When a fossil of an 'industry' demands 'protection' money...

Summary: An outline of some of the latest troll cases to be aware of and their consequences too (e.g. software patents being used to literally shut down entire programs)

THERE is no lack of stories about patent trolls. I spoke to one likely victim on the phone today for almost an hour. Patent trolls are not a US-only problem, but they often exploit patents granted by the USPTO because a lot of businesses operate in (if not based in) the US.

Today's outline will be split for easier digestion. We probably won't be covering EPO issues for a few days to come due to travel, but some time in the near future we are going to show that EPs too facilitate patent trolls, more so over time. Patent trolls are a growing problem in Germany, for instance, and definitely (in a very big way) in China.

Cloudflare

I often protest against Cloudflare, which I unfortunately have to depend on at work (many clients use it). Cloudflare and I are no friends, but now that Cloudflare is a victim of patent trolls it's difficult to not have some sympathy or empathy. Yes, Cloudflare too -- like many companies of its size -- has become a victim of patent trolls with software patents of the "Internet" variant (like old ideas "over the Internet"). Found via this tweet was an article about it, showing that Blackbird is once again trying to destroy legitimate companies (we wrote about Blackbird before):

Cloudflare says it will go above and beyond to destroy what it claims is a uniquely dangerous patent troll.

The troll in question is Blackbird Technologies LLC, a law firm based in Boston, US. It has accused Cloudflare of ripping off a patent it owns on internet communications.

Crucially, Cloudflare CEO Matthew Prince said the battle between his company and Blackbird is over more than just one infringement claim: Blackbird's approach to poses a serious threat to other tech companies, and, we're told, it must be stopped.

"They are a very dangerous new breed of patent troll different from what we have seen before," Prince, himself a former lawyer, told The Register. "This is a perfect innovation killing machine."

The original from Cloudflare says that "[o]n March 20th, Cloudflare received our first patent infringement claim: Blackbird Tech LLC v. Cloudflare, Inc. Today we’re filing our Answer to that claim in a federal court in Delaware. We have very strong arguments we will present in the litigation, mostly because the patent asserted against us does not have anything to do with our technology."

We've long written about Blackbird; it's a nasty, horrible patent troll. It needs to be purged. "Worse still," Cloudflare explains, "Blackbird is a new, especially dangerous breed of patent troll. Like the dinosaur in the latest Jurassic Park movie, a synthetic combination of Tyrannosaurs and Velociraptor, Blackbird combines both a law firm and intellectual property {sic} rights holder into a single entity. In doing so, they remove legal fees from their cost structure and can bring lawsuits of potentially dubious merit without having to bear any meaningful cost. In other words, Blackbird’s new breed of entity is specifically designed to add leverage and amplify the already widely maligned problem of patent trolling."

Good luck to Cloudflare and let's hope that they invalidate this patent, which would otherwise be used against other innocent victims. Cloudflare might need to spend some money on this (it already fights against various sorts of censorship in court) and if it wins the case, the PR karma can help offset the losses (legal bills).

GoDaddy

GoDaddy has become a rather large Internet company and like most Internet companies GoDaddy is an attractive target for trolls. Yes, GoDaddy too is coming under software patent attacks from patent trolls. It was covered by The Register (same as above), which said:

Domain registrar and host GoDaddy has won its battle with a patent-holding company that had accused it of violating a handful of claims related to basic email functions.

Let's hope GoDaddy fights back against this, even if this requires going to higher courts (more expensive).

Netflix

Netflix, like GoDaddy and Cloudflare, is a company that I strongly dislike for several different reasons, but now that it's attacked by patent trolls I feel compelled to take its side. With software patents disguised as "cloud", as is commonly the case these days, Netflix is vulnerable to such a lawsuit.

As this article put it, "using cloud computing to do business may get you sued by patent trolls in the District Court for the Eastern District of Texas." [via]

Notice the pattern. All the above are software patents. That's just what patent trolls so habitually use.

Moom

Leaving aside those large companies that have reasonably deep pockets, watch what happens to the Moom developers. They don't have deep pockets, so a lawsuit (or threat thereof) immediately kills the software. We have covered many such examples in the past, ranging from plugins and code samples to complete applications. Software patents can often doom an entire application. Sometimes the developers are not even allowed to speak about what happened (for fear of being sued for breaking the silence).

"We just had to remove Moom from sale due to a broad software patent," wrote the developer. "Pissed doesn't begin to describe my mood."

The number of comments has increased considerably since we first saw it. "Software patents," one person emphasised, are the culprit here. "Moneymakers for non creating people. Good luck! Hope it will be fixed soon!"

Here is the corresponding blog post about it:

Tonight we received notice that Moom is in violation of US patent number 8434019, Apparatus and method for positioning windows on a display. Yes, someone has patented positioning windows on a screen via a grid. Given we’ve been notified of a patent violation, we have no choice but to remove Moom from sale, effective immediately.

Honestly, we have no idea how to proceed here—the notice arrived at 8pm on a Friday evening, meaning it will be a few days until we can even speak to an attorney about our options, if any. We’re not a big company by any stretch, and certainly don’t have the resources for a patent fight.

Facebook

Facebook is a very malicious company, including on the patent front. But that does not mean that we should celebrate when patent trolls want to enrich themselves using Facebook, having already enriched themselves because Apple and Microsoft paid. As Reuters have just put it, "Patent firm Mirror Worlds targets Facebook in latest lawsuit" and here is a key part:

Patent licensing firm Mirror Worlds Technologies LLC on Tuesday sued Facebook Inc for infringing software patents Apple Inc and Microsoft Corp have already paid a combined $30 million to license.

The more money they receive, the hungrier they get.

Microsoft

Microsoft, in the mean time, patents creepy stuff [1, 2 3, 4] which reveals plans to spy on one's meal, not just people. Incredible! Incredibly spooky. Maybe such patents will one day be passed to trolls; Microsoft loves passing patents to trolls.

Statistics

Numbers associated with trolls continue to be alarming. As this tweet put it the other day: "Of the 29 patent suits filed yesterday, 25 were filed by patent trolls -- that's 86%. It's time to #FixPatents"

This is pretty normal. The proportion of patent lawsuits that are filed by trolls is very high.

What will it take to weed out the trolls? There is no secret formula.

When patent law firms dump patent trolls (which happens) there is this interesting situation which Patently-O remarked on a few days ago. It said: "I’ve discussed a few times this fight over whether a patent assertion entity should be required to pay full hourly fees, or anything, to a firm that dumped it after losing the case on summary judgment, when the client hired another firm, got the case reversed on appeal by paying hourly rates to the new firm, and later settled the case for significant money."

The problem is, each time a law firm rejects such business (it does happen) the troll will turn to less ethical and potentially nastier firms.

See this new article from Mobile Mag. "Eighty percent of patents litigated by PAE’s are acquired from operating companies through bankruptcies," it says. Here are some of the interesting figures:

The PAE or patent assertion entity problem is big and growing, posing a threat to startups and established companies alike, costing companies millions in defensive litigation fees and diverting money that would be better spent on innovation. However, unlike big companies with money to spend on litigation, PAE’s or “patent trolls” greatly affects startups and small entrepreneurs due to patents with supposedly questionable quality. More than 10,000 companies have been sued at least once by a patent trolls, and these PAE trolls file 84 percent of high-tech patent lawsuits a year. Over the past decade, there has been a 500% growth in patent troll lawsuits, and research from the Boston University School of Law found that PAE litigation results in $80 billion in lost wealth annually.

[...]

It’s also a reactive course of action. It protects the defendant company, but it is not the only way to combat the patent troll problem as a whole. Eighty percent of patents litigated by PAE’s are acquired from operating companies through bankruptcies, special funds, or even through a direct sale if a company is looking to boost its revenue. Companies, because of financial pressure or to recoup expenses upon folding, might sell off their patents or license the assertion rights to a PAE for a percentage of any money extracted. Cutting off this supply is one way to go about fighting PAE’s.

How can one defend oneself? It certainly has become rather hard.

"More than 10,000 companies" have experienced lawsuits from patent troll/s, according to another new report which says: [via]

More than 10,000 companies have been sued at least once by a patent troll, and patent trolls file 84 percent of high-tech patent lawsuits a year. Over the past decade, there has been a 500 percent growth in patent troll lawsuits, and research from the Boston University School of Law found that PAE litigation results in $80 billion in lost wealth annually.

See where the money goes and comes from? What is the use of that?

China Replaces US as Trolls' Hub

We have recently been writing many articles about SIPO's misguided policies, which are guaranteed to tax the whole Chinese industry for the sake of trolls and law firms. Yes, patent maximalism in China is now killing startups and companies in China, just as we predicted last year. Even IAM, which promotes this, cares to admit that by stating that "YouOn was a relatively late entrant to China’s billion dollar bike sharing market, but it hoped to be the first such company to go public. Now, the Jiangsu-based firm’s share float is on hold after an individual inventor’s patent suit and complaint to regulators caused a minor media storm. Bringing patent suits against companies about to go public is certainly not a new strategy, but the environment in China could make it a particularly effective one there."

Thankfully, the political momentum in the US right now (and media framing) seems to be curbing or at least slowing down trolls. See this new article from lobbyists' press. [via]

For a change, it gives a platform not to some lobbyists (it often spews out patent propaganda from patent politicians) but to "Austin Meyer is the owner and developer of X-Plane, a flight simulator based in South Carolina. Michael Skelps is the General Manager of Capstone Photography based in Connecticut. Eric Rosebrock is the developer of iDrumTech and other apps, and is based in Florida."

To quote some portions:

As three entrepreneurs from South Carolina, Connecticut and Florida working in different lines of business, we have encountered a variety of stumbling blocks in starting our own companies. But one barrier in particular has challenged our abilities to thrive: abusive litigation from patent trolls.

We have seen firsthand how our broken patent system incentivizes patent trolls to target small businesses with frivolous and onerous litigation. Unlike entrepreneurs who strive to bring their innovations to better consumers’ lives – bringing jobs and other benefits to their local communities in the process – patent trolls do not contribute anything of value to society. Instead, they simply buy up vague, low-quality patents – many of which never should have been granted in the first place – and use them to launch patent infringement litigation against innovative businesses.

[...]

It’s time for Congress to once and for all close the loopholes that patent trolls exploit to target American businesses and to preserve our ability to challenge the low-quality patents wielded against us. By supporting the important gains that the courts and the U.S. Patent and Trademark Office have started to make in cleaning up our broken system, as well as legislative reform efforts, members of Congress can have a real impact on the strength and vitality of the small businesses in their districts, states and around the country. Patent trolls impose a tax on innovation; remove this burden, and watch Main Street businesses thrive.

We predict that in the coming years the overall number as well as proportion of patent troll lawsuits in the US will decline, whereas in China everything will go up. Up litigation-wise! That's not a desirable thing, unless one works in the patent 'industry' (a predator). ⬆