Is It Time to Offer Bounties for Patent Killing Evidence?

July 14, 2017

One tech company is hoping that offering a public bounty for evidence that will help it fight a patent infringement lawsuit could change how patent wars are fought and even won.

The idea of using a bounty to incentivize the public to gather evidence that can be used to prove a patent isn’t valid goes back as far as 2000. However, it’s unusual for a defendant in a patent infringement lawsuit to make its own request for such evidence—also known as “prior art”—to the general public.

Normally, companies facing a patent infringement lawsuit hire outside companies to gather prior art. Those companies may crowdsource for prior art, which is a business model that seeks the input of Internet users for services, cash or ideas. However, those companies pay a select community of experts for what they find, instead of putting out a request to the general public.

Cloudflare, Inc., an internet security provider, offered a $50,000 public bounty award last month in exchange for evidence to use against Blackbird Technologies Inc., which claimed Cloudflare infringed its patent in March (Blackbird Tech LLC v. Cloudflare, Inc. , D. Del., No. 1:17-cv-00283, complaint filed 3/16/17 ) . The patent, No. 6,453,335, from 1998, describes a system that monitors how data is transmitted back and forth across the internet.

Prior art is documentation, such as technical papers, scientific articles, and even patent applications, that show technology already exists in some shape or form, and therefore, can show that a subsequently granted patent is invalid.

Cloudflare has obtained about 200 sources of prior art so far in its dispute with Blackbird and will consider filing a patent challenge at the Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) against Blackbird. There are five pending patent challenges from other parties against Blackbird patents at the PTAB, according to agency data.

Blackbird’s Patent Battles

Blackbird, a patent licensing company with a portfolio that covers an eclectic combination of technology from LED lights, pedometers, and even sports bras, makes money from selling licenses for patents it owns rather than producing a product or delivering a service. Blackbird has 44 patents assigned to it, according to PTOdata, and acquired 30 patent applications in 2017.

For Blackbird, convincing companies to pay for a license to one or more of those many patents often means going to court. Since 2014, it filed 112 patent infringement lawsuits through the end of June against an array of companies, including Sony Corp.’s mobile unit, Netflix Inc., Home Depot, Lululemon Inc., and Uber Technologies, according to Bloomberg Law data, and more than half of the cases filed by Blackbird ended before going to trial, which is often the result of settlements.

Cloudflare calls Blackbird a patent troll, a derogatory term for companies that buy patents and threaten legal action for infringement based on overly broad interpretations of patents. Cloudflare alleged that Blackbird files lawsuits to scare parties into settling out of court. Blackbird called that allegation “completely untrue” and said they wouldn’t file a lawsuit without planning to go the distance.

Doug Kramer, general counsel for Cloudflare, told Bloomberg BNA that the company never planned to settle, and this case prompted the bounty idea as a way to change the current patent infringement litigation process.

“When we were faced with this lawsuit, we already knew that patent trolls were going after emerging tech companies like ourselves,” Kramer said. “A lot of folks normally settle, but if you play that game then you perpetuate that problem. We wanted to do something that would change that dynamic.”

Companies that are sued in patent infringement cases by patent licensing companies normally settle, so they don’t accumulate high litigation costs. It could cost more than $5 million to defend a patent infringement lawsuit brought by a patent licensing company, like Blackbird, according to an American Intellectual Property Law Association 2015 report.

Blackbird is not a fan of Cloudflare using the bounty tactic, but says it won’t be effective. “It’s a distraction and I think it’s a publicity stunt, frankly,” Wendy Verlander, co-founder of Blackbird, told Bloomberg BNA. “I don’t find it to be an effective method. I think it’s a ‘pounding their chest’ kind of thing as opposed to litigating the actual case.”

Good Legal Practice?

Some who have faced past lawsuits by patent licensing companies said they see the bounty tactic as clever, but also think that $50,000 could be too low to be a successful strategy in this case. “I think this model is innovative and well overdue,” Lee Cheng, online electronics retailer Newegg’s former general counsel and self-proclaimed “patent troll hunter,” told Bloomberg BNA. “But, if you think about what prior art is or kill art is—it is evidence. Why should they do all of this just for $50,000? Let’s say this. If you were going after Google, you have to make it worth their while.” Cloudflare’s initial offer was even lower. The company started with a $20,000 prize for prior art, but boosted it to $50,000.

The bounty was then expanded by an anonymous additional $50,000 donation, according to Cloudflare, bringing the total to $100,000. The company decided that the donation would be used to help find prior art that invalidated Blackbird’s other patents. This prior art will be made available to the public , Cloudflare said.

Verlander said that Blackbird’s case is strong and it isn’t affected by the bounty, due to the validity of its patent and claims. “Every defendant brings up prior art, and they try to argue it is invalid,” she said. “We wouldn’t have brought this case if we didn’t think we would win. The patent is strong. The case is strong. We don’t bring a litigation unless we believe that.”

Public Bounties Ready for a Comeback?

Article One Partners LLC, an intellectual property research company that has used the public bounty method in the past but isn’t using them any longer, supports Cloudflare for its use of the bounty, its CEO, Peter Vanderheyden said.

Article One acquires prior art for its clients by crowdsourcing and in fact, is the owner of a patent on crowdsourcing prior art.

“I really do applaud them for what they’re trying to do, but at the same time the situation is so unique,” Vanderheyden said.

Vanderheyden said that Cloudflare will more than likely be successful because there is only one patent involved and the company has a client base of technological professionals who are invested in patent infringement cases such as these. Adam Kelly, patent lawyer at Loeb & Loeb, LLC, told Bloomberg BNA that he thought the idea of a public bounty was clever, but he would caution defendants in patent cases from using the tactic, because it could be seen as vexatious litigation, which is any type of legal action that’s used to harass or negatively impact an opponent.

“Just imagine that you’re the judge and you hear that one of the parties has posted a public bounty in search of prior art,” Kelly said. “What would your reaction be as to which party is the bad guy?”

However, Kelly said that while offering public bounties could be risky in a federal district court, using it to collect prior art for action at the PTAB should have little to no effect on the board. This is because the prior art needed in an inter partes review proceeding—a patent challenge hearing held before the PTAB— would already be included in the original petition.

Cloudflare said they’ve received positive feedback and would consider using bounties in future cases, if necessary.

To contact the reporter on this story: Ayanna Alexander in Washington at aalexander@bna.com

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

This article can be found here: https://www.bna.com/time-offer-bounties-n73014461741/

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