Salesforce Wields Old Patent License as Shield Against New Suits

Nearly seven years ago, Salesforce.com Inc. paid $4 million and entered into a patent licensing agreement with the most active patent-assertion company at the time, Uniloc USA, which dropped its infringement lawsuit against the software company.

Now, Salesforce is wielding that licensing agreement in three different federal courts to fend off 10 lawsuits filed against it by a newer patent-monetization entity, WSOU Investments LLC.

WSOU, like Uniloc before it, purchases patents and generates revenue through licenses and litigation. They share another thing in common: surfer-turned-executive Craig Etchegoyen.

Etchegoyen was Uniloc’s former CEO and in 2017 founded WSOU. The 2016 deal, Salesforce argues, gives it rights to use all “future” Uniloc patents and broadly defines Uniloc enough to cover future patent assertion activities by Etchegoyen’s new businesses.

Whether the license applies not just to Etchegoyen but to newer entities he controls will be a critical question for determining whether that defense holds up, according to attorneys interviewed by Bloomberg Law. That question has proved important enough to open the door to deeper discovery in a series of lawsuits in the US District Court for the Western District of Texas, known for limiting the practice.

Jim Farrington, an IP attorney who specialized in licensing and teaches at the University of Notre Dame’s Law School, said it’s not unheard of for a license to use intellectual property that specifically names individuals, such as patent owners, in addition to corporations.

Naming an executive is “not unusual when dealing with startups where founders may be a bit sloppy with some of the paperwork,” Farrington said.

But he said it’s not clear that the Salesforce-Uniloc license goes further to “capture other entities controlled by” Etchegoyen, based on excerpts in a recent Salesforce brief where the company also described its defense.

Jorge Contreras, a law professor at the University of Utah College of Law and author of a textbook on intellectual property licensing and transactions, agreed.

“There seems to be some question whether WSOU, which seems to be controlled by Mr. Etchegoyen, would also be counted as an affiliate of Uniloc,” he said. “The obvious implication of this dispute is that lawyers need to be very attentive to these definitions when drafting and negotiating licensing agreements.”

Representatives for Salesforce and WSOU didn’t respond to requests for comment.

2016 Licensing Pact

Though confidential, basic details from the 2016 agreement and more than 100 other similar agreements were revealed in a Uniloc lawsuit against Apple Inc. Northern California federal Judge William Alsup ruled in late 2020 that Uniloc had lost control of its patents after defaulting on a loan from Fortress Credit Co. Uniloc thus didn’t have standing to sue.

More substantive descriptions of the license and Salesforce’s defense are included in a recent brief the company filed in federal court in Delaware, where it had been seeking records from two WSOU affiliates.

The brief is part of a broader effort by Salesforce to obtain documents it hopes will show Etchegoyen controls WSOU—which also goes by Brazos Licensing and Development, taking the name of a river that runs through patent-litigation hotspot Waco, Texas. It has subpoenaed records from WSOU Holdings LLC, WSOU Capital Partners LLC, and a third company set up by Etchegoyen, Orange Holdings Inc., and moved to compel compliance with those subpoenas in federal courts in Delaware, Nevada, and Waco.

It also described its defense in the Delaware case, before that matter was transferred to Texas: the 2016 agreement “granted Salesforce a license to all future patents that Uniloc—defined to include Mr. Etchegoyen specifically by name and ‘Affiliates’ generally—had or has the ‘ability or right to enforce or license.’”

Salesforce further argued that the WSOU operating agreements and corporate filings it has already obtained in discovery indicate Etchegoyen “controls WSOU Investments through his ownership, management, and control of the entities that own controlling interests” in the company.

Charts pulled from the agreements and cited by Salesforce show that Orange Holdings used to be a 51% owner of WSOU Investments, but the ownership structure grew more complex over time. The most recent documents cited by Salesforce indicate that Orange owns a 69% share of WSOU Capital. WSOU Capital, in turn, owns 80% of WSOU Holdings, which owns 64% of WSOU Investments.

Orange Holdings was incorporated in Nevada in 2017, with Etchegoyen listed as the sole member of its board of directors, according to Salesforce’s various motions to compel. According to information posted by the Nevada Secretary of State and last updated by Orange in mid-2020, Etchegoyen is Orange’s president, secretary, treasurer, and director—a point also highlighted in Salesforce’s brief.

WSOU Hits Back

Morgan Pietz, a lawyer representing two companies that own portions of WSOU Investments, summarized WSOU’s counterarguments at a recent Zoom hearing held by Waco Magistrate Judge Derek Gilliland.

“Mr. Etchegoyen was not a party to the Salesforce-Uniloc license agreement; he signed it only as a representative of the company and not as an individual, and so it’s not binding on Mr. Etchegoeyn,” Pietz said.

But, “even if it is binding on Mr. Etchegoyen,” he continued, it doesn’t reach WSOU Investments, “which didn’t even exist” when the licensing deal was completed.

The Salesforce cases are unusual in that, typically, judges in Texas have restricted discovery in patent cases from reaching communications around licensing negotiations and related documents.

“Judges in Texas tend to be more protective of information about patentees’ operations, financings, and fundings than judges elsewhere,” Paul Gugliuzza, a law professor at Temple University who has written about the proliferation of patent litigation in Waco, told Bloomberg Law.

However, Gilliland told lawyers for WSOU Capital, WSOU Holdings, and Salesforce in a motion hearing earlier this month that the license defense required somewhat broader discovery in a departure from that general rule.

Etchegoyen’s Path

WSOU Investments and Etchegoyen’s role at the company have come up in at least one other lawsuit.

Etchegoyen was called by WSOU as a witness at its February trial in a case against software company VMware Inc.

A lawyer for WSOU asked him about how he went from a 13-year-old pro surfer to an executive at the patent monetization company.

Instead of going to college, Etchegoyen testified, he started a company that sold a product for sending emails to fax machines. He eventually co-founded Uniloc with a surfing friend, Ric Richardson—"this wild Australian guy,” Etchegoyen said.

While there, Etchegoyen said he and Richardson licensed software to Microsoft Corp., but eventually got in a decade-long patent infringement fight with the giant that settled in 2013 after a jury in Rhode Island awarded Unlioc $388 million.

Etchegoyen told the Texas jurors that the Microsoft litigation took a toll on his friend. “It almost killed him, so [Richardson] ended up retiring,” he said.

‘I Can Be the CEO’

Etchegoyen said his newer company, WSOU Investments, in 2017 paid around $17 million for roughly 12,000 patents. The portfolio previously belonged to Finnish telecom giant Nokia Corp., which had bought them from Alcatel-Lucent.

During cross-examination, Etchegoyen was also asked if he was the company’s chief executive. He objected to the question at first.

“I think I said chairman and founder,” he said.

When VMware’s lawyer repeated herself, Etchegoyen said, “I haven’t seen that title, but that’s fine, yeah, I can be the CEO.”

Quinn Emanuel Urquhart & Sullivan LLP and Conrad Metlitzky Kane LLP are representing Salesforce.

Kasowitz Benson Torres LLP, Steckler Wayne Cherry & Love PLLC and Cherry Johnson Siegmund James PLLC are representing WSOU Investments LLC in the underlying patent infringement suits.

Pietz & Shahriari LLP represents Orange, WSOU Capital Partners, and WSOU Holdings. Lewis Roca Rothgerber Christie LLP represents Orange in the Nevada case.

The cases are WSOU Investments LLC v. Salesforce.com, Inc., W.D. Tex., No. 6:20-cv-1163, -1164, -1165, -1166, -1167, -1168, -1169, 1170, -1171, -1172; In re: Salesforce, Inc., W.D. Tex., 6:23-mc-174, motion to comply hearing 3/15/23; WSOU Investments, LLC v. Salesforce, Inc., D. Nev., No. 3:23-cv-23.