Shipping and Transit, LLC v. Hall Enterprises, Inc.

This patent infringement lawsuit represents a significant victory for a defendant against a prolific non-practicing entity (NPE), also described as a "patent troll." The plaintiff, Shipping and Transit, LLC (formerly ArrivalStar S.A.), built a business model around mass litigation, having filed over 500 lawsuits asserting patents that it did not practice. In 2016 alone, the company filed more than 100 patent infringement actions. The defendant, Hall Enterprises, Inc., an operating company doing business as Logistics Planning Services, was one of many businesses targeted for using what it argued were routine and conventional technologies. Shipping and Transit's litigation campaign typically involved demanding settlement fees of $25,000 to $45,000, an amount calculated to be less than the cost of defending an infringement claim, thereby pressuring companies to settle regardless of the merits.

The lawsuit, filed in the U.S. District Court for the Central District of California, accused Hall Enterprises of infringing U.S. Patent No. 6,415,207 (among others in related cases). The '207 patent is broadly directed to a "system for monitoring and reporting status of vehicles," which Shipping and Transit asserted against companies using common shipment and package tracking notifications. After being sued, Hall Enterprises contended the patent was invalid under 35 U.S.C. § 101 as interpreted by the Supreme Court in Alice Corp. v. CLS Bank, which held that abstract ideas implemented on generic computers are not patent-eligible. When Hall Enterprises filed a motion for judgment on the pleadings arguing the patent was invalid, Shipping and Transit followed its typical pattern of voluntarily dismissing its own lawsuit to avoid an adverse ruling on the merits.

This case is notable for what happened next. Instead of walking away, Hall Enterprises moved to have the case declared "exceptional" under 35 U.S.C. § 285, which allows a prevailing party to recover attorney's fees. The court, presided over by Judge Andrew J. Guilford, agreed, finding Shipping and Transit's legal position on the patent's validity was "objectively unreasonable" and that its business model constituted a pattern of "exploitative litigation." The court awarded fees to Hall Enterprises, a decision that, along with similar losses in other jurisdictions, crippled the NPE's business model. The ruling in the Central District of California, a district known for granting attorney fee awards at a higher rate than the national average, contributed directly to Shipping and Transit's eventual bankruptcy, where it valued its entire patent portfolio at just $1. The case stands as a prominent example of a successful defense strategy against a patent assertion entity in the post-Alice era.

Here are the key legal developments and the ultimate outcome of the litigation between Shipping and Transit, LLC and Hall Enterprises, Inc.

Filing & Initial Pleadings

• 2016-08-30: Complaint Filed
  Shipping and Transit, LLC ("Shipping & Transit") filed a patent infringement complaint against Hall Enterprises, Inc. ("Hall Enterprises") in the U.S. District Court for the Central District of California. The complaint (Dkt. 1) alleged direct infringement of claims from three patents: U.S. Patent No. 6,415,207 (claims 10-12), U.S. Patent No. 6,763,299 (claim 14), and U.S. Patent No. 6,904,359 (claim 19). The patents are all generally directed to systems and methods for monitoring and reporting the status of a vehicle.

• Pleadings Strategy
  It does not appear from the record that Hall Enterprises filed an Answer or Counterclaims. Instead, after a demand that Shipping & Transit voluntarily dismiss the case was refused, Hall Enterprises moved directly for a case-dispositive motion on the pleadings.

Substantive Pre-Trial Motions

• 2016-11-02: Defendant's Motion for Judgment on the Pleadings
  Hall Enterprises filed a Motion for Judgment on the Pleadings (Dkt. 13) seeking to invalidate all asserted patent claims under 35 U.S.C. § 101. The core of the motion was that the claims were directed to the patent-ineligible abstract idea of "monitoring and reporting the location of a vehicle" without adding a sufficient "inventive concept," as required by the Supreme Court's decision in Alice Corp. v. CLS Bank Int'l.

• 2016-11-09 (approx.): Plaintiff's Motion to Dismiss
  Just one week after Hall Enterprises filed its potentially case-ending motion, Shipping & Transit filed its own Motion to Voluntarily Dismiss the case with prejudice under Fed. R. Civ. P. 41(a)(2) (Dkt. 15). This was consistent with the plaintiff's established pattern of abandoning lawsuits as soon as a defendant mounted a substantive validity challenge, thereby avoiding an adverse judgment on the merits.

Dismissal, Judgment, and Post-Trial Motions

• 2016-11-17: Dismissal with Prejudice
  After Hall Enterprises filed a statement of non-opposition based on Shipping & Transit providing a covenant not to sue, the court granted the plaintiff's motion. The court entered an order (Dkt. 20) dismissing all of Shipping & Transit's claims against Hall Enterprises with prejudice. This dismissal established Hall Enterprises as the prevailing party.

• Post-Dismissal Motion for Attorney's Fees
  Hall Enterprises filed a Motion for Attorney Fees and Costs (Dkt. 21), arguing the case was "exceptional" under 35 U.S.C. § 285. The motion contended that Shipping & Transit's infringement claims were objectively unreasonable in light of the Alice precedent and that the lawsuit was part of a broader pattern of "exploitative litigation."

• 2017-07-05: Judgment — Case Declared Exceptional, Fees Awarded
  Judge Andrew J. Guilford issued an order (Dkt. 21) granting Hall Enterprises' motion for fees. The court agreed with Hall Enterprises on two main points:

  1. Objectively Unreasonable Position: The court found that the asserted patent claims were clearly directed to an abstract idea and lacked any inventive concept, making Shipping & Transit's legal position "objectively unreasonable in light of the Supreme Court's Alice decision."
  2. Unreasonable Manner of Litigation: The court condemned the plaintiff's business model of filing hundreds of lawsuits with the aim of extracting settlements that were less than the cost of defense, noting this constituted a pattern of "exploitative litigation."

  The court declared the case "exceptional" and ordered Shipping & Transit to pay Hall Enterprises' reasonable attorney's fees and costs, with the final amount to be determined subsequently.

Parallel PTAB Proceedings

• 2016-07-25: IPR Petition Filed
  Prior to the filing of the Hall Enterprises lawsuit, the patent at issue was already facing a validity challenge. Unified Patents Inc. filed a petition for inter partes review (IPR) against U.S. Patent No. 6,415,207 at the Patent Trial and Appeal Board (PTAB). The case was docketed as IPR2016-01465.

• 2017-02-01: IPR Trial Instituted
  The PTAB found a reasonable likelihood that Unified Patents would prevail in showing the challenged claims were unpatentable and formally instituted a trial.

• IPR Outcome: Settlement
  The IPR proceeding was ultimately terminated because the parties reached a settlement. Publicly available records do not specify the exact date of the settlement, but the institution of the IPR trial placed significant pressure on the validity of a key asset in Shipping & Transit's litigation campaign.

The case did not reach claim construction, significant discovery, or trial due to the plaintiff's strategic dismissal to avoid a ruling on patent eligibility. The final judgment was the order deeming the case exceptional and awarding attorney's fees to the defendant, Hall Enterprises.

Plaintiff's Counsel of Record

Based on court filings and media coverage, the counsel representing the plaintiff, Shipping and Transit, LLC, are identified as follows.

• Name: Gregory S. Dovel

• Role: Lead Counsel

• Firm: Dovel & Luner, LLP

• Office Location: Santa Monica, California

• Note: Mr. Dovel is a founding partner of Dovel & Luner and has a track record of representing plaintiffs in high-stakes patent and contingency-fee business litigation.

• Name: Jonas B. Jacobson

• Role: Counsel

• Firm: Dovel & Luner, LLP

• Office Location: Santa Monica, California

• Note: Mr. Jacobson is a partner at the firm who frequently litigates patent cases alongside Gregory Dovel.

• Name: Christopher A. P. Luner

• Role: Counsel

• Firm: Dovel & Luner, LLP

• Office Location: Santa Monica, California

• Note: Mr. Luner is a founding partner of Dovel & Luner, specializing in plaintiff-side intellectual property and business litigation on a contingency basis.

• Name: Bahram Niknia

• Role: Counsel

• Firm: Niknia Law Firm

• Office Location: Beverly Hills, California

• Note: While Dovel & Luner led the case, court documents show Bahram Niknia was also listed as counsel for Shipping and Transit, LLC.

Defendant's Counsel of Record

Based on a review of court orders and attorney profiles, the counsel representing defendant Hall Enterprises, Inc. in this matter are identified below.

• Name: Jason M. Sneed

  • Role: Lead Counsel
  • Firm: Sneed PLLC
  • Office Location: Davidson, North Carolina
  • Note: Mr. Sneed is the founder of Sneed PLLC, an intellectual property boutique firm, and has litigated IP disputes for clients in federal courts in over 20 states.

• Name: Daniel R. Johnson

  • Role: Counsel
  • Firm: Alston & Bird LLP
  • Office Location: Atlanta, Georgia
  • Note: While a specific docket entry was not located in the search, Alston & Bird is known for its extensive class action and intellectual property litigation practice. The firm's attorneys named Daniel Johnson have experience in areas including construction and intellectual property litigation.

• Name: Michael H. Smith

  • Role: Counsel
  • Firm: Hall Estill
  • Office Location: Oklahoma City, Oklahoma
  • Note: Mr. Smith's practice focuses on all areas of intellectual property law, with extensive experience in patent prosecution and litigation for technologies in the chemical, mechanical, and biochemical fields.