Update on Engate Patent Litigation

August 1, 2003 - NCRA Executive Director Mark Golden, CAE, provided an update on the current status of the Engate litigation during today's Member Business Meeting at the NCRA Annual Convention. The text of his presentation follows:

The news from Chicago, where Engate's patent suit is being litigated, is uncertain.

At a status hearing on July 22nd, the court postponed action on Engate's motion for reconsideration of the court's prior ruling that the defendants did not directly infringe the remaining patents and claims in dispute in this case. (In that earlier ruling, the court had found that the actions of the firms' employee reporters "using" allegedly patented processes and the firms' actions "offering to sell" services that utilize these allegedly patented processes did not directly infringe.) This failure to act on the motion for reconsideration introduces a certain degree of uncertainty over the defendants' previous complete victory on the direct infringement issue.

In addition, the court also postponed ruling on the defendants' motion for summary judgment that they did not indirectly infringe the patents by helping attorneys and other users to infringe them. Instead, it granted Engate three months to conduct discovery to see if it can establish its indirect infringement case. Following the hearing, Engate apparently served extensive discovery on the defendants regarding their reporters, customers, and business relationships in an attempt to develop this information.

In the past week, LiveNote has informed NCRA that it has entered into an exclusive licensing agreement with Engate. Although few concrete details and a multitude of questions exist over the exact nature of the plan, it appears that LiveNote intends to implement a sublicensing system whereby attorneys and other users will be charged a daily fee that is estimated to be in the range of $30 to $45 per day to be paid directly by the attorney/user receiving the realtime feed, or paid by the reporter and then billed to the attorney/user. Although this 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 require this to be done electronically in order for its software to permit the transmission of a realtime feed.

Presumably, all court reporters will receive notification from LiveNote of these new arrangements and will be offered the opportunity to agree to whatever the final terms of the Engate/LiveNote agreement may be as a means of avoiding patent infringement claims by LiveNote and/or Engate.

NCRA has also learned that Engate has offered to settle the litigation with the three court reporting firms that remain defendants in the Chicago litigation if they will agree to these terms. Firms that previously entered into licensing agreements with Engate will be offered the alternative to continue their current arrangements or switch to the new system.

LiveNote believes this potentially industry-wide solution will help to eliminate the threat of future claims regarding interactive realtime and provide a safe harbor for those reporters who choose to participate in the agreement. At this point, however, the defendants have not conceded the validity of the patents or agreed to accept Engate's offer. A number of questions have also been raised regarding the settlement and its potential impact on the reporting and captioning professions.

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 questions this proposal raises. As reliable information becomes available, we will circulate it to you immediately.

The defendants in the Chicago litigation are the most knowledgeable and probably in the best position to weigh the cost of continuing to litigate with Engate vs. the new arrangements that may be offered. Accordingly, to a great extent, we must await their decision of whether to keep fighting or to accept the new arrangement with Engate and LiveNote.

NCRA will continue to gather as much information as it can, evaluate the practical and legal implications of these developments, and advocate member questions and concerns to the extent legally permissible. Most of the timing and many of the critical decisions that will decide the outcome in this matter are outside of NCRA's control, but we will continue to do our best to keep you informed.

While NCRA is and will continue to provide as much information and support as we can, individual members still need to assess this information and make an informed and independent decision of what actions are in their own and their business's best interests. Moreover, NCRA will continue to help facilitate the defense of those reporters who have elected to participate in the joint defense group. Until Engate abandons its patent claims, joining the joint defense group or retaining separate legal counsel is still the best way for reporters and firms that have decided not to enter into a licensing arrangement with Engate to protect themselves.

For the most current information on the Engate matter, visit " pathattribute="0">NCRA's Key Issues Area.