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Why is ATM patent troll ATL selling its stock-in-trade?

Patent troll ATL is offloading 28 of its ATM patents, as well as a couple more that it has pending. Here's the backstory that might explain why.

August 27, 2014 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

Last Friday, ATM Marketplace published anews itemabout a package of 28 ATM patents (and two more pending) to be sold at auction in October. From the description, it seemed pretty obvious that these were just the sort of intellectual properties that patent trolls have used for years to cudgel ATM deployers into paying what are politely called "licensing fees."

Shortly after the item ran, I traded emails with Ralph Jocke, a patent attorney at Walker & Jocke Co. LPA, who has written more than 700 granted U.S. patents related to ATMs and also has been involved in many patent infringement lawsuits. Given his familiarity with the subject of ATM patents, Jocke was able to fill in the very interesting backstory of the patents up for sale.

According to Jocke, the seller is Automated Transactions LLC, a patent troll that has filed about 100 patent infringement cases, mostly against small banks, contending (among other things) that any ATM system that assesses a transaction fee violates its patents.

In a case filed against 7-Eleven, this particular patent was held not to be infringed, and (except for a couple claims related to selling florist services through an ATM) was held invalid in a reexamination proceeding in the U.S. Patent Office. ATL appealed all the way to the U.S. Supreme Court and lost every step of the way, Jocke said. But, he added:

The loss did not deter ATL, which continued to file more lawsuits. In these later cases, ATL usually alleged infringement of 13 patents, most of which had nothing to do with any ATM or system that a bank or other accused infringer was operating.

Then something unusual happened with a spate of ATL claims: The defendants asked to have them consolidated.

It should be said here that the law usually requires patent infringement lawsuits to be brought separately against each accused infringer. In fact, Jocke explained, Congress implemented this law to protect the defendant from the hazards of a multidefendant action:

The entities being sued were often competitors whose products had nothing in common other than they were accused of infringement. Because all of the entities were defendants in the same case, it was common for the defendants to have disputes over things like trying to avoid disclosing trade secret information about their products or business practices to the competition who were co-defendants, while having to disclose the information to the patent troll. Also in such cases, a strategy that might be beneficial for one defendant was detrimental for another defendant. Factors like this often made it difficult for defendants to coordinate on the defense of the case, and made it easier for the patent troll to win and/or to extract substantial settlements.

The ATL lawsuits were consolidated into a single case at the request of the entities being sued. And while unusual, the strategy has been successful in this instance — since the consolidation, ATL has not been able to effectively threaten each small bank with having to defend an infringement case on its own. Settlement payments to ATL have apparently dried up, Jocke said:

The public filings in the Delaware case show that the attorneys that have been representing ATL for several years have withdrawn. Also, ATL has been trying to end the lawsuits without having to fight the defendants' counterclaims for patent invalidity and noninfringement, and possibly later, claims for attorneys fees for bringing baseless lawsuits.

The issue over counterclaims is ongoing, Jocke said, and the fact that the ATL patents are now up for sale suggests that the company and its lawyers no longer wish to fund pending lawsuits.

I asked Jocke whether he saw the ATL development as the beginning of a trend following a Supreme Court ruling in June that said: 1) Abstract ideas cannot be protected by patents; and 2) A defendant who wins should be able to recover attorney's fees if the case stands out in terms of the plaintiff having a weak case, or the plaintiff acting in an unreasonable manner.

Jocke said that while he didn't see that the Supreme Court ruling had a particular bearing on the ATL sale, the decision still might have ATL nervous that if it continues to pursue its weak claims and ultimately loses, the PAE (or its counsel) might have to pay defendants' attorney fees.

By dropping its current cases, ATL preserves the patents' current presumption of validity — and their potential usefulness to another patent troll. Jocke explained that if the patents are sold, the new owner could continue to bring claims, and would be free of the current constraints on ATL to make these new claims part of the lawsuit in the Delaware Court:

[T]hat entity can bring infringement lawsuits against any bank or ATM user that ATL has not previously settled with and granted a license, or given a covenant not to sue. This still leaves a large number of potential defendants. Also, the new owner of the patents would likely not be saddled with the requirement to bring all of its new cases as part of a single action in Delaware. The new owner would be free to pick on accused infringers in separate cases in multiple different courts, providing greater leverage to extract settlements.

But there is this: Any future defendants have the Delaware example to use as a boilerplate for fighting fire with fire. Better yet, the industry could pool its resources to buy those ATL patents in October. And then burn them.

About Suzanne Cluckey

Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.