affidavit from Mr. Liauw, the '456 application could not have issued as a United States Patent". That's right -- but they did file that affidavit. It was in the record all the time. Yahoo notes that the inventor and his patent attorney had told the patent office that the required declaration was submitted in a copy from a prior application, and then alleges that "[t]his was false and deceptive, because no Oath or Declaration by Mr. Liauw was ever submitted". But Facebook has now shown that this declaration had been in the record all the time.

Here's the relevant passage from Yahoo's counter-counterclaims (red underlinings are mine; click on the image to enlarge it):

Facebook now brought a motion to strike (available here) the inequitable conduct claim, and as an exhibit to that motion, provided the complete "United States Patent File History", which includes, on page 123 of that PDF, the following document (click on the image to enlarge):

The affidavit was signed on June 1, 2001, and received by the USPTO on July 9, 2001. It was discoverable for a decade before Yahoo claimed "deceptive" conduct.

Why didn't Yahoo's lawyers find it? Because they apparently jumped the gun, accusing Facebook of fraud instead of requesting the relevant file history. Here's an interesting passage from a declaration filed in support of Facebook's motion by Cooley partner Heidi L. Keefe (red underlining is mine; click on the image to enlarge):

Nobody even requested the file history before Facebook's lawyers did so after Yahoo brought its allegation of "inequitable conduct"...

Oddly, Yahoo accused Facebook of not acting in good faith when it brought its own counterclaims:

"On information and belief, Facebook failed to perform a good faith investigation into its counterclaims prior to asserting them in retaliation against Yahoo! For example, as described more fully below, Facebook purchased and asserted patents tainted by inequitable conduct. Furthermore, Facebook asserted its newly-acquired patents against aspects of Yahoo!'s products for which there is little to no publicly-available information. Unless Facebook has unlawfully acquired Yahoo! confidential business information, Facebook could not have developed a good-faith basis for many of the infringement allegations in its counterclaims."

It now appears that Yahoo, not Facebook, "failed to perform a good faith investigation". And while Facebook may have had "little to no publicly-available information" to rely on in connection with how Yahoo's servers operate (a separate issue I'm not going to digress into here), the patent file history that Yahoo failed to look up was publicly-available (on request).

This is astonishing.

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