Harbor Island Dynamic LLC (HID), a subsidiary of Quest Patent Research Corporation (QPRC), has filed its first litigation, suing Samsung ( 2:24-cv-00140) in the Eastern District of Texas. The defendant is alleged to infringe four patents through the provision of products, including "smartphones, tablets, and other similar devices", that incorporate certain Samsung image sensors (including some integrated into downstream products from Samsung customers Alphabet (Google), Lenovo (Motorola Mobility), and Leopard Imaging) and switching circuits.
QPRC is publicly traded and has been picking up portfolios for assertion for well over decade, under funding schemes that have shifted over those years. In February 2023, QPRC acquired seven patents from Newfort Fab, LLC (d/b/a Tower Semiconductor Newport Beach, Inc.), the assets generally related to transistor and semiconductor fabrication. The assignment was direct to HID and was recorded with the USPTO on March 24, 2023. It is from this portfolio that the plaintiff draws its patents now in suit (7,745,886; 7,772,673; 9,147,609; 9,245,826).
HID targets with the '886 patent the provision of certain Samsung switching circuits, including an "Antenna Switch and Coupler die" allegedly used within the Galaxy S22 Ultra; with the '673 patent, of certain Samsung CMOS image sensors and products incorporating them, including the Samsung Galaxy S22 Ultra, as well as the Google Pixel 7 Pro and Motorola Moto G Stylus 5G smartphones; with the '609 patent, of certain Samsung backside illuminated sensors and products incorporating them, including the Samsung Galaxy S22 Ultra, "Leopard Imaging camera modules", and the Motorola Moto G Stylus 5G smartphone; and with the '826 patent, of certain Samsung CMOS image sensors and products incorporating them, including the Samsung Galaxy S22 Ultra smartphone; and certain downstream products from alleged Samsung customers: Certain "Leopard Imaging camera modules" as well as the Google Pixel 7 Pro and Motorola Moto G Stylus 5G smartphones.
QPRC is currently operating under financial backing in place put in place in February 2021 to avoid bankruptcy. Prior to that, QPRC operated with backing by Intelligent Partners LLC, an Austin, Texas-based company "specialising in investing in and managing technology and intellectual property assets". Intelligent Partners is controlled by Andrew Fitton (founder of Gracchi Capital Partners in the UK) and Michael Carper (a former executive and general counsel at Nextel), who are also associated with NPEs Mobile Telecommunications Technologies, LLC (d/b/a MTel, LLC) (which sued more than 25 defendants between 2012-2017 over a group of former SkyTel patents) and United Wireless Holdings Inc., with which QPRC had even earlier funding arrangements.
Longtime QPRC CEO Jon S. Scahill has described Intelligent Partners as the "transferee of United Wireless under the 2015 Securities Purchase Agreement". Fuller coverage of QPRC's pre-February 2021 financing arrangements, as reflected in earlier SEC filings, is provided at "QPRC Debuts Two New Patents in Latest Suits, Against Mitsubishi, Nintendo, and Xiaomi" (March 2021). In September 2020, by their own terms, certain promissory notes "in the aggregate amount of $4,672,810 were outstanding" and "became due", as a result of which "Intelligent Partners had the right to declare a default" and, per QPRC, force a bankruptcy. Instead, QPRC stopped all monetization efforts in favor of a restructuring. QPRC secured a rescue from QPRC Finance LLC (QFL, formed in Delaware in December 2016).
As RPX has previously reported, in a set of February 2021 agreements,
QFL agreed to make available to [QPRC] a financing facility of: (a) up to $25,000,000 for the acquisition of mutually agreed patent rights that the Company intends to monetize; (b) up to $2,000,000 for operating expenses; and (iii) $1,750,000 to fund the cash payment portion of the restructure of the Company's obligations to Intelligent Partners. In return the Company transferred to QFL a right to receive a portion of net proceeds generated from the monetization of those patents.
In its most recent annual report, QPRC announced that in March of this year, it and HID (formed in Texas in January 2023) entered into a new set of agreements, these with QPRC Finance III LLC (QF3, formed in Delaware in December 2022), an entity that QPRC indicates is related to QPRC Finance, by which
QF3 agreed to make available to [QPRC] a financing facility of: (a) up to $4,000,000 for operating expenses; (b) $3,300,000 to fund the cash payment portion of the purchase of a patent portfolio from Tower Semiconductor Ltd.; and (c) up to an additional $25,000,000 for the acquisition of mutually agreed patent rights that we intend to monetize. In return [QPRC] transferred to QF3 a right to receive a portion of net proceeds generated from the monetization of those patents.
(Delaware records contain a QPRC Finance II LLC, formed there in February 2022, but QPRC's recent SEC filings make no mention of this entity.) QPRC reports that on March 17, 2023, it used the $3.3M allocated in this deal with QF3 as "the cash payment portion of the purchase of a ten-patent portfolio (the "HID Portfolio") from Tower Semiconductor Ltd." HID presumably refers to Harbor Island Dynamic.
Scahill, QPRC's only fulltime employee, has formed two additional entities in Texas. In July 2022, QPRC subsidiary Koyo Licensing LLC was created there, receiving two US patents generally related to a "sensitive" display on a computing device via an August 28, 2023 assignment that was recorded on September 18, 2023. Then, on June 8, 2023, Scahill formed Flash Uplink LLC in Texas—assignment of any assets to this entity have yet to be reflected in publicly available USPTO records.
QPRC's board consists of Scahill (CEO since January 2014) and his first cousin Timothy J. Scahill, characterized as having been the company's CTO since October 2014, together with "independent" directors William R. Carroll (since 2014 as well), "an associate professor and chairman of the marketing department at St. John's University College of Business since July 2014"; and Ryan T. Logue, "an investment advisory representative [with] Lincoln Investment, a position he has held since 2019", prior to which "he spent 16 years with Morgan Stanley in the private wealth management department". The date that Logue reports having joined the QPRC board is February 2021, the same month that QPRC underwent its restructuring to avoid bankruptcy.
QPRC SEC filings also mention payments made to three unnamed consultants for work done over recent years in developing the company's monetization business strategy. Since 2021, QPRC has launched nine litigation campaigns, six of which are now inactive—those of Peregrin Licensing LLC (ending in October 2021), Soundstreak Texas, LLC (ending in March 2023), M-Red Inc. (ending in March 2022), and Audio Messaging Inc. (in September 2022), LS Cloud Storage Technologies, LLC (in November 2023), and Tyche Licensing LLC (in May 2023). QPRC has represented that it does not "anticipate allocating further resources to monetization" of the M-Red portfolio, but it has not made such statements about the others.
The most recent ruling in the LS Cloud Storage campaign contained a warning for its counsel, Ramey LLP, from Western District of Texas Judge Robert L. Pitman. Having dismissed a case filed against Amazon there with prejudice, after William P. Ramey III of Ramey LLP (again) faulted his paralegal and/or docketing teams for failure to timely file an amended complaint, the court deemed the dismissal with prejudice as sufficient sanction but "warned that failures to meet docketing deadlines in cases before this Court will result filings being automatically stricken or the imposition of sanctions under Rule 11". For additional details concerning this decision, see "Fees Shifted, Other Sanctions Avoided, Warning Issued" (March 2024).
Left open are the QPRC litigation campaigns conducted through subsidiaries Multimodal Media LLC (begun in November 2021), Taasera Licensing LLC (that same month), Deepwell IP LLC (last September), and now HID. Active defendants in the Multimodal campaign are Samsung (in claim construction before Eastern District of Texas Chief Judge Rodney Gilstrap) and TCL (mired in service issues before the same court). A slew of prior defendants is exiting the Taasera Licensing campaign; early in February 2024, the plaintiff hit Sonicwall in the Northern District of California where Taasera identified only QPRC as a nonparty with an interest, financial or otherwise, in the outcome of the case. Finally, a September 2023 case filed by Deepwell IP against MediaTek remains in pleadings before Judge Gilstrap. For background coverage of these litigation efforts, see "QPRC Inks Another Financing Deal, Acquires More Patents, Files More Cases" (September 2023).
QPRC's most recent 10-K further details its post-restructuring "total monetization proceeds obligation" (TMPO) to Intelligent Partners, the remaining portion of which (as of that filing, following a $1.75M cash payment provided by QFL) totaled $2.805M.:
Under our amended monetization proceeds agreements with Intelligent Partners, we pay Intelligent Partners 60% of the net monetization proceeds from associated intellectual property portfolios. Further, until we have paid Intelligent Partners a total of $2,805,000 under all of the monetization proceeds agreements, for net proceeds between $0 and $1,000,000 we are to pay Intelligent Partners 10% of the net proceeds realized from new assets acquired by us, provided, that, if, in any calendar quarter, our net proceeds realized exceed $1,000,000, Intelligent Partner's entitlement for that quarter shall increase to 30% on the portion of net proceeds in excess of $1,000,000 but less than $3,000,000, and if in the same calendar quarter, net proceeds exceed $3,000,000, Intelligent Partners' entitlement for that quarter shall increase to 50% on the portion of net proceeds in excess of $3,000,000. These payments come from our share of the proceeds after QFL and QF3 have recovered their negotiated rate of return, respectively. In these agreements, the monetization proceeds is [sic] determined after payment of contingent legal fees and certain other expenses, including payments due by us to as part of the purchase price for intellectual property rights.
In its last 10-Q, the company reports that:
At September 30, 2023, we had current assets of approximately $675,000, and current liabilities of approximately $15,807,000. Our current liabilities include funding liabilities of approximately $10,821,000 payable to QFL and QF3, a non-interest bearing total monetization proceeds obligation (the "TMPO") to Intelligent Partners in the amount of approximately $2,797,000 under the Restructure Agreement, both of which are only payable from money generated from the monetization of intellectual property, loans payable of approximately $138,000, a warrant liability of approximately $300,000, accounts payable and accrued liabilities of approximately $283,000, and accrued interest of approximately $1,469,000. As of September 30, 2023, we have an accumulated deficit of approximately $29,132,000 and a negative working capital of approximately $15,133,000.
Fabricant LLP represents HID in the new case against Samsung; Chief Judge Gilstrap presides. 2/27, Eastern District of Texas.
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