Augme's Patent Licensing Is Key To Getting Ahead

| About: Hipcricket, Inc. (HIPPQ)

Augme Technologies' (AUGT) 2007 lawsuit against AOL (NYSE:AOL) may finally go to trial after a nearly five-year delay. Last week, Judge Colleen McMahon of New York's Southern District ordered Augme Technologies and AOL, opposing parties in a 2007 patent infringement lawsuit, to advise the court of anything the parties need prior to issuing a Joint Pre-Trial Order - a key step toward bringing the trial to fruition.

Founded as Modavox in 1999, Augme describes itself as a provider of "strategic services and mobile technology to leading consumer and healthcare brands." Company literature claims that successful use of its marketing technology platform benefited major brands like Macy's (NYSE:M), MillerCoors, Nestle (OTCPK:NSRGY), KFC, and Clear Channel (NYSE:CCO). The five-year old lawsuit against AOL relates to US Patents 6,594,691 and 7,269,636 which relate to adding and embedding functionality in websites.

According to court documents, Judge McMahon already resolved the majority of issues raised by Augme's suit. However, one specific question remains relating to whether AOL infringes Augme's patents under the doctrine of equivalents, requiring a trial. Specifically, while Judge McMahan appears to agree that all other aspects of Augme's claimed invention are in use by AOL, a question remains about whether AOL's use of a "Data Agent" and "Data Tag," in combination, are equivalent to Augme's claimed "first code module embedded" in a web page. According to the Judge, "only the Data Tag is fully embedded, and the Data Agent does not embed until it is called by the Data Tag." However, the Data Agent "becomes fully embedded before the webpage is fully downloaded," thus prompting the question of whether the combination is equivalent to the claimed embedded code module.

Legendary jurist Learned Hand wrote that the doctrine of equivalents "prevent[s] an infringer from stealing the benefit of the invention." Specifically, the legal rule prevents a would-be infringer from escaping liability for patent infringement by making insubstantial changes to a product or process. According to Judge McMahon:

If this combination of elements [Data Tag/Data Agent] were fully embedded when the web page was designed, [AOL] would appear to be guilty of literal infringement-and I have already concluded that they are not. The issue is whether the combination of features that is only partly embedded to begin with, but that fully embeds (i.e., becomes part of the programming architecture) prior to the full rendering of the webpage, performs substantially the same function in substantially the same way. That is … the only issue that must be tried.

Augme aggressively enforces its patent portfolio, and, in so doing, demonstrates a shared characteristic with board member Donald Stout. Stout, within patent circles is likely regarded as one of Augme's more famous board members. He previously founded NTP, Inc. and made headlines in 2006 when its patent case against Blackberry maker Research In Motion (RIMM) seemingly threatened to shut down the mobile e-mail service - a horror movie plot to lawyers, bankers and executives nationwide. Instead, however, RIM maintained its mobile e-mail service, while paying more than $600 M to license NTP's patents.

About Augme, and the role of IP for start-up business, Stout, also a partner at Antonelli, Terry, Stout & Kraus, LLP told Gametime IP, "Companies in emerging industries enhance their ability to compete by incorporating a value-generating IP strategy." When start-ups leverage their intellectual property, they not only protect their innovation space, but further provide a return for investors. As long as companies continue to do this, investors have an additional incentive to fund new technology growth. Stout agreed with the sentiment, adding:

Quality patents, strategically deployed, support young operating businesses and provide investors additional ways to achieve return. Rights these businesses can generate internally, acquire from others, and license will move them to a higher level faster. It also helps to have the capital and commitment to get there.

Stout's mention of acquiring patents from others hints at another of Augme's current strategies. Two days before Judge McMahon's decision to move the case toward trial, Augme announced its acquisition of Geos Communications IP Holdings, Inc for $355,000 in cash and $4 Million in stock. By virtue of the acquisition, Augme "acquired 5 U. S. patents covering Voice over Internet Protocol ("VoIP") and other critical mobility inventions and 7 U. S. patent applications and 18 pending international patent applications covering related invention families within the field of mobile VoIP."

By acquiring IP assets outside of its current core focus, Augme adds both depth and breadth to its portfolio. Win, lose or draw in its trial against AOL, one thing is clear: Augme's interest in licensing patented technology are likely far from over.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.