Federal Circuit Affirms PTAB Invalidity Ruling in Favor of Game Companies in Group Messaging Patent Spat
Headline: On June 16, 2020, the Federal Circuit affirmed the Patent Trial and Appeal Board’s invalidity findings relating to PalTalk’s U.S. Patents Nos. 5,822,523 and 6,226,686, relating to group messaging features. The ruling can be expected to short circuit multiple PalTalk pending patent lawsuits based on these patents.
Background: PalTalk Holdings, Inc. is a Delaware corporation that acquired patents from a predecessor company for handling group communications through a group messaging server and establishing groups for online game play. PalTalk asserted the patents against Microsoft in 2006, and after that case settled, brought another lawsuit against multiplayer online game companies like Turbine, Activision Blizzard, and Sony in 2009. According to PalTalk, it earned “many tens of millions of dollars” in license fees from “leaders in the video gaming industry” for the patents.
In 2010, the U.S. Patent and Trademark Office subjected the patents to ex-parte reexamination. The patents emerged from that process with an additional 92 claims added between them.
In December 2016, PalTalk filed separate suits in Delaware district court against Riot Games and Valve. PalTalk alleged that Riot Games’ League of Legends game and Valve’s Defense of the Ancients 2, and especially their respective multiplayer online battle arenas, infringed the patents. The complaints emphasized that each accused game was “one of the most profitable online games in the world” with grosses in the hundreds of millions of dollars and peak simultaneous players in the millions.
In May 2018, the lawsuits were stayed after the U.S. Patent Trials and Appeals Board instituted the first inter partes reviews petitions filed by Riot Games and Valve against the patents. In all, Valve and Riot Games filed eight IPR petitions, covering all claims of the two patents. Final PTAB decisions on May 14, 2019 found all the claims unpatentable, rendered obvious by publications describing such various systems as video conferencing and an interactive exercise bicycle.
PalTalk appealed a subset of these rulings to the Federal Circuit.
Holding: The Federal Circuit’s June 16, 2020 ruling affirmed the PTAB’s invalidation of the patents in summary fashion, finding that substantial evidence supported all of the PTAB obviousness findings challenged by PalTalk:
The Court affirmed the obviousness of having a host computer send a message to a group messaging server to “create,” “join,” or “leave” a message group. Accordingly, dependent claims 4–5, 34–37, and 41–42 of the ’523 patent, were unpatentable. For similar reasons, dependent claims 30, 34, 35, 49, 53, 54, 66, and 70 of the ’686 patent were also found unpatentable.
The Court also affirmed the PTAB’s finding that prior art disclosed “echo suppression” – described as ensuring that a host does not receive copies of messages it is sent, rendering obvious claim 11 of the ’523 patent and claims 22, 41, and 58 of the ’686 patent. The Court also found that the PTAB sufficiently described its reasoning on this issue in its final decision.
Practical Takeaways: This case provides a cautionary warning to gaming companies about their desirability as targets of patent monetization entities (and their funders), and effective ways to combat such suits. The original Delaware complaints against Riot Games and Valve shows they were targeted based on a structural feature of the game’s type, and the game’s success. The case also illustrates the power of the U.S. Patent Trials and Appeals Board’s inter partes review process to thwart patent monetization entities. The patents at issue here had been successfully monetized for over ten years and for millions of dollars (according to the patentee), surviving ex-parte reexamination at the patent office, and yet were found obvious and invalidated in the space of 18 months in IPR.
A copy of the order is located here.
Erin Jones, the “Wise One”