On December 17, 2010, GeoTag, Inc. filed seven patent infringement lawsuits in the U.S. District Court for the Eastern District of Texas against more than 150 retailers. The seven lawsuits will likely be consolidated in some manner (if only for administrative purposes) and will be one of the largest patent litigations ever brought in that Court. Although most of the nation’s larger retailers are named as defendants, even retailers not yet sued have a vested interest in this litigation as it may eventually impact any retailer with an on-line presence.

Each of these seven lawsuits allege that the defendants infringe U.S. Patent No. 5,930,474 (the “‘474 Patent”). The ‘474 Patent was issued by the U.S. Patent and Trademark Office on July 27, 1999 based on an application filed January 31, 1996. The ‘474 Patent purports to cover systems and methods for associating on-line information with geographic areas. As asserted in these lawsuits, the ‘474 Patent allegedly applies to store locator functions on a retailer’s website. In effect, the lawsuits allege that every time a PC user searches online for the closest Home Depot or Costco, the ‘474 Patent is infringed. Needless to say, if such a broad interpretation of the ‘474 Patent is recognized by the courts, virtually every retailer in the United States would have to pay licensing fees to GeoTag or disable the store locator function on its website.

The ‘474 Patent was “invented” in the mid-1990s by Peter D. Dunworth, John W. Veenstra and Joan Nagelkirck. The patent was assigned to Z Land LLC. After unsuccessful attempts to commercialize the patent, the rights to it were assigned to an intellectual property holding company, Geomas Ltd. In or about 2001, Jason W. Galanis, a U.S. entrepreneur, began investing in Geomas. These investments apparently provided the capital to bring a patent infringement lawsuit in November 2006 against Verizon Communications, Inc. and Idearc Information Services, Inc. alleging infringement of the ‘474 Patent. Mr. Galanis arranged $20 million in institutional financing to support the lawsuit which was filed in the U.S. District Court for the Eastern District of Texas. That lawsuit was settled in December 2008. The terms of the settlement were confidential.

Thereafter, the ‘474 Patent was acquired by Ubixo Ltd. and knowledgeable patent lawyers anticipated a new round of lawsuits. None, however, were forthcoming. On July 1, 2010, Ubixo Ltd. formed Ubixo, Inc. and assigned to it the ‘474 Patent and associated rights. On July 12, 2010, Ubixo, Inc. was spun off as an independent corporation. On July 16, 2010, it was reincorporated in Delaware under the name GeoTag, Inc. The above-described new lawsuits followed.

This litigation promises to be challenging for the retailers named as defendants for several reasons and should be taken very seriously by all retailers. First, GeoTag appears to be well funded and capable of sustaining an aggressive long-term litigation. Second, the U.S. District Court for the Eastern District of Texas is notoriously friendly to patent plaintiffs, even non-practicing plaintiffs (often referred to as “patent trolls”). Third, the Court has previously rendered a “claim construction” (a ruling that interprets the meaning and scope of a patent) on the ‘474 Patent in the lawsuit against Verizon and Idearc. The Court is likely to follow that pre-existing construction which was apparently based upon not particularly effective argument by defense counsel. Finally, a number of prominent intellectual property firms will be conflicted out of any role in these cases due to past representation of the current or former owners of the ‘474 Patent.  We will keep you posted on this lawsuit.

Content for this post was provided by Terry Ross, a partner in Crowell & Moring’s Washington, D.C. office whose practice focuses on litigation of intellectual property and technology matters.