Appeals Court Throws NPE Upaid a Lifeline in Patent Claims Against Telstra

Back in March this year I wrote about an interlocutory (i.e. provisional, or interim) decision of Justice Yates in the Federal Court of Australia, in which he described claims of patent infringement made by Upaid Systems Ltd against Australia’s largest telecommunications carrier, Telstra Corporation Ltd, as being everything from ‘untenable’ to ‘confusing and embarrassing’.  (As a quick recap, Upaid is a ‘non-practising entity’ (NPE) – or, less flatteringly, a ‘patent troll’ – which sued Telstra back in August 2013 for the alleged infringement of two Australian patents relating to making online purchases of goods and/or services from mobile devices.)

Specifically, Justice Yates found, in relation to Australian patent no. 2008203853, that Upaid failed to particularise, or argue, any tenable case for infringement at any time, while in relation to Australian patent no. 770646, it had failed to particularise a tenable case for infringement, but that its submissions at the hearing departed from the particulars in ways that left unclear whether or not it might be in a position to present an arguable case.  His Honour thus proposed to strike out Upaid’s case on infringement of claim 1 of the ‘853 patent, but generously offered it a further opportunity to amend its particulars of infringement in relation to the ‘646 patent.

Had the court proceeded with these orders, it would, in all likelihood, have eviscerated Upaid’s case against Telstra.  In reporting an earlier ruling in this dispute, I suggested that the reason for Upaid’s extremely poor performance may be that, as an NPE, not itself mired in the business and technology of providing services competing with Telstra’s, it may well have a reduced understanding of the technical operations of a major national telecommunications carrier, and may therefore be reliant upon inference and observation of end results as a basis for its allegations.

Unwilling, it seems, to accept almost certain defeat, Upaid applied for leave to appeal to a Full Bench of three judges of the Federal Court.  The matter was heard before Justices Perram, Jagot and Beach on 14 and 15 November 2016, and judgment handed down on 22 November 2016: Upaid Systems Ltd v Telstra Corporation Limited [2016] FCAFC 158.

The Full Court has delivered a glimmer of hope to Upaid, partially granting leave to appeal, and allowing the appeal in relation to the primary judge’s order in relation to the ‘853 patent.  Instead, the court has ordered that Telstra’s application for summary dismissal of Upaid’s infringement claims against it be dismissed, and that Upaid be given an opportunity to file and serve further and better particulars of its infringement case in relation to the ‘853 patent (albeit that the scope of this opportunity remains to be determined by Justice Yates).

This ruling is undoubtedly a lifeline to Upaid, for which all hope had appeared to be lost.  Indeed, it now seems quite likely that the case will proceed to a full trial, unless it is settled in the meantime.

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Tags: Australia, Infringement, Litigation, NPEs, Summary judgment, Trolls

Upaid v Telstra – Here’s How We Deal With NPEs in Australia!

Upaid Systems Ltd is a ‘non-practising entity’ (NPE) – sometimes referred to as a ‘patent troll’ – which sued Australia’s largest telecommunications carrier, Telstra Corporation Ltd, back in August 2013 for the alleged infringement of two Australian patents relating to making online purchases of goods and/or services from mobile devices.  More specifically, Upaid alleges that various subscription operations performed in relation to Telstra’s MOG online music streaming service (formerly Bigpond Music) infringe its patents when conducted using a mobile device.

Some two-and-a-half years later, Justice Yates in the Federal Court of Australia has issued an interlocutory, i.e. provisional, decision comprising more than 500 paragraphs (Upaid Systems Ltd v Telstra Corporation Limited (No 3) [2016] FCA 227) in which Upaid’s various allegations of infringement are largely described in unflattering terms along a spectrum from ‘untenable’ to ‘confusing and embarrassing’!

Furthermore, even where the court has determined that Upaid may have some prospect of overcoming Telstra’s objections, it has found that Upaid’s corresponding case, even after all this time, still does not correctly or adequately identify details of Telstra’s alleged infringements.

It is not that Upaid has not been given ample opportunity to develop its case.  It has had multiple opportunities to address deficiencies identified by Telstra.  It has been granted access to internal documentation of how Telstra’s relevant operational and billing systems work.  It has even been given the opportunity to question Telstra employees on these factual matters.  Yet still the NPE is struggling even to outline an arguable case for infringement.

While the court has not yet completely killed-off Upaid’s case, in my view it certainly seems likely to have been mortally wounded.  While there remains a possibility of appeal (the time for either party to apply for leave has been extended until 12 April 2016), the recent judgment leaves Upaid with very little scope to make out a case with any reasonable prospects of success.  The court has all but struck out Upaid’s entire case in relation to one of the two Upaid patents at issue, and has offered only a limited opportunity for Upaid to try to rectify the deficiencies in its case in relation to the other.

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Tags: Australia, Federal Court practice, Infringement, Litigation, NPEs, Trolls