Chief Judge Connolly held a second Mavexar-related hearing yesterday, this time in Swirlate IP LLC v. Quantela, Inc., C.A. No. 22-235-CFC (D. Del.). This was after the one in the Backertop action that we just posted about.
Chief Judge Connolly questioned both the out-of-town attorney who represented Swirlate as lead counsel in the action, and the sole member of the Swirlate NPE
The Court addressed several topics with the attorney, including:
- Gaps and redactions in the court-ordered document production, which was supposed to include communications with his client.
- Swirlate (the NPE) and its operations.
- Whether he ran a conflict check before taking on the representation.
As to the last point, the attorney seemed uncertain, but testified that he had personally run a conflict check. Chief Judge Connolly pressed him on this point, and ultimately directed him to maintain his records in such a way that a third party can review them. The attorney said that he had replaced his computer since he originally ran the conflict check, so the Court ordered him to preserve the state of all of his computers.
At the end of the hearing, the Court said it intended to refer the attorney to his state's office of disciplinary counsel based on the "overwhelming evidence" that he had not complied with the rules of professional conduct in representing his client, particularly in failing to get informed consent from the NPE as to various issues—although the fundamental problem here seemed to be that the attorney's real relationship was with Mavexar and/or IP Edge, and not the nominal client.
As with the earlier hearing yesterday, Chief Judge Connolly indicated he would also refer these matters to the US DOJ because the Court, the PTO, and the defendants were defrauded by the collective effort to hide the real entities involved.
Side Note: Backertop's Attorney Changes Hats, Represents Mavexar and IP Edge
When the Court did introductions, the attorney who had represented the first NPE, Backertop, in the prior hearing was sitting in the first chair at counsel table.
If you recall, there was some question in the first hearing yesterday as to why he was asking his nominal client questions that seemed (on their face at least) to help Mavexar and IP Edge and go against his nominal client's interests.
This time, when the Court asked him who he represented, he said he was there to represent Mavexar and IP Edge—neither of which is a party to either case.
A Stay-at-Home Mom Whose Side Hustle Is Monetizing Patents?
The Court interviewed the sole member of Swirlate, who described herself as a stay-at-home mom from Houston. She testified that she was recruited to head up the NPE by a friend who works for IP Edge. Like at least one of the others the Court has heard from, she earns just 5% of the profit from the settlements on the patents her NPE holds.
The Court asked her if, in her view, Mavexar truly was just a consultant for her, or if she was actually just letting them use her name. She initially recited that Mavexar acted only as a consulting company that she had hired to help Swirlate monetize its patents.
But Chief Judge Connolly dug deeper. He asked her about her role at Swirlate and what she contributed. She said her contribution was reviewing settlement agreements—but then she admitted that she had never turned a settlement down, and indicated that her "review" relied on Mavexar's attorneys.
I don't have the transcript (we blew our blog budget on buying PACER filings!), so like everything in this post, this is paraphrased. But according to my notes, here is how the exchange ultimately played out:
The Court: "What ARE you contributing?"
The witness: "My name."
The Court: "Is there anything you contribute besides your name?"
The witness: "No."
Of course, in reality, Mavexar and IP Edge likely don't want just her name—they want her to act as a liability shield, providing one more hop before those entities face any potential legal or financial exposure for their litigation activities.
Come Back for the Transcript—In December
Both hearings yesterday touched on many other issues as well, and I'm sure I'm not doing them justice. The transcripts are already posted to PACER, but subject to a transcript restriction. They'll be available on December 18—we may have more on these hearings then!
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