Non-practicing entity slammed by CAFC

Tech Dirt reports that in Eon-Net LP v. Flagstar Bancorp, the Court of Appeals for the Federal Circuit found against Eon-Net, a non-practicing entity, saying that the lawsuit had the “indicia of extortion,” and fined the lawyers under Rule 11 for filing lawsuits with the intent to harass. The district court had found Eon-Net acted in bad faith by exploiting the high cost to defend against the infringement accusation to obtain a settlement from Flagstar. At the time, Eon-Net had filed over 100 lawsuits against a number of defendants; each complaint was followed by a “demand for quick settlement at a price far lower than the cost of litigation.”

The court also allowed the district court's award of $141,984.70 for Rule 11 violations and another $489,150.48 in attorneys' fees.

Separately, the court joined the NPE argument, noting, “As a non-practicing entity, Eon-Net was generally immune to counterclaims for patent infringement, antitrust, or unfair competition because it did not engage in business activities that would potentially give rise to those claims.”

USSC Justice Kennedy earlier alerted trial courts to what was happening in a cautionary note in eBay Inc. v. MercExchange, LLC, “in cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder [referring to NPEs] present considerations quite unlike earlier cases.” It appears someone listened.