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When Austin inventors Kermit Aguayo and Khanh “Kelvin” Tran suspected that one of their patents had been violated by Motorola, they called an attorney. Then another. And another. “We called and talked to seven different law firms during a long period of search time to find one that would be willing to represent [us],” says Aguayo. Why so many rejections? Because representing a couple of small inventors against a mighty corporate opponent is an expensive and lengthy proposition. “Patent cases are traditionally among the most expensive lawsuits,” says Houston attorney David L. Burgert of Porter & Hedges, who, with Austin attorney Kevin L. Daffer of Conley, Rose & Tayon, took the case all the way to the U.S. Court of Appeals for the Federal Circuit. Before the appellate court issued its opinion, however, the parties settled for what Burgert calls a “handsome amount of money,” the details of which are subject to a confidentiality agreement. Kermit Aguayo and Khanh N. Tran v. Motorola Inc. arose from Aguayo’s and Tran’s suspicions that their patent for a “method and apparatus for assembling multiple component products using automated assembly equipment” — designed to improve the accuracy of robotic assembly processes — had been violated by Motorola. Burgert says he and Daffer invested about $1 million in the case, including approximately $800,000 in time and $200,000 in expenses, a sum that might be daunting to many firms considering taking on such a case. Patent cases in particular can be costly because of the expense of the many experts needed to try the case, Burgert says. “You have to pay them up front, so that’s the biggest exposure,” he says. If the case had not terminated with a summary judgment on appeal, Burgert says it probably would have cost another $500,000. “That’s frankly why Kermit and Kelvin had such a hard time finding lawyers,” he says. Burgert and Daffer took the case on a contingent-fee basis, and the two firms split the fee. Although contingent-fee work in patent infringement cases is “pretty high risk” — the cases are expensive, drawn out and frequently get appealed — he and Daffer “truly believed” in the case. And their confidence paid off. “Even with all the detours and roadblocks, we’re so encouraged by the economic results of this case that there are a number of other infringers that we will likely pursue in the next two months,” Burgert says. The patent at issue came about when Aguayo, 68, and Tran, 39, were employed by a company that manufactured electronic circuit boards for other companies. Circuit boards are made on assembly lines in factories. Although the machines assemble the circuit boards, factory workers must ensure all the parts needed for assembly are in their proper places so that the machine picks up the correct components in the correct order during assembly. However, since the components are small and virtually indistinguishable from one another, factory workers can make costly errors. Aguayo and Tran worked out a system to minimize human error in the loading of components by using bar coding, light-emitting diodes and a personal computer to verify that the right parts are loaded into the machine. The system also can be retrofitted on machines that are already out in the field. Although Aguayo and Tran had developed this system on company time, the company agreed to sell them the rights. The two then obtained a patent for their invention with surprising ease. “Typically, patents take a number of years to get, and you have to go through a lot of amendments,” Burgert says. “This one really sailed through because the patent office wasn’t able to locate a lot of prior art they thought would prevent the patent from being issued.” Next Aguayo and Tran hired a company to market the system. When it became apparent that the company was not aggressively promoting the product, in essence breaching the agreement, Burgert and Daffer persuaded the company to sign a release, leaving Aguayo and Tran free to market their system again, Burgert says. By sheer coincidence, Aguayo was approached by a friend who worked at Motorola to co-author a paper for presentation at a conference. The friend lent him a book to give him an idea of the format they would use. One of the papers in the book concerned a device for eliminating placement errors that was essentially identical to the Aguayo-Tran device and appeared to be in violation of their patent, Burgert says. The inventors suspected there might be other infringers out there, but decided to proceed against Motorola first. “We figured, here is the biggest, baddest dog on the block, and if we can take them out, perhaps other infringers will be more willing to negotiate,” Burgert says. After sending a demand letter to Motorola, Burgert says Motorola’s outside counsel, William L. LaFuze of Vinson & Elkins, sent him “reams of Japanese patents he [said] will bust our patent. So we looked at them, and had an expert look at them, and we think we can get around all of them.” “It is a fact that prior art was discovered that was not before the patent examiners,” says LaFuze. “That is a fact.” Due to the confidential nature of much of the proceeding, however, LaFuze’s “official response” to all other inquiries concerning the case is to refer such questions to Motorola. Motorola’s Jonathon P. Meyer, senior vice president and assistant general counsel of intellectual property, remains equally mum, responding to questions with a written statement that Motorola is restricted from commenting because of the strict confidentiality agreement between the parties. Meyer states that while Motorola investigates accusations of patent infringement by the company thoroughly and listens to “reasonable positions” presented by patent owners, the company defends itself “aggressively” when “presented with accusations which Motorola believes are unfounded.” Adds Meyer, “[S]ome individual patent owners” are under the “misguided impression” that they must sue Motorola to get their attention, a “tactic [which] ends up needlessly costing both parties lots of money and chills further discussions between the parties.” ‘SURPRISING OPINION’ On Feb. 12, 1999, Aguayo and Tran filed suit in the U.S. District Court for the Western District of Texas in Austin alleging patent infringement against Motorola. On Nov. 24, 1999, after months of discovery, Motorola sought summary judgment on all 28 claims of the patent on the grounds that some claims were “anticipated” by publications that pre-dated the patent application, while other claims were so similar to these publications as to be “obvious” to anyone skilled in the art. One year after the complaint had been filed, Judge Sam Sparks granted summary judgment in favor of Motorola, declaring all 28 claims of the patent invalid as either anticipated, obvious or both. The plaintiffs appealed. “It was a very surprising opinion to us,” Burgert says. “Typically in a patent case, where you have [so many] claims, there is going to be something there that is going to raise a fact issue, so it was very surprising to have the case dismissed so totally.” The oral argument before the U.S. Court of Appeals for the Federal Circuit, on Jan. 10, 2001, was noteworthy in that one of the judges deemed Sparks’ findings on obviousness “awfully cryptic” and asked Motorola, “Aren’t we in a situation where the district judge didn’t make the kind of findings on a summary judgment motion that are really needed in a case like this, and aren’t you asking us to sort through this record and make the findings that he should have made?” In addition, the appellate court noted that the affidavits of the plaintiffs’ and defendant’s experts were in “collision,” implying that summary judgment would be inappropriate. But the appellate court never ruled on the matter. Instead, after oral arguments, Motorola and the plaintiffs negotiated a settlement, which ultimately took several months. The key condition of the settlement was that Tran and Aguayo would get the patent validated again so they could sue other infringers. The settlement also included a monetary award. “We essentially told the appellate court that we had settled the case and wanted to dismiss the appeal, subject to Judge Sparks vacating his order invalidating the patent,” Burgert says. An order was submitted and signed by Sparks on Aug. 17, 2001, stating that the parties agreed to settle the case and that Sparks’ former order was vacated. On Sept. 7, 2001, the Federal Circuit dismissed the appeal as moot. Although representatives of Motorola decline to comment on the settlement, LaFuze says: “Our position was that the case had no merit as stated in the court papers, and the case went through a single, final ruling from the district judge that found the patent invalid. … It was later vacated only by agreement so that a settlement could be affected.” A full three years after the suit was filed, the inventors are finally in a position to go after other potential infringers, using the Motorola case as a deterrent. A few weeks ago, they attended a technical conference in California to scout out possible infringers who might be showing their wares. In addition, the inventors have been approached by entities that have heard about the Motorola settlement and want to negotiate with them. As for the inventors’ attorneys, “It’s kind of enjoyable from our perspective to represent the small guy who had the wherewithal to come up with a really neat idea that would save a lot of money and actually take the idea and … file a patent,” Daffer says. “A lot of times, it’s very hard for a small person to, on their own, go out and enforce their patent. It’s very, very rare. It’s very satisfying. … It was all worthwhile.”

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