Property, intangible

a blog about ownership of intellectual property rights and its licensing

You Can’t Just “Re-Form” a Plaintiff

Here are the facts:

  • Ness Stewart Irvine was a patentee.
  • Irvine assigned his patents-in-suit to InterAD Technologies, LLC.
  • InterAD assigned them to Zeroclick, LLC (“Zeroclick I”), the plaintiff, a Texas entity.
  • Zeroclick I sued Apple for patent infringement.
  • Erich Spangenberg, listed as the “governing person,” terminated the Zeroclick I entity.1
  • Non-party Granicus IP, LLC transferred ownership of Zeroclick I to Irvine.2
  • Irvine dissolved Zeroclick I and formed Zeroclick, LLC (“Zeroclick II”), a Texas entity.
  • Irvine assigned the patents-in-suit to Zeroclick II.

Irvine testifed that Zeroclick II was a “brand new” entity and that he was continuing the lawsuit filed by Zeroclick I. Zeroclick I served supplemental responses to Apple’s first set of interrogatories, stating:

On July 30, 2019, the sole member of Zeroclick, LLC transferred ownership in that entity to Dr. Nes Irvine, making him the sole member. Subsequently, Dr. Irvine dissolved the existing Zeroclick, LLC entity and reincorporated the entity (still Zeroclick, LLC) with a new operating agreement. Dr. Irvine further executed a confirmatory assignment of the patents-in-suit to the new entity.

Needless to say, Apple moved to dismiss for lack of standing.3

We’ll start with the plaintiff’s argument that Zeroclick I had been “reincorporated” or “reformed” into Zeroclick II. That’s not how it works.

Zeroclick I points to no evidence or authority to support its theory that Zeroclick I and Zeroclick II are the same entity. Further, Dr. Irvine’s own deposition testimony, and other documents submitted by Apple, contradict the notion that Zeroclick I and Zeroclick II are the same entity. See ECF No. 108-6 at 4-5 (Dr. Irvine’s deposition testimony stating that he created a “brand new company” also called Zeroclick, LLC); ECF No. 108-8 (operating agreement of Zeroclick II, stating that Zeroclick II was “formed” on November 6, 2019); ECF No. 107-8 at 2-4 (documents generated from the website of the Texas Office of the Comptroller showing that Zeroclick I and Zeroclick II have different taxpayer numbers, dates of registration, registered addresses, and registered agents). Accordingly, the Court cannot find that no standing defect exists on the basis that Zeroclick I and Zeroclick II are the same entity.

Failing in its claim that Zeroclick I and Zeroclick II were the same entity, Zeroclick I argued that the standing defect could be cured by substituting Zeroclick II as plaintiff. It doesn’t work that way either. The substitute plaintiff would have to have standing, but there was no evidence that Zeroclick II owned the patents either:

There is a gap in the chain of title with respect to the patents-in-suit that prevents the Court from concluding that Zeroclick II has sufficient exclusionary rights to be a plaintiff in this patent-infringement action. This gap starts when Zeroclick I was terminated in 2017, and ends in January 2020, when Dr. Irvine assigned the rights he purportedly had to the patents-in-suit to Zeroclick II. Zeroclick I has submitted no evidence to show what happened to the ownership of the rights to the patents-in-suit during that timeframe.…

Zeroclick I does not dispute that it was terminated in December 2017 pursuant to the Certificate of Termination filed with the Texas Secretary of State. Zeroclick I has submitted no evidence to show what happened to Zeroclick I’s assets, including the patents-in-suit, as a result of that termination.… The Court cannot simply assume, based on Zeroclick I’s arguments alone, that ownership of all rights to the patents-in-suit remained with Zeroclick I notwithstanding its termination in 2017, because Texas law, which applies to entities formed in that state, requires that the assets of a limited liability company be distributed to creditors and owners before it is terminated. There is nothing in the record to support the notion that Zeroclick I retained any of its assets, including ownership of the patents-in-suit, notwithstanding its winding-up and termination in 2017.

Moreover, even assuming that Zeroclick I owned the patents, and Irvine owned Zeroclick I (despite its termination by Spangenberg), Zeroclick I would have been the owner of the patents – but it was Irvine, not Zeroclick I, who assigned the patents to Zeroclick II.

Zeroclick I has 21 days to file a brief and evidence on the chain of title to the patents-in-suit.

Zeroclick, LLC v. Apple, Inc., Case No. 15-cv-4417-JST (N.D. Cal. Apr. 23, 2020).

Creative Commons License
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

  1. There just has to be so much more to this story. Why do you terminate the legal existence of the plaintiff in the middle of the suit and apparently walk away? If anyone has the back story please fill us in. 
  2. The opinion doesn’t give any more information about who on earth Granicus IP is and how it might have ended up owning Zeroclick I. But, Spangenberg. 
  3. This is after the parties have already been up and down the the Federal Circuit once on claim construction. 
Share Button

Leave a Reply

Your email address will not be published. Required fields are marked *