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November 5, 2002

A San Diego corporation named PanIP LLC has filed more than 50 suits in U.S. District Court here, claiming small-size e-tailers around the country have infringed upon the patent of a local inventor.

Some of the e-tailers have settled for a small sum, and some cases have been dismissed, but a large number of the remaining defendants have formed a defense fund named "Stop PanIP – The PanIP Group Defense Fund."

They complain that PanIP has selected small e-tailers that are located a long distance from San Diego – thus, making a settlement easier to attain.

"This group is going to fight," says Jon Hangartner, a lawyer with Sheppard Mullin who has defended several suits, and will defend more.

"They have a well-thought-out approach to this, selecting defendants based on their size and their location," says Hangartner. "They (defendants) are mostly mom-and-pop operations – everything from feed companies in the Midwest to electronics firms back East. One makes Christian neckties."

According to computerized records, PanIP LLC also goes by the name Pangea Intellectual Properties. The inventor, Lawrence Lockwood, is managing partner of PanIP. In the early 1990s, he sued American Airlines for patent infringement, and lost in a case that eventually got to the U.S. Supreme Court.

"The American Airlines litigation was an invaluable learning experience," says Lockwood, who says it cost his company $2 million. In his current lawsuits, he says that the e-tailers are violating two of his patents related to data processing systems designed to facilitate commercial and financial transactions conducted through use of computers.

"PanIP will move forward in the court system and let the trademark and patent laws prevail," says Lockwood, who went into Chapter 7 liquidation bankruptcy in the 1980s.

"I have been sued in a San Diego court," says Scott Hicks, owner of American Cinema Equipment in Portland, Ore. "They only sue companies a thousand miles away from U.S. District Court there. I have been dismissed because of a technicality."

One of the defendants has set up a Web site, youmaybenext.com. 

"Why did PanIP choose not to go after any businesses in the state of California where PanIP is located?" asks the Web site, constructed by Tim Beere of Indiana-based DeBrand Fine Chocolates. "Are there no small companies with e-commerce Web sites in California?"

A spokesperson for PanIP says that the DeBrand Web site "is full of inaccurate information." The spokesperson also denies that PanIP has cleverly targeted small companies long distances from San Diego.

The first group of 11 suits asked for $30,000 from each defendant, says Hangartner. That was later dropped to $5,000. Most of the defendants in the first group settled for a small amount, he says.

"The matter has been settled. I am not at liberty to discuss it," says Greg Smith of Colorado-based Bradford Publishing Co.

Then, beginning in late August, came four more suits, with 10 defendants in each. "They include a letter saying that 'we will give you 45 days, and if you agree to pay $5,000, we will drop the lawsuits,' " says Hangartner.

Kathleen M. Walker is attorney for PanIP. She calls the original $30,000 demand a "licensing fee." She agrees the sum was dropped to $5,000. However, in the still-outstanding suits, "we will pursue damage fees beyond the $5,000," she says.

"We intend to continue marketing and protecting the intellectual property," says the spokesperson for PanIP.

"We have developed a very reasonable licensing program," says Lockwood.

But, says Hangartner, "We will file counterclaims against them (PanIP)," although he hasn't yet decided their form.

Don Bauder: (619) 293-1523; don.bauder@uniontrib.com