Update on Engate Claims Regarding Patent Infringement
April 24, 2003 - During the last few months, NCRA has worked closely with the three defending firms and the more than 30 firms that have notified NCRA that they have received letters from Engate regarding the company's patent infringement claims.
As you recall, in late January, Engate Inc., through the law firm Stadheim & Grear Ltd., sent demand letters to a number of court reporting agencies across the country alleging that they have infringed on patents involving interactive realtime. The company's portfolio includes 16 issued patents, as well as pending applications. In addition, the company is claiming that reporting firms that sell or market interactive realtime services are inducing their clients to infringe on Engate's patents. Of note, Engate has initiated a second round of demand letters in late March and early April.
The company is urging reporting agencies to agree to a royalty licensing arrangement to protect themselves against possible future claims and litigation. Currently Engate is in active litigation against three reporting agencies (WordWave/LegaLink, Esquire and Atkinson-Baker) which has lasted for almost two years. The defending firms have whittled Engate's claims down to 26 from a number originally exceeding 300. To provide a more in-depth review of this litigation, WordWave/LegaLink's lead defense counsel has prepared an article offering his perspective on the case.
It is important to stress that, at this time, the court has not addressed whether the Engate patents are valid or whether infringement actually has occurred.
Regardless of the actions taken by NCRA, any firm or individual who receives a demand letter is strongly urged to seek advice from competent legal counsel since there is possible substantial financial exposure if the patents are ultimately determined to be valid. Even though NCRA believes the responsibility for defending against patent infringement claims should lie with the manufacturers of the allegedly infringing software, this does not relieve any firm or individual from defending itself against any asserted claims.
NCRA Actions: Next Steps
Since January, NCRA has focused its efforts on communicating with and educating those firms that have received demand letters from Engate so that they can make informed decisions on how best to respond to Engate. Specifically:
- NCRA's legal counsel has followed this litigation closely and worked with the defendants' attorneys to provide information, contacts and other resources that can be used by the defendants to support their argument that no valid patent has been infringed because the processes and technology were in use prior to the patent applications being filed.
- NCRA has contacted all of the realtime and litigation-support manufacturers regarding this litigation to determine their willingness to work with NCRA members to resolve these complaints as quickly as possible and indemnify users of their software for any infringement claims involving Engate's patents. Several vendors have indicated a willingness to help NCRA's members defend against Engate's claims.
- NCRA has actively investigated ways to pool resources and facilitate an organized and effective joint defense by those firms currently targeted by Engate and those that may be targeted in the future. The first step in this process involved the creation of a listserv for those firms that have received demand letters, giving them a way to communicate among themselves and with NCRA and providing them with quick access to any new information.
The second step involved those firms participating on the listserv deciding whether to join the joint defense group. A handful of firms chose to settle with Engate, other firms adopted a wait-and-see approach, while other firms joined the joint defense group. Each firm that received a demand letter made an independent decision on how to respond to Engate.
The third step involves those firms participating within the joint defense group working with NCRA counsel and counsel from the defending firms to collect prior art in order to examine the feasibility of developing an expert legal opinion. The opinion letter, based on the tremendous amount of available prior art, would offer a review of Engate's claims and the legitimacy of the company's patents. If favorable, firms receiving demand letters could make decisions based on the opinion letter, which should shield them from claims of willful infringement (which if proven involve treble damages) because decisions would have been made according to an expert technical and legal review. Moreover, a favorable opinion letter would benefit those firms currently involved in the litigation.
What You Can Do
Engate's patent infringement claims are of direct concern not only to the firms that have received demand letters, but also to every firm or reporter currently providing or offering interactive realtime. As has been noted, Engate continues to expand its distribution of demand letters within the freelance reporting industry in an effort to obtain a royalty revenue stream for patents yet to be determined valid by the court. And, if the three defending firms prove successful in their litigation without having to address the issue of the validity of Engate's patents, that will leave Engate free to continue sending out demand letters, as the court's ruling will only apply to the current litigation involving WordWave/LegaLink, Esquire and Atkinson-Baker.
Thus, the importance of an expert legal opinion to protect against claims of willful infringement and offer reporting firms that may receive demand letters in the future a defense against having to make immediate decisions on an issue of such importance to the profession.
Clearly, preparing an opinion letter is an expensive proposition. Although NCRA will be making a significant contribution to fund the legal opinion, we are not in a position to assume the entire cost on our own. Once NCRA has determined which claims Engate is asserting and the cost of developing an expert legal opinion, we will be asking all firms and reporters and all realtime and litigation-support vendors to contribute to the cost of developing this opinion. We will of course publicize contributions made by members of the reporting profession in support of this effort in the JCR and NCRA's other communications vehicles unless anonymity is requested.
This issue has direct import for the entire reporting industry, not just those firms that have received demand letters. So please consider making a contribution at the appropriate time to help fund this critical endeavor. As more information becomes available regarding Engate's patent infringement claims, we will make every effort to keep you fully informed.
For the most current information on the Engate matter, visit " pathattribute="0">NCRA's Key Issues Area.