01 Communique Gets More Aggressive With Intellectual Property

Already a headache for Citrix Systems Inc. (CTXS), 01 Communique Laboratory Inc. (OCQLF, ONE.T) could soon be a full-blown migraine for numerous other companies that provide remote access to personal computers.

The Toronto software company said Thursday it filed patent-infringement lawsuits against Dell Inc. (DELL) and LogMeIn Inc. (LOGM), alleging that remote-access products made by those companies infringe on technology used in 01's "I'm In Touch" product. The lawsuit was filed in the U.S. District Court for the Eastern District of Virginia.

Officials from Dell weren't immediately available for comment.

A spokesman for LogMeIn declined to comment, saying the company hasn't been served.

The lawsuits come two months after the U.S. Patent and Trademark Office reaffirmed the 01 patent at the center of 01's dispute with Citrix. The patent is the same one being asserted against Dell and LogMeIn.

Citrix asked the USPTO to re-examine 01's patent in early 2008 just weeks before an infringement trial was scheduled to begin in Ohio District Court. The court stayed the trial pending the outcome of the re-exam. News of the stay sent 01's stock plummeting, as re-exams can take years.

01's stock languished in the 15-20 Canadian-cent range for more than two years until the company announced in July that the USPTO reaffirmed all claims that had been subject to re-exam. That move is rare, occurring in about 8% of all USPTO "inter partes" re-exams, 01 Chief Financial Officer Brian Stringer told Dow Jones Newswires, citing USPTO statistics.

01's stock has climbed sharply since the re-exam result was announced. In Toronto Thursday, the stock closed 2 Canadian cents, or 1.2%, higher to $1.64 on 1.8 million shares. The stock traded as high as C$1.90 earlier Thursday.

01 has asked the court to lift the stay in the Citrix case, Stringer said. If it agrees, the case would proceed to trial, he said. He declined to comment when asked if 01 has held settlement discussions with Citrix.

According to the PACER Web site, which provides access to U.S. court documents, the parties held mediation talks in early 2008, suggesting a settlement was discussed but couldn't be reached. 01's position appeared favorable at the time because, at a key 2007 hearing, the court upheld 01's interpretation of 19 out of 20 claims in the disputed patent.

Now that the patent has survived re-exam unscathed, 01's position may be even more favorable. For instance, Stringer said it's his understanding that Citrix cannot raise validity issues at trial that could have been raised during the re-examination process.

Officials from Citrix weren't immediately available for comment.

If it prevails, 01's potential windfall could be significant. The disputed patent doesn't expire until 2022 so 01 would receive royalties for about 12 years. The company is also seeking payment for past damages dating back to 2005 and it's alleging willful infringement, which could result in a tripling of damages.

One observer following the case estimated Citrix generated nearly U$1 billion between 2005-2009 from its online division, which includes Citrix's allegedly infringing GoToMyPC product. While no royalty has been set, average royalty rates for software patents are among the highest in the technology industry at about 11.5%, according to data compiled by AUS Consulting Inc., a financial consulting firm based in Mount Laurel, N.J.

Hence, if 01 is awarded an 11.5% royalty for past damages on the total US$1 billion generated by Citrix's online division between 2005-2009, damages would reach $115 million. If it is awarded treble damages, that figure could climb to $345 million.

01 would have to share a portion of any award with its contingency law firm, Baker & Hostetler LLP. However, with the re-exam behind it, the company is becoming more aggressive, as evidenced by the Dell and LogMeIn lawsuits. More lawsuits could be coming.

"We've got patents and products in the remote access and communications market," Stringer said. "We want to participate in the growth of that market (and) I think we've proven we don't mind enforcing our intellectual property rights."

Company Web Site: http://www.01com.com

-By Stuart Weinberg, Dow Jones Newswires; 416-306-2026; stuart.weinberg@dowjones.com

Citrix Systems (NASDAQ:CTXS)
Historical Stock Chart
From Jul 2024 to Jul 2024