Zeroclick, LLC v. Apple Inc.

Background

Zeroclick alleged that Apple’s products infringed claims in two patents: claims 2 and 52 of U.S. Patent No. 7,818,691 and claim 19 of U.S. Patent No. 8,549,443. The court had previously found those claims indefinite, but the Federal Circuit vacated that judgment and remanded the case for further proceedings. After remand, the district court entered a second claim-construction order, discovery closed, and Apple filed motions for judgment on the pleadings and summary judgment.

Apple separately moved to dismiss for lack of standing. Standing is the requirement that the party bringing a federal lawsuit have a legally sufficient connection to the dispute. In a patent-infringement case, the plaintiff generally must possess sufficient rights to exclude others from using the patented invention.

Ownership history

The original Zeroclick entity, referred to by the court as Zeroclick I, received the patents from InterAD Technologies, LLC in May 2015 and filed the lawsuit against Apple in September 2015. Zeroclick I was terminated on December 1, 2017, after a voluntary decision to wind up the entity. The record did not show what happened to Zeroclick I’s assets, including the patents, after termination.

In July 2019, a non-party transferred ownership of Zeroclick I to Dr. Ness Irvine. In November 2019, Dr. Irvine formed a new entity, also named Zeroclick, LLC, which the court called Zeroclick II. In January 2020, Dr. Irvine signed an assignment purporting to transfer patent rights to Zeroclick II. That agreement did not explain how Dr. Irvine had obtained the patent rights, and the assignment was not recorded with the United States Patent and Trademark Office.

Court’s analysis

The court concluded, based on the record then before it, that Zeroclick I had been dissolved and no longer held legal rights to the patents. The court therefore concluded that Zeroclick I had lost constitutional standing to continue the infringement action, making the action moot.

The court rejected Zeroclick I’s argument that it had merely been re-formed and was the same entity as Zeroclick II. The court noted that Zeroclick I and Zeroclick II had different taxpayer numbers, registration dates, registered addresses, and registered agents, and that Dr. Irvine had testified that he created a “brand new company.”

The court also concluded that Zeroclick II could not yet be substituted as plaintiff. A substitution can cure a standing problem only if the proposed new plaintiff can show that it owns sufficient patent rights to sue. The court found a gap in the chain of title from Zeroclick I’s termination in 2017 through Dr. Irvine’s purported assignment to Zeroclick II in January 2020. The record did not establish that the patent rights had been transferred to Dr. Irvine before he purported to assign them to Zeroclick II. The court therefore concluded that Zeroclick II had not shown an injury in fact or standing.

Order

The court did not grant or deny Apple’s motion to dismiss in this order. Instead, it ordered Zeroclick I to show cause—meaning to explain and provide evidence—why the action should not be dismissed for lack of standing. Zeroclick I was given 21 days to file a brief and evidence establishing the chain of title from its 2017 termination through the January 2020 transfer to Zeroclick II. Apple could respond within seven days after that filing. The court said it would then take Apple’s motion under submission without a hearing.

The court vacated the hearings scheduled for May 6, 2020, concerning Apple’s motion to dismiss, its summary-judgment motion, and related motions to exclude expert testimony. It stated that those hearings could be rescheduled if necessary.