A Victory for the Ages

Starting in 1996, and with growing frequency over the last decade, a company called Eon–Net, L.P. and two related entities filed over 100 lawsuits against a wide range of businesses, alleging infringement of related patents claiming inventions relating to the transfer of information from hard copy documents into an electronic format. Eon–Net’s formula was simple—file suit, offer a cut–rate settlement of less than $100,000, and wait for defendants to make the business calculation that the cost of settlement dwarfed the likely cost of defense. On the whole, the plan worked, with one major, public exception—Flagstar Bank stood out from the crowd, took a stand, and set out to take Eon–Net down.

This week, after a long and winding road from the District of New Jersey to the Western District of Washington, then up to the Federal Circuit and back, the case ended with an award of fees and sanctions to Flagstar of over $600,000. During the proceedings, Flagstar was able to prove that Eon–Net believed its patent spanned the World Wide Web to cover virtually all e–commerce web sites, despite the fact that neither the inventor nor his counsel could show that they performed any substantive pre–filing analysis that would support such a contention. That failure supported sanctions under Fed. R. Civ. P. 11, and the lack of merit to Eon–Net’s claims made the case exceptional, entitling Flagstar to an award of its attorneys’ fees.

We cannot report with certainty that Flagstar’s pluck, perseverance, and patience have been repaid with a total victory, however, as the case now returns to the Federal Circuit a second time.