Machine vision vendor Cognex Inc. yesterday disclosed it is seeking a declaratory judgment from a Minneapolis federal district court to combat assertions that its products infringe on a 2D symbology reading patent assigned to a California company. That company is seeking licensing fees from Cognex customers.
U.S. Patent 5,612,524 was originally awarded in 1997 to Veritec Inc., a Golden Valley, MN-based developer of 2D matrix coding technology, which is currently operating under bankruptcy protection. The patent was reassigned to Acacia Research Corp. of Newport Beach, CA, which has since contacted Cognex customers to enforce Veritec's patent claim.
Cognex became aware of the patent enforcement campaign in October of 2004 when one of its customers settled a patent-enforcement claim by Veritec. That campaign escalated last fall in the wake of Veritec's early 2005 bankruptcy protection filing and its failed breach-of-contract suit against Mitsubishi Corp. of Japan, when some 70 companies were informed of their potential infringement of the Veritec patent, Cognex officials told Managing Automation.
A number of companies -- including Adidas, Advanced Micro Devices, Nokia, and Boston Scientific -- have signed license agreements rather than litigate, and for good reason: Acacia is seeking licensing fees in the vicinity of $400,000 -- a sum considerably less than what it would cost those companies to defend themselves in court, noted Art O'Dea, Cognex's in-house patent attorney. Other companies, including Hitachi Global Storage, Stamps.com, and US Bank have claims pending, a Cognex spokesman said. Cognex officials would not say which of the company's products were referenced by the patent infringement claim.
By directing patent infringement claims at manufacturers rather than technology vendors, Acacia's approach is reminiscent of an earlier patent enforcement dispute Cognex was involved in, which became known as the Lemelson case.
In the complaint filed in the United States District Court in Minnesota on March 13, Cognex (Natick, MA) contends that the Acacia/Veritec patent is invalid and unenforceable, and not infringed upon by Cognex' products. Cognex was able to take this action once customers who were contacted by Acacia asked Cognex for indemnification from the patent infringement claim, Cognex said.
Fresh off its victory in the Lemelson case, Cognex was happy to oblige, noted Mike Steir, Cognex's vice president of legal affairs. "We have a saying around here that the reward for good work is more work."
In a prepared statement, Dr. Robert Shillman, chairman, CEO, and co-founder of Cognex, likened Acacia's tactics to "a form of legalized extortion." He added: "It appears that Acacia first estimates the defendant's cost of mounting a legal defense, and then agrees to settle the claim for less than that cost. Even if the defendants believe the assertion is without merit, they nevertheless often choose the less expensive, but distasteful, option of paying off these abusive patent trolls."
Nello Zuech, of machine vision market research and consulting firm Vision Systems International (Yardley, PA), said that although Veritec received a patent for its 2D matrix symbology in the late 1990s, its approach is similar to technology other vendors brought to market in the mid 1970s and early 1980s, which were later placed in the public domain. "My sense is that since there is prior art, this claim [will be found] null and void," Zuech said.
Calls seeking comment from officials of Acacia and Veritec were not returned by press time.
The Lemelson case pitted Cognex and other vendors against Lemelson Medical, Education and Research Foundation, an organization which asserted claims on patents awarded to the late inventor Jerome Lemelson. The group of vendors sued in 1998 to stop the foundation from demanding licensing fees from the vendors' customers for 14 patents covering machine vision and bar-code technologies.
Six year later, a federal court in Nevada ruled that Lemelson's patent claims were invalid and unenforceable. The court's ruling was upheld last fall by a federal appeals court -- although not before manufacturers paid an estimated $1.5 billion in licensing fees to avoid legal trouble.
While Acacia's letter-writing campaign to manufacturers seeking licensing fees or promising consequences is identical to the approach taken by the Lemelson Foundation, there are differences between the patent enforcement disputes, Cognex's Steir noted. "This case is far simpler," he pointed out, noting that Acacia is seeking enforcement of only one patent -- not the 14 patents and 500 claims that the Lemelson case involved.
While early settlements have given Acacia some momentum in its licensing claims, some Cognex customers have requested a summary judgment from the court, Steir said. "We hope our case takes precedence and priority," over those settlements, Steir said, adding that Cognex hopes its request for a declaratory judgment is seen as a way for the court to create "efficiencies" that would prevent further legal action.
Steir said Acacia has 20 to 30 days to respond to Cognex's request for a declaratory judgment. He said Acacia has delayed its response, perhaps in recognition of the fact that in the Lemelson case "the licensing fees got smaller and smaller as time went on."
He also said Veritec's push to collect license fees took on a greater urgency after the court ruled against the company in its breach-of-contract suit against Mitsubishi. Veritec later lost an $8 million counterclaim filed by the Japanese company for copyright infringement, Steir said. "[Veritec] turned to Acacia to turn nothing into something in desperation to generate revenue to salvage the company," he claimed.
Acacia's website says its goal is to protect patent holders and their inventions from unauthorized use, generate revenue from licensing and, if necessary, enforce their patents. "Our clients are primarily individual inventors and small companies with limited resources to deal with unauthorized users but include some large companies looking to turn their idle patents into revenue," the website states.
Steir said he was not sure when a hearing on the matter would take place. Cognex is hoping that increased publicity will undercut Acacia's profit motives. "Once we succeeded in our appeal [in the Lemelson case] ... the spigot was turned off," he concluded.