Consolidation within the prison payphone communications industry, also known as inmate communications services (ICS), continues with Global Tel*Link (GTL) asking the FCC for approval to buy (some? all?) of the assets of Legacy/Edovo.

GTL is the largest provider of ICS in the US. Legacy Inmate Communications is a wholly owned subsidiary of Jail Education Solutions, Inc. d/b/a Edovo (“Edovo”).

From the FCC filling, “On July 2, 2020, GTL, Legacy, and Edovo entered into a Master Transaction Agreement (“Agreement”) pursuant to which GTL will purchase certain assets and customers of Legacy, including certain customer accounts and receivables, certain customer agreements and contracts, certain vendor agreements and contracts, and certain equipment (the “Transaction”).”

Pursuant to the Transaction, Legacy will assign the following correctional facility contracts to GTL:

(1) Cook County, Illinois;

(2) Fresno County, California;

(3) Maine Department of Corrections;

(4) Bay County, Florida;

(5) Sonoma County, California;

(6) Kane County, Illinois;

(7) City of Santa Ana, California;

(8) Jackson County, Oregon;

(9) Mendocino County, California;

(10) Carroll County, Maryland;

(11) Yolo County, California;

(12) Dunn County, Wisconsin;

(13) Santa Clara County, California.

As a result of the Transaction, GTL will provide ICS to the Correctional Facility Customers pursuant to the terms of the above-referenced contracts, which are primarily county jail contracts.

Interestingly, the filing states, “Further, the proposed Transaction will not adversely affect competition because, after consummation of the Transaction, the total share of the interstate interexchange market of GTL will be less than ten percent (10%), and there are many other interexchange and international carriers operating on a nationwide basis, including other ICS providers. The Transaction will not provide Applicants with any competitive advantage as the result of concentration of fiber assets and will not harm consumers or negatively impact the market for facilities-based service. The proposed Transaction will not have a negative impact on the public interest, services to customers, or competition.”

With GTL and Securus Technologies controlling 80% if the total ICS market, we are not sure how this does not, in fact, continue the trend of adversely affecting competition in the ICS industry though the elimination of smaller competing vendors.

What this latest proposed acquisition shows is that the ICS industry is a duopoly and the current competition has neither the scale nor scope to compete. This market structure hinders true competition and thereby the economic and innovation benefits a robust marketplace would bring to inmates and their families.

The following image from a recent Prison Policy Initiative article highlights how these two firms have been allowed to capture this industry through acquisition.

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meshDETECT® is pleased to announce that it has recently received a notice of allowance from the United States Patent and Trademark Office (USPTO) for U.S. Patent Application Number US16/386,248 entitled “System and method for controlling, monitoring and recording of wireless telecommunications services in penal institutions.” This is our sixth patent overall and the fifth in this family of patents.

A notice of allowance from the United States Patent and Trademark Office is a written notification that a patent application has cleared internal review and is pending issuance.

This sixth patent, combined with our recently allowed blockchain patent, further expands our Secure Prison Cell Phone Solutions™ intellectual property portfolio and further solidifies our position as the prime innovator in the prison mobile device space. The claims in this latest patent are directed toward expanding the use and functionality of an inmate mobile communications device as well as the network systems that support its deployment and functionality.

The control systems of mobile devices used in correctional facilities are currently focused on the monitoring and recording of inmate usage and application access. However, these devices can be used to monitor more than just the individual activity and communication of the inmate in possession of the device. The devices themselves can be used to monitor the broader correctional facility environment and its detainees. This new functionality provides unique security, safety and investigative capabilities to the administrative personnel of prisons and jails.

Brian Byrne, Managing Partner of meshIP, LLC commented, “With this sixth patent, we now have intellectual property which covers six key aspects of secure wireless inmate communication systems – system, application, device management, device security, blockchain enabled wireless service and now investigative environmental monitoring. We are the only inmate communications services company with the intellectual property portfolio protecting these six core elements of the now mainstream inmate mobile device market.”

Update: The patent (US10,764,757) was issued on September 1, 2020 by the United States Patent Office. You can view the patent here: Sixth meshDETECT patent.

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The National Sheriffs’ Association (NSA), in a recent FCC filing for Docket No. 12-375 (Inmate Calling Services), made the case that jails should be compensated for the costs they incur to allow inmate calling service (ICS). The FCC, in its Second Further Notice of Proposed Rulemaking (SFNPRM), proposed the elimination of the payment of site commissions as a category to correctional facilities, including jails.

On January 12, 2015, NSA’s submitted a cost survey to the FCC which provided information on the cost to Sheriffs to provide security and administrative functions necessary to allow ICS in jails. Sheriffs operating jails in 23 states and the District of Columbia reported the number of hours per week officers, supervisors and other employees spent on monitoring/security duties and administrative duties in connection with ICS and the annual compensation for the officers and employees engaged in these duties.

With respect to monitoring/security duties, the Sheriffs reported time spent on call monitoring, responding to ICS system alerts, responding to law enforcement requests for records/recordings, call recording analysis, enrolling inmates for voice biometrics, and other duties.

With respect to administrative duties, the Sheriffs reported time spent on system administration, answering questions from the public, answering questions from inmates, blocking/unblocking numbers, providing escorts for phone repairs, educating inmates on the use of ICS and other duties.

Sheriffs also were asked to provide the most recent three months of data from ICS providers concerning the total minutes of use for the facility for each month. From this data, the per minute cost for each facility was calculated.

The NSA cost survey provides the inputs for a sampling of jails of all sizes for the hours spent on ICS related duties, the salaries and benefits for the officers and employees performing the ICS-related duties and the number of ICS minutes for the jails.

This input data was then used to calculate a per minute cost to perform the duties associated with ICS for each jail. Excluding the highest cost jails (any result over $1.00), which might reasonably be considered outliers, the average per minute cost for jails by average daily population (ADP):

• $0.409 for jails with 1-99 ADP
• $0.209 for jails with 100-349 ADP
• $0.088 for jails with 350-999 ADP
• $0.059 for jails with 1000-2499 ADP

(NSA’s survey includes only one facility with ADP of 2500 or more, with a per minute compensation amount of approximately $0.007.)

However, after taking into account similar analysis conducted by Pay-Tel, CenturyLink, Praeses, Global Tel*Link, it proposes the following commission rates:

ADP                                     Per Minute Compensation

1-349                                         $0.09-$0.11

350-2,499                                  $0.05-$0.08

?2,500                                       $0.01-$0.02

The NSA concludes its analysis by stating that facility costs should be recovered via a per minute amount added to the per minute ICS rate and that if Sheriffs do not receive compensation, they would have the incentive to reduce the amount of unrecoverable cost by reducing access to ICS.

The NSA further states, “Unlike food, shelter and healthcare, there is no obligation on the public at large to pay for inmate calling services. Some argue, and the Commission has found, that the public benefits from ICS because it keeps children in touch with incarcerated parents and reduces recidivism, which reduces the costs to our justice and prison systems. Even if this is true, it does not change the fact that the Communications Act and Commission precedent establish that costs incurred in connection with a service should be recovered from the cost causer. Nor does it change the fact that the Commission has no authority under the Communications Act to mandate the recovery of cost from general taxpayers. It also does not change the fact that in most cases ICS is a discretionary service and that Sheriffs have wide latitude in determining the extent of ICS calling that will be allowed.”

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The FCC has released its order (FCC 13-113) detailing the rules associated with the regulating of prison payphone interstate calling rates. This is the culmination of FCC Proposed Rule Making 12-375 (The Wright Petition – follow the link for to see the new proposed rates) in which the Federal Communications Commission proposed to lower rates charged to prison inmates for long distance telephone calls by considering changes to its regulations governing rates for interstate inter-exchange inmate calling services (ICS), after studying the issue for nine years.

The ruling effectively guts the per minute LD rates and one-time per call fees companies such as Global Tel*Link and Securus Technologies can charge imates and their families as well as the commissions paid to Federal, State and County prisons.

The FCC claims that commissions are “not recoverable through interstate ICS rates because the record makes clear that they are not a direct cost of providing interstate ICS.”

It also sets the ground work for a similar action on intrastate rates. Relevant excerpts from the ruling relating to one time fees and to the payment of commissions to jails and prisons by the prison payphone providers are below. Securus has previously stated that it will go to court to stop the implementation of these rules.

As the prison payphone companies and prisons grapple with the challenge of recovering the revenues associated with this order, we suggest they consider meshDETECT Secure Prison Cell Phone Solutions™ as a potential new service offering that also reduces the demand for contraband cell phones while reducing recidivism.

Commissions

The Commission has previously held that site commissions are-for purposes of considering ICS rates under section 276—an apportionment of profit, not a cost of providing ICS.In the 2012 ICS NPRM, the Commission sought comment on its prior conclusion that site commission payments, or “location rents are not a cost of payphones, but should be treated as profit.” Site commission payments are not costs that are reasonably and directly related to the provision of ICS because they are payments made to correctional facilities or departments of corrections for a wide range of purposes, most or all of which have no reasonable and direct relation to the provision of ICS. After carefully considering the record, we reaffirm the Commission’s previous holding and conclude that site commission payments are not part of the cost of providing ICS and therefore not compensable in interstate ICS rates.

In this Order we find that site commissions are not recoverable through interstate ICS rates because the record makes clear that they are not a direct cost of providing interstate ICS. If commissions or other payments from ICS providers to correctional facilities reflect costs of providing ICS, providers have several avenues available to them.

Although it is clear that site commissions are a revenue stream to the correctional facility, we cannot foreclose the possibility that some portion of payments from ICS providers to some correctional facilities may, in certain circumstances, reimburse correctional facilities for their costs of providing ICS. As a result, we provide several avenues for exploring this issue further. First, we set the interim safe harbors and interim rate caps at conservative levels above costs in our record. Second, any ICS provider seeking a waiver of the rate cap or seeking to justify costs between the safe harbor and the interim rate cap may provide specific details about payments to correctional facilities that it contends are compensable for costs meeting our cost standards through interstate ICS rates as articulated in this Order. Third, as part of the mandatory data collection we initiate below, we will seek further information on payments to correctional facilities and whether they cover any costs of service. Finally, in our accompanying Further Notice, we seek comment on whether we should categorically find that payments to correctional facilities are not compensable costs, or whether there are certain compensable costs that those payments can legitimately address. In his Dissent, Commissioner Pai notes that this Order recognizes that excluding sitecommissions from cost data used to develop our safe harbor benchmark and rate cap may be an “underinclusive approach given that correctional institutions themselves often incur costs to provide ICS and those costs may need to be included in any costs-of-service estimates.” While it is correct that the rates and cost studies that the Commission used as a basis for the safe harbor benchmarks and the interim rate caps do not includesite commission payments, the Commission did not exclude them. Rather, the rates used to establish the safe-harbor benchmarks are rates for service in states that have prohibited site commission payments. Also, the ICS provider cost studies that we use as a basis for the interim rate caps adopted in the Order were prepared by the ICS providers to show costs of service excluding site commission payments. Furthermore, we do not remove costs or adjust inputs from the data used to establish the interim rate caps. For example, both cost studies used to establish the interim rate caps use an 11.25% rate of return to determine the cost of capital. We do not opine on whether this input is appropriate in this context. Instead, we accepted the figures in the cost study, as asserted, without considering whether they represent accurate levels of costs that are reasonably and directly related to provision of interstate ICS and, therefore, are appropriately recoverable thought interstate ICS rates. Consequently, it is likely that these cost figures are overstated, but we accept that possibility as part of our decision to set conservative interim rate cap levels.

We also disagree with ICS providers’ assertion that the Commission must defer to states on any decisions about site commission payments, their amount, and how such revenues are spent. We do not conclude that ICS providers and correctional facilities cannot have arrangements that include site commissions. We conclude only that, under the Act, such commission payments are not costs that can be recovered through interstate ICS rates. Our statutory obligations relate to the rates charged to end users— the inmates and the parties whom they call. We say nothing in this Order about how correctional facilities spend their funds or from where they derive. We state only that site commission payments as a category are not a compensable component of interstate ICS rates. We note that we would similarly treat “in-kind” payment requirements that replace site commission payments in ICS contracts.

Per Call Fees

We are concerned about the evidence regarding current per-call rates and associated practices. In particular, we are concerned that a rate structure with a per-call charge can impact the cost of calls of short duration, potentially rendering such charges unjust, unreasonable and unfair. We have particular concerns when calls are dropped without regard to whether there is a potential security or technical issue, and a per-call charge is imposed on the initial call and each successive call. As a result, we conclude that unreasonably high per-call charges and/or unnecessarily dropped calls that incur multiple per-call charges are not just and reasonable

Our interim rate structure will help address concerns raised about unreasonable per-call charges while we consider further reforms in the Further Notice. As described above, we adopt interim safe harbor rate levels and interim rate caps to ensure the overall cost of a 15-minute call is just, reasonable, and fair. ICS providers have the flexibility to satisfy the safe harbor either through a certification that the per-minute rate is at or below the safe harbor, or by demonstrating that the cost of a 15-minute call (including any per-connection charges) is at or below the safe harbor per-minute rate times 15.Thus, where an ICS provider elects to take advantage of the interim safe harbor rate levels described above, we allow the provider flexibility to determine whether its rate structure should include per-call charges. Specifically, we allow ICS providers to calculate whether their rates are at or below the interim safe harbor levels or the interim rate caps by calculating their compliance on the basis of a 15-minute call. Because our interim safe harbors constrain the cost of a 15-minute conversation to a level we find to be just, reasonable, and fair, we find it is appropriate to afford ICS providers such flexibility

Although we are unable to find ancillary charges per se unreasonable based on the record,
we have sufficient information and authority to reach several conclusions regarding ancillary charges. First, as stated earlier, interstate ICS rates must be cost-based, and to be compensable costs must be reasonably and directly related to provision of ICS. Ancillary service charges are no exception; they also fall within this standard and the Commission has the jurisdiction and authority to regulate them. Section 201(b) of the Act requires that “all charges, practices, classifications, and regulations for and in connection with” communications services be just and reasonable. Section 276 of the Act defines “payphone service” to encompass “the provision of inmate telephone service in correctional institutions, and any ancillary services,” and requires that providers be “fairly compensated.” The services associated with these ancillary charges are “in connection with” the inmate payphone services for purposes of section 201(b) and “ancillary” for purposes of section 276. As such, they fall within the standards we articulate above for determining which costs are compensable through interstate ICS rates. Therefore, even if a provider’s interstate ICS rates are otherwise in compliance with the requirements of this Order, the provider may still be found in violation of the Act and our rules if its ancillary service charges are not cost-based.

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Wireless carriers rejected proposals to jam wireless signals inside and around U.S. correctional facilities in reply comments filed with the Federal Communications Commission Aug. 23, arguing that jamming wireless signals is unlawful and could prevent legitimate wireless communications.

CTIA – The Wireless Association “strongly opposes” the use of contraband mobile phones in prisons but said any requests by non-federal entities to jam wireless signals would be an illegal violation of the Communications Act. Carriers also noted that the FCC and the National Telecommunications and Information Administration had previously denounced non-federal mobile phone jamming because it could prevent the transmission of 911 calls and hinder law enforcement communications.

Their comments came in response to the FCC’s May 1 notice of proposed rulemaking regarding contraband mobile phone use in prisons.

The carriers sought to deter the FCC from considering other proposals to limit spectrum use, including the establishment of wireless exclusion zones in and around correctional facilities. Requiring such “quiet zones” would “unnecessarily complicate network design” and force carriers to re-engineer their networks “potentially to the detriment of consumers,” said CTIA in its filing. The American Corrections Association said quiet zones would create a “modest diminution of rights” that would be far outweighed by the benefits to the public, according to its FCC filing.

Source

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Epilogue: In December of 2017, Securus Technologies and Global Tel*Link  reached a confidential settlement to end their long-running infringement dispute over patents used in prison phone systems, according to a joint motion for dismissal filed in Texas federal court.

As detailed in depth below, the two rivals have for years engaged in litigation over their various patents, accusing each other of infringement and alleging that the other’s patents should be invalidated at the USPTO’s PTAB. Each side finally ended the patent war and agreed to voluntarily dismiss their claims in the latest and last iteration of the dispute. In 2016, Securus estimated that the companies had spent more than $40 million suing each other in this contentious IP battle.

Although Securus still has a sizable advantage in intellectual property, several PTAB decisions stripped Securus of key patents for call-monitoring technology. These rulings paved the way for GTL to file a massive infringement suit against Securus in 2017, seeking $115 million and an injunction against the use of technology integral to Securus. In December 2017, before trial, the companies reached a confidential settlement to end their litigation battle.

Update (7/20/17): A turning point in this long running patent battle? GTL has announced that the United States Court of Appeals for the Federal Circuit affirmed the decision of the Patent Trial and Appeal Board (PTAB) validating all claims of GTL patent 7,853,243, which protects GTL’s technology for biometric and voice validation of inmate calls – widely used features of inmate calling systems and a requirement in many U.S. county jails and state prisons. The Federal Circuit decision clears the way for GTL to request a Texas Federal judge to restart GTL’s pending $100M infringement lawsuit against Securus Technologies involving ‘243 and two other GTL patents, where GTL seeks past damages and an injunction to prevent Securus from using the technology on its platforms at all facilities where infringement is occurring.

GTL is asserting the following patents in its Texas suit against Securus:

United States Patent No. 7,853,243, “Telecommunications Call Management and Monitoring System” (filed Dec. 17, 2007; issued Dec. 14, 2010)

United States Patent No. 7,783,021, “Digital Telecommunications Call Management and Monitoring System” (filed Jan. 28, 2005; issued Aug. 24, 2010)

United States Patent No. 7,551,732, “Centralized Voice over IP Recording and Retrieval Method and Apparatus” (filed Dec. 7, 2004; issued Jun. 23, 2009)

Securus initiated the patent litigation between the companies in 2013, filing an infringement suit against GTL, followed by two more infringement suits, while seeking $115M from GTL to license Securus’ patents. After spending four years and admitting to spending at least $15M in legal fees, Securus has not collected a single dollar in damages. Securus has publicly and repeatedly implored GTL to mutually walk away from all patent cases at no cost to either party and urged “patent peace forever.”

Whether this proves to be the turning point in this patent war remains to be seen, but it will be interesting to see if the patent litigation battlefield instead widens to include the emerging and high growth prison wireless voice communications opportunity as well.

Update (3/22/17): In the latest salvo in what is now a four year patent battle, GTL has countersued Securus Technologies for infringing three GTL patents covering wireless services, voice messaging, and biometric capabilities. The suit seeks monetary damages and an injunction to prevent Securus’ continued use of the patented technology on its SCP Inmate Telephone system, used by 99.6 percent of all Securus customers, and Securus’ Offender Voice Mail System.

In the countersuit just filed, GTL asserted U.S. Patent Nos. 9,509,856; 8,515,031; and 9,521,250. In addition, GTL previously filed complaints in Texas federal court against Securus alleging infringement of four other GTL patents — U.S. Patent Nos. 7,783,021; 7,853,243; 7,551,732 and 7,256,816 — which also implicate the Securus SCP platform and cover services that include call management, voice authentication, VOIP calling, and scheduling video/audio communications for inmates. Securus attempted to invalidate each of these four patents at the Patent Trial and Appeal Board (PTAB) during the past two years, but failed to do so.

Update (6/6/16): Securus continues the patent war against GTL with two recent announcements. First, it has filed additional patent invalidation requests (a.k.a. Inter Partes Reviews or IPRs) with the Patent Trial and Appeal Board (PTAB) for the following GTL patents:

Patent No. 8,630,726 – “System and Method for Detecting Three-way Call Circumvention Attempts” and Patent No. 7,403,766 – “Telecommunication Call Management and Monitoring System with Voiceprint Verification”

Second, it has filed an additional four patents in a new patent infringement lawsuit against Global Tel Link:

1. U.S. Patent No. 7,529,357 (Inmate Management and Call Processing Systems and Methods);
2. U.S. Patent No. 8,340,260 (Inmate Management and Call Processing Systems and Methods);
3. U.S. Patent No. 7,916,845 (Unauthorized call activity detection and prevention systems and methods for a Voice over Internet Protocol environment); and
4. U.S. Patent No. 8,180,028 (System and method for called party controlled message delivery)

In the press release Securus’s CEO states that, “I estimate based on our licensing agreements with other carriers is that GTL will owe us approximately $115 million in license fees – and I expect to collect that, and we have sought a permanent injunction, that if granted, will prohibit them making, using, selling, or offering for sale, any of their products and/or services that fall within the scope of the claims in these 4 asserted patents. This will in all likelihood involve key products and features that they presently are offering. ”

Update (5/4/16): In a case of is the glass half full or half empty, both Securus and GTL have issued dueling press releases concerning a recent PTAB decision invalidating all claims of patent 7,551,732 it had undertaken for review.

At the institution of the PTAB review on 5/1/2015, Securus requested all 27 claims be reviewed for validity. The PTAB board agreed to review claims 1–8 and 11–27, or 25 out of the 27 total claims.

Securus’s press release trumpets, “The PTAB issued its Final Written Decision on April 29, 2016, and found that all instituted claims were invalid, because each such claim was disclosed in Securus’ Patent Number 7,899,167.”

The press release finishes with a quote from Securus’s CEO, “When my investors (equity and debt) ask me why GTL continues to tilt at our formidable advantages in patents, my response is that I believe they have no options left and are desperate. I win business from them, I have much better technology, they refuse to take my ‘Technology Bake Off Challenge,’ I use my own/better people to take good care of my customers, I operate at a much higher level of integrity, my investors like what we do more and are transparent in the way we do business, and I could go on – so desperation I think on GTL’s part.”

GTL’s press release on the final outcome of the case states, “the U.S. Patent Trial and Appeals Board (PTAB) had completed its review of GTL patent 7,551,732, preserving two key elements protecting GTL’s technology for connecting voice streams to storage devices – an essential component for storing inmate call recordings, which is required in nearly every jail and prison in the U.S.  The decision enables GTL to pursue claims now pending in Dallas federal court that Securus Technologies infringes the ‘732, and where experts in the case have estimated Securus could be liable for more than $100M in damages for past use.”

Interestingly, the two claims GTL states that the PTAB “preserved” (claims 9 and 10) were known to be preserved since the PTAB institution decision on 5/1/2015…

Update (4/13/16): Global Tel*Link recently announced that it has prevailed against Securus Technologies in the Inter Partes Review (IPR) of GTL patent 7,853,243, which protects GTL’s technology for biometric and voice validation of inmate calls – widely used features of inmate calling systems and a requirement in many U.S. county jails and state prisons. The Patent Trial and Appeal Board (PTAB) confirmed the validity of all of the ‘243 patent’s claims, clearing the way for GTL to move forward with a pending infringement lawsuit against Securus involving the patent.

GTL has asserted the ‘243 patent against Securus as part of a lawsuit in the U.S. District Court for the Northern District of Texas, targeting alleged infringement by Securus’ “Secure Call Platform,” which Securus has described as the “heart” of its centralized communications management systems. GTL is seeking an injunction from the Texas court to prevent Securus from using its patented technologies, in addition to monetary damages for past infringement.

GTL is currently asserting the following patents in its Texas suit against Securus:

• United States Patent No. 7,853,243, “Telecommunications Call Management and Monitoring System” (filed Dec. 17, 2007; issued Dec. 14, 2010)
• United States Patent No. 7,783,021, “Digital Telecommunications Call Management and Monitoring System” (filed Jan. 28, 2005; issued Aug. 24, 2010)
• United States Patent No. 7,551,732, “Centralized Voice over IP Recording and Retrieval Method and Apparatus” (filed Dec. 7, 2004; issued Jun. 23, 2009)

Update (3/3/16): On February 19, 2016, GTL announced that the PTAB had found invalid all claims in Securus patent 7,805,457. In the press release, GTL states, “The PTAB process and litigation have revealed that Securus misled patent examiners while seeking patents, sought patents for products already in the market, like Apple’s FaceTime, and misled its customers about the capabilities of its products. GTL has challenged the validity of seven additional Securus patents before the PTAB, and the PTAB has already determined that there is a reasonable likelihood GTL will prevail.”

Securus quickly responded with its own, rather lengthy, press release in order to rebut what it called GTL’s, ” grossly inaccurate press release.” Some highlights from the David Letterman-like top ten list shows no punches are being pulled in this ongoing patent and PR war:

Update (1/28/16): On January 22, 2016 Global Tel*Ling announced that it had another win before the Patent Trial and Appeal Board (PTAB), as the PTAB issued two final written decisions invalidating all 36 claims of Securus’ U.S. Patent No. 7,860,222 (‘222 patent).  The ‘222 patent discloses systems and methods for monitoring inmate communications via phone calls, video calls and emails and identifying items of interest, such as keywords, during a call.

In the press release, GTL stated. “As of today, Securus has failed to receive any of the “$50 million” it claims it is owed under the infringement lawsuit filed against GTL. Continued victories at the PTAB clearly validate GTL’s position that assertion of these patents is no more than an overused bullying tool employed by an industry competitor in search of a leg-up. Even in light of the overwhelming evidence, Securus refuses to admit loss, claiming that their patents are still valid due to pending appeals in the Federal Circuit Court of Appeals.  This is empty rhetoric by Securus. The Federal Circuit has yet to reinstate a single claim invalidated by the PTAB since implementation of the current patent review system established by the America Invents Act of 2011.

Further exposing the weaknesses of Securus’ patent portfolio, GTL has filed a second set of post-grant challenges at the PTAB.  Trial has been instituted on all claims challenged in nine out of the 10 proceedings, with the Board determining that there is a reasonable likelihood that all claims are unpatentable.  In the final written decisions received to date regarding Securus and GTL, 95 claims were held unpatentable out of 130 challenged, giving GTL a 73 percent win rate. Yet, another indication that Securus can expect more losses in its patent portfolios in the future.”

Update (1/6/16): On December 29, 2015 Securus announced that it has had two (2) recent wins from the Patent Trial and Appeal Board (PTAB) related to patent invalidation filings by Global Tel*Link (GTL). Despite GTL’s contentions that two (2) Securus patents should be invalidated – the court sided with Securus on these two (2) patents:

1. U. S. Patent No. 7,529,357 – which discloses a system and method for controlling inmate access to a telephone carrier network using voice over internet protocol data packets exchanged between call processing gateways;
2. U. S. Patent No. 8,000,269 – which discloses systems and methods for processing voice over internet protocol calls originating within a prison facility that include an unauthorized call activity detector.

In the press release Securus’s CEO stated, “GTL has filed twenty (20) Inter Partes Reviews to attempt to invalidate Securus patents but has only been successful on invalidating two (2) patents to date. My estimate is that they have spent over $10 million in that effort – so not a very good return on that money for them,” said Smith. “At that rate, they will have to spend in excess of $200 million attempting to invalidate all of our patents – and that effort clearly will not be successful.”
Update (11/19/15): On November 4, 2015, Securus Technologies announced that it has had three (3) recent positive rulings from the Patent Trial and Appeal Board (PTAB) and the Court related to patent infringement cases and Inter Partes Reviews (IPRs) between Securus and Global Tel*Link (GTL).

The decisions are summarized below:

1. Despite GTL’s challenge to the validity of Securus’ 7,324,637B2 patent, in an IPR proceeding, Securus successfully retained 2 of 8 claims of the patent with its key elements determined by the PTAB to be patentable. So the Securus patent continues to stand (Note: IPR Case Number IPR2014-00810);
2. GTL sought damages and attorney’s fees in another patent case in which it alleged Securus had filed improperly – but the Court denied GTL’s request in that case, finding that GTL had been unable to prove any of its damages claims;
3. Two (2) other patents, that GTL claimed were infringed upon by Securus, were found by the Court not to be patentable, because the claims of both patents were too abstract and lacked the “inventive concept” necessary to make them eligible for patent protection.

Update (10/13/15): On October 7, 2015, the United States Patent and Trademark Office – Patent Trial and Appeal Board (“PTAB”) ruled in favor of Securus and against Global Tel*Link’s (GTL) petition to invalidate a Securus patent. The disputed patent was Patent: 6,636,591 B1 “System and Method for Affecting Inmate Conduct with Good Behavior Discount Telephone Rates.”

Update (9/14/15): The Patent Trial and Appeal Board (PTAB) on Friday issued final written decisions granting Global Tel*Link’s request to invalidate two Securus Technologies patents:

• Inter Partes Review of U.S. Pat. 8,577,003 (Centralized call processing), Case Number: IPR2014-00749

And

• Inter Partes Review of U.S. Pat. 7,899,167 (Centralized call processing), Case Number: IPR2014-00493

Friday’s decisions are the first Final Written Orders issued from the 19 patent petitions GTL filed at the PTAB Between March 2014 and May 2015, in which GTL targeted a broad cross section of the Securus portfolio, alleging that the Securus patents mimic available consumer products, like Apple’s FaceTime.  The rulings also signal the imminent demise of Securus’ pending claim in a Dallas federal court that GTL infringed the invalidated patents.

Update (7/2/15): A U.S. District Court judge in Dallas granted GTL’s request to immediately halt proceedings in Securus Technologies Inc.’s patent infringement suit against GTL until after the U.S. Patent and Trademark Office (PTO) decides whether three patents in the case are invalid. For its part, GTL voluntarily agreed to stay its counterclaims for patent infringement in the case so that the lawsuit would be halted in its entirety. Additionally, GTL has claims remaining in two separate cases alleging that Securus infringes a total of five GTL patents. Those cases are proceeding on schedule for trial in Dallas in February 2016, and if GTL is successful, Securus faces the potential of millions of dollars in past damages and the risk of injunctions preventing its use of GTL-patented products or future royalty payments to GTL for use of its technology.

Separately at the PTO, GTL has challenged the validity of 17 Securus patents across a range of technologies, comprising a cross-section of Securus’s patent portfolio. In its petitions to the PTO, GTL has asserted that Securus inflated its intellectual property portfolio by filing duplicative patents with minor changes, obtained patents covering a wide range of technologies already in the public domain and patented by other companies, made misleading statements to a patent examiner and secured patents without inventing any new technology.  Decisions on these patent challenges are expected starting later this summer and continuing through 2016.

Update (6/4/15): According to a new press release, Securus expects some patents challenged by GTL to be invalidated by the PTAB. The release also estimates the cost of GTL’s patent offensive from $18 million to $27 million for those IPRs filed to date.

Securus CEO Richard Smith is also quoted saying, ‘”I can justify a GTL payment to Securus of $115 million, with a 10 to 25 year payment plan – based upon existing, pending, and future patents – for a license granting GTL access to all existing and future patents into perpetuity.  On a net present value basis, that is $61 million – which is at the low end of what other licensees have paid on a percentage basis, so that is an okay deal for GTL.”

One wonders if GTL and Securus, with their frequent, dueling press releases on these cross patent challenges, are negotiating a license deal via press release.

Update (5/19/15): Global Tel*Link Corporation (GTL) today announced that it had filed 10 more petitions at the Patent Trial and Appeal Board (PTAB) as part of an expanding effort to invalidate the core of Securus Technologies Inc.’s patent portfolio.

From the press release, “GTL is determined to end Securus’ legacy of patent litigation,” Oliver said. “We are committed to exposing their baseless claims in court, to end their harassing lawsuits, and to stop the fear tactics that have been a plague on this industry for a decade.”

In these new filings before the PTAB, GTL alleges that 9 additional Securus patents and 209 additional patent claims are invalid. The patents that GTL has challenged include:

Update (4/03/15): In this ongoing patent war, Global Tel*Link has filed a total of 10 IPR’s of Securus’s patents, while Securus has filed three IPR’s against GTL. Additionally, Securus recently issued a press release stating that after a recent federal court ruling cleared the way, Securus Technologies has refiled its federal patent infringement lawsuit against Global Tel*Link (GTL) seeking damages from September 18, 2014. (The original lawsuit is described in detail in our original post below.)

According to the press release, Securus’s CEO estimates “GTL will owe us approximately $50 million in license fees – and I expect to collect that, and we have sought a permanent injunction that will deny them access to key products and features that they presently are offering.”

Here are the USPTO IPR case numbers and the current case status for each:

GTL Inter Parties Review case number & status:

IPR2014-00749, Instituted

IPR2014-00493, Instituted

IPR2014-00824, Instituted

IPR2014-00825, Instituted

IPR2014-00810, Instituted

IPR2014-00785, Instituted

IPR2014-01278 Instituted

IPR2014-01283 Instituted

IPR2014-01282 Instituted

CBM2014-00166 Not Instituted

Securus Inter Parties Review case number & status:

IPR2015-00153 Not Instituted

IPR2015-00155 Instituted

IPR2015-00156 Instituted

Update (7/15/14): According to a Global Tel*Link press release issued today, the original patent lawsuit filed by Securus Technologies (see original blog post below) has been decided in GTL’s favor with the judge dismissing with prejudice all of the claims asserted by Securus Technologies against GTL and barring Securus from filing the same claims. The court also ordered Securus to pay GTL’s costs in the case.

Update (6/3/14): Global Tel*Link has filed with the USPTO Patent Trial and Appeal Board (PTAB) for Inter Partes Review (IPR) of six Securus Technologies’ patents. Introduced by the America Invents Act (AIA) as a counterpart to post-grant review, it is a procedure to challenge the validity of patent claims based on patents and printed publications. A petitioner for inter partes review may request to cancel as unpatentable one or more claims of a patent on a ground that could be raised under section 35 U.S.C 102 or 103 and only on the basis of prior art consisting of patents or printed publications.

The six patents being challenged are:

• Inter Partes Review of U.S. Pat. 8,340,260 (Inmate management and call processing systems and methods), Case Number: IPR2014-00824

• Inter Partes Review of U.S. Pat. 7,529,357 (Inmate management and call processing systems and methods), Case Number: IPR2014-00825

• Inter Partes Review of U.S. Pat. 7,324,637, (Resource allocation system and method), Case Number: IPR2014-00810

• Inter Partes Review of U.S. Pat. 6,636,591 (System and method for affecting inmate conduct with good behavior discount telephone rates), Case Number: IPR2014-00785

• Inter Partes Review of U.S. Pat. 8,577,003 (Centralized call processing), Case Number: IPR2014-00749

• Inter Partes Review of U.S. Pat. 7,899,167 (Centralized call processing), Case Number: IPR2014-00493

Update (5/6/14): Yesterday, Securus filed suit against Global Tel*Link and its Chief Executive Officer, Brian D. Oliver in response to the press release GTL filed on 3/11/14 (link to the press release in the update below). In its complaint, Securus claims, “Recently, unable to beat Securus fairly in the marketplace, GTL has embarked on a campaign to defame Securus in an attempt to damage its reputation in the eyes of its customers, culminating in its issuing a press release in which GTL and its Chief Executive Officer, Brian D. Oliver, egregiously and maliciously published numerous false, misleading, disparaging and defamatory statements about Securus’ products, services, intellectual property, and business practices.”

Update (10/21/13): Global Tel*Link has responded to Securus Technologies’ patent infringement lawsuit and this case is turning into a barn-burner. In a press release issued today, GTL unsurprisingly denies infringing the Securus patents, but also goes on to claim that “Securus is barred by contract from bringing patent claims against GTL, that Securus’ patents are invalid and were obtained through false statements and that GTL does not use Securus’ patented technology in any event.” It has also responded with filed claims of its own alleging that Securus has systematically infringed on GTL’s patented technology and asked the court to stop Securus’ unauthorized use.

Of particular interest is GTL’s claim that Securus’ patents were obtained by false statements. In its response to the court, GTL states that Securus patent 7,899,167 for Centralized Call Processing was obtained through “a knowing and deliberate misrepresentation” of U.S. Patent No. 7,505,406 in a response to a final rejection of the ‘167 patent application by the USPTO as being unpatentable over patent 7,505,406 and that this misrepresentation was made “with the intent to deceive the PTO for the purpose of obtaining allowance of the patent application.” As a result, GTL claims that “the ‘167 patent is unenforceable due to inequitable conduct before the PTO.” The added wrinkle in all this, besides the very serious charge of misrepresentation, is that the ‘406 patent is also owned by Securus (via its predecessor company Evercom). It will be interesting to see how this all plays out…

Update (10/4/13): In our original blog post below, we asked the question whether this law suit was filed “to extract royalties from GTL thereby adding to its cost of doing business (and competing against Securus for lucrative prison telecommunications and video visitation business) or if it is intended to hamstring GTL in the deployment of its competing services by forcing them to work around the patents.” We have some additional insight via a press release Securus issued today.

The press release states, “In the lawsuit, Securus also seeks an injunction permanently enjoining GTL from continuing to infringe Securus’s patents. Securus believes that the requested injunction would significantly impede GTL’s ability to exploit its current products and services in order to serve its existing or prospective clients in the inmate corrections industry. Securus intends to pursue the suit aggressively to a successful conclusion.”

Richard A. Smith, President and Chief Executive Officer of Securus Technologies comments, “It is well known that Securus Technologies has by far the largest patent portfolio in the corrections industry and we have spent in excess of $200 million developing sophisticated technology – and we have solid patents. You cannot operate in our industry legally without having a patent license agreement with us and GTL’s license agreement expired in early August, 2013 – they did not renew the license agreement so we had to file this lawsuit.”

“Without an agreement, GTL cannot legally provide the Securus patented services to prisons and jails – so they cannot run their business and we will ask the Court to stop them,” said Smith. “If I was a GTL customer, I would be very concerned that they may not be able to continue my services – inmate calling is important to facilities and they cannot operate without this method of communication.”

The Original Post:

In a move reminiscent of the patent battle between Apple and Samsung, the two biggest players in the inmate communications services space are squaring off over patents.

Securus Technologies has sued Global Tel*Link (GTL) in the U.S. District Court for the Northern District of Texas for infringing on four of its patents. At this time, it is unclear whether this is a strategy simply intended to extract royalties from GTL thereby adding to its cost of doing business (and competing against Securus for lucrative prison telecommunications and video visitation business) or if it is intended to hamstring GTL in the deployment of its competing services by forcing them to work around the patents. The patents cover services for centralized call processing, analyzing investigative information, identifying members of a gang, and visitation terminal user identification. So Securus is going after GTL for processing detainee phone calls, video visitation services and investigation tools.

The four patents at issue are:

1.) 7,899,167: “Centralized call processing” which includes 21 claims (2 indep.). It was filed 8/15/2003 & granted 3/1/2011.

Systems and methods which provide a centralized architecture for call processing. Embodiments utilize voice over Internet protocols (VoIP) to carry calls from a location at which calling services are provided to a centralized call processing platform providing call processing functionality, such as calling party identification, call validation, call routing, and connection to the public switched telephone network (PSTN). Call processing gateways may be utilized to provide plain old telephone service (POTS) analog line interfaces for use with a plurality of telephone sets disposed for use at a location and at least one wide area network (WAN) interface for providing high speed data communication to a centralized call processing platform. PSTN interfacing by a call processing platform may be provided as a VoIP connection to the PSTN and/or as POTS trunking. Call processing platforms may provide for data sharing, aggregation, and/or analysis across multiple facilities served.

2.) 7,860,222: “Systems and methods for acquiring, accessing, and analyzing investigative information” Includes 36 claims (2 indep.). Granted 12/28/2010.

Disclosed are systems and methods which provide availability of information on a network wide basis, with the network or information technology (IT) fabric spanning a wide range of institutions and other sources of information, including correctional facilities, without regard to which jurisdiction the source of information belongs, e.g. police, courts, federal investigation agencies, public databases etcetera. Embodiments provide an electronic based capability to identify useful information and for locating, collecting, compiling, aggregating, distilling, and/or reporting robust data.

3.) 7,805,457: “System and method for identifying members of a gang or security threat group” Includes 17 claims (4 indep.). Granted 9/28/2010

System and method for monitoring activity of detainees comprising identifying a detainee who is affiliated with a gang, searching one or more databases for information associated with the detainee, and correlating the information to identify individuals who may be affiliated with the gang. The databases may include call record databases, and the information associated with the detainee may include individuals called by the detainee, individuals who visit the detainee, telephone numbers called by the detainee, and sources of funding for the detainee’s calls voice and/or facial biometric identifiers. An alert may be triggered when the detainee calls a specified individual or telephone number.

4.) 8,031,850: “Systems and methods for visitation terminal user identification” Includes 46 claims (3 indep.). Granted 10/4/2011.

Systems and methods which collect information regarding users of controlled environment visitation terminals for identification of one or more parties to a visitation conversation are shown. Identifying information may be provided by various means, such as entry of a PIN, RFID, biometrics, etcetera. Embodiments provide a closed circuit visitation communication system in which a single port of a communication control system is used with respect to a pair of visitation terminals. Embodiments operate to prevent communication between a resident of a controlled environment facility and a visitor while identifying information is collected and verified. Thereafter, the resident and visitor may be placed in communication, whilst the identifying information may be utilized for such purposes as associating a recording of the conversation with the resident and/or visitor, issuing an alert to appropriate individuals that a conversation by one or more parties of interest is being conducted, collect investigative information, etcetera.

The timing is interesting given that the FCC has recently signaled that it will be moving to reduce the cost of interstate long distance calls in prisons and jails as as a result of Proposed Rule Making 12-375. If the FCC does so, this will potentially significantly reduce both companies margins for the highly lucrative detainee long distance calls thereby dealing GTL a one-two punch in its margins and service offering capabilities.

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This article regarding the rate increase for Michigan’s state prisoner telephone services offers the following insight, “Criminologists report that prisoners with strong social bonds are less likely to re-offend or exhibit anti-social behavior. Prisoners able to talk more with their families display the higher signs of rehabilitation than prisoners who converse less frequently.” A secure prison cell phone service would increase the ability of prisoners to communicate with their families while reducing the contraband value of smuggled prison cell phones. This rate increase, to pay for cell phone signal jammers, may not have been necessary as a result.

Under a new contract, prisoners pay almost double the amount to make phone calls. The increase means more money to Department of Corrections at great cost to prison families, inmates say.

July 1, local calls went from 12 cents per minute to 20 cents per minute. Interstate calls went from 15 cents per minute to 23 cents per minute.

Public Communications Services (PCS) recently acquired the contract for Prisoner Telephone Services. PCS promotes itself as a nationwide Inmate Communications Service provider with “affordable calling options” that are approved by the correctional facilities.

Michigan Department of Corrections spokesperson John Cordell said the price increases reflect the cost of new telecommunications equipment, safety and security features.

“Embarq, which had the contract for 10 years, had not made upgrades. Out-of-date technology equipment had to be replaced,” Cordell said. “The cost of installation of equipment that can detect cell phone usage was also built into the contract.”

Not so, according to a letter received from Dennis Boatwright, imprisoned at Mid-Michigan Correctional Facility.

“A Michigan Department of Corrections (MDOC) memorandum showed that the PCS phone company only charges inmates 3 cents a call,” Boatwright writes. “At the same time, this memo reveals that the MDOC is receiving up to 15 cents a minute kickback.”

According to Cordell, the technology will enhance security and increase the safety of staff, prisoners, visitors and citizens of the state of Michigan.

“The equipment was not available in the past because of the high cost associated with installation,” Cordell said. “The increases in rates will offset that cost and allow the department to implement this much needed security enhancement.”

When the cost of installation is recouped, the phone rates will be reduced, Cordell said.

Security is a false issue, according to Boatwright.

Court evidence has revealed prison staff smuggle in cell phones for bribes, Boatwright says. Furthermore, there are no incident reports of cell phones being brought in by visitors through the visiting rooms.

“Funds for security measures are already accounted for in preexisting corrections budgets. The equipment the MDOC will use to detect prohibited phone calls cost significantly less than the kickbacks the corrections department will pocket,” Boatwright writes. “MDOC is using these kickbacks to prevent more prison closings, and to maintain sweetheart fringe benefits for staff such as unquestioned sick days off and numerous vacation days. To be sure, many correctional facilities are already outfitted with scanner-like devices.”

Cordell indicated the cost per minute with the previous contractor, Embarq, was fifth lowest in nation. With PCS increases, the rates are 11th lowest in nation.

Cordell says installation cost is still being calculated.

“We are still working out what the cost will be after the installation. They would be reduced, but we won’t know how much until we know what specific system we are using and what the maintenance/operational costs will be,” Cordell said. “It is too early to speculate on what the rate would be once it is reduced.

In the meantime, increased phone rates hurt not only prisoners, but also relatives and friends who send money to incarcerated loved ones, according to Boatwright.

“Criminologists report that prisoners with strong social bonds are less likely to re-offend or exhibit anti-social behavior. Prisoners able to talk more with their families display the higher signs of rehabilitation than prisoners who converse less frequently,” Boatwright writes. “Thus outrageous phone rates not only cost society additional money, but may cost even more socially if taxpayers don’t express their disapproval at this unjust business practice.”

Source

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