Joe Mullin (original) (raw)

Posted on Techdirt - 7 November 2024 @ 11:48am

Judge’s Investigation Into Patent Troll Results In Criminal Referrals

In 2022, three companies with strange names and no clear business purpose beyond patent litigation filed dozens of lawsuits in Delaware federal court, accusing businesses of all sizes of patent infringement. Some of these complaints claimed patent rights over basic aspects of modern life; one, for example, involved a patent that pertains to the process of clocking in to work through an app.

These companies – named Mellaconic IP, Backertop Licensing, and Nimitz Technologies – seemed to be typical examples of “patent trolls,” companies whose primary business is suing others over patents or demanding licensing fees rather than providing actual products or services.

However, the cases soon took an unusual turn. The Delaware federal judge overseeing the cases, U.S. District Judge Colm Connolly, sought more information about the patents and their ownership. One of the alleged owners was a food-truck operator who had been promised “passive income,” but was entitled to only a small portion of any revenue generated from the lawsuits. Another owner was the spouse of an attorney at IP Edge, the patent-assertion company linked to all three LLCs.

Following an extensive investigation, the judge determined that attorneys associated with these shell companies had violated legal ethics rules. He pointed out that the attorneys may have misled Hau Bui, the food-truck owner, about his potential liability in the case. Judge Connolly wrote:

[T]he disparity in legal sophistication between Mr. Bui and the IP Edge and Mavexar actors who dealt with him underscore that counsel’s failures to comply with the Model Rules of Professional Conduct while representing Mr. Bui and his LLC in the Mellaconic cases are not merely technical or academic.

Judge Connolly also concluded that IP Edge, the patent-assertion company behind hundreds of patent lawsuits and linked to the three LLCs, was the “de facto owner” of the patents asserted in his court, but that it attempted to hide its involvement. He wrote, “IP Edge, however, has gone to great lengths to hide the ‘we’ from the world,” with “we” referring to IP Edge. Connolly further noted, “IP Edge arranged for the patents to be assigned to LLCs it formed under the names of relatively unsophisticated individuals recruited by [IP Edge office manager] Linh Deitz.”

The judge referred three IP Edge attorneys to the Supreme Court of Texas’ Unauthorized Practice of Law Committee for engaging in “unauthorized practices of law in Texas.” Judge Connolly also sent a letter to the Department of Justice, suggesting an investigation into “individuals associated with IP Edge LLC and its affiliate Maxevar LLC.”

Patent Trolls Tried To Shut Down This Investigation

The attorneys involved in this wild patent trolling scheme challenged Judge Connolly’s authority to proceed with his investigation. However, because transparency in federal courts is essential and applicable to all parties, including patent assertion entities, EFF and two other patent reform groups filed a brief in support of the judge’s investigation. The brief argued that “[t]he public has a right—and need—to know who is controlling and benefiting from litigation in publicly-funded courts.” Companies targeted by the patent trolls, as well as the Chamber of Commerce, filed their own briefs supporting the investigation.

The appeals court sided with us, upholding Judge Connolly’s authority to proceed, which led to the referral of the involved attorneys to the disciplinary counsel of their respective bar associations.

After this damning ruling, one of the patent troll companies and its alleged owner made a final effort at appealing this outcome. In July of this year, the U.S. Court of Appeals for the Federal Circuit ruled that investigating Backertop Licensing LLC and ordering its alleged owner to testify was “an appropriate means to investigate potential misconduct involving Backertop.”

In EFF’s view, these types of investigations into the murky world of patent trolling are not only appropriate but should happen more often. Now that the appeals court has ruled, let’s take a look at what we learned about the patent trolls in this case.

Patent Troll Entities Linked To French Government

One of the patent trolling entities, Nimitz Technologies LLC, asserted a single patent, U.S. Patent No. 7,848,328, against 11 companies. When the judge required Nimitz’s supposed owner, a man named Mark Hall, to testify in court, Hall could not describe anything about the patent or explain how Nimitz acquired it. He didn’t even know the name of the patent (“Broadcast Content Encapsulation”). When asked what technology was covered by the patent, he said, “I haven’t reviewed it enough to know,” and when asked how he paid for the patent, Hall replied, “no money exchanged hands.”

The exchange between Hall and Judge Connolly went as follows:

Q. So how do you come to own something if you never paid for it with money?

A. I wouldn’t be able to explain it very well. That would be a better question for Mavexar.

Q. Well, you’re the owner?

A. Correct.

Q. How do you know you’re the owner if you didn’t pay anything for the patent?

A. Because I have the paperwork that says I’m the owner.

(Nov. 27, 2023 Opinion, pages 8-9.)

The Nimitz patent originated from the Finnish cell phone company Nokia, which later assigned it and several other patents to France Brevets, a French sovereign investment fund, in 2013. France Brevets, in turn, assigned the patent to a US company called Burley Licensing LLC, an entity linked to IP Edge, in 2021. Hau Bui (the food truck owner) signed on behalf of Burley, and Didier Patry, then the CEO of France Brevets, signed on behalf of the French fund.

France Brevets was an investment fund formed in 2009 with €100 million in seed money from the French government to manage intellectual property. France Brevets was set to receive 35% of any revenue related to “monetizing and enforcement” of the patent, with Burley agreeing to file at least one patent infringement lawsuit within a year, and collect a “total minimum Gross Revenue of US $100,000” within 24 months, or the patent rights would be given back to France Brevets.

Burley Licensing LLC, run by IP Edge personnel, then created Nimitz Technologies LLC— a company with no assets except for the single patent. They obtained a mailing address for it from a Staples in Frisco, Texas, and assigned the patent to the LLC in August 2021, while the obligations to France Brevets remained unchanged until the fund shut down in 2022.

The Bigger Picture

It’s troubling that patent lawsuits are often funded by entities with no genuine interest in innovation, such as private equity firms. However, it’s even more concerning when foreign government-backed organizations like France Brevets manipulate the US patent system for profit. In this case, a Finnish company sold its patents to a French government fund, which used US-based IP lawyers to file baseless lawsuits against American companies, including well-known establishments like Reddit and Bloomberg, as well as smaller ones like Tastemade and Skillshare.

Judges should enforce rules requiring transparency about third-party funding in patent lawsuits. When ownership is unclear, it’s appropriate to insist that the real owners show up and testify—before dragging dozens of companies into court over dubious software patents.

Reposted from the EFF’s Deeplinks blog.

Posted on Techdirt - 20 February 2024 @ 10:52am

Don’t Fall For The Latest Changes To The Dangerous Kids Online Safety Act

The authors of the dangerous Kids Online Safety Act (KOSA) unveiled an amended version last week, but it’s still an unconstitutional censorship bill that continues to empower state officials to target services and online content they do not like. We are asking everyone reading this to oppose this latest version, and to demand that their representatives oppose it—even if you have already done so.

KOSA remains a dangerous bill that would allow the government to decide what types of information can be shared and read online by everyone. It would still require an enormous number of websites, apps, and online platforms to filter and block legal, and important, speech. It would almost certainly still result in age verification requirements. Some of its provisions have changed over time, and its latest changes are detailed below. But those improvements do not cure KOSA’s core First Amendment problems. Moreover, a close review shows that state attorneys general still have a great deal of power to target online services and speech they do not like, which we think will harm children seeking access to basic health information and a variety of other content that officials deem harmful to minors.

We’ll dive into the details of KOSA’s latest changes, but first we want to remind everyone of the stakes. KOSA is still a censorship bill and it will still harm a large number of minors who have First Amendment rights to access lawful speech online. It will endanger young people and impede the rights of everyone who uses the platforms, services, and websites affected by the bill. Based on our previous analyses, statements by its authors and various interest groups, as well as the overall politicization of youth education and online activity, we believe the following groups—to name just a few—will be endangered:

What’s Changed in the Latest (2024) Version of KOSA

In its impact, the latest version of KOSA is not meaningfully different from those previous versions. The “duty of care” censorship section remains in the bill, though modified as we will explain below. The latest version removes the authority of state attorneys general to sue or prosecute people for not complying with the “duty of care.” But KOSA still permits these state officials to enforce other part of the bill based on their political whims and we expect those officials to use this new law to the same censorious ends as they would have of previous versions. And the legal requirements of KOSA are still only possible for sites to safely follow if they restrict access to content based on age, effectively mandating age verification.

KOSA is still a censorship bill and it will still harm a large number of minors

Duty of Care is Still a Duty of Censorship

Previously, KOSA outlined a wide collection of harms to minors that platforms had a duty to prevent and mitigate through “the design and operation” of their product. This includes self-harm, suicide, eating disorders, substance abuse, and bullying, among others. This seemingly anodyne requirement—that apps and websites must take measures to prevent some truly awful things from happening—would have led to overbroad censorship on otherwise legal, important topics for everyone as we’ve explained before.

The updated duty of care says that a platform shall “exercise reasonable care in the creation and implementation of any design feature” to prevent and mitigate those harms. The difference is subtle, and ultimately, unimportant. There is no case law defining what is “reasonable care” in this context. This language still means increased liability merely for hosting and distributing otherwise legal content that the government—in this case the FTC—claims is harmful.

Design Feature Liability

The bigger textual change is that the bill now includes a definition of a “design feature,” which the bill requires platforms to limit for minors. The “design feature” of products that could lead to liability is defined as:

any feature or component of a covered platform that will encourage or increase the frequency, time spent, or activity of minors on the covered platform, or activity of minors on the covered platform.

Design features include but are not limited to

(A) infinite scrolling or auto play;

(B) rewards for time spent on the platform;

(C) notifications;

(D) personalized recommendation systems;

(E) in-game purchases; or

(F) appearance altering filters.

These design features are a mix of basic elements and those that may be used to keep visitors on a site or platform. There are several problems with this provision. First, it’s not clear when offering basic features that many users rely on, such as notifications, by itself creates a harm. But that points to the fundamental problem of this provision. KOSA is essentially trying to use features of a service as a proxy to create liability for speech online that the bill’s authors do not like. But the list of harmful designs shows that the legislators backing KOSA want to regulate online content, not just design.

For example, if an online service presented an endless scroll of math problems for children to complete, or rewarded children with virtual stickers and other prizes for reading digital children’s books, would lawmakers consider those design features harmful? Of course not. Infinite scroll and autoplay are generally not a concern for legislators. It’s that these lawmakers do not likesome lawful content that is accessible via online service’s features.

What KOSA tries to do here then is to launder restrictions on content that lawmakers do not like through liability for supposedly harmful “design features.” But the First Amendment still prohibits Congress from indirectly trying to censor lawful speech it disfavors.

We shouldn’t kid ourselves that the latest version of KOSA will stop state officials from targeting vulnerable communities.

Allowing the government to ban content designs is a dangerous idea. If the FTC decided that direct messages, or encrypted messages, were leading to harm for minors—under this language they could bring an enforcement action against a platform that allowed users to send such messages.

Regardless of whether we like infinite scroll or auto-play on platforms, these design features are protected by the First Amendment; just like the design features we do like. If the government tried to limit an online newspaper from using an infinite scroll feature or auto-playing videos, that case would be struck down. KOSA’s latest variant is no different.

Attorneys General Can Still Use KOSA to Enact Political Agendas

As we mentioned above, the enforcement available to attorneys general has been narrowed to no longer include the duty of care. But due to the rule of construction and the fact that attorneys general can still enforce other portions of KOSA, this is cold comfort.

For example, it is true enough that the amendments to KOSA prohibit a state from targeting an online service based on claims that in hosting LGBTQ content that it violated KOSA’s duty of care. Yet that same official could use another provision of KOSA—which allows them to file suits based on failures in a platform’s design—to target the same content. The state attorney general could simply claim that they are not targeting the LGBTQ content, but rather the fact that the content was made available to minors via notifications, recommendations, or other features of a service.

We shouldn’t kid ourselves that the latest version of KOSA will stop state officials from targeting vulnerable communities. And KOSA leaves all of the bill’s censorial powers with the FTC, a five-person commission nominated by the president. This still allows a small group of federal officials appointed by the President to decide what content is dangerous for young people. Placing this enforcement power with the FTC is still a First Amendment problem: no government official, state or federal, has the power to dictate by law what people can read online.

The Long Fight Against KOSA Continues in 2024

For two years now, EFF has laid out the clear arguments against this bill. KOSA creates liability if an online service fails to perfectly police a variety of content that the bill deems harmful to minors. Services have little room to make any mistakes if some content is later deemed harmful to minors and, as a result, are likely to restrict access to a broad spectrum of lawful speech, including information about health issues like eating disorders, drug addiction, and anxiety.

The fight against KOSA has amassed an enormous coalition of people of all ages and all walks of life who know that censorship is not the right approach to protecting people online, and that the promise of the internet is one that must apply equally to everyone, regardless of age. Some of the people who have advocated against KOSA from day one have now graduated high school or college. But every time this bill returns, more people learn why we must stop it from becoming law.

We cannot afford to allow the government to decide what information is available online. Please contact your representatives today to tell them to stop the Kids Online Safety Act from moving forward.

Republished from the EFF’s Deeplinks blog.

Posted on Techdirt - 27 December 2023 @ 01:03pm

Stupid Patent of the Month: Selfie Contests

Patents are supposed to be an incentive to invent. Too often, they end up being a way to try to claim “ownership” of what should be basic building blocks of human activity, culture, and knowledge. This is especially true of software patents, an area EFF has been speaking out about for more than 20 years now.

This month’s Stupid Patent, No. 8,655,715, continues the tradition of trying to use software language to capture a monopoly on a basic human cultural activity — in this case, contests.

A company called Opus One, which does business under the name “Contest Factory,” claims this patent and a related one cover a huge array of online contests. So far, they’ve filed five lawsuits against other companies that help build online contests, and even threatened a small photo company that organizes mostly non-commercial contests online.

The patents held by Contest Factory are a good illustration of why EFF has been concerned about out-of-control software patents. It’s not just that wrongly issued patents extort a vast tax on the U.S. economy (although they do—one study estimated $29 billion in annual direct costs). The worst software patents also harm peoples’ rights to express themselves and participate in online culture. Just as we’re free in the physical world to sign documents, sort photos, store and label information, clock in to work, find people to date, or teach foreign languages, without paying extortionate fees to others, we must also be free to do so online.

Patenting Contests

Claim 1 of the ‘715 patent has steps that claim:

The patent also uses other terms for common activities of general purpose computers, such as “transmitting” and “displaying” data.

In other words, the patent describes everyday use of computers, plus the idea of users participating in a contest. This is a classic abstract idea, and it never should have been eligible for a patent.

In a 2017 article in CIO Review, the company acknowledges how incredibly broad its claims are. Contest Factory claims it patented “voting in online contests long before TV contest shows with public voting components made their appearance,” and that it holds patents “associated with online contests and integrating online voting with virtually any type of contest.”

Lawsuit Over Radio Station Contest

In its most recent lawsuit, Contest Factory says that a Minneapolis radio station’s “Mother’s Day Giveaway” for a mother/daughter spa day infringed its patent. The radio station asked people to post mother-daughter selfies online and share their entry to collect votes.

Contest Factory sued Pancake Labs (complaint), the company that helped the radio station put the contest online. Contest Factory also claimed a PBS contest in which viewers created short films and voted on them was an example of infringement.

For the “Mother’s Day Giveaway” contest, the patent infringement accusation reads in part that, “the executable instructions … cause the generation of a contest and the transmission of the first and second content data to at least one user to view and rate the content.”

Contest Factory has sued over quite a few internet contests, dating back more than a decade. Its 2016 lawsuits, based on the ‘715 patent and two earlier related patents, were filed against three small online marketing firms: Vancouver-based Strutta, Florida-based Elettro, and California-based Votigo, for contests that go back to 2011. We don’t know how many more companies or online communities have been threatened in all.

Sharing user-generated content like photos—cooperatively or competitively—is the kind of sharing that the digital world is ideal for. When patent owners demand a toll for these activities, it doesn’t matter whether they’re patent “trolls” or operating companies seeking to extract settlements from competitors. They threaten our freedoms in unacceptable ways.

The government shouldn’t be issuing patents like these, and it certainly shouldn’t be making them harder to challenge.

Originally posted to the EFF’s Stupid Patent of the Month Series.

Posted on Techdirt - 16 October 2023 @ 01:46pm

Is Landmark Technology’s Two-Decade Patent Assault On E-Commerce Finally Over?

Landmark Technology’s U.S. Patent No. 7,010,508, and its predecessor, are very likely two of the most-abused patents in U.S. history. These patents, under two different owners, have been used to threaten thousands of small businesses since 2001.

In just one 18-month period, the ‘508 patent was the subject of more than 1,800 patent demand letters sent to more than 1,100 different businesses. All of these businesses were told to pay up—typically $65,000—for using basic e-commerce technology like home pages, customer login pages, and product-ordering pages.

Now the ‘508 patent’s threat is likely dead, thanks to a recent ruling by a North Carolina federal judge in a case that started after Landmark threatened the website Binders.com for selling binders (but, you know, on the Internet). NAPCO, the company that owns Binders.com, responded to Landmark’s $65,000 demand by challenging Landmark’s patent in court. After more than two years of litigation, the judge issued a ruling stating that the ‘508 patent’s disputed claim is invalid because it is ‘indefinite.’ Specifically, it purported to cover network technology that could perform various functions but failed to describe a way those functions could be achieved. While not at issue here, similar terms in the patents’ other independent claims are likely invalid for the same reasons.

“[T]he company broadly and aggressively misuses the patent claims, targeting virtually any small business with a website, seemingly at random,” is how the Washington State Attorney General describes Landmark’s business model.

The Washington State Attorney General’s office sued Landmark in 2021, claiming its aggressive patent trolling violated state consumer protection laws. That case has been removed to federal court and is ongoing.

We hope to never see the ‘508 patent—or any patent related to it—in a threat letter again. Landmark’s long, punishing campaign against small businesses who simply used basic online tools is, hopefully, over. It’s a good moment to take stock of how we got here. Unfortunately, many elements of our broken patent system continue to encourage behavior like Landmark’s.

Courts Let “Functional Claiming” In Software Patents Get Out Of Control

The ‘508 patent involves “means-plus-function” claims. This is a type of patent that allows for broad, functional claiming. As explained by the Federal Circuit, the nation’s top patent court, this type of patent allows “patentees to express a claim limitation by reciting a function to be performed rather than by reciting structure for performing that function.”

The Federal Circuit, the nation’s top patent court, has explicitly allowed this type of patent claim, and they are most used in software patents. Allowing broad “functional” claiming is part of what’s led software patents to become the disaster they have for developers and ordinary internet users.

As patent scholar Mark Lemley explained in a 2012 research paper on functional claiming, it’s similar to allowing a pharmaceutical inventor to claim “an arrangement of atoms that cures cancer,” and assert their patent against any chemical, in any form, that achieves the purpose of curing cancer. “Indeed, the whole idea seems ludicrous,” he wrote.

Lemley’s paper goes through the history of functional claiming, which has had ups and downs throughout American history. The idea of a “means-plus-function” claim is that functional claiming is allowed, as long as it’s connected to a “structure” described in the specification of the patent.

Functional claiming has taken off in software patents. The Federal Circuit established rules that disclosing an “algorithm” would constitute the type of structure that could allow a patent. But the court set the bar for what an “algorithm” is to be shockingly low. You don’t have to send in a mathematical formula at all; prose or even a flow chart is sufficient.

Would-be patent owners have definitely taken advantage of the idea that a flow chart can constitute an “algorithm.” It’s allowed patent trolls to get patents on things like using mathematical proofs, using a lyrics website, and clocking in to work.

The law on software patents is so bad it requires real reforms. In our Defend Innovation whitepaper discussing patent reform ideas, EFF proposed installing strong limits on functional claiming and requiring those who want software patents to provide running code for each patent claim. Those are still good and necessary ideas.

The ‘508 Patent’s “Algorithm”

The ‘508 patent’s supposed “algorithm” is truly a nothingburger. Its primary claim just describes a bunch of things computers do, strung together. Yet Landmark’s lawyers argued that the patent contained a “detailed six-step algorithm” with the following steps. (The “station” here is a general-purpose computer.)

  1. The station reading textual data from memory;
  2. The station reading graphical data from memory;
  3. The station accepting user input;
  4. Displaying, after accepting user input, textual data along with mutually-related graphical data describing more than one transaction option;
  5. Analyzing data provided by the user of the station or data received from a remote location;
  6. Depending on the result of the analysis, retrieving additional data from mass memory.

In other words, getting data and analyzing it.

Of course, “processing” or “accepting” data and “analyzing” it are simply generic verbs that don’t tell you how to do anything. That was exhaustively pointed out in the 66-page order finding Landmark’s patent claim to be invalid. Landmark’s citations “contain no explanation of how that data is ‘analyzed’ or how one would program the ‘processor’ to conduct such processing,” explained District Judge Thomas Schroeder.

Landmark History

At some point in 2019, Landmark Technology stopped filing lawsuits, and a new entity called “Landmark Technology A” began using the ‘508 patent, again targeting small businesses. Litigation has revealed that while inventor Lawrence Lockwood owned the original entity, Landmark Technology A—the newer company that has been sued by the state of Washington— is wholly owned by an IP consultant named Raymond Mercado.

The Washington State Attorney General was able to identify more than 1,800 businesses threatened by Mercado, but the number may be much higher. And while this stupid patent was filed in 1995, it is related to an even earlier stupid patent, which won our Stupid Patent of the Month award a few years ago, for terrorizing even more small businesses.

Lawrence Lockwood used these patents to terrorize hundreds of small businesses, demanding that any sized e-commerce operation: bakers, brownie shops, an organic farm, and many others, all pay him a royalty payment for making basic use of the internet economy.

Adding insult to injury is the fact that there’s no evidence that “inventor” Lawrence Lockwood made any contribution whatsoever to software. Lockwood, a former travel agent, started his long patent trolling career by suing American Airlines for their software system. In that litigation, Lockwood admitted under oath that he had “never, for any length of time, used a personal computer.” When asked what he did for a living, he said that he simply litigated patents, according to a 2003 profile of Lockwood in the Los Angeles Times.

We’ve lived with ultra-aggressive patent trolls like Landmark and its predecessor, PanIP, for more than two decades now. Congress needs to think about how to reel them in and must reject proposed bills that would actually help trolls get more broad patents, and ruin our existing legal defenses against them.

Originally published to the EFF’s Stupid Patent of the Month series.

Posted on Techdirt - 1 May 2023 @ 03:42pm

Stupid Patent Of The Month: Trying To Get U.S. Patents On An AI Program

Only people can get patents. There’s a good reason for that, which is that the patent grant—a temporary monopoly granted by the government—is supposed to be given out only to “promote the progress of science and useful arts.” Just like monkeys can’t get a copyright on a photo, because it doesn’t incentivize the monkey to take more photos, software can’t get patents, because it doesn’t respond to incentives.

Stephen Thaler hasn’t gotten this memo, because he’s spent years trying to get copyrights and patents for his AI programs. And people do seem intrigued by the idea of AI getting intellectual property rights. Thaler is able to get significant press attention by promoting his misguided legal battles to get patents, and he has plenty of lawyers around the world interested in helping him.

Thaler created an AI program he calls DABUS, and filed two patent applications claiming DABUS was the sole inventor. These applications were appropriately rejected by the U.S. Patent Office, rejected again by a district court judge when Thaler sued to get the patents, and rejected yet again by a panel of appeals judges. Still not satisfied, in March, Thaler petitioned the U.S. Supreme Court to take his case. He got support from some surprising quarters, including Lawrence Lessig, as noted in a Techdirt post about the Thaler case.

Fortunately, on April 24, 2023, the Supreme Court declined to take Thaler’s case. That should put an end to his arguments for his AI patent applications once and for all.

Thaler filed U.S. Application Nos. 16/524,350 (describing a “Neural Flame”) and 16/524,532 (describing a “Fractal Container”) in 2019, and listed “DABUS” as the inventor on both applications. He submitted a sworn inventorship statement on DABUS’ behalf, as well as a document assigning himself all of DABUS’ invention rights.

“Thaler maintains that he did not contribute to the conception of these inventions and that any person having skill in the art could have taken DABUS’ output and reduced the ideas in the applications to practice,” the Federal Circuit opinion explains.

But the Patent Act requires inventors to be “individuals,” which means “a human being, a person” in Supreme Court precedent.

The Idea Of AI Patents Keeps Coming Up

The issue of AI invention won’t go away, because there’s a dedicated lobby of enthusiasts—and patent lawyers who want to work for them—that wants to keep talking about it. The patent office is currently collecting public comments about the possibility of AI inventorship for the second time, having already done so in 2019.

Why would anyone want AI to have inventorship rights in the first place? The amicus brief from a Chicago patent lawyers’ group, which supported Thaler’s case to take DABUS to the Supreme Court, holds a clue. They imagine a future in which:

ownership can be partitioned in various ways between entities that developed the AI, provided training data to the AI, trained the AI, and used the AI to invent, to the extent that these entities are different. In some cases, such agreements will result in one entity owning 100% of inventions produced by the AI, but other allocations of ownership are possible.

Endless negotiations over slices of idea-ownership might be a win for the lawyers involved in those negotiations, but it’s a loss for everyone else.

We don’t need property rights systems to govern everything. In fact, the public loses out when we do that. The thousands of software patents created by humans are already a mess, causing real problems for developers and users of actual software. Applications seeking to grant monopoly rights to computer programs created by an AI are a bad idea, which is why we’re giving Thaler’s patent applications our Stupid Patent of the Month award.

Reposted from the EFF’s Stupid Patent of the Month series.

Posted on Techdirt - 31 March 2023 @ 03:33pm

Stupid Patent Of The Month: Traxcell Tech Gets Ordered To Pay Attorneys’ Fees

If someone loses a patent lawsuit very badly—to the point where they face orders to pay attorneys’ fees—you wouldn’t think they would be eager to come back to court with a nearly identical lawsuit. But that’s what has happened with this month’s patent. What’s more, the lawyer representing the patent owner, William Ramey, has been ordered to pay attorneys’ fees no fewer than five times in recent years.

U.S. Patent No. 10,820,147 is owned by Traxcell Technologies. It’s not clear what, if anything, Traxcell ever made. The company applied for patents back in 2002. By 2004, it had a bare-bones website stating that its mission “is to provide leading edge technology and innovation to in [sic] the field of telecommunications.” Today, its business is pretty clear—Traxcell is a patent troll. The company’s website has little information beyond its patents, which have been used in dozens of lawsuits since 2017.

The key claim of the ‘147 patent is long, but it essentially describes a wireless device that collects and shows location information, and also includes traffic congestion information. There’s also the “feature” that the device can allow, or disallow, tracking (a standard feature on modern smartphones).

This patent has come up in more than 20 of Traxcell’s lawsuits in the last two years, with its litigation picking up steam as the patent’s expiration date of September 2022 drew near. It’s been used to sue major cell phone companies like T-Mobile and Verizon, the makers of online maps like Google and Apple, and delivery and gig companies. It’s sued FlightAware for using publicly available flight-tracking information, and the Curb app for tracking taxis, and Instacart for tracking its own shoppers.

“Objectively Baseless Theories”

Traxcell was scheduled to bring this patent to trial next week in a federal Texas court. The trial actually would have been the conclusion of Traxcell’s second lawsuit against Verizon. Since it’s coming back for another round, one might think that Traxcell’s first lawsuit was a big success. That’s not the case, though.

In the first Traxcell v. Verizon patent lawsuit, filed in the Eastern District of Texas (then a hot patent venue), Verizon won on summary judgment—meaning, before the case went to a jury, a judge ruled there was no patent infringement, and that the case was over. Traxcell appealed, but the appeals court agreed that Verizon should win the case. After the failed appeal, a judge awarded Verizon attorneys’ fees based on “Traxcell’s pursuit of objectively baseless infringement theories and filing of meritless motions that disregarded the earlier rulings.”

Traxcell objected to the fee order, and didn’t pay. But its objection was overruled and in December 2022, it was ordered to pay within 30 days. Traxcell appealed 28 days later, and also filed a motion in district court asking to not post a bond, or have a reduced bond. Last month, the district court ordered it again to pay, posting a bond of the fee award plus 20% interest, for a total of $587,902. But Traxcell still hasn’t paid the fees, or paid for a bond.

None of this stopped Traxcell from filing its second lawsuit against Verizon, this time in the Western District of Texas (Waco division), which became popular after a Supreme Court ruling narrowed the ability of patent trolls to shop for favorite venues.

Last week, the judge in charge of Traxcell’s second case dismissed it, ruling that Traxcell no longer has standing. Its patent is in receivership.

“Ignored Obvious Issues”

Traxcell’s lawsuit never should have gotten this far. Now that a judge has shown it clearly doesn’t have standing to sue Verizon, its lawsuits against other defendants, including much smaller companies, should be called into question as well.

U.S. technology users and companies shouldn’t have to constantly face the same bogus threats from the same actors. Judges should vet these repeat players. A company with Traxcell’s track record, or a company hiring an attorney who has been subject to at least five fee orders in recent years, can and should be required to post bonds to proceed to get their patent lawsuits past the initial pleading stage. Finally, judges should follow the example set by 25% of courts in this country and demand that the financial interests in patents be disclosed at the outset of litigation. In 2020, at least 30% of all patent litigation was financed by outside entities—up from essentially zero 15 years ago.

Reposted from EFF’s Stupid Patent of the Month series.

Posted on Techdirt - 28 February 2023 @ 12:19pm

Stupid Patent Of The Month: Clocking In To Work—On An App

What if we told you the Stupid Patent of the Month has a sponsor, but we don’t know who it is? That would seem shady, wouldn’t it?

This month’s stupid patent, U.S. Patent No. 9,986,435, was brought to you—to all of us, really—from the murky depths of the litigation finance industry. Originally assigned to a shell company linked to giant patent troll Intellectual Ventures, this patent was sold off and is now in the hands of Mellaconic IP LLC, a recently-created Texas shell company. Mellaconic has sued more than 40 companies over claims that a vast array of HR software infringes their patent.

Here is Mellaconic’s key patent claim:

1. A method to perform an action, comprising:

receiving, by a first device located at a first geographical location, one or more messages that indicate geographical location information of a second device located at a second geographical location, and

include a request for a first action to be performed by the first device, wherein the one or more messages are received from the second device, and wherein the geographical location information of the second device acts as authentication to allow the first action to be performed by the first device; and

autonomously performing, based at least on the received one or more messages, by the first device, the authenticated first action.

In other words: A device receives a request from a second device to take action. That action may or may not be performed, depending on the location of the second device.

Mellaconic’s lawyers say this applies to something hourly workers do every week: clock in and clock out of their jobs. Even though their patent doesn’t even discuss clocking in—and despite the fact that clocking in has happened since, well, clocks—they’ve sued a huge swathe of U.S.-based companies that market human resources and payroll software.

For instance, they sued Paychex, saying that the Paychex server is the first device, and the second device is a mobile user with the Paychex Flex app, which, like many HR apps, allows for clocking in and out of a job. Same thing for Hi Bob, a smaller HR company that Mellaconic sued in August. They’ve repeated this allegation—that clocking in (but with an app!) equals infringement of their patent, which means the companies owe money to the people behind Mellaconic.

Who’s Making Money From This Patent?

Mellaconic, like so many patent trolls, has been able to hide its true beneficiaries. Most of the 40 companies that Mellaconic sued have likely paid to settle, because their cases ended within a few months, before any significant hearings. That suggests many defendants settled for less than the hundreds of thousands (potentially even millions) of dollars that it would have cost to fight off this stupid patent.

Unusually in this case, a Delaware federal judge overseeing some of Mellaconic’s cases has insisted that the supposed owner come to testify in court. That’s what led Hau Bui, a Texas restaurateur and food-truck owner who says he owns Mellaconic, to travel to Delaware in November and testify under oath in federal court.

But Hau Bui has now said under oath (see transcript p. 87) that he hasn’t paid anything for Mellaconic’s patent, nor the other patents it hasn’t yet sued over. He hasn’t paid anything to Mellaconic’s lawyers (p. 96), or any other litigation expenses. And Bui said he only collects 5 percent of Mellaconic’s settlement money (p. 91), which has amounted to about $11,000 (p. 98).

Bui was promised this “passive income” stream by Linh Dietz, a person whose name has come up at every stage of the Delaware investigation, and is linked to IP Edge, a large-scale patent troll. Every supposed “owner” of the patent troll entities who have testified in Delaware acquired their patents, for free, by talking to Dietz and signing paperwork she provided.

Patent Trolls Have A Growing Network of Secret Funders

IP Edge is far from the only player in the vast world of patent trolling, which continues to account for the great majority of patent lawsuits against tech companies—more than 88% in 2022. Why do these lawsuits keep coming even while overall patent litigation is going down?

In part, it’s because there is nothing stopping aggressive litigation finance from paying out money to fund patent lawsuits, in the hopes that “investing” in a broad campaign of patent lawsuits will pay off a big return. Unified Patents, a company that sells patent defense services, recently estimated that about 30% of all patent lawsuits are now backed by third-party financing.

That’s one reason why EFF, along with other public interest groups, filed a brief stating that the Delaware investigation must be allowed to continue. The lawyers working for Mellaconic and related shell companies are doing everything they can to shut it down. They appealed to the Federal Circuit, twice, and were rejected both times.

The public deserves to know more about patent trolls that are using our public courts to seek rents for innovations they had nothing to do with. That’s especially true as litigation finance helps spread lawsuits over patented “inventions” like clocking in on an app.

Reposted from the EFF’s Stupid Patent of the Month series.

Posted on Techdirt - 31 January 2023 @ 01:24pm

Stupid Patent Of The Month: Digital Verification Systems Patents E-Signatures

Patent trolls make patents, and argue over them. They don’t have to ever make the thing described in their patents, if it’s even possible to determine what those things are. Instead, they generate legal threats and waste the time and money of companies that do do these things.

This month’s Stupid Patent of the Month is a great example of that. U.S. Patent No. 9,054,860 has been used by a company called Digital Verification Services, LLC, (DVS) to sue more than 50 companies that provide different types of e-signature software.

There’s no evidence that the inventor of this patent, Leigh Rothschild, ever created his own e-signature software. But in patent law, that doesn’t matter. He acquired this patent in 2015, by adding a trivial, almost meaningless limitation to an application that the U.S. Patent Office had spent the previous seven years rejecting.

You can’t learn much about how to verify digital identities from the patent owned by Digital Verification Services. But the breadth of work on actual digital verification can be gleaned by looking at the long list of companies and products that DVS has sued. In fact, DVS has sued more than 50 different companies. Some are large, like NASDAQ-listed DocuSign, but many more of its targets are small companies with less than 50 or even less than 10 employees. They stand accused of offering “hardware and/or software for digital signature services.”

That’s a pretty big chunk of litigation even for a Rothschild-linked company. Some of Rothschild’s other “inventions” include an internet drink mixer that’s positively out of a sci-fi novel, and a patent on online movies (from the cloud!) that was filed in 2011.

So what’s described in this patent, which so many companies are accused of infringing?

The patent’s key claim describes “module generating assembly” that will receive a “verification data element” resulting in a “digital identification module.” This “module” will then “at least partly associate” with an “entity,” and be embedded in a file.

In his declaration, inventor Rothschild says the “module generating assembly” could be a lot of things—a computer application, a web server, a file server, or “or other computing device.” In a recent deposition, he declined to describe that term any further. In court filings, DVS described a person “skilled in the art” of understanding this patent as someone “having a bachelor’s degree in computer science or electrical engineering,” or the equivalent. Rothschild—whose software patents have been used to sue hundreds of companies—admitted he had no such degree.

Rothschild’s patent, like the great majority of software patents, includes no code—it simply proclaims it’s made up of “modules,” “assemblies,” and “components.”

Actual E-Signature Software Rest On Well-Known Standards And Laws

Innovation in this area—electronic signatures—rests on a bedrock of publicly shared knowledge and publicly known law. There’s no evidence at all that patents on e-signatures (of which Rothschild’s stupid patent is not the only example) have done anything to push forward innovation in the e-signature space.

The history of e-signatures is long. The U.S. government established standards for digital signatures in 1994, and Congress passed the E-Sign Act in 2000, establishing a general rule of validity for electronic signatures. The E.U. regulated them beginning in 1999. The United Nations published a Model Law on Electronic Commerce in 1996 that has addressed e-signatures. These foundational laws all have been revised multiple times. They are all much older than the claimed 2008 priority date on Rothschild’s patent application.

Using electronic signals to verify identities and seal contracts pre-dates the internet, as well. A New Hampshire Supreme Court case from 1869 called Howley v. Whipple said that a contract established via telegraph was binding. “Nor does it make any difference that in one case common record ink is used, while in the other case a more subtle fluid, known as electricity, performs the same office,” wrote the justices in that case.

That’s not to say there isn’t room for new and improved types of electronic signatures. The proof of innovation won’t be found in this stupid patent, however. But it can be found in the ongoing work of the dozens of companies, large and small, that have been sued by DVS. At least one DVS defendant has been providing e-signature services since 2000. As with so many other flourishing areas of software, patents don’t push forward the state of the art—they drag it down.

Unfortunately, getting software patents based on vague terms like a “module generating assembly” and a “digital identification module” is not uncommon. We need better laws to kick out indefinite patents like these faster, so they can’t be used to harass companies into paying settlements, as most of DVS’ targets appear to have done. We also support a stronger patent review system to weed out patents that courts can’t get to. Finally, we need strong and enforceable fee-shifting in patent cases to penalize repeat litigants like the Rothschild-linked companies, which use some of the stupidest patents we’ve seen to terrorize small companies.

Reposted from the EFF’s Stupid Patent of the Month series.

Posted on Techdirt - 8 June 2022 @ 01:53pm

Patent Troll Uses Ridiculous “People Finder” Patent To Sue Small Dating Companies

Finding people near you with shared interests, and talking to them, has a very long history in human culture. We’re social animals. We need to find other people close to us to work together with, play games with, and build relationships and families with. Modern online social networks are built on top of those basic human needs.

The technologies we humans use to do these things are ever-changing, but the basic concepts aren’t. Software that promotes new types of social networking is a terrible fit for the patent system, which hands out hundreds of thousands of 20-year monopolies each year on inventions that are supposedly new, but often aren’t. No one should be able to patent an “invention” that simply describes a method of finding like-minded people.

Unfortunately, that seems to be just what happened with a patent we looked at recently. A patent troll called Wireless Discovery LLC sued eight different social and dating apps for patent infringement, claiming that they infringe U.S. Patent No. 9,264,875, which claims “location-based discovery” based on people’s “personal attributes.” Wireless Discovery, which was created just before its patent was granted in 2016, sued eight different online dating apps in April—most of them small apps.

Claiming the “Mobile Social” World

Wireless Discovery lawyers say that a simple combination of basic computing services is enough to infringe their patent. Its claim chart makes it explicit what is required to infringe the ‘875 patent. For its lawsuit against the dating network Zoosk, the claim chart describes how:

And that’s it.

The Wireless Discovery patents were originally filed for a company called Ximoxi, which tried to market a type of “electronic social cards.” Ximoxi founder Ramzi Alharayeri, who is the named inventor on the patent, said in a 2012 press release that his software was “the first social-discoverability application that works on iPhone, Android and Blackberry alike.”

In 2016, however, the Ximoxi website said that the app was still “under development.” It continued: “After releasing our Beta, we needed to go back to work for bugs fixes and features improvements.” Today, the Ximoxi website is defunct.

Not the First

The idea of connecting nearby users of a social network isn’t an idea that should be patentable at all. But it’s also worth noting that—even if Ximoxi executed this concept in some way—it was far from the first. The Ximoxi patent was filed in 2014, but claims that it’s a continuation of a patent that was originally filed in October 2008, the time that Ximoxi was founded.

Location-based social networking on mobile devices is quite a bit older than that, though. It was conceptualized, and used, well before smartphones were common. The New York City-based app “Dodgeball” dates back to 2000. It was acquired by Google (with plenty of press coverage) in 2005. By then, it was clear that different types of social mobile apps were going to be taking off. A paper presented at the 2006 IEEE engineering conference notes the growth of mobile social networking: “An entire sub-industry of the wireless sector is slowly being created as companies such as Dodgeball, Playtxt, and SmallPlanet.net begin to capitalize on this new phase in the mobile technology platform.”

None of this earlier technology was presented to the U.S. Patent and Trademark Office in Wireless Technology’s patent applications.

Unfortunately, this is all too common. It’s how many software patents get issued—examiners have just 18 hours, on average, to complete the examination, and the applicants can come back with endless revisions. Ultimately, persistent applicants get patents, even when they don’t have a great case for one.

And those monopolies do serious damage. Most patent lawsuits filed in the past several years aren’t disputes that result from a company trying to defend the market for its product. Rather, they are initiated by patent trolls—companies with no products, that simply use patents to demand payment from others. In 2021, 87 percent of high-tech patent disputes in federal courts were filed by companies or people that make most of their money from patent licensing.

It’s very difficult, and expensive, to get patents thrown out in court, even when the technology described in the patent existed long before the patent was filed. That’s why 10 years ago, Congress created a more robust review system for already-granted patents, called inter partes review (or IPR). Over the years various patent owners have tried to weaken the IPR system, encouraging the patent office to reject many IPRs on technicalities, or even saying IPRs are unconstitutional. Thankfully, those efforts have all failed.

There’s a bill in Congress that would strengthen IPR, closing some of the loopholes that patent owners have used over the years to dodge the IPR process. Right now, passing the Restoring America Invents Act, as it was introduced, is the best thing we could do to weed bad patents out of the system.

Originally posted to the EFF Deeplinks blog.

Posted on Techdirt - 12 August 2021 @ 09:39am

Stupid Patent Of The Month: This Captcha Patent Is An All-American Nightmare

A newly formed patent troll is looking for big money from small business websites, just for using free, off-the-shelf login verification tools.

Defenders of the American Dream, LLC (DAD ), is sending out its demand letters to websites that use Google?s reCAPTCHA system, accusing them of infringing U.S. Patent No. 8,621,578. Google?s reCAPTCHA is just one form of a Captcha test, which describes a wide array of test systems that websites use to verify human users and keep out bots.

DAD?s letter tells targeted companies that DAD will take an 8,500payment,butonlyif?licensingtermsareacceptedimmediately.?Thethreatescalatesfromthere.IfanyonedarestorespondthatDAD?spatentmightbenotinfringed,orinvalid,feeswillrisetoatleast8,500 payment, but only if ?licensing terms are accepted immediately.? The threat escalates from there. If anyone dares to respond that DAD?s patent might be not infringed, or invalid, fees will rise to at least 8,500payment,butonlyif?licensingtermsareacceptedimmediately.?Thethreatescalatesfromthere.IfanyonedarestorespondthatDAD?spatentmightbenotinfringed,orinvalid,feeswillrisetoatleast17,000. If DAD?s patent gets subject to a legal challenge, DAD says they?ll increase their demand to at least $70,000. In the footnotes, DAD advises its targets that ?not-for-profit entities are eligible for a discount.?

The DAD demand letters we have reviewed are nearly identical, with the same fee structure. They mirror the one filed by the company itself (with the fee structure redacted) as part of their trademark application. This demand letter campaign is a perfect example of how the U.S. patent system fails to advance software innovation. Instead, our system enables extortionate behavior like DAD?s exploding fee structure.

DAD Didn’t Invent Image Captcha

DAD claims it invented a novel and patentable image-based Captcha system. But there?s ample evidence of image-based Captcha tests that predate DAD?s 2008 patent application.

The term ?Captcha? was coined by a group of researchers at Carnegie Mellon University in 2000. It?s an acronym, indicating a ?Completely Automated Public Turing test to tell Computers and Humans Apart.? Essentially, it blocks automated tools like bots from getting into websites. Such tests have been important since the earliest days of the Internet.

Early Captcha tests used squiggly lines or wavy text. The same group of CMU researchers who coined ?Captcha? went on to work on an image-selection version they called ESP-PIX, which they had published and made public by 2005.

By 2007, Microsoft had developed its own image-categorization Captcha, which used photos from Petfinder.com, then asked users to identify cats and dogs. At the sime time, PayPal was working on new captchas that ?might resemble simple image puzzles.? This was no secret?researchers from both companies spoke to the New York Times about their research, and Microsoft filed its own patent application, more than a year before DAD?s.

There?s also evidence of earlier image-based Captcha tests in the patent record, like this early 2008 application from a company called Binary Monkeys. Here’s an image from the Binary Monkeys Patent:

And here’s an image from DAD’s patent:

So how did DAD end up with this patent? During patent prosecution, DAD?s predecessor argued that they had a novel invention because the Binary Monkeys application asks users to select ?all images? associated with the task, as opposed to selecting ?one image,? as in DAD?s test. The patent examiner suggested adding yet another limitation: that the user still be granted access to the website if they got one ?known? image and one ?suspected? image.

Unfortunately, adding trivial tweaks to existing technology, such as small details about the needed criteria for passing a Captcha test, can and often does result in a patent being granted. This was especially true back in 2008, before patent examiners should have applied guidance from the Supreme Court?s 2014 Alice v. CLS Bank decision. That?s why we have told the patent office to vigorously uphold Supreme Court guidelines, and have defended the Alice precedent in Congress.

Where did DAD come from?

DAD?s patent was originally filed by a Portland startup called Vidoop. In 2010, Vidoop and its patent applications were purchased by a San Diego investor who re-branded it as Confident Technologies. Confident Tech offered a ?clickable, image-based CAPTCHA,? but ultimately didn?t make it as a business. In 2017 and 2018, Confident Tech sued Best Buy, Fandango Media, Live Nation, and AXS Group, claiming that the companies infringed its patent by using reCAPTCHA. Those cases all settled.

In 2020, Trevor Coddington, an attorney who worked on Confident Tech?s patent applications, created Defenders of the American Dream LLC. He transferred the patents to this new entity and started sending out demand letters.

They haven?t all gone to large companies, either. At least one of DAD?s targets has been a one-person online publishing company. Coddington?s letter complains about how Confident Tech failed in the marketplace and suggests that because of this, reCAPTCHA users should pay?well, him. The letter states:

[O]nce Google introduced its image-based reCAPTCHA for free, no less, [Confident Technologies] was unable to to maintain a financially viable business? Google?s efficient infringement forced CTI to abandon operations and any return on the millions of dollars of capital investment used to develop its patented solutions. Meanwhile, your company obtained and utilized the patented technology for free.?

Creating new and better Captcha software is an area of ongoing research and innovation. While the lawyers and investors behind DAD have turned to patent threats to make money, other developers are actively innovating and competing with reCAPTCHA. There are competing image-based Captchas like hCaptcha and visualCaptcha, as well as long lists of Captcha alternatives and companies that are trying to make Captchas obsolete.

These individuals and companies are all inventive, but they?re not relying on patent threats to make a buck. They?ve actually written code and shared it online. Unfortunately, because of their real contributions, they?re more likely to end up the victims of aggressive patent-holders like DAD.

We?ll never patent our way to a better Captcha. Looking at the history of the DAD patent?which shares no code at all?makes it clear why the patent system is such a bad fit for software.

Originally posted to the EFF Deeplinks Blog