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The U.S. Court of Appeals for the Federal Circuit has upheld a lower court’s order that patent lawyer Jean-Marc Zimmerman and patent holding company Eon-Net pay $631,135.18 in sanctions and fees. In the lower court case, the trial judge found “indicia of extortion” in patent lawsuits filed by Zimmerman. A Nov. 16 order in Eon-Net L.P. v. Flagstar Bancorp denied Eon-Net and Zimmerman’s motion to stay a monetary judgment against them issued by the lower court on May 17. In that judgment, reinstating a Jan. 4 order, Judge Ricardo Martinez of the District of Washington awarded Flagstar $489,150.48 in attorney fees and expenses. He also issued a $141,984.70 sanctions order against Zimmerman pursuant to Rule 11 of the Federal Rules of Civil Procedure. The Federal Circuit order, authored by Senior Judge Alvin Schall, addressed Zimmerman’s “declaration of counsel” submitted to the lower court in which Zimmerman claimed he was unable to pay the sanctions and fees. Schall wrote that the district court “found that the declaration was ‘not credible with respect to counsel’s alleged poverty.’ ” He noted that the motion does not mention the ability of Eon-Net, Zimmerman or his law firm to pay or post a bond. Judges Arthur Gajarsa and Kimberly Moore joined the order. The Federal Circuit’s ruling follows its September 2007 ruling in the case, which vacated the district court’s summary judgment order for Flagstar and its first sanctions order against Eon-Net, Zimmerman and his then-law firm, Zimmerman, Levi & Korsinsky of Westfield, N.J. That 2007 Federal Circuit order also affirmed the district court’s denial of sanctions against Flagstar. In the 2007 order, the Federal Circuit ruled that the district court’s August 2006 summary judgment was improper because it did not give Eon-Net “notice and the opportunity to present argument on infringement and the appropriate construction” of the information processing methodology patent. The 2007 order also determined that the district court erred in its October and December 2006 sanctions against Eon-Net because it didn’t give Eon-Net the opportunity to make arguments about the claims of the patent. In response to the 2007 order, the district court conducted a claims analysis, known as a Markman hearing. In his May order, Martinez wrote: “Now that the claims have been construed in the Markman hearing, it can be said, as a matter of law, that the claims cannot be construed as Eon-Net contends.” As a result of that finding, the Federal Circuit issued its recent order upholding the sanctions and fees. In the underlying lawsuit, Eon-Net sued Flagstar in the District of New Jersey for allegedly infringing one of its patents for information processing methodology. The suit was later transferred to the Western District of Washington, and the complaint was amended to include infringement claims related to two continuation patents stemming from that patent. According to Martinez’s Jan. 4 order, Eon-Net is one of three patent holding companies formed by three inventors to “enforce various continuation or divisional patents arising from an original filing in 1991.” Martinez wrote that the inventors’ Millennium L.P. company has filed at least 41 patent infringement cases in the Southern District of New York and 13 in District of New Jersey. Also according to Martinez, Eon-Net also filed 22 in each court. In the Eastern District of New York, Eon-Net has filed four cases and Millennium has filed one. The third inventors’ entity, Glory Licensing LLC, has filed a total of six cases in the three courts. Martinez wrote that Zimmerman filed all but the first four, which date from 1996 to 2001. The Flagstar case is the only one to have reached the Markman hearing stage. Martinez wrote that his original sanctions order determined that Eon-Net’s initial complaint in the Flagstar case was almost identical “to at least thirteen other complaints filed to that date against parties engaging in greatly diverse business operations.” He found that Eon-Net’s settlement offers to the defendants, which ranged from $25,000 to $75,000 depending on the defendants’ sales, were “indicia of extortion.” In the sanctions order, Martinez also cited Zimmerman’s “failure to perform a reasonable pre-filing inquiry, failure to identify an accused product, and failure to reasonably evaluate” the reach of the patent. Zimmerman and John Hathaway, a Seattle lawyer who also represented Eon-Net at the lower court, did not respond to requests for comment. Eon-Net, which is described in the complaint as a limited partnership with a post office box in the British Virgin Islands, could not be reached for comment. Neither Flagstar nor its lawyers at Los Angeles-based Quinn Emanuel Urquhart & Sullivan responded to requests for comment. Sheri Qualters can be contacted at [email protected].

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