Green Sheet

he horror is over for the 11 companies sued by PanIP for patent infringement (Green Sheet, June 24, 2002, issue 02:06:02), but it has just begun for 10 more. Just a few days after an out-of-court settlement had been reached between the parties, PanIP attorney Kathleen Walker filed the second of what can only be assumed will be an ongoing wave of lawsuits.

Their alleged crime, same as the companies named in the first extraordinary lawsuit: Their Web sites are infringing on PanIP's e-commerce patents.

To review: According to documents filed with the Superior Court for the Southern California District, the patents involved in the alleged infringement were designed, developed and filed by an inventor named Lawrence B. Lockwood. U.S. Patent No. 5,576,951 was issued to Lockwood in 1996 for "automated sales and service system." Corresponding U.S. Patent 6,289,319 was issued to Lockwood in 2001 for "automatic business and financial transaction system."

PanIP (which stands for Pangea Intellectual Properties) is based in San Diego and was formed as a limited liability corporation in March 2002, the same month the original complaints were filed.

The defendants in the first lawsuit had vowed to fight to the bitter end. Why the change of heart? It all came down to money.

Jonathan Hangartner, a patent attorney for the San Diego law firm Liu & Liu and counsel for five of the original defendants, filed a motion to dismiss in June. While the exact details of the settlement are confidential, it has been learned that PanIP offered the defendants the opportunity to pay a much smaller licensing fee than the $30,000 per company that originally was demanded.

"Even though my clients were all working together to connect the dots and efficiently deal with litigation costs, those costs were still going to be substantial," Hangartner said. "For better or for worse, my clients agreed to settle, as have all other defendants who did not default."

What the defendants did not agree to was that they were in violation of the PanIP patents. However, they will be taking a license for those respective patents.

"My clients are pleased they don't have to deal with it anymore," says Hangartner. "They are somewhat conflicted because they don't think they've done anything wrong, but there is a reality of economics you have to face.

"I also believe PanIP will continue to sue. Their goal is to collect licensing fees. I don't know how they will continue their licensing efforts. They may have the same or different approach, but I think you'll be seeing it in some form."

Walker and PanIP officials did not return phone messages from The Green Sheet.

New PanIP Defendants

On Aug. 29, 2002, the following companies were named defendants in a lawsuit filed in Superior Court in San Diego:

• Katco Industries, Inc., Northport, N.Y.
• Right Ascension, Inc., Butler County, Pa.
• Bradford Publishing Co., Denver
• Bringe Music Center, St. Petersburg, Fla.
• Able Supply Company, Chicago
• Delasco Dermatologic Lab and Supply, Council Bluffs, Iowa
• DeBrand Fine Chocolates, Fort Wayne and Indianapolis, Ind.
• Advanced Battery Systems, Inc., Holbrook, Mass.
• Cherry Republic, Inc., Glen Arbor, Mich.
• Border Bob's, International Falls, Minn.