Shopify Renews Bid to Unmask IP Edge Patent Lawsuit Investors

Shopify Inc., for the second time in as many months, asked a federal judge in Texas to require disclosures that would reveal the backers of a patent lawsuit against the electronic commerce platform.

Shopify on July 21 filed an objection to a magistrate judge’s rejection of their earlier bid to compel disclosure. The company argued that the magistrate and presiding Judge David A. Ezra don’t have enough information to determine whether they have a conflict of interest in the case that might require a recusal.

Shopify’s original June motion with Ezra, who is sitting by designation in the US District Court for the Western District of Texas, urged the judge to direct Lower48 IP LLC to publicly disclose investors funding its lawsuit.

Corporate litigants in federal courts must disclose their parent corporations and any publicly traded corporations with large ownership stakes when they initiate a lawsuit. Lower48 identified an oil and gas company as its parent, but Shopify said records associated with Lower48’s patent acquisitions and an executive listed on its corporate filings indicated undisclosed ties to prolific Houston-based patent monetization company IP Edge LLC.

Shopify’s initial motion flagged the connection to IP Edge, which has been in the crosshairs of US District of Delaware Chief Judge Colm F. Connolly’s investigation into litigation funding in a series of patent lawsuits.

Lower48 responded to argue that Shopify was simply trying to gauge how much funding resources it had to gain an unfair advantage in the case.

Ezra referred the decision on the motion to compel to Magistrate Judge Derek T. Gilliland, who denied it on grounds that Texas’ federal judges have not previously required such heightened disclosure and reasoning that it was sufficient that Shopify had publicly highlighted IP Edge’s connection to the case.

The decision was also in line with the thinking of Judge Alan D. Albright, a former patent litigator whose Waco, Texas, courtroom has drawn roughly a fifth of all patent lawsuits in recent years. Albright selected Gilliland in late 2021 as a patent-focused magistrate judge.

Albright said in a March interview that he was “not even slightly interested” in adopting Connolly’s approach of requiring heightened disclosure around civil litigation funding.

In its opposition, Shopify argued that IP Edge structures its patent lawsuits to keep private other investors “with a financial and controlling interest in this litigation,” and that the court and the public “should know who else stands to benefit.”

Lower48 is represented by Daignault Iyer LLP and Mort Law Firm PLLC. Wilmer Cutler Pickering Hale and Dorr LLP and Scott, Douglass & McConnico LLP represent Shopify.

The case is Lower48 IP LLC v. Shopify, Inc., W.D. Tex., 6:22-cv-997, objections to nondispositive order 7/21/23.