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Did AOL allegedly destroy evidence to avoid liability in patent lawsuit?

Augme Technologies is claiming that AOL destroyed evidence to shield itself from liability in regards to a patent-infringement case involving AOL-owned Tacoda.

In 2007 Augme filed a complaint against Tacoda for alleged patent infringement. Shortly after, Tacoda was acquired by AOL, which continued to use the Tacoda technology which the patent suit questioned.

?In 2007 we filed a matter against Tacoda for patent infringement,? said Jim Lawson, chief legal officer and general counsel at Augme, New York. ?After Tacoda was acquired by AOL, we filed the lawsuit against AOL because they started using the technology and also infringed the patents.

?Until recently we were led to believe [by AOL] that Tacoda was a separate business operation,? he said. ?This is not the case, as Tacoda no longer exists. At the end of the day, under applicable legal theories, if a party is acquired and business operations are merged together, then the subsidiary does not shield the parent company.

?The acquiring company, in this case AOL, is liable for the act of the predecessor. There?s no point in having separate lawsuits. AOL is the alter ego of Tacoda and there is no distinction between the two.?

Augme specializes in helping marketers and agencies integrate brands, promotions, video and other digital content through the power of the Internet and mobile communications.

AOL said it does not comment on pending litigation, as it is against company policy.

In mid-2008, Augme filed a separate trademark infringement action against AOL, which is now pending before a different judge in the same court in New York.

Augme?s action against AOL was later amended to add additional claims for patent infringement and to add as additional defendants Time Warner Inc. and Platform-A Inc.

The most recent action filed against AOL is a ?Motion for Leave to File Second Amended Complaint Joining Claims Against AOL Based Upon Fraud and Inequitable Conduct? related to its pending patent infringement action against Tacoda Inc.

Augme claims that as a matter of law, AOL is responsible for Tacoda?s liabilities in this matter.

Augme?s action against Tacoda is pending in the United States District Court, Southern District of New York, Case No. 1:07-cv-07088.

The patents
Patents No. 6594691 and No. 7269636 have to do with the ?method and system for adding functionality to a Web page,? according to the patent filings.

Basically the patents are about the method by which mobile content is converted and rendered on various devices. Additionally, the patents focus on behavioral marketing, which Augme believes will migrate to mobile.

?The patents are essentially a process by which you can dynamically customize content for a Web page based upon information about the Web site visitor or his/her computing environment,? Mr. Lawson said. ?In 1999 when these things were devised, the invention covered by the Augme patents was a code module embedded in a Web page to deliver customized content.

?It is basically about the use of technology for appropriately-rendered Web pages,? he said ?The patents also have to do with behavioral targeting for rendering content.?

Because consumers are increasingly accessing the Web from their mobile devices, these same processes are now being applied for device-specific content, to provide users with the best possible Internet experience on their handsets.

AOL?s alleged shield
Augme claims that the onus was on AOL to notify Augme that Tacoda is no longer operating.

Augme?s most recent motion alleges that, based upon new evidence, it would unfairly prejudice Augme to continue to stay the AOL infringement case pending resolution of the Tacoda action, given that Tacoda is no longer operating as a separate entity.

The plaintiff?s motion specifically alleges that Tacoda is currently a mere ?shell? company with no apparent assets to satisfy a judgment against it.

Further, Augme alleges that based upon recently discovered evidence, AOL has been dominating and controlling Tacoda during almost the entire period this action has been pending, with Tacoda operating as a ?division? within AOL, and that as a result AOL has become the alter ego of Tacoda and thus should be directly liable for Tacoda?s alleged patent infringement.

Augme?s motion seeks to add AOL as an additional defendant in the Tacoda action and to hold AOL liable for Tacoda?s alleged infringement of Augme?s patents during the time that Tacoda was under AOL?s control.

The motion further argues that AOL should not be permitted to use the Tacoda ?shell? as a liability ?shield? while simultaneously using Tacoda?s technology and goodwill.

Permitting Augme to amend its complaint against Tacoda to include AOL as an additional defendant will avoid any possible fraud or inequity upon Augme in its pursuit of remedies against Tacoda for alleged infringement of Augme?s patents, the company claims. 

Augme also claims that AOL destroyed or significantly altered evidence for Augme?s use before this reasonably foreseeable litigation.

Legally, if a party knows or should know that a legal action is pending and the destroyed or lost materials are subject to an obligation of disclosure or discovery, any spoliation of such evidence is a violation of the disclosure and discovery rules.

Spoliation of evidence may be sanctioned under authorities including Rule 37 of the Federal Rules of Civil Procedure.

Click here to read more on Augme?s claims that AOL destroyed evidence.

?Although AOL was legally required to let us know, they used it as a shield,? said Mark Severini, CEO of Augme, New York. ?We spent all this money and time going after Tacoda, when AOL is the parent company and is liable.

?The Internet is moving to the mobile phone and more and more people will be accessing it from their mobile phones and if we have the patents that drive this space to deliver content in a smart way and to behaviorally target, then you can say that it really comes down to the Platform-A?s of the world,? he said. 

?The future of the Internet is in the mobile space.?