Pardalis & Nohavicka Intellectual Property Law Update: Predictive Software Company Sues Lawyers For Flawed “Placeholder Claim Patent” Filing
Economic Alchemy LLC, a software company, was formed in 2011 to employ social media and other real time data to quantify economic expectations and to forecast the United States economy.
They hired a law firm to file certain patent applications before the United States Patent and Trademark Office (“USPTO”) beginning on October 11, 2012. The patents, if granted, would have been a breakthrough technology that would help track the United States economy in real-time and would have been a highly-attractive software for market speculators.
However, according to the company, their lawyers committed numerous errors in the process of filing 5 separate “placeholder claim” patents and by failing to amend them at a later date. [A placeholder claim gives the patent owner time to see how the competition reacts to the granted patent. The patent owner may then file a preliminary amendment to replace the placeholder claims with new claims that more effectively capture any design-around products.]. The errors caused substantial impairment to the value of the company’s patent portfolio by allowing competitors additional time to enter a marketplace not yet penetrated, and caused the company significant damages to mitigate the potential losses, lost licensing revenue, and royalty income in addition to a substantial diminution of the value of the patent. The company sued their lawyers in state court and the lawyers filed a motion to dismiss arguing that the software was not patentable. CASE NOT DISMISSED.
The court noted that it was not its function to determine whether the company’s software was patentable under recent Supreme Court decisions and that the software company sufficiently plead an action for malpractice. The legal malpractice case against the lawyers was allowed to proceed.
Read the Case Here: