Intellect Wireless, lawyers ordered to pay HTC $4 million over patent suit tossed for 'inequitable conduct'

By Dana Herra | Jul 30, 2015

A Chicago federal judge has ordered Intellect Wireless and its former lawyers to pay more than $4 million in legal costs and interest to HTC, a wireless phone maker, in the aftermath to Intellect’s loss in court over its claims HTC had infringed its patents.

The judge found Intellect’s former attorneys, Raymond Niro, Paul Gibbons, David Mahalek and Paul Vickrey, jointly liable. The order was issued on July 21 as part of continuing proceedings in U.S. District Court Case No. 09-C-2945.

In 2012, more than three years after Intellect filed its initial complaint, the court dismissed Intellect’s claims HTC had infringed upon its patents, which Intellect had claimed included the technology to give mobile phones the ability to receive and display caller ID, text messaging, photos and videos. The court had dismissed the claims through a finding they were unenforceable due to so-called “inequitable conduct” on the part of Intellect Wireless.

Key to the dismissal was the court’s finding that Intellect and its founder Daniel Henderson had sought to deceive the U.S. Patent and Trademark Office by submitting declarations containing false statements, which had a material effect on the issuing of the patents.

Among the alleged deceptions were Intellect’s claim that it had a working prototype of the invention, when it actually had only a mock-up that was not truly functional. After receiving patents in 2007 based on the false statements, Intellect Wireless began suing cell phone companies, including T-Mobile, Samsung and HTC, for infringement. HTC fought back, however, filing a counterclaim against Intellect in which it alleged false declarations by the inventor and claimed Intellect had not, in fact, created a working prototype at the time the patents were issued.

The legal counterattack by HTC was similar to its response to patent infringement claims brought against it by Taiwanese company Wi-Lan, which had also claimed HTC, along with Sony, Alcatel and others, had violated patents it held for a key mobile phone technology. In that case, HTC and its co-defendants had taken the case to trial, and persuaded a jury to rule in favor of the phone makers.

In its dismissal of Intellect’s suit, the court ordered Intellect be held liable for court costs, attorney fees and other associated expenses. Intellect appealed the dismissal of the case, which was affirmed in October 2013 by the U.S. Seventh Circuit Court of Appeals.

HTC later asked the attorneys be held jointly liable, because they “unreasonably and vexatiously multiplied the proceedings” and for litigation misconduct.

In the nearly three years since the dismissal, the companies have been working to establish the amount of the liability, plus interest. Intellect and its attorneys claimed the amount should be $3.7 million, but the court again sided with HTC, awarding it a total of $4,090,030.50.

The case was not a complete win for HTC, however. The company had sought to hold Henderson, who still serves as owner and principal of Intellect Wireless and the holder of the patents in question, personally liable for the expenses associated with the suit. The judge’s order noted that Henderson had not been named in any of HTC’s previous countercomplaints, dating back to the original countercomplaint in 2009, and refused to find him liable. That count was dismissed without prejudice.

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