New Hampshire Supreme Court to Hear Appeal in ‘Patent Troll’ Defamation Case

On the morning of February 14, the New Hampshire Supreme Court will hear what could be one of this year’s most important set of arguments related to patent ownership taking place outside of the federal judiciary. At 10:30 AM that morning, the Court will listen to oral arguments in Automated Transactions, LLC and David Barcelou v. American Bankers Association et. al. to determine whether the New Hampshire Superior Court erred by dismissing a defamation case after finding that the term “patent troll” isn’t necessarily pejorative.

Being Branded a Troll

Automated Transactions and David Barcelou alleged that the defendants in the action made defamatory statements by referring to them as a “patent troll.” This exposed them to hatred, ridicule and contempt, which caused them to be ignored by automated transaction machine (ATM) operators across the country and injured their legitimate business of licensing patents that they developed and that were issued by the U.S. Patent and Trademark Office. The appeal argues that the Superior Court did not examine the full context of the reference to the term “patent troll” when making its determination, dismissing the action before the plaintiffs were able to present any evidence or proof and depriving them of their rights to a trial on the merits.

There are undoubtedly innumerable patent owners and researchers across the world who will take a much different view of the “patent troll” moniker than did New Hampshire Superior Court Judge Brian T. Tucker, who granted the motion to dismiss. Arguably, a trial on the merits of this defamation case is necessary because, among other issues, “patent troll” rhetoric has been tremendously damaging to the innovation economy of the United States in recent years.

IPWatchdog first covered this case in August 2017, with the intention of running a series of articles on Barcelou’s story. However, Barcelou suffered a major heart attack and the idea was shelved. Regardless, it’s difficult to overstate the importance of this case. Barcelou is a self-made inventor, the kind envisioned by U.S. Supreme Court Justice Clarence Thomas in his opinion in eBay v. MercExchange (2006). Although that U.S. Supreme Court decision did inventors no favors by dealing massive harm to their ability to obtain injunctive relief against infringers, Justice Thomas’ opinion did recognize that “self-made inventors” like Barcelou “might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves.”

Story of a Self-Made Inventor

Barcelou’s inventor story begins in the late 1970s  with the invention and development of the award-winning and patent-protected CHEXX™ Hockey Game, more commonly known as “bubble hockey.” In the 1980s, he developed the first professional race-car simulator using his personal research into in-car-camera technologies, again earning award recognition for his efforts. Through the 1990s, he developed a prototype for a web-enabled ATM that provided services over the Internet, which were previously unavailable to consumers. In 2001, his multi-million-dollar business plan to unveil his ATM product across New York City was deterred by the 9/11 terror attacks. By the time Barcelou obtained his first of 29 ATM patents in 2005, about a decade after filing his first patent application, other parties began bringing infringing products to the market.

Up until 9/11, Barcelou was partnering with banks to finance the development of his machines and he had discussions with officials at Hitachi regarding manufacturing the ATMs. However, five years of re-examination proceedings at the USPTO after Barcelou’s patents issued and then an appeal to the Federal Circuit tied his hands through 2010, at which point the web-enabled ATM market had become saturated. It was only due to the recognition that Automated Transactions couldn’t enter the market as a manufacturer that Barcelou decided to switch gears and license his intellectual property through Automated Transactions or, in the event that an infringing party didn’t want to license, enforce his IP through litigation as a last resort.

A High-Stakes Case

Thursday’s argument will take place eight years to the date that Automated Transactions survived a motion to dismiss its patent infringement case in 2011 against Buffalo, NY-based First Niagara, the first banking institution that Automated Transactions took to court. The district judge in that case allowed it to proceed and, as a result, Automated Transactions was able to settle the case after First Niagara agreed to take a license to the asserted patents. This was the first license agreement signed by Automated Transactions, which would go on to complete patent licensing agreements with about 200 banks and financial institutions, many of which agreed to take licenses without Automated Transactions filing any infringement action against them.

It was only after the financial services industry began to realize the value of Barcelou’s patents that a campaign casting Automated Transactions as a “patent troll” took root, backed by various players with tremendous resources. According to Automated Transactions’ appeal brief to the NH Supreme Court, the American Banking Association (ABA) made comments that Automated Transactions was a “patent troll” that “targets” banks. The Credit Union National Association (CUNA) published a presentation to its members which identified Automated Transactions as a “well known troll.” Within months, Automated Transactions’ licensing operations were reduced to nil.

It’s not just inventors who have a great deal of interest in learning how this case progresses. The Electronic Frontier Foundation (EFF) has weighed in on this case, teaming up with the American Civil Liberties Union to to file an amicus brief supporting the ABA, CUNA and the other defendants. The EFF argues that “[t]he challenged statements are part of a national debate about patent policy and litigation.” Of course, the EFF probably has a strong interest in making sure that pejorative rhetoric involving patents cannot be deemed defamatory—the organization chooses one patent each month that it publicly mocks as “stupid.”

After Judge Tucker granted the motion to dismiss Automated Transactions’ case last March, IPWatchdog Founder Gene Quinn wrote the following:

The reality is the term patent troll has been intentionally used in a derisive manner to belittle patent owners and manipulate decision makers on every level for over a decade. Large corporate entities that steal patent property rather than pay fair and reasonable rates to use the property have colluded to convince the public, press, Judiciary and Congress that inventors and patents are evil with a false narrative about patent owners.

The New Hampshire Supreme Court’s decision in this appeal could go a long way in unmasking that false narrative and deal a blow to the efficient infringer lobby who would rather hurl invectives than recognize the economic value of self-made inventors and intellectual property.

Representing Automated Transactions and Dave Barcelou as appellate counsel at the New Hampshire Supreme Court are Steven M. Gordon and Timothy McLaughlin of the law firm Shaheen & Gordon P.A. In 2017, Gordon was lead counsel in a defamation case in which a jury verdict awarded $275 million in damages, believed to be the largest monetary verdict ever handed out in New Hampshire state courts and more than twice the $114 million that Gordon asked the jury to award in closing arguments. Oral arguments are set to be heard at 10:30 AM Thursday, with attorney check-in at 10:00 AM and can be viewed live here.

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