Over the past two decades, the term “patent troll,” or the more politically correct “NPE” (i.e., non-practicing entity), has become aligned with no company more than Intellectual Ventures (“IV”). However, in the past few years, IV has appeared to shift its focus from litigating its patents in court to investing in research-based efforts such as Intellectual Ventures Lab, Global Good, and launching a number of spinout companies built on IP generated from its Invention Science Fund. Reflecting this shift, the number of patent matters filed by IV in Federal Court has drastically dropped. For instance, back in 2017, IV filed over a dozen lawsuits against various companies asserting patents in its portfolio. However, in the last year, IV filed only a handful of lawsuits, all directed to one company – VMware. VMware is a virtualization and cloud computing company. In particular, VMware allows multiple virtual machines to be run on the same physical server using hypervisors. This allows each virtual machine to then run its own operating system.
In its Complaint, IV asserts that VMware’s products and/or services that infringe its patents include at least vSphere, ESX/ESXi, Horizon/View, Horizon Client/Horizon HTML 5 Client, vCenter Server, Connection Server, vMotion, and vSan, VMware NSX and SD-WAN by VeloCloud. In particular, IV asserts five different patents in its Complaint filed in March 2020 (US6816464, US7016963, US9092546, US9338217, and US9686378). As an example, US9338217 (“the ‘217 patent”) generally relates to the concept of distributing computational power on a wide area network (“WAN”) in a manner that maximizes efficiencies and reduces costs. In particular, the ‘217 patent permits a computer system to be run as a virtual machine through a web page provided at a web site to allow computing functionality to be distributed across a WAN.
In its Complaint, IV discusses the ‘217 patent in a way that focuses on how it provides “a technical solution to an unsolved technical problem.” Other phrases used to discuss the ‘217 patent include that the claims have “non-conventional and non-generic ordered combination” of elements. This language is a clear attempt to couch the patent and claims in a manner to overcome assertions that the claims are directed to unpatentable subject matter under 35 U.S.C. §101. Introducing these concepts in the Complaint, IV appears to be attempting to preempt any arguments by VMware related to the patent being invalid under Section 101.
Introducing these preemptive Section 101 concepts in the Complaint is an interesting strategy because Section 101 is often used in a Rule 12(b)(6) motion to dismiss a matter early in the case by invalidating the claims as being directed to ineligible subject matter. A Rule 12(b)(6) motion occurs very early in litigation, making it a preferred approach by many defendants due to the avoidance of costs associated with patent litigation. Additionally, introducing these preemptive Section 101 concepts appears to play into the presiding judge’s opinion of early dismissal under Section 101. In particular, the presiding judge — Judge Alan Albright — has issued recent rulings that indicate a preference to not dismiss a matter under Section 101 in a Rule 12(b)(6) motion. Instead Judge Albright appears to prefer to wait until after claim construction in a “Markman Hearing” to evaluate claims under Section 101 (e.g., Judge Albright made a ruling like this back in September 2019 in Hammond Development International v. Google before Hammond even filed its Response to Google’s Rule 12(b)(6) motion).
Related to Markman Hearings, last year IV had filed another matter against VMware asserting a different set of patents (US7949752, RE42726, RE43051, RE44686, and RE44818). Of interest, when IV filed its second matter against VMware, the first matter IV had filed against VMware was on the verge of the Markman Hearing (which took place on 5/14/2020) that will determine the claim construction of the asserted patents in the matter. It was during the briefings for the Markman Hearing that IV filed this second matter against VMware in March 2020. It could very well be that IV filed this second matter asserting the additional five patents against VMware to strengthen its negotiating position in an attempt to encourage settlement. Following the completion of claim construction, it will be interesting to see what subsequent motions are filed by VMware and/or IV in these two lawsuits (or if the parties instead decide to settle).