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Rates Tech., Inc. v. Broadvox Holding Co., LLC

United States District Court, S.D. New York

October 7, 2014

RATES TECHNOLOGY INC., Plaintiff,
v.
BROADVOX HOLDING COMPANY, LLC, CYPRESS COMMUNICATIONS OPERATING COMPANY, LLC, AND ABC COMPANIES, 1 TO 10, Defendants

Page 516

[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

Page 518

Gerald Weinberger, Pro se, Smithtown, New York.

For Springut Law PC: Milton Springut, Esq., Tal S. Benschar, Esq., Scott Spencer, Esq., New York, New York.

For Broadvox Holding Company, LLC and Cypress Communications Operating Company, LLC, Defendants: Andriy R. Pazuniak, Esq., Carter Ledyard & Milburn LLP, New York, New York; Alex Gertsburg, Esq., The Gertsburg Law Firm Co., LPA, Chagrin Falls, Ohio; George Pazuniak, Esq., O'Kelly Ernst & Bielli, LLC, Wilmington, Delaware.

Page 519

OPINION AND ORDER

Shira A. Scheindlin, United States District Judge.

I. INTRODUCTION

On June 9, 2014, I dismissed the patent infringement suit brought by Rates Technology Inc. (" RTI" ) against Broadvox Holding Company, LLC and Cypress Communications Operating Company, LLC (collectively " Broadvox" ).[1] Two weeks later, on June 23, 2014, Broadvox moved, under section 285 of Title 35 of the United States Code, to collect attorneys' fees and nontaxable costs from RTI and its former counsel, Springut Law PC (" Springut" ).[2] However, on August 1, 2014, Broadvox withdrew its motion as to Springut.[3] Nonetheless, Broadvox now moves for attorneys' fees and nontaxable costs against RTI.

Springut, in a separate motion, moves under section 1927 of Title 28 of the United States Code, as well as under the Court's inherent authority, for sanctions, in the form of attorneys' fees, against Broadvox and its counsel.[4] For the reasons that follow, Broadvox's motion for attorneys' fees and nontaxable costs against RTI is DENIED, and Springut's motion for sanctions is DENIED.

II. BACKGROUND

A. RTI's Patents

In January 2013, RTI initiated this litigation by bringing a patent infringement suit against Broadvox.[5] RTI, a Delaware company, owns several patents in the telecommunications field, including the two telecommunications patents at issue, United States Patent No. 5,425,085 (the " '085 Patent" ) and United States Patent No. 5,519,769 (the " '769 Patent" ).[6] Both the '085 Patent and the '769 Patent have less than two years remaining until they expire.[7] RTI's president and shareholder, Gerald Weinberger, has authority from RTI's board of directors to enforce, at his discretion, the patents at issue.[8] However, the upcoming expiration of the patents at issue, and the resultant effect that will have on RTI's profitability, has led Weinberger to question his job security.[9]

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B. RTI's Business

RTI's current businesses include the " support[] [of] several of its old customers with rate chip updates for their private pay telephones," " some consulting work," " work on some new inventions," and the " enforce[ment] of its patents." [10] The rate chip updates, however, only consist of " giv[ing] away" chips to customers -- approximately a hundred chips to twenty-five customers in 2013.[11] RTI has not received payment for a rate chip in almost a decade.[12] Nor do records exist that document the distribution of chips.[13] Moreover, RTI refuses to reveal the identity of its chip customers.[14]

RTI's consulting work includes " advi[sing] [people] with respect to various telecommunication issues." [15] RTI received " a few hundred thousand dollars" in compensation for its consulting work from 2009 through 2013.[16] However, no contracts exist to memorialize the consulting work,[17] and RTI either did not retain the documents relating to its compensation for the consulting work, or it included the documents in a storage bin produced to Broadvox.[18] And again, RTI refuses to identify its consulting clients.[19]

RTI's work on new inventions has not generated any revenue from 2009 through 2013.[20] RTI cites its inability to obtain patent protection for its new products as the obstacle to generating revenue.[21]

In relation to its patent enforcement, RTI derives a relatively large amount of its revenue from companies that pay RTI for covenant not to sue agreements (" CNS agreements" ).[22] These companies may or may not infringe RTI's patents, and have chosen to settle with RTI rather than litigate the issue.[23] The CNS agreements ...


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