In a twist, Apple is being sued for patent infringement by a company owned by a North Dakota-based Native American tribe that has probably never invented anything close to resembling a tablet computer, ARS Technica reports.
MEC Resources LLC is a North Dakotan company wholly owned by the Mandan, Hidatsa, and Arikara Nation (also known as the Three Affiliated Tribes). The self-described “small patent holding company” had no revenue in 2016 and has had no revenue to date in 2017 according to legal filings. Yet it has launched a lawsuit against a multibillion dollar tech giant claiming royalties from iPad sales thanks to a patent it purchased from another company.
The original intellectual property complaint against Apple was filed in March by Texas-based Prowire LLC, which alleged that inductors in the iPad 4 (named the “Accused Inductors” in its complaint) infringe on its patent for “Inductors with Minimized EMI Effect and the Method of Manufacturing the Same”. Prowire, in turn, obtained the patent, which was invented by two Taiwanese nationals, from a Taiwanese company called Fuco Technology Co., LTD.
Although the complaint was originally filed in Delaware, was recently transferred to the Northern District of California by judges who cited a congested court and a depleted bench as reasons.
The rights to the patent were likely sold onto the MEC Resources LLC for legal reasons. It turns out that Native American tribes enjoy something called “sovereign immunity”, which, under the Eleventh Amendment of the US Constitution, means they cannot be sued in federal court unless they consent to. Sovereign immunity comes in handy when it comes to patent disputes because sovereign patent holders can avoid having the US Patent Office judge their patents in a process called inter partes review (IPR).
IPR cases go before the Patent Trial and Appeals Board (PTAB) rather than before district courts. IPR has emerged as one of the most quick, efficient, and cheap methods for fighting off patent trolls. According to Unified Patents, a defensive patent group, the PTAB cancels around 74 percent of patent claims, making IPRs the preferred method of legal recourse for tech companies besieged by bogus patent claims.
While IPR has made it riskier for holders to assert weak patent claims, the sovereign immunity loophole may have shifted the balance in favor of patent trolls. In any case, more and more patent holders seem to be paying Native American tribes to hold onto their claims in the hopes that it will allow them to circumvent the IPR process.