US judge says 'patent monetization' firm IP Edge may have broken law

Nov 27 (Reuters) - U.S. District Judge Colm Connolly on Monday referred Texas-based patent monetization firm IP Edge and its lawyers to the U.S. Department of Justice, Patent and Trademark Office and state bar regulators to investigate their conduct in a series of patent cases in Delaware.

Connolly said that IP Edge-backed patent plaintiffs Nimitz Technologies, Mellaconic and Lamplight Licensing concealed that IP Edge was the "de facto" owner of the patents and that their attorneys violated professional conduct rules.

Connolly said there was also evidence that France Brevets, an investment fund owned by the French government that shut down last year, had an undisclosed monetary interest in the litigation, and asked the Justice Department to investigate whether the failure to disclose it and other interested parties violated federal law.

The judge also referred IP Edge attorneys to the Texas Supreme Court for allegedly practicing law without authorization, which could lead to their criminal prosecution in the state.

George Pazuniak of O'Kelly & O'Rourke, who represented Nimitz, told Reuters that the plaintiffs' attorneys "had not done anything wrong or unethical or unprofessional," and that the issues were "thankfully being transferred to neutral bodies for consideration."

Representatives for IP Edge did not immediately respond to requests for comment on Monday, nor did attorneys Jimmy Chong and Andrew Curfman, who represented Mellaconic and Lamplight.

The plaintiff companies voluntarily dismissed their patent lawsuits last year. The patents covered a range of technology related to computers and cellphones.

A spokesperson for Bloomberg, one of the defendants in the patent cases, declined to comment. The other defendants, which included BuzzFeed and CNET, did not immediately respond to requests for comment on Monday.

Connolly had previously ordered all parties appearing in his court to disclose every "owner, member, and partner" and any third-party litigation funders. He specifically ordered Nimitz, Mellaconic IP and Lamplight to turn over relevant documents based on suspicions that they had tried to hide the involvement of IP Edge and its affiliate Mavexar.

Connolly said on Monday that the plaintiffs — all companies with "relatively unsophisticated" sole owners and no other employees — were shell companies created to shield self-described patent monetizer IP Edge from liability.

"The reality in these cases is that the de facto owner of the asserted patents — that is, the party that truly controls and profits from their assertion — is IP Edge," Connolly said, adding it had gone to "great lengths" to hide its role.

Connolly said that the companies' attorneys broke their obligation to give the plaintiffs their "undivided loyalty" by litigating at IP Edge's discretion.

"Their loyalty was not to their clients, but rather to IP Edge," Connolly said.

Connolly referred the cases to the Justice Department and Patent and Trademark Office to investigate whether IP Edge broke federal law or PTO rules by making false statements to a federal agency.

The cases are Nimitz Technologies LLC v. CNET Media Inc, Buzzfeed Inc, Imagine Learning Inc and Bloomberg LP; Mellaconic IP LLC v. TimeClock Plus LLC and Deputy Inc; and Lamplight Licensing LLC v. ABB Inc and Ingram Micro Inc, U.S. District Court for the District of Delaware.