NPE Litigation Misconduct Does not Warrant Dismissal . . . Yet

The court denied defendant's motion to dismiss a non-practicing entity's infringement action in light of litigation misconduct but reserved the right to consider such a sanction in the future. "[Plaintiff's founders] were aware that [plaintiff] might not own the [patent-in-suit] back in 2010. [Plaintiff] attempted to conceal evidence of the incomplete transfer through discovery stonewalling and obfuscation. . . . Taken in its entirety, [plaintiff and its founders] engaged in an extensive cover-up. . . . [Plaintiff] manufactured venue in Texas via a sham. [The founders] rented a windowless file-cabinet room with no employees in Texas and held it out as an ongoing business concern to the Texas judge. . . . To create the impression that [plaintiff] is something other than a patent troll, [plaintiff] and its principals have repeatedly made misleading statements to [defendant] and to the Court. . . . The litigation misconduct is most troubling. But does it warrant outright dismissal? This is a close case. At this stage, the Court is unwilling to impose a terminating sanction but may be willing to do so if the abuse continues. Attorney’s fees caused by and traceable to the misconduct are likely to be imposed but that remedy will be held in abeyance to see how well both sides behave from here on out."

Network Protection Sciences, LLC v. Juniper Networks, Inc., et. al., 3-12-cv-01106 (CAND August 20, 2013, Order) (Alsup, J.).