Sued For Using Axis Cameras, Settles With Troll

We were recently sued by Canatelo for patent infringement for selling Axis cameras that make use of video motion detection, and can send the video through email. Until our recent settlement, we were asked not to discuss the lawsuit with anyone. I am curious if anyone other integrators have been the subject of a suit from this patent troll, or others.

I know industry manufacturers have been the target of several suits, and it has been discussed on IPVM, Axis, Sony, Cisco, 11 More Sued, Sued! Avigilon, Hikvision, Vivotek, UTC, More. We settled out of court, and now have to pay a royalty for every Axis camera we sell. I'm not sure if I can share the details of our settlement in a forum, but would like to know if anyone else has been dealing with this or a similar issue.

Summary:

Axis reached a settlement with the troll, whereby use of their products are covered from patent litigation. We believe this should also cover Eric's company, who previously had reached an agreement to pay royalties.

However, Axis terminated its invalidation procedure against the patent, as part of the settlement, meaning that the troll can target other manufacturers / integrators / users.


Eric, first of all, thanks for sharing, that's certainly going to help others be aware / figure out what to do.

I have not heard of any other integrators being sued, however, we were recently discussing Hawk, who is widely suing end users.

My first question is: Did you talk to Axis and what did they say? I'd have to imagine they have a huge interest in not having their partners be sued for using their product.

The suit was against my company, CSC (or distributor), and Axis. As of a few months ago, Axis had not settled the suit, and I don't know what CSC did. Each suit was filed separately in the Delaware courts. I'd be willing so share the details with you if you're interested, but not in the forum.

Eric,

Here is the original complaint Canatelo filed against Axis. Here is the dismissal of the case filed in June 2014. So it looks like it was settled or decided with Axis as well, no?

At the very least, I think it's important that Axis makes a public statement because if one Axis partner needs to pay a royalty, it exposes a risk that any and all would have to do something similar.

I completely agree. I will contact my attorney tomorrow for clarification on the Axis suit.

As required by the terms of our settlement, we had to provide a list of all Axis cameras we sold to Canatelo at the end of the year, which is why I am bring it up now. We were not aware that Axis settled, so I'll find out report back.

Eric,

What Axis tried to do is invalidate the patents, by bringing up prior art. See this counter filing from Axis explaining that.

However, the invalidation proceeding have been terminated (see timeline here). Axis and Canatelo have settled.

The good news, I believe, is that Axis has resolved this for users of their product. The bad news is that the patents have not been invalidated so it means other parties are still at risk.

This is interesting. I need to find out how this effects our settlement with Canatelo. We were told that we could be exempt if Axis pays; I'm not sure what is required of us now. Hopefully your right and Axis took care of it.

I did a search on the US government courts database and, according to that, Canataelo has filed 29 cases, all of them closed excepted the lawsuit against Trendnet.

Here's the summary listing:

Now, there certainly could be cases Pacer is not listing / finding. Was the suit against you during this time or?

John, at the advice of our attorney, we did not contact Axis directly. Our attorney was in contact with Axis' attorney, but Axis is still fighting the suit themselves. The only thing I know so far is that if Axis settles with Canatelo, or wins the suits, we may be exempt from paying the royalty because the company can't collect royalties for the same product twice.

John, the third one down, 1-2013-cv-01227 was our case; I don't see Axis' case listed, but I did find it in the USPTP.gov portal under IPR2014-00394 and IPR2014-00396.

Cross-posting from my comment above, that case, 1-2013-cv-01227, was dismissed in June 2014. There are 61 documents for the case which I am still trying to scan through to better understand what happened. I am pretty sure Axis has closed this out. What I don't know, and what I want to ask Axis, is what happened. Presumably they either beat it or they are paying something to protect their dealers?

John,

The initial discussions were that other manufacturers were subject to this same action but only a few updates were subsequently offered on the status of these cases?

We believe cases like these with patent infringement (troll) claims from Canatelo, Hawk and potentially others, WILL have a huge impact on the future business strategy of every integrator. We further believe that we all should use this forum to share ideas, band together to develop a robust a strategy for dealing with this industry threat.

How big does this problem need to get before most end users refuse to do business with any of us. I realize that some large end users already include some levels of idemnification in some purchase contracts however, it is not a widespread requirement. If this continues however, all video orders big or small, will be requiring a blanket indemnification against everything from the security integrator.

End users look to the integrator for this indemnification, because with rare exceptions, they are not buying from the security camera and VMS manufacturers. I believe we have to shift this responsibility to them. What is next, H.264, IR illumination, integration with access control, biometrics, or more?

If any of these other Canatelo cases against Cisco, Sony or others have been resolved, it would be helpful to us all if we could know which ones? Further, does anyone have a list of which manufacturers have been subject to these Canatelo claims. My speculation is that all of them eventually would be targets unless someone fully invalidates Canatelo's patent claim.

The worst thing that can happen is when a settlement payoff is made. I understand the business decision to do so however, paying a troll only emboldens them.

IPVM is our best and candidly, a great resourse to discuss and stay up to date on these legal issues. I would encourage everyone to actively participate in these discussions. Hopefully we can pool our resources and ideas in addressing this serious industry threat.

John, any regular updates your team could provide on these would be helpful also, to keep it on the front burner.

Thanks!

Terry,

Thanks for the detailed and thoughtful feedback. We'll spend some time over the next week catching up on the status of these various lawsuits.

One thing though I want to emphasize to the manufacturers here is that they need to band together and fight as one. There's only so much IPVM can do to share information and publicize the issues. Ultimately, deep pocket companies who are directly at risk (i.e., the manufacturers) need to work together to invalidate these patents. It won't stop until that happens. Sadly, the manufacturers all seem to stand apart, getting picked off one by one.

John, That could not have been said better, and I agree with your appeal to manufacturers, 100%!

There is a time to compete and a time to come together to combat a common threat! This is one of those times. Perhaps a class action lawsuit by a unified group of manufacturers seemingly would be the best strategy, but what do we know, right?

The old saying likely rings true here "the best defense is a good offense"

I/we appreciate your commitment to this issue!

I have trouble understanding why the legal counsels for end users / distributors / integrators cannot have a suit easily thrown back on the manufacturer since they are the source of where the alleged infringement occurs? If not, then for every dollar Canatello/Hawk/Avigilon/Object Video sues me for, I would sue the manufacturer for $1.50 plus legal costs, because it is them who made and sold the alleged infringing product, if it is a.) proven they did so, or b) admitted by them they did so, either by outright admission, or indirect admission by doing nothing. And if they think they can hide behind some clause or disclaimer "as is" (allegedly Aimetis), they should realize those disclaimers can be invalidated if they are found not in good faith. And not standing behind the legal legitimacy of your product is sure not a sign of good faith.

And if they [manufacturers] say nothing and think they can throw their dealers and customers (and distributors) to the wolves, then they are admitting they are at fault and deserve no sympathy or misplaced loyalty when dealers, customers, and distrbutors start suing the manufacturers.

John, you need to make a push for more patent attorneys to join IPVM!

Axis has responded to this discussion. Full response below:

"Axis is committed to being a responsible company in all aspects and we are dedicated to ensuring our partnerships remain mutually beneficial so that together we can drive the industry and offer customers all of the benefits of comprehensive intelligent network video solutions.

In short, Canatelo first filed a suit against Axis in Puerto Rico and then later in Delaware for the same patents, this time together with our partners Prevent and CSC. Axis drove the case forward aggressively and filed for invalidity of the patents with the United States Patent and Trademark Office (USPTO), a so-called inter partes review (IPR). You can see the filings here.

Canatelo and Axis reached an agreement to dismiss the case and then Axis terminated the process for invalidation. In this discussion with Canatelo, Axis made sure that CSC was also dismissed and that no other party using our products can be liable for infringement of these patents. We cannot comment on what is in the agreement, but as we withdrew the IPRs after dismissal it can be understood that this was part of the agreement with Canatelo. Prevent settled the case before Axis came to the agreement with Canatelo, so we are unable to speak to their terms."

To Eric, I recommend you talk to your attorneys in light of this about terminating that royalty, given that Axis confirms the settlement covers use of their products.

Beyond that, while it's good that Axis was able to eliminate this risk for their customers, from an industry perspective, it is disappointing that they terminated their invalidation filing, since a successful invalidation would have ended Canatelo's threats entirely.

"Beyond that, while it's good that Axis was able to eliminate this risk for their customers, from an industry perspective, it is disappointing that they terminated their invalidation filing, since a successful invalidation would have ended Canatelo's threats entirely."

Yes, I agree, but from an accounting and strategic perspective then, wouldn't they have been doing everyone else a favor on their dime? Would it not probably have cost more money to try and invalidate the patent than come to an agreement with Canatelo that seems to have said, "We will spend the money to fight you [Canatelo] and you will loose, but if you back off now and not harrass us or our partners and users anymore, we will not seek to invalidate your bogus patents (saving us legal fees), so that leaves you the freedom to continue harrasing our competitors and their partners and customers who can spend their own money fighting you."

Yes, from a short-term perspective, Axis saved money.

As I said above:

"Ultimately, deep pocket companies who are directly at risk (i.e., the manufacturers) need to work together to invalidate these patents. It won't stop until that happens. Sadly, the manufacturers all seem to stand apart, getting picked off one by one."

Axis, and all the big manufacturers, would be better off working together to systematically invalidate all the patent trolls that come after them. Instead, each of them needs to individually go through the same process of dealing with Canatelo, OV, the doomsday prepper, etc.

Manufacturers should think of themselves as living in the same village and these trolls as invaders. Sure, they could say "Ha, I'll pay off the invader, then they will burn down my neighbor's house and then I can take his land," but I think everyone is better off working as one to protect the village.

In this case Avigilon actually tried to work off the Axis initiated IPR, but Axis moved to terminate it before it was completed. So much for working together.

John,

Thanks you for all you have done. This is a great forum, and I'm glad I asked the question here. I wasn't aware that Axis had settled; I reach out to our attorney, and I'm sure we will be able to get the royalties removed. The power of IPVM really showed itself here, thanks again.

Eric,

I agree with you also, Great Forum! Exchanging information on such a toxic threat is critical and absent of IPVM, what other forum do we have?

Thanks John!

In this discussion with Canatelo, Axis made sure that CSC was also dismissed and that no other party using our products can be liable for infringement of these patents.

Note the actual language used here: discussion. How exactly did they make sure no one can be liable, in a discussion? We don't know if it's actually in writing because they can't comment on the actual agreement.

Is this becoming more common or is it just more publicized? I never heard about this until various IPVM articles on Hawk and Canatelo. Is it just a shift that occurred to a more effective strategy: sue the end user, integrator, and just bypass the deeper pockets/better defended manufacturer?

This seems like a real threat to the integrator/end user. How long before indemnification from the manufacturers becomes more important to integrators than anything else?

Good question.

Patent holders / trolls suing manufacturers is not new (overall nor in our industry).

Suing end users or integrators, that seems new to me. I've been tracking such suits for 5 years but I only started seeing / hearing about end user / integrator suits in the last 2. Maybe some else has a longer history and can share their perspective.

It sure seems effective because it really gets manufacturer's attention. To that end, it seems that patent holders / trolls would be motivated to use this strategy more.

In our case, Canatelo sued us, Axis, and our distributor. I don't beleive that it's going to be a big threat to integrator in the long term though. Our attorney believes that we were sued becasue Canatelo; after having the case dimissed in Puerto Rico, wanted to get the suit heard in a Delaware court, and having a Delaware based company listed in the suit increases their chance of success. If that is the case, it would make sense that they chose my company, even though there are larger integrators in Delaware; we are probably the largest independent Axis dealer in the state. Hopefully our case was an anomoly and not the beginning of a larger problem.

Eric, thanks for the further details.

For other members, the more prominent suer of end users has been Hawk who has sued dozen, a few dozen end users, see: Surveillance End Users Getting Sued by Hawk, Patent Troll - Hawk Initiates A New Round Of Patent Infringement Lawsuits?