Patent cases can often linger unresolved, particularly when the defendant is able to demonstrate the case lacked the necessary foundation to be brought forward in the first place. Until there exist mechanisms for certain patent claims to be expediently disposed of using alternative dispute mechanisms, such cases are likely to persist. It’s thus crucial, in the meantime, to draw valuable insights from the cases that don’t result in victory, and give them as much attention as those where the patentee is successful.
A relevant example is the recent decision that resulted from a case I first paid attention to back in 2020. This decision was endorsed by one of our lead jurists, the Southern District of New York’s Judge Jed S. Rakoff. The decision is noteworthy not only because it involved a patent-driven investment scenario which spiraled off course, but also for the fascinating aspects it reveals in a patent case Full Story.
Journeying back to August 2020, there was a privilege waiver case that arose with a potential investor in a company that subsequently pursued patent litigation in the field of lab-grown diamond technology. This company, M7D Corporation, operating under the trade name WD Lab Grown Diamonds, had received an equity investment from the private equity firm, Huron Capital, in 2019. The primary attraction for this investment was the extensive portfolio of exclusive global licenses centering on Chemical Vapor Deposition (CVD) process and other methods of growing diamonds, all held by WD under licensing from the Carnegie Institution of Washington.
In another development, during the litigation itself, Rakoff took a strong stand against the plaintiffs’ conduct. He criticised them for pushing forward with a weak case. The case was labeled “substantively weak”. The court held that the plaintiffs wrongfully continued with one patent they knew was not infringed, causing the defendants to incur unnecessary expenses in time and resources to move for a summary judgement of non-infringement, subsequently criticizing them for persisting in their approach to litigation despite clear indications to the contrary.
The case, at its close, serves as a word of caution on several counts. Firstly, it uncovers the reality that companies jointly involved in patent litigation share the risks and potential pitfalls as much as they stand to gain from the proceeds. Secondly, any statements made while seeking investment can come to light and be used against the party in the course of a litigation. Lastly, persisting as a litigant on legally shaky grounds on key issues like infringement, could lead to unfavorable consequences down the line. This was a instance where the diamonds might have been fake, but the awarded fees were very real.