BVI-based Eon-Net sanctioned by Federal Judge for filing patent infringement complaints

Eon-Net, a patent holding company registered in the British Virgin Islands, has filed a patent suit in March 2005 in New Jersey against Flagstar – a $16 billion savings bank based in Michigan. This bank was one of 32 companies, each of them being sued separately by the BVI company for infringing a patent that covers technology that allows online shoppers to enter information into Web sites and have it transferred to the Web retailer’s computer.

Eon-Net method of enforcement involved filing a complaint followed by a letter offering a settlement of $25,000, $50,000, or $75,000. Taking into account the patent litigation costs which could make hundreds of thousands of dollars, most clients chose the cheaper variant of settlement.

However, Flagstar fighted the suit, and Flagstar’s attorney Melissa Baily has said that the company decided to challenge BVI-based Eon-Net’s lawsuit precisely because of the egregious nature of the company’s conduct. She noticed that the BVI company’s lawyers “had used nearly identical complaints and demand letters in all 32 suits”.

Flagstar suggested a lack of careful advance investigation. A Federal Judge of Western District of Washingyon, Marsha Pechman, has ruled in favor of Flagstar, and ordered Eon-Net and its New Jersey attorney Jean-Marc Zimmerman to pay the Flagstar bank’s defense costs in the amount of more than $100,000.

Pechman has indicated that Eon-Net’s complaint and claim chart were almost identical to  company’s complaints in the other cases. The judge also reasoned that the claim charts were broad enough to be sent to all kinds of Web-based business, and that no meaningful analysis was reflected in the claim charts.

Penchman has indicated that Eon-Net’s patent enforcement strategy violates Federal Circuit Rule 11, which requires patent plaintiffs to conduct a “reasonable pre-filing inquiry” to identify the accused device and conduct a preliminary determination that at least one if not all of the patent claims appear in the product.

Flagstar’s attorney Melissa Baily received even more than what she asked for. In addition to awarding Flagstar fees and costs, Pechman also ordered the BVI company to notify all other defendants accused of infringing its patent of her ruling.

Eon-Net, which also has had pending litigation against JetBlue Airways and Liz Claiborne Inc., had successfully extracted settlement money from ING Bank and Sony Corp. over the same patent.

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