Self-Help ‘Guru’ Takes Expensive Hit in Patent Suit
Law.com/September 7, 2016
By Scott Graham
Keith Raniere is said to hold a lot of sway over the people who are drawn to his professional success training programs, be they girlfriends, wealthy heiresses or business associates.
The “guru” behind NXIVM Corp. is also an inventor who holds three science degrees from New York’s Renssalaer Polytechil Institute. But when it comes to patents his spell seems less powerful. His inability to get official sign-off from a few co-owners of a patent he asserted against Microsoft Corp. and AT&T Inc. is going to cost him a big attorney fee bill, possibly as much as $1 million.
U.S. District Judge Barbara M.G. Lynn of Dallas declared Raniere’s case exceptional last week under Section 285 of the Patent Act, saying he gave “untruthful testimony” and showed “a pattern of obfuscation and bad faith.”
Raniere has been described in magazine articles and lawsuits as a mastermind behind NXIVM. The Albany, N.Y.-based company conducts “professional success training programs for executives and other individuals concerned with developing their skills and achieving their goals,” according to its own court papers. Training covers “internal ethics, logical analysis and problem-solving skills, and are based primarily on a patent pending system, called Rational Inquiry.TM”
That’s not the patent Raniere was asserting, though. Some 20 years ago Raniere and several co-inventors applied for a series of patents on an “intelligent switching system for voice and data.” The patents were assigned to Global Technologies Inc. and issued in the early 2000s.
Raniere sued Microsoft and AT&T last year in his personal capacity for infringing the patents. The tech giants immediately challenged Raniere’s right to assert them, pointing out that Global Tech was dissolved in 1996.
Raniere originally had said in his complaint that he was the owner of the patents. Last year, he told the court that said that he’d executed a series of documents that, “if effective,” would have transferred ownership of the patents to him in 2014. Then this year he indicated newly discovered documents showed he held at least a 75 percent interest in Global Tech.
There were a couple of problems. One is that the 75 percent share is held for Raniere in trust by his former-girlfriend, Toni Natalie, who in a 2011 court filing called Raniere “a compulsive gambler, a sex addict … and a con man that specialized in Ponzi schemes.” Raniere said the trust arrangement was memorialized in a side letter, but he was not sure where to locate it.
AT&T and Microsoft further argued that even if Raniere held 75 percent ownership, that didn’t prove he would have had authority under the company’s bylaws to re-assign the patents to himself.
After several rounds of discovery, Lynn decided she’d had enough. Raniere’s recent testimony contradicted earlier evidence in which he represented he was the sole shareholder of all Global Tech stock at all times before and after the dissolution, she wrote. “The court, in its role as fact-finder, concluded that plaintiff’s testimony was wholly incredible and untruthful,” Lynn wrote in her Sept. 2 order.
That made a fee award appropriate under either Section 285 or the court’s inherent powers, she wrote.
The decision is a win for Paul Hastings, which represented AT&T along with local counsel Carter Scholer Arnett Hamada & Mockle. Partner Chris Kennerly and associates Lindsay White and Even McLean led Paul Hastings’ team. Sidley Austin and Grey Reed & McGraw represented Microsoft.
Raniere was represented originally by Susman Godfrey and Caldwell Cassady Curry, then later by Crockett & Associates, Gus & Gilbert Law Firm and Smeiser Olsen & Watts.
“Raniere, on the advice of counsel, executed corporate documents which he believed gave him 100 percent ownership of his own patents and proceeded to file suit,” Robert Crockett wrote in Raniere’s defense. “That is not bad faith.”
AT&T has asked for $935,000 in fees, with Microsoft requesting $202,000. Lynn has instructed to the two companies to resubmit their bills and ensure that billings aren’t duplicative of each other.
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