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StreamScale Lawsuit and NDAs

A recent case implicates interesting best practices for entering into NDAs with patent assertion entities, particularly for claims accusing open source software.

The First Lawsuit: A Patent Troll Comes to Call

In 2014, a patent assertion entity called StreamScale approached Intel with patent claims against the Intel Intelligent Storage Acceleration Library (ISA-L).¹  StreamScale had a history of accusing open source software projects, and Intel’s ISA-L is licensed under the MIT license. 

Intel and StreamScale had discussions under a non-disclosure agreement (NDA).  Talks did not result in a settlement, and so on March 2, 2021 StreamScale sued Intel for patent infringement in Judge Albright’s plaintiff-friendly Waco courthouse in the Western District of Texas.  That district court has become the most popular one for bringing patent claims in the last few years.

StreamScale’s original complaint alleged that Cloudera, ADP, Experian, Wargaming, and Intel infringed U.S. Patent Nos. 8,683,296; 9,160,374; 9,385,759; 10,003,358; 10,291,259; and 10,666,296. 

Intel moved to dismiss, arguing that StreamScale failed to plead facts sufficient to show induced and willful infringement.  Intel’s motion explained that induced infringement requires that an alleged infringer: (1) had actual knowledge of the asserted patent, (2) knowingly induced a third-party to infringe the patent, and (3) had specific intent to induce infringement.²  Intel explained further that willful infringement similarly requires that an alleged infringer: (1) knew of the asserted patent, (2) infringed the patent after acquiring that knowledge, and (3) knew or should have known that its conduct amounted to patent infringement.³

According to Intel, StreamScale’s “serious allegations” that Intel willfully induced infringement rested entirely on “on a single factual allegation: that it provided Intel with ‘express notice’ of one of the six asserted patents in 2014.”⁴

In response, StreamScale filed an amended complaint on May 28, 2021 stating that StreamScale and Intel had expressly discussed StreamScale’s patents, and that StreamScale had notified Intel that it was inducing infringement of the specific patents at issue.⁵  According to StreamScale the amended complaint “included additional detailed factual allegations regarding (i) Intel’s widespread knowledge of StreamScale, StreamScale’s patents, and StreamScale’s then-pending-patent applications, (ii) Intel inducing infringement of StreamScale’s patents, and (iii) Intel’s willful and wanton conduct” sufficient to “squarely refute” Intel’s motion and render it moot.⁶  Much of StreamScale’s new pleadings apparently came directly from the parties’ earlier discussions under NDA.

The NDA and Breach of Contract

Intel then filed a lawsuit against StreamScale, in a different court, for violating the NDA.⁷  The NDA said this:

Neither the fact that Discloser or its Representatives have disclosed any information to Recipient or its Representatives under or in connection with this Agreement nor the fact that the parties have engaged in discussions or investigations relating to a potential Transaction will be cited or otherwise used by Discloser (i) as evidence of notice of intellectual property infringement (including but not limited to notice under 35 U.S.C § 287), ... (iv) evidence that any alleged infringement was willful or (v) evidence that any alleged inducement of infringement satisfies the knowledge or intent elements for a claim for inducement of infringement.

Clauses like this are not unusual in NDAs used to cover patent infringement settlement discussions (although patent owners often resist their inclusion).  Disputes about the effect of specific NDA provisions during early stages of litigation are also not uncommon. Whether this specific provision will help Intel fend off StreamScale remains to be seen.

Open Source

StreamScale has a history of alleging patent infringement to accuse open source software projects.  Today, almost all patent assertions accusing open source projects are made via patent assertion entities, like StreamScale, Rothschild, or Sound View.  Open source software projects can be vulnerable to broad inducement claims due to their often wide adoption.  While merely releasing open source software would not normally, on its own, be a basis for inducement, companies often release open source software to gain a business advantage that might be advanced as evidence for inducement.  Companies faced with patent claims against open source software from patent assertion entities usually need to clear the rights for everyone to use their open source software, and they should carefully consider their strategy for drafting NDAs to cover patent settlement discussions.

¹ See StreamScale WDTX Amended Complaint ¶90.

² See Intel WDTX MTD at 5, citing Affinity Labs of Texas, LLC v. Toyota Motor N. Am., 2014 WL 2892285, at *2 (W.D. Tex. May 12, 2014) and DSU Med. Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1305 (Fed. Cir. 2006).

³ See Intel WDTX MTD at 11, citing Parity Networks, LLC v. Cisco Systems, Inc., 2019 WL 3940952, at *3 (W.D. Tex. July 26, 2019).

⁴ See Intel WDTX MTD at 1.

⁵ See StreamScale WDTX Amended Complaint ¶¶83-110.

⁶ See StreamScale WDTX Response to MTD at 1.

⁷ Intel Corp v. StreamScale Inc., 5:21-cv-04999 (N.D. Cal. June. 29, 2021)

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