Secretive Company Sues The Cable Industry, Claiming It Owns Patents On VOD

Back in November, a little-known Virginia company named Pragmatus AV sued Facebook, YouTube (NSDQ: GOOG), LinkedIn, and Photobucket over patents it purchased from giant patent-holding company Intellectual Ventures. Now, Pragmatus has turned to the cable television industry for its next payout.

After creating a subsidiary called Pragmatus VOD, it has used its two patents to file a lawsuit [PDF] against the nation’s biggest cable companies. Comcast (NSDQ: CMCSA), Cox, Charter (NSDQ: CHTR), Cablevision (NYSE: CVC), Time Warner (NYSE: TWX), Advance/Newhouse, and Bright House are all named as defendants. This suit against the cable industry suggests that many companies, and in fact whole industries, may be in danger of getting hit with patent suits now that Intellectual Ventures is releasing those patents into the marketplace.

The lawsuit asks for unspecified damages, saying that by offering video-on-demand (VOD) services, the cable companies all infringe on the two patents Pragmatus owns.

The two patents have an unusual provenance. They were originally granted to a small Connecticut company, Image Telecommunications Corporation. At a patent auction in 2007, Image Telecommunications sold its patents to an anonymous buyer for a little more than $3 million. That buyer turned out to be Intellectual Ventures, the giant patent-holding company founded by ex-Microsoft (NSDQ: MSFT) CTO Nathan Myhrvold.

At some point after Pragmatus was created in June, Intellectual Ventures sold it the patents now being used to sue the cable industry. Pragmatus’ November lawsuit also involves patents that were acquired from Intellectual Ventures. A spokesperson confirmed that Intellectual Ventures once owned these two patents but doesn’t any longer.

While Intellectual Ventures doesn’t own Pragmatus or the patents, it isn’t clear whether it has any stake in the outcome of these lawsuits; sometimes Intellectual Ventures sells patents with agreements to get a part of any litigation winnings, while other patents are sold outright.

The identity of Pragmatus’ owners wasn’t clear when the company first appeared on the map after suing Facebook and YouTube in November. But documents filed Friday in the Facebook and YouTube suits show that Pragmatus is owned by two patent lawyers, William Marino and Anthony Grillo, both of whom have experience working for other patent-holding companies. Marino is a partner and general counsel at Altitude Capital, a New York investment bank that has more than $250 million it is investing in patent lawsuits.

It’s increasingly common for patent lawyers themselves to be at the heart of such “patent trolling” operations, either as owners of a patent-holding company, like Grillo and Marino, or even as inventors, like the Alexandria, Virginia, patent lawyer who sued Twitter last week.

Pragmatus’ lawyers had to provide more information about the company because they’re arguing against motions filed by Facebook and YouTube to move the lawsuit from Virginia to Northern California, a venue that the internet companies say would be more convenient for litigation. Pragmatus filed papers opposing a transfer on Friday, and in doing so had to demonstrate its ties to Virginia. Pragmatus’ documents show that Marino, who splits ownership of Pragmatus with Grillo on a 50-50 basis, has lived in Alexandria since 2005. Co-owner Grillo lives in Pennsylvania. In the same filing, Marino says that Pragmatus owns more than 100 patents, which probably means that more Pragmatus suits are on the way.

Lawyers representing Pragmatus said their client had no comment on the recently filed lawsuit.

»  Read Pragmatus VOD v. Bright House et al. Complaint [PDF]