This is the latest in the series titled “NPE Showcase,” where we discuss high-volume non-practicing entities (or as some call them, “patent trolls”). This installment will focus on a company named Traxcell Technologies, LLC.
Non-practicing entities, by their very nature, have few assets other than the patents asserted in a lawsuit. NPEs are typically single entity LLCs that shield the real stakeholders from liability should things go south. Rarely, an NPE can be held liable for filing a baseless lawsuit and owe the defendant attorneys’ fees. But courts are reluctant to find a lawsuit “baseless” unless it meets the high standard of “no reasonable litigant could realistically expect to secure favorable relief”.
Traxcell Technologies previously owned a patent directed to a navigation app. Traxcell sued a number of defendants in various Texas federal courts but lost at summary judgment. One of the defendants moved for attorneys’ fees and won – requiring Traxcell to pay $490,000 within 30 days. Of course, Traxcell failed to pay the fee and instead continued its litigation campaign while fighting the fees order.
Time ran out on Traxcell and they still have failed to pay the attorneys’ fees or post a bond while the attorneys’ fee appeal is pending. This caused the defendant to dig deeper for relief and seek liquidation of Traxcell’s assets. Of course, an NPE has few assets other than the asserted patent – so a Texas state court ordered Traxcell to surrender all of its patents so they can be sold off to pay the attorneys’ fees award.
Traxcell somehow was not deterred. Incredibly, Traxcell maintained another lawsuit based on the same patents they were ordered to hand over to a receivership. This led Judge Albright to dismiss the latter lawsuit, finding “Traxcell holds less than all substantial rights to the asserted patents” that are required to maintain the lawsuit because the receivership was the rightful owner of the patents. It is somewhat difficult to understand how he could not reach this decision without affirmatively ignoring the Texas state court order (to turn over the patents to the receivership) and the Texas federal court order (awarding attorneys’ fees).
What happens next is still a mystery. What is the value of the patents after the summary judgment decision? Likely very little and not enough to cover the fee award. Will Traxcell simply declare bankruptcy or cease to exist? This is more likely since it would potentially allow the people behind Traxcell to avoid paying the fee award and cut their losses.