07.16.17

After the ‘Fall’ of Texas, Patent Trolls Struggle and Some Are on the Retreat

Posted in America, Patents at 11:37 am by Dr. Roy Schestowitz

Texas flag
Shifting dynamics after TC Heartland (2017) and Alice (2014)

Summary: Things are getting out of hand for patent trolls, which find themselves on the defensive (from challenges to all their patents) and try to escape the cases they started in order to dodge paying fees (to no avail)

THE terrain is getting worse for US patent trolls. Fewer of them can sue in Texas (in fewer of potential cases), the invalidation rates are high, and the patents they typically use (software patents) lack substance.

Nevertheless, patent trolls remain a major problem in the US. Regarding the recent Blackbird case, which we covered last week, one person told them “what you’re doing is unethical, is detrimental to technology innovation, and amounts to extortion…”

“Over 60% of defendants in patent troll litigation are small businesses without resources to defend themselves,” said United for Patent Reform around the same time. “Because of low-quality patents,” it added, “our patent system “has become a minefield of lawsuits.””

This was part of a series of tweets that strive to guard Alice and PTAB — something we have been doing for years. Another tweet said: “Congress needs to protect #Alice & #IPR “so #smallbiz are protected from abuse of the very worst #patents by trolls””

Julie Samuels, whom we mentioned here before, said: “Our patent system is headed in the right direction, but Congress must continue to examine patent quality issues…”

Yes, the USPTO and especially US courts have contributed to an improvement in patent quality. Another pro-reform site, Patent Progress, said this four days ago:

Tomorrow morning, the House Judiciary Committee’s Subcommittee on Courts, Intellectual Property, and the Internet is holding a hearing on “The Impact of Bad Patents on American Businesses.”

The impact of bad patents is a topic worth taking some time to examine, because it isn’t just about the direct impact from abusive troll litigation—bad patents cause a lot of harm even if they’re never asserted.

I’m going to start out with a definition. There are good patents out there. They’re not what we’re talking about. We’re talking about “bad patents.” You know.

We intend to deal separately with the political angle as there are companies like Microsoft pulling strings behind the scenes and we want to properly show this to readers. We need to name and shame those who strive to make the patent system chaotic again.

Suffice to say, extinction of software patents would contribute towards extinction of patent trolls and companies that depend solely (or mostly) on patents rather than products.

Gilstrap

We don’t typically name or shame judges, but Gilstrap is the exception because the media names him a lot. Single-handedly (almost) this man impeded the extinction of software patents (he doesn’t seem to care much for Alice) and harboured an enormous number of patent trolls in Texas. Whenever we write about him we mention the pattern of his rulings. IAM, a site for patent trolls, might admire the man, but the damage he caused to actual US businesses can be measured at billions. Finally realising that Gilstrap is the trolls’ facilitator and a software patents proponent, some politicians finally name and shame him too. What would IAM do about it? Well, IAM being IAM: [via]

Patent policy has not been in the US Congress’s spotlight much of late. True, the STRONGER Patents Act was introduced in the Senate last month, but few expect that bill to get much traction and it’s a far cry from the period between 2013 and 2015 when there was a flurry of new bills. With last year’s election and the controversies of the first months of the current administration keeping legislators busy, patent reform has slipped down the agenda.

But it was back in focus yesterday as the subcommittee on courts, IP and the internet, which is a part of the House of Representatives’ Judiciary Committee, held a hearing on “the impact of bad patents on American businesses”.

These committee get-togethers can be fairly dull affairs that don’t generate much news. However, there were a couple of interesting elements to yesterday’s hearing which are worth covering.

First up there is clearly controversy brewing over a recent decision from Judge Gilstrap in the Eastern District of Texas, which was highlighted by subcommittee chairman Darrell Issa in his opening comments. The ruling concerns venue, a hot topic in US patent circles at the moment thanks to the Supreme Court’s recent ruling in TC Heartland which placed stricter limits on where patent owners can file infringement lawsuits.

In a ruling earlier this week in a case between Raytheon and Cray Inc, Gilstrap revealed a four stage test to determine whether a defendant has “a regular and established place of business” in East Texas and can therefore be sued there. That is the part of the statute concerning venue that is still open to interpretation following TC Heartland and which has led some to insist that more still needs to be done to reform venue laws. You can see a nice summary of the decision here.

No doubt, as always, the proponents of patent trolls will defend Gilstrap, but who does that really help?

Bikes

The above link came from Benjamin Henrion. Bike enthusiast that he is, Henrion also took note of this new interview which included this nugget of information: “Turner abandoned the Horst-Link suspension system that he founded his brand with to avoid being harassed by patent holders. His choice to go with Dave Weagle’s DW-Link would prove to be the better decision.”

Who benefits? Certainly not cyclists.

This isn’t about software, but it certainly shows how products are made worse — not better — by some patents. The EPO recently bragged about EPs on bicycles, but this above-mentioned tale isn’t the kind of story it wants told. WIPR even produced an EPO puff piece to that effect.

Moving on to software, here’s the latest…

Cloudflare

Cloudflare is no friend of mine (in fact, many of their staff would refuse to speak to me because of my criticism of their company). I need to technically grapple with Cloudflare due to some of our clients who insist on using Cloudflare, but I don’t like Cloudflare and I repeatedly warn people, urging them to avoid Cloudflare both as site visitors and as Webmasters. Censorship, surveillance and lock-in are just some among the many dangers posed by Cloudflare.

Nevertheless, despite my disdain for Cloudflare, I wrote several positive posts about Cloudflare earlier this summer. The company does a good job on the patent front; it is going after the software patents of a patent troll rather than simply pay to settle. 5 days ago AOL published the article “The hunted becomes the hunter: How Cloudflare’s fight with a ‘patent troll’ could alter the game” and it said this:

Matthew Prince knew what was coming. The CEO of Cloudflare, an internet security company and content delivery network in San Francisco, was behind his desk when the emails began to trickle in, slowly at first, then in bursts. College classmates-turned-defense attorneys, including from the University of Chicago, where Prince had nabbed his law degree years earlier, were reaching out to say hello and to ask: did Prince perhaps need help to fight a lawsuit they’d seen filed against Cloudflare in Delaware?

We wish Cloudflare good luck in this case. It’s fighting for many of us. It can help eliminate Blackbird Technologies, which — as stated above — is “doing [what] is unethical, is detrimental to technology innovation, and amounts to extortion…”

Garfum

Speaking of “extortion”, remember Garfum? It was last mentioned here about a year ago (we had written about it for much longer than a year). The EFF brought up this bunch of Mafiosos again (“patent trolls” would be almost a compliment for such vermin). It happened only days ago. Garfum is a patent troll that basically turned software patents into an extortion racket which mostly targets very small sites and relatively poor people. As the EFF put it:

Ruth Taylor never expected that her hobby would get her sued for patent infringement. Her photography website, Bytephoto.com, barely made enough advertising revenue to cover hosting costs. The site hosts user-submitted photos and runs weekly competitions, decided by user vote, for the best. Ruth’s main business is her own photography. She supports that business by visiting more than a dozen local art festivals in Bucks County, Pennsylvania every year.

In 2007, almost four years after Bytephoto began running online photo competitions, a company called Garfum.com Corporation applied for a patent titled “Method of Sharing Multi-Media Content Among Users in a Global Computer Network.” The patent, U.S. Patent No. 8,209,618, takes the well-known concept of a competition by popular vote and applies it to the modern context of computer networks. On September 23, 2014, Garfum filed a federal lawsuit accusing Bytephoto of patent infringement for allowing its users to vote for their favorite photo.

Why does this patent even exist after Alice? When is it going to be invalidated and how many people need to be coerced into paying ‘protection’ money before that happens?

Uniloc

One rather famous troll is called Uniloc (see our Wiki page about Uniloc) and it was covered here recently in relation to the latest Apple lawsuit. “Uniloc continues legal assault against Apple with two new patent suits,” said Apple Insider 4 days ago, correctly labeling Uniloc: “So-called “patent troll” Uniloc added to its quickly growing list of patent infringement lawsuits against Apple on Wednesday, filing two separate actions targeting AirPlay and Continuity features.”

Uniloc oughtn’t even exist. It’s truly a disgrace to the patent system that some man in a van (literally) continues to shake down companies that make stuff, unlike him (Ric Richardson, the Australian behind it all). What has the patent system become?

Shipping & Transit LLC

Speaking of truly nasty patent trolls (there’s even worse than Uniloc), how about Shipping & Transit LLC?

“Shipping & Transit” sounds like a real company, but it’s not.

Thankfully, this troll finds out the hard way that trolls now have a much tougher terrain. “Court Won’t Let Patent Troll Dismiss Its Way Out Of A Lawsuit, Orders It To Pay Legal Fees,” TechDirt wrote last week:

This fee award comes as the result of the plaintiff’s cut-and-run tactics. As we’ve seen in countless troll operations, lawsuits that are challenged often result in plaintiffs dismissing suits in hopes of avoiding paying the winning parties’ legal fees. (The government does this as well in asset forfeiture cases.) The same thing happened here.

Hall Enterprises, Inc. was targeted by the patent troll in hopes of an easy settlement. That didn’t happen. Hall Enterprises pushed back, hoping to have the court find the asserted patents invalid under the Supreme Court’s Alice decision. Unfortunately that didn’t happen either. Because of the dismissal, the court was unable to rule the patents invalid. But the court does take the time to indicate it would have done so if Shipping and Transit hadn’t force quit BaselessLitigation.exe.

Here is what the EFF wrote about it:

A court in the Southern District of Florida has recommended (PDF) that prolific patent troll Shipping & Transit LLC pay a defendant’s legal costs. This is the second court in less than a week to find Shipping & Transit’s patent litigation suit “exceptional” for purposes of awarding legal fees to a defendant.

The latest finding comes out of Shipping & Transit LLC v. Lensdiscounters.com, a case originally filed by Shipping & Transit just over a year ago, but not lasting nearly that long. When at an early hearing it came out there were serious defects in Shipping & Transit’s case, Shipping & Transit immediately sought to end the lawsuit. Lensdiscounters opposed letting Shipping & Transit run away without consequences. Lensdiscounters told the court its belief that Shipping & Transit had failed to investigate infringement before filing its lawsuit and that Shipping & Transit’s patents were invalid. It argued it should be awarded the cost it incurred in defending against Shipping & Transit’s infringement claim.

As usual, the trolls expert, who had followed this troll for a while, wrote about it that “Two judges smack down notorious patent holder “Shipping and Transit” in one week” [via]

Shipping and Transit LLC, a company that claims to have patented both the tracking of vehicles and the packages they deliver, has been hit with an order (PDF) to pay $36,317.50 in attorney’s fees.

US Magistrate Judge Dave Lee Brannon, who published the order yesterday, is the second federal judge to hit Shipping and Transit with fees in less than a week. It could be the beginning of the end for the patent-holding company, which has filed several hundred patent infringement lawsuits over the course of about a decade.

Swatting patent trolls like flies, especially after they used software patents in the post-Alice era, would help attract businesses to the US (or convince them to remain there). All these trolls that go on extortion expeditions have greatly damaged US attractiveness to any business and some time later we’ll write about politicians who openly state this.

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