Why Rackspace Is Suing The Most Notorious Patent Troll In America
rackspace.com
rackspace.com
That's some shady shit right there.
For example I had a case where I represented a plaintiff suing over breach of a confidential settlement, b/c I attached the confidential settlement as an exhibit the defendant counter-sued for disclosing the confidential settlement. I got their counter-suit dismissed as a matter of law b/c the anti-slapp protected the freedom of speech to disclose the confidential agreement to the court for the purpose of enforcement.
At this time the Federal Government does not have a anti-slapp equivalent, and most IP cases are federal; therefore, it might be actionable to disclose confidential information in Federal Court for enforcement, maybe under seal...if a Federal practitioner happens to have experience with this issue, please shed some light.
I wouldn't advise this for the latter group, but it is quite enjoyable to wind up time saying a lot of nothing (except maybe a nice description of your bowel movements) to the legal firm, who then charge their client for writing it down and telling them what was said.
In general, keep your effing mouth shut. It's generally safe to ignore "scary letters" (and especially emails) if you're not actually served, because it's inexpensive to carpet bomb potential suckers. Once they legally act against you (such as the IRS telling you they have started auditing your returns), break out your rainy day retainer fund. There are good attorneys out there and they're not hard to find.
I feel that for every major, an introduction to business/contract law unit should be undertaken if only to educate people on the formal rules that surround the contracts everyone enters in to during their lives.
This one act of Microsoft's has made it very hard for me to buy any of their products. I feel like I'm funding a patent extortionist (I would call them a "troll" but I know many people would nitpick the definition of that).
Reference?
http://www.zdnet.com/blog/microsoft/microsoft-withdraws-one-...
But you can judge for yourself:
"Loading status in a hypermedia browser having a limited available display area":
http://www.google.com/patents?id=DwEJAAAAEBAJ
"Remote retrieval and display management of electronic document with embedded images":
http://www.google.com/patents/about/5778372_Remote_retrieval...
"System provided child window controls":
http://www.google.com/patents/about/5889522_System_provided_...
"Selection handles in editing electronic documents"
http://www.google.com/patents/about/6891551_Selection_handle...
Take the "loading status" one for instance: the entire patent consists of displaying an animated graphic while a page loads and then removing the animated graphic afterwards. That's supposed to be an invention worthy of protection because otherwise Microsoft might keep its implementation secret, thus the public should wait 20 years to use it. In my view, that is exactly the kind of patent that makes a mockery of the patent system.
No, what happens is
Most of the company directors/managers doesn't know much about patents. They think it's a magical thing and that if MS is saying that we violate them it's better to pay them because MS invented computers or something.
I'm not making this up.
So then came B&N that apparently knows a bit more about patents and call their BS.
My reasoning is like this, either you infringe or you don't. So the patent holder can say "We believe you infringe claims x, y, and z on patents q, r, and s." Or they can't. So if someone tells you infringe but they won't tell you the patent or the claims, and they are threatening to sue anyway, that is a protection racket and actionable under the RICO statutes as far as I can tell.
Presumably because if given a choice, Rackspace would rather spend its time and energy on hosting servers than in court.
From what I read, it seems like the suit may be mostly predicated on the agreement that required IP Nav to wait 30 days. I don't believe they could have just sued for "patent extortion" originally.
It is nice that they are asking for a declaratory saying they are not infringing, but I believe they only could have done this on the defensive originally whereas now they can be on the offensive.
If I read it correctly Rackspace probably wanted to see if they could be legitimately (in the eyes of the law) at fault.
The way I read that mind bogglingly stupid forbearance dance was as if a bill collector calls me up and says I have a bill to pay, but they won't tell me what it's for unless I promise not to dispute it. I'm not going sue then and there because maybe I really do have a bill outstanding, so I play their stupid game and agree neither side will do anything for 30 days, now show me the damn bill.
The steps here of attempting to intimidate them into a favorable position without any way of knowing if they are in fact liable, is what pushes it into the extortion space for me.
No, the course of action I would try to take in this situation is that as soon as I was presented with this demand I would respond, "Either sue us and open up to discovery, or go away, and if you go away and try to sue us later we'll use that as evidence that you didn't really believe we infringed in the first place."
I don't know if you have ever been in a bar fight but I can tell you from experience that once the trouble maker has asked you if you just called them a liar (or some other affront) there really isn't any negotiation that is going to work, their is going to be a fight whether you want it or not so your best bet is to just start planning to win it.
When presented with the "possible infringement" demand Rackspace was already in the fight. Appeasement doesn't work, it can push off the start of hostilities (and that can be strategic) but the safe bet is to assume they are coming after you. (which I have to believe RS knew because they did the whole mutual forbearance thing).
Don't get me wrong, if someone came to me with a mystery case and that dumbass agreement, I'd be sorely tempted to officially respond via certified letter with a single piece of paper stating "LOL."
But as is, it looks like they get a little mileage out of the idiots forgetting about the 30 day agreement. So their approach did help a bit.
As for suing because of the forbearance agreement, they try to write these things so they are just on the side of the line, and it is really hard to make a RICO suit stick (see Cisco and Innovatio).
We, of course, think that it is just BS. Now we are on record saying so.
- Van (Rackspace VP of IP)
FWIW I've added you to the list of technology companies being harmed by patent extortion (I try to keep my congressional representatives informed in order to disallow them the excuse that they had no idea how bad the problem is)
[1] http://online.wsj.com/article/SB1000142412788732490600457828...
I have been thinking I should be more proactive with my congresscritters. It seems I am always sending reactive messages.
Also Newegg and Rackspace are incredibly cheap so I haven't found anyone that beats their prices anyway. In fact, unless I miscalculated, after I switch from Amazon to Rackspace next week my monthly bill will be lower.
This is above and beyond the "do no evil" motto that Google pretends to uphold. This is actively fighting to improve society.
One such way is countersuit, which Rackspace is doing. If everyone (successfully) countersued, the incentive to be a patent troll would diminish.
There might be other ways. Is there some common property patent trolls depend on that might be penalized or forbidden? I've noticed that patent trolls rarely seem to produce anything. Perhaps some sort of "use it or lose it" clause, in which patent holders have a certain amount of time to effectively license their technology to some degree of effectiveness before they can't enforce infringements.
It works in other areas. For instance, in my home state, many people would love to live in the country extremely cheaply, so there's an incentive to set up dubious Christmas tree farms to get nice tax rates. To combat this, you have a certain number of years to turn a profit, and if you don't, you lose the farm credit.
(here's an example of why they do this: http://www.huntingnet.com/forum/wildlife-management-food-plo...)
I was under the impression that these patent troll shell companies are set up so that they have virtually no assets under them. Does countersuing even hurt these shell companies significantly? The only thing I can see countersuits costing patent trolls is time in court (maybe that costs the parent of the shell company money if they operate on a scale where they're hiring lawyers to go sue companies?)
The problem is that more are being assigned all of the time. And if the assignee goes bankrupt, trolls can buy the patent rights for a song.
Look at Apple for instance. It is older than all of the patents it is being sued with. Many of the lawsuits that it faces are for cases where the patent is younger than Apple's technology. Apple still gets sued for it though.
If the top 100 companies in tech donated just ten million dollars a year to this effort you would instantly have a one billion dollar "kill the trolls" fund. If the fund is not fully consumed during the first year it could become three or four billion in five to seven years. How many trolls are going to be willing to go up against any company with that kind of a war chest to protect it?
Small entities would contribute less. The way I see it, in the US alone, this kind of protection is easily worth $50K to $100K per year for a small entity.
Yes, we are at a point where you might have to consider paying a membership fee to a troll protection association that is equivalent to the salary of a full-time employee. Sad.
The US government ought to also provide a sizable chunk of money to this fund as well as tax-exempt status. Say, a billion dollars a year. Considering the economic damage being done this is chump change. Now you have a kill-the-trolls association that, through public and private funding, could end-up with nearly ten billion dollars in five to seven years. Scary enough?
I am not one for government getting involved in private matters, much less blowing money like they did in Solyndra and others. However, this is a government-sponsored monopoly that they crated. You and I did not create this. This mess is 100% on government hands. And, like most things government does, it eventually went off the rails. It's an absolute mess. They have a responsibility to fix it.
The first step is to grant a sizable amount of money to a private entity that will shield entrepreneurs from trolls. They should hand over the money and get out of the way. Consider it reparations for running such a fucked-up patent office. Then they can go off and take ten years to reform the system.
Oh, yes, they should also make the patent invalidation process 100% free. In other words, anyone should be able to file a patent invalidation action and it should be 100% free. Then we could crowd-source patent invalidation runs on all the patents held by trolls. Form crowd-sourced teams that target trolls and file away.
Seriously folks, this is war. And in war you have to have more powerful weapons than your enemy. The enemy has the power of the monopoly they were granted by the US government. What they don't have is unlimited and massive capital. An association of practicing entities --no trolls allowed-- with billions of dollars available to mount a shield and defend members would be massively intimidating.
The association's mission statement should state that all engagements will have, as a goal, the invalidation of the patents in question. In other words, if you screw with us we will go directly to rip those patents out of your hands. No middle ground. No deals. No mercy. Attacking us means you, as the attacker, risk it all and you better have a real patent.
How many trolls are going to risk that? How many will do it after one, two or several are absolutely decimated in court and their patents invalidated.
One more thing. If a non practicing entity has a patent invalidated they are also put through a bankruptcy style procedure whereby a trustee takes a look at what moneys were derived from licensing the invalid patents. The idea is to refund ill-gotten funds to those who paid the fees.
In other words, hit them with a nuke.
EDIT: Also, on the subject of patent invalidation. This should be ripped out of the hands of the government and run just like a trial. I don't know exactly how it works today, but this is what I have in mind: A judge is appointed to oversee the process. A jury of people well-qualified in the patent's subject matter is assembled. Both parties present their case. The jury deliberates and decides. Fast, efficient and 100% in private hands with the blessings of the US government. Rough strokes.
It definitely feels like there are a lot of problems facing software developers in general that could be addressed if collectively the industry would take a stand for civilized, rational behavior and pool their resources. In some cases, you could possibly turn a profit doing it!
I won't go into the details here, just rough strokes. I had a serious dispute with a multinational that cost me eight months of work (three engineers) and about $800K in cash. I sought to find an amicable solution but they really didn't care. They didn't even want to talk to me. I also learned that they were doing similar things to other companies. One of them was about to go broke because they could not deliver product to their major customer due to what happened. Anyhow, in a telephone conversation with one of their VP's I told him that I was planning on visiting them at an upcoming trade-show and that I would not leave the booth until we had a meeting about the issue at hand. The entire conversation was 100% relaxed and amicable. A matter-of-fact dull business conversation.
A week before the trade-show I was served with a temporary restraining order to keep me away from the convention center. They made the radius so large I couldn't even go see their competitors. I drove from Los Angeles to San Jose in a hurry to challenge it in court. Only one of my accusers showed-up with a lawyer from the company. They lied through their teeth. The judge saw it. I didn't really have to say much of anything other than "Your Honor, they are not telling the truth and are using this TRO to bully a small business.". The judge looked at them and said something like this: "You folks ought to be ashamed. You are going to have to walk on water for me to uphold this TRO and make it permanent. And you better not say a word or there will be consequences". I did pay them a visit at the trade-show and they had no choice but talk to me. They still screwed me and a dozen other companies.
From the blog post, for example: """ Until Congress reforms the patent laws, companies of all sizes and industries could – and likely will – find themselves in the crosshairs of a greedy patent troll looking for a quick cash-grab. No company is immune, and, sadly, small companies can’t afford to fight. If they don’t succumb to the troll’s demands by settling, they face certain ruin. """
Patent trolls are on the right side of the law. The law is the problem.
And invalidating a worthless patent doesn't harm the troll at all -- no harm in trying, right? They can always get another patent. As non-practiciing entities, they don't have any business at risk. It's asymmetric.
So yes, patent trolls have real patents. That does not mean they are real inventions that were deserving of a patent.
My point is that I would hit NPE's with bullshit patents as hard as possible if they stick their heads out of the sand. If they know you are backed by a multi-billion dollar legal fund with a mandate to invalidate bullshit patents they will only stick their heads out when they have real patents for real inventions. And, you know what, at that point I don't mind. Real invention can be laborious and risky at many levels. And, being that technology has advanced so far, real invention is harder and harder every day because engineering and other disciplines continue to advance.
Practicing or not, if you have a real patent covering a real, no-bullshit real, invention, then that's different. Trolls with bullshit inventions that should have never been granted deserve to have the sewers of Los Angeles dumped into their breakfast each and every morning for the rest of their lives. Since we can't do that, attack them with a multi-billion dollar legal organization that mercilessly goes after their IP assets and seeks nothing less than invalidation.
To me "not obvious to those skilled in the art" means something that has been lost from the process for a long, long time. We need to restore that. The problem is, government will likely take decades to do so, if ever. They can't even pass a damn budget or keep us out of bullshit wars. Now you want them to modify the entire patent system? Right.
The only solution I see is some form of massive legal threat that unifies companies against trolls. It can perhaps go beyond that (some kind of reasonable cross-licensing mechanism between members, etc.). I don't know. Regrettably we need lawyers to craft some of the finer points of something like this.
As an engineer this is incredibly frustrating. I see it as a bunch of lawyers and government bureaucrats fucking with our ability to innovate. I want to create and I want to create with absolute freedom. I want to be a fee man. We are not free at all these days.
I went fishing with my kids today. I had to pay a $50 license fee to be able to go fishing. I have to pay the government for permission to fish. If I needed to fish to feed my family the government could arrest me and fine me further for not having paid them a fee. Luckily I don't need to fish to feed my family. But it is almost surreal to think that the most fundamental act of man, to feed yourself in order to remain alive, requires a license fee paid to government or risk being incarcerated.
Yes, yes, I know about conservation and all of that. The point is that no government agency should be able to get in the way of a person feeding themselves and their family. If that is not a fundamental law of the universe I don't know what could be.
Not the same subject, I know, but it is one of those surreal things to help point out that government actions can have really bad unintended consequences. When it comes to the way patents are being grated what this means is that I am not free to use my brain to create and invent.
If I was completely isolated from society after graduating from college and independently "invented" the idea of sliding a graphical button on a screen I could be sued because I did not apply for a patent. The fact that, as a human being, I can put one idea together with another to create a third idea is being grotesquely violated by bullshit government-grated monopolies. That, is wrong.
That is as much wrong as having to pay the government a license to be able to feed myself or my family. Outside of being able to hunt and forage for food --something every species on this planet does without the need for government authorization and fees-- the one fundamental evolutionary trait that has gotten us here is that we can INVENT. And invent we have. Gloriously. For hundreds of thousands of years. Only now this thing we call government has actually come up with a way to take that from us, regulate it and even have others prevent us from using the fruits of our own mental abilities if they use theirs to come up with the same thing before us.
Have we really evolved?
Slightly OT but in this case, given that unrestricted fishing might well cause the fish to go extinct in short order, so nobody can benefit from them to feed their families (see: tragedy of the commons), some form of government regulation might be a pretty good idea, 'fundamental laws' notwithstanding.
That said, I don't have a problem with having carefully chosen and crafted laws that punish bad behavior. In other words, I should be able to go fishing without having to pay the government for a permit.
I'll give you a concrete example of the "people are fundamentally good" idea. Yesterday, as I said, I took the kids fishing to a local lake. When we got there we saw a sign that said something like "<name> Cove closed due to spawning. No boat or fishing". We actually motored by the cove en-route to our spot. There were no signs there and only a couple of buoys marking low submerged rocky formations. Not one person was fishing there. Not one boat entered. There must have been dozens of boats on the lake. This area is very isolated. The closest ramp is nearly five miles away. You could go in there and do as you wish, yet people responsibly respected the request to not do so.
I really don't think most sports fishermen would go out and fish at an industrial scale if permits were not required. Today, you'd easily let everyone know of limits, seasons and issues via email/web methods and the vast majority of people would comply. That's what I believe. I could be wrong.
And that doesn't account for the one ass who decides to overfish.
There's a difference between real life and academic experiments.
What side of the law you are on is largely influenced by money. Even when you very clearly are on the right side, fighting the patent war is extremely expensive.
> The next legislative effort will likely center around what is known as the SHIELD Act, which has been introduced by Rep. Peter DeFazio (D-Oregon) and Representative Jason Chaffetz (R-Utah). This bill would require plaintiffs to pay defendants’ legal costs if the suit is unsuccessful. -- http://www.rackspace.com/blog/patent-trolls-make-them-pay/
While this is a less drastic strategy, I think it's a more realistic one. It would have an immediate, deterrent effect on all trolls--big and small--because there would be direct, legal repercussion for their actions. This way, you don't need new infrastructure and new funding to support a watchdog group, and nobody can "slip through the cracks"--trolls paying for all the costs of a failed suit is just part of the system they are using to file the suits. This may not prevent the "big players" from throwing their weight around with patent litigation, but it would certainly help the current situation quite a bit, imo.
Here's the relevant text of the bill:
> [I]n an action disputing the validity or alleging the infringement of a computer hardware or software patent, upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding, the court may award the recovery of full costs to the prevailing party, including reasonable attorney's fees [...] -- http://www.gpo.gov/fdsys/pkg/BILLS-112hr6245ih/pdf/BILLS-112...
[EDIT: Link to bill wasn't including the trailing colon ':', linked to PDF]
There needs to be a personal, professional cost to the attorney who represents the troll. Trolling doesn't work if you can't find a lawyer willing to take the risk on your bogus "on teh interwebs" patent.
A better version of the law would have the troll pay for legal fees in advance. A bona Fidel estimate of fees is made and the troll has to deposit this amount with the court. If they loose, the court can pay the defendant out of that fund. Now you still have to have the money to defend yourself, but at least you know they won't be able to file bankruptcy and walk away. It also increases the immediate cost of troll operations exponentially.
The next step would be to reduce defendant fees to zero.
The next step would be for the patent office to become involved in some capacity and re-examine for invalidation.
Every time you sue someone for patent infringement you have to first PAY FOR a full expedited patent invalidation trial. In other words, you are free to use your patent to make stuff but if you want to sue somebody we will first re-examine it's validity. Tis is fair. The government granted the monopoly. Now the government is obligated to protect us from this monopoly by re-examining the grant when it is used to cause financial harm. Only if the patent passes the re-examination process is the trial allowed to take place. Every time you attack someone you face invalidation and having to make a huge deposit with the courts to cover all costs. That ought to slow them down.
Anyhow, these are random ideas from the vantage point of a non-lawyer engineer. I am sure they are flawed in a thousand ways. I truly don't think government is really going to fix this mess.
Otherwise, if you've only got defensive patents (or no patents) the patent trolling defense fund isn't going to do any harm to you.
IP laws are little weak and innovation can thrive. If somebody wants to copy paste it can happen anywhere, irrespective of laws.
Or it could just, you know, stop this whole patent troll madness altogether.
The problem? That means that your mega-corp would be at a net-loss for every patent suit filed. What's more, it would create the issue wherein parties who couldn't adhere to the standards of whatever mega-entity are exiled from the industry.
The only corps that can be sued effectively are those with cash. This is why people are willing to innovate in patented areas; if they succeed, they're rich and can afford to pay for litigation. If they lose, they won't get sued anyways.
Additionally, how exactly do you sue an NPE? They aren't infringing a patent. That's the entire idea behind being an NPE in the first place; you're not dissuaded by counter-patent litigation because you don't practice. NPEs were a reaction to the exact type of litigation broadside that you're talking about, specifically that patent-rich corps (Apple, Google, Microsoft and most of the companies in the telecom industry, for instance are a notable subset) could amass a patent portfolio so large that any encroachment you made into their industry would saddle you with massive search and negotiation costs in order for you to pay licensing fees, or open yourself up to being demolished in court the moment they needed you out of the market.
Non-practicing entities aren't really the issue. Most companies cannot, and do not, have the skills and assets to effectively enforce their rights. If you're a developer, you're better at focusing on developing. Accordingly it makes sense to allow people specialized in IPR enforcement to do that work for you. The idea that 'anything under the sun' can be captured under a method patent is far more sinister, and it accounts for the massive inflation in patents. The fact that protections over electronics are receiving overlapping IPRs from copyright, trademark, patent, trade secret is a far larger issue. It shouldn't be an issue of 'who' is asserting the patent rights, but rather 'what' patent rights they can assert. You bring this up in one of your replies, and I think your follow-up argumentation is a lot closer to a solution than this initial post.
Circuit topography's protection in the law makes a lot more sense, as its tailored to the industry it seeks to regulate. Patent, however, is a circus with too many clowns under the big-top.
There's security in numbers. If I was a patent troll and knew if I was going to sue a company like RackSpace and knew they had 25-50 companies standing behind them with a large pool of legal and financial resources, I'd be more apt to try and find an easier target.
Well, one reason is that it may be illegal. We have antitrust laws that prohibit companies that make up a large percentage of an industry from coordinating in certain ways... this is an edge case but might be a problem.
But the main reason is just that it is prohibitively expensive. It's really, really expensive to fight a patent troll, and if you win then they turn out to be a shell company with no assets so you can't be reimbursed for your costs (and probably wouldn't be eligible for that anyway in the US). So for small companies, flying under the radar and hoping they won't notice you seems to be the way to go.
They prohibit independent actors from colluding to form a monopoly, but they do not prohibit a company from being successful enough in the marketplace to become an effective monopoly. However, if a company IS that successful, then the laws restrict what the company with monopoly power can do (for instance, they cannot leverage that monopoly to increase their power and market share in a different area of business).
My guess is that funding a nonprofit, something like the EFF or the ACLU but focused specifically on providing legal representation to those sued by patent trolls, would probably be allowed under the law as long as the nonprofit assisted ANY company attacked by a patent troll, not only contributors. If it assisted only contributors, perhaps it could work as some sort of legal insurance policy?
Someone could set up an insurance company specialising in patent-troll insurance.
Seems like they can just start shell companies in order to avoid being counter-sued.
Res judicata is the concept that once a party in a suit has facts determined of a particular situation in one court, that party can't then go into another court and argue the opposite.
As I understand it:
* Parallel Iron owns IPNav.
* IPNav and Rackspace signed a contract saying that IPNav won't sue Rackspace without giving 30 days notice first.
* Parallel Iron sues Rackspace without giving notice first.
* Rackspace sues Parallel Iron and IPNav for breach of contract.
But IPNav and Parallel Iron are separate legal entities, and so unless Rackspace can argue that they can 'pierce the corporate veil' (which might be difficult if they followed appropriate standards to separate the companies, which I presume lawyer heavy patent trolls would be careful to do) and treat them as the same legal entity, IPNav isn't responsible for Parallel Iron filing the suit, and Parallel Iron isn't subject to the contract entered into by IPNav.
Disclaimer: IANAL
It could also be an attempt to get Google juice for anyone else looking for info on these jokers.
It's not that. Schoenbaum (who is General Counsel) has been largely focused on this for Rackspace in DC for a while, and vocal on it over the last year.
http://www.rackspace.com/blog/author-post-list/?articlesbyau...
"GET 'EM RACKSPACE!!!"