Update on Engate Patent Litigation

July 31, 2003 - There have been two recent patent court decisions of critical importance for court reporters and firms that have received demand letters from Engate or who are otherwise following Engate developments. The first decision is a crucial ruling in the ongoing Engate litigation in Chicago that represents a substantial victory for the three defendants in that case. (View the Engate ruling.) The second decision involving Blackberry mobile e-mail devices demonstrates the continued importance for reporters to consider and respond appropriately to Engate's demand letters in order to avoid the possibility of substantial and multiple damages awards. (View the Blackberry rulings - one, two.)

NCRA is continuing to monitor the ongoing Engate litigation and is moving forward to help facilitate the defense of those reporters who have elected to participate in the joint defense group. At this time, NCRA has received no information that Engate is abandoning its patent claims, so continued vigilance is required.

Addressing first the ongoing Engate litigation against Esquire, Atkinson-Baker, and WordWave, the court previously ruled that these firms could not be held liable for the acts of their reporters who are independent contractors. On June 13, 2003, the court granted summary judgment to all three defendants that they did not directly infringe the remaining patents and claims in dispute in this case either: (1) in connection with "using" patented processes with the court reporting services provided by their employee reporters; or (2) by "offering to sell" services that utilize these patented processes. The court scheduled a status hearing on June 19, 2003 "to discuss what, if anything, remains of the case in light of the Court's rulings."

It is important to note that the Court did not address the validity of Engate's patents, but rather was addressing the specific facts presented by Engate and these three defendants in the context of cross motions for summary judgment to determine whether there was direct infringement in this particular case. The Court was careful "not to say that some court reporters and some attorneys do not infringe the patents; it is just that Engate has not marshaled the evidence to show that this is the case generally or with respect to the defendants' employees particularly." The Court also went on to state that the defendants "might be liable for contributory infringement or inducement of infringement" for the acts of their employees "working together with attorneys" -- but that "such claims are not before us at this time." Similarly, the Court's ruling that the three firms were not liable for direct infringement based on "offers to sell" was fact specific to this particular case.

Whether the Court determines that there is "anything" left of this case at the June 19 status conference, whether Engate decides to appeal, and whether Engate decides to continue these or other patent claims against other court reporters and firms remains to be seen. Until then, court reporters and firms that have received demand letters must continue to treat the situation seriously and appropriately.

On this point, the recent Blackberry decision is instructive. The court actually entered two orders on May 23, 2003. In the first order, the court basically saved from challenge the previous jury determination that the manufacturer had willfully infringed the patents in dispute. In the second order, the court granted enhanced damages of 50 percent, attorney's fees for the patent claims that eventually were tried and prejudgment/postjudgment interest. For present purposes, it is important to note that in considering whether the manufacturer's behavior warranted enhanced damages (which could have been as high as 300 percent with a finding of willful infringement), the court listed a number of factors including: "whether the infringer, upon notice of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed." Among other things, the court noted that "[u]pon receiving actual notice of another's patent, a potential infringer 'has an affirmative duty of care that normally requires the potential infringer to obtain competent legal advice before infringing or continuing to infringe.'" It should be noted that the Patent & Trademark Office has granted reexamination of at least one of the patents and the implications are unknown if the PTO should determine the patent is invalid.

NCRA has encouraged each reporting firm that has received a demand letter from Engate to make its own decision about whether to enter into a licensing agreement. For those reporters and firms that have independently decided not to agree to Engate's terms, NCRA has helped facilitate the joint defense group for the very purpose of retaining legal counsel to avoid the result in the Blackberry and similar cases. Depending upon how events unfold, legal counsel will still write to Engate to determine its current position with respect to its licensing demand letters. If still necessary and financially feasible, legal counsel will conduct an investigation and write an opinion upon which the reporters and firms participating in the joint defense group can rely in order to avoid a multiple damages award as in the Blackberry case. 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.

More to follow as events unfold.

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