Nebraska Furniture Mart Makes Preemptive Strike Against NPE

On February 3, 2011 Nebraska Furniture Mart filed a complaint in the United States District Court in Delaware seeking a declaratory judgment against Kelora Systems, LLC. The complaint seeks a declaration that U.S. Patent No. 6,275,821 ("the '821 patent") is invalid and not infringed. The '821 patent, entitled "Method and system for executing a guided parametric search." Kelora is considered by many to be a non-practicing entity, or NPE. NPE's are sometimes referred to as "patent trolls" for collecting licensing fees without actually commercially exploiting patented technology.

In October 2007 Kelora's predecessor-in-interest filed suit in federal court in the Eastern District of Texas against six companies, including eBay, Yahoo!, and Microsoft. That case was transferred to the Northern District of California and in August 2009, that court entered summary judgment that claims 1 and 2 of the '821 patent invalid under the on-sale bar (35 U.S.C. 102(b)). Even after that ruling, Kelora apparently continued to assert the '821 patent against numerous parties, including sending a demand letter to NFM on January 20, 2011 seeking a $100,000 licensing fee. Based on this history, NFM is seeking fees and costs.

The case, and its history, demonstrates how the quick assessment of a patent troll and their history can allow for a strategic and efficient response. As Congress considers patent reform legislation that would, among other things, revise the damages provisions of the patent laws, patent trolls will likely look to file infringement actions early. Companies dealing with these nuisance demands and lawsuits are wise to assess the facts, then move quickly to obtain jurisdictional advantages and position themselves as plaintiff in a declaratory judgment action.