New Twist in Engate Litigation
August 18, 2003 - As members are aware, in August 2001, a company called Engate filed a lawsuit in Chicago against six court reporting firms alleging infringement of patents the company holds on interactive realtime features. Three of the reporting firms remain in litigation, two have settled with Engate, and one was dismissed from the case. To date in the litigation, Engate's original 300 claims have been reduced to 26. The litigation has not yet reached the point in the process where the validity of the patents themselves have been considered by the court. Due to the complex nature of patent litigation, it is not likely to reach this point anytime soon.
Late in 2002, Engate expanded its efforts to enforce its patent claims by beginning to send letters to an indeterminate number of reporters throughout the country, threatening litigation if the reporter/firms did not agree to a licensing fee payment of $0.35 per page of realtime transcript. Several firms have settled; others are still assessing the most prudent steps to protect their interests. More than two dozen of the member firms that have received demand letters from Engate are participating in joint defense activities, under the auspices of NCRA.
NCRA has endeavored to keep the membership informed of developments in this important case, and has created a joint defense group for those member reporters facing "actual or threatened litigation" (e.g., those who are in litigation or have received the Engate demand letter and declined to enter into a licensing agreement).
[Background documents and earlier member communications on this matter can be found on the NCRA Web site.]
During the Member Business Meeting at the Reno Convention, NCRA Executive Director and CEO Mark J. Golden, CAE, provided an update on the Chicago litigation and other developments.
Of greatest interest to meeting attendees was an extremely new surprising development: LiveNote had announced that it had entered into an exclusive licensing agreement with Engate, covering its entire portfolio of current and future interactive realtime patents. LiveNote intends to implement a sublicensing system whereby attorneys and other users receiving a realtime feed will be charged a daily fee. This fee can be paid directly by the attorney/user receiving the realtime feed, or paid by the reporter and then billed to the attorney/user. Although the payment of the "token" initially will be done manually, on a so-called "honor" system basis, LiveNote is taking steps to implement modifications in its litigation-support software product that will allow users to prepay for a volume of tokens and have the fee automatically debited when a realtime feed is utilized. (Smart Tag and other electronic highway toll systems in use throughout the United States, where drivers prepay and their account is automatically debited every time their car passes a toll gate, offer a good analogy.) Once implemented within its software, LiveNote users will be blocked from receiving a realtime feed unless a token is paid. LiveNote has indicated it will sublicense and make this fee collection technology available to all manufacturers of litigation-support software.
Where the automated process is not available, the attorney or reporter may make instant payments for single tokens by phone, fax or via the Internet on LiveNote's Web site.
LiveNote states that the manual system will be in place by September 1, 2003. The automated system will be included in a free update to LiveNote's software, which will be available by January 1, 2004.
LiveNote states that it pursued this arrangement because it felt it was necessary for some industry-wide solution to be reached to eliminate the uncertainty created by Engate's claims and the threat of future claims. Its arrangement with Engate is intended to provide a safe harbor for those reporters who voluntarily choose to participate.
Impact on the Chicago Litigation
Engate offered to settle the Chicago litigation with each of the three court reporting firms if they would agree to utilize the LiveNote token system. None of the three remaining litigants accepted this settlement offer before the deadline dictated by Engate.
Accordingly, as of this writing, the Chicago litigation is proceeding. The three remaining defendants continue to dispute the validity of the patents and the claimed infringement.
NCRA is actively pursuing discussions with all the parties in the litigation as well as those involved in this new proposal in order to gather additional, authoritative information about these developments and to seek answers to the many open questions regarding the Engate/LiveNote proposal.
Toward that end, NCRA has today conveyed to LiveNote a list of questions that have arisen in members' discussions. These questions include:
Engate's patents claim rights to certain, specific interactive realtime features, not to the simple creation and delivery of a realtime feed. How will the token system differentiate between those realtime sessions that (allegedly) infringe upon the patented features and those outside the scope of the patents?
Engate has indicated that it will not waive its right to aggressively pursue claims against individual reporters and firms if it feels this token payment system is not being fully complied with. What assurance will reporters/firms who choose to use the "safe harbor" and make token payments have that Engate will not make audit demands or take other action to satisfy itself that all of the reporter's/firm's interactive realtime sessions are being accounted for?
What restrictions, conditions or limitations (if any) will govern future increases in the cost of tokens?
Will adequate systems, personnel and other resources be in place as of September 1 to assure that the purchase, registration and use of tokens will be a simple and undisruptive transaction?
Will adequate systems, customer service, technical service and other resources be in place as of September 1 to resolve technical problems, confusion and uncertainty that will certainly arise at deposition sites among court reporting clients who are unaware of this new fee arrangement?
What is the reporter's obligation if one or more attorney at a deposition refuses to participate in the token system or pay the fee?
Will Engate, in written and enforceable form, indemnify or otherwise assure reporters who elect to participate in the token system that they will not face threats of future claims of infringement of the Engate portfolio of patents?
Once the automated token payment system has been integrated into its product, will LiveNote indemnify users of its software against any future claims of patent infringement, by Engate or any other party?
LiveNote has indicated that token payments will not be required from court personnel, but will be required from attorneys receiving realtime in the courtroom. What steps are being taken and at what time will federal and state court rules be modified to permit this new charge to be collected in the courtroom setting?
LiveNote has indicated that realtime captioning, CART and courtroom personnel will not be required to make token payments. Will LiveNote and Engate, in written and enforceable form, confirm that they will not require licensing fees from these persons?
LiveNote has indicated the price of tokens could vary depending upon such factors as the quantity purchased. While such price differentials might be logical, how will the reporter be able to square such variations with their ethical obligation under NCRA's Code of Professional Ethics to be "fair and impartial toward each participant in a proceeding," including offering comparable services under the same terms and conditions to all parties?
Under what terms and conditions will the automated token collection technology that LiveNote is developing be made available to other realtime litigation-support software vendors?
Will LiveNote hold users of its own software to the same terms, conditions and pricing for the token system that it requires of users of other realtime litigation software?
How and when will LiveNote create awareness and understanding among the end users of its software of this new charge?
What happens to this proposal if the Chicago litigation is ultimately resolved in favor of the defendants? It should be stressed that this is a late-breaking and fast-developing topic. These are open questions, which may or may not be satisfactorily addressed in the weeks ahead.
Additional questions will certainly arise in the course of discussions. NCRA will endeavor to collect and circulate all such questions and any information answering or clarifying them, so that members can remain informed and make informed judgments.
What Members Should Do
All members should familiarize themselves with this matter and stay informed, in order to make their own independent and sound judgments on what actions (if any) are in their individual best interest.
NCRA is not a party to the LiveNote/Engate agreement and did not participate in its development. Neither NCRA, Engate, LiveNote, the Chicago litigants nor anyone else can decide for you whether or not this proposal is your own most prudent course of action. Each person and firm's circumstances and interests are unique.
Different parties may reach drastically different conclusions and hold widely divergent opinions on the future prospects for the Chicago litigation, the patents, and the LiveNote/Engate agreement. Accordingly, consider information from all sources before reaching any conclusions.
LiveNote gave a presentation on its proposal in Reno, and a video and transcript of that session is available directly from the company. NCRA is in discussions with the court reporting firms in the Chicago suit to get a further update on the litigation and their assessment of the situation. As we get responses from LiveNote to our questions, or other relevant information is identified, we will make members aware of this.
If a member has received a demand letter from Engate (placing it in the category of those facing "actual or threatened litigation") and wishes to participate in joint defense activities, he or she should contact NCRA Senior Director of Communications and Public Affairs Peter Wacht (email@example.com) for more information. Such joint actions are extremely sensitive and must be conducted within rigorous legal guidelines, which have been established for the group. It is not legally permissible for those who are not in actual litigation or who have not received a demand letter to participate in the group's discussions or activities.
NCRA will continue to help facilitate the defense of those member reporters who have elected to participate in the joint defense group. Until Engate abandons its patent claims, joining the joint defense group and retaining separate legal counsel is still the best way for reporters and firms that have received demand letters and have decided not to enter into a licensing arrangement with Engate or to accept the new LiveNote offer to protect themselves. There is still some risk to members participating in the joint defense activities if the patents are ultimately found to be valid; however, the joint defense activities are intended to help eliminate the possibility of multiple damage awards and the award of attorney fees.
LiveNote has indicated that reporting firms that have previously signed a licensing agreement with Engate may choose to continue with their current arrangement or shift to the new system.
For the general membership, NCRA is and will continue to provide as much information and support as we can so that individual member reporters can make an informed and independent decision of what actions are in their own and their business's best interests.
We also continue to investigate all available, legally permissible options for achieving an industry-wide resolution of this unsettling matter.
For the most current information on the Engate matter, visit NCRA's Key Issues Area.