Cisco suits claims Innovatio used fraud to con Wi-Fi clients

California’s Cisco Systems Inc. has joined Motorola Solutions Inc. and Netgear Inc. in an intellectual property claim against a business the companies accuse of extortion and, by association, the crime of racketeering. The plaintiffs say Innovatio IP Ventures LLC pelted its Wi-Fi customers with “threatening” letters pressuring clients to pay for patent licensing agreements.

Innovatio is a “non-practicing entity,” known as a patent troll that buys patents simply to own them without using them to create services or products. In the past, NPEs typically confronted companies like Cisco in court. Cisco’s complaint said Innovatio’s 8,000 letters to retail Wi-Fi users were an extortion attempt. Officials from Innovatio want a federal judge to dismiss the Cisco claim.

Mosaid Technologies Inc. is an NPE named in a similar but separate lawsuit. Cisco said Mosaid paid witnesses to testify against Cisco last year in an infringement suit before the U.S. International Trade Commission.

Companies like Mosaid and Innovatio typically buy patents to receive money from lawsuits or licensing agreements. NPE defenders say the companies are protecting low-budget inventors. Apparently Innovatio’s patents were once the property of chip manufacturer, Broadcom Corp.

Technology companies say patent trolls, or patent monetizers as they are sometimes called, have inundated courts with useless lawsuits purely to seek a profit through litigation. Intellectual property analysts say NPE patent infringement lawsuits climbed from 22 to 40 percent between 2007 and 2011.

Going after customers of technology companies has been a strategy used by NPEs for several years. Normally, the smaller business owners are cowed by the threat of legal action and quickly agree to enter into licensing contracts.

Despite the enormous costs of litigation, Cisco is moving forward with claims against Innovatio backed by two companies who can share the legal debt. Intellectual property experts say Cisco and its co-plaintiffs will have a hard time proving to a court that Innovatio tried to mine licensing agreements through “fraudulent” means.

Source: online.wsj.com, “Cisco Calls Patent Trolls Racketeers,” Ashby Jones, Nov. 11, 2012