Dubious Patent Trolls and a Crowdfunded Infringement Defense

by Winthrop & Weinstine, P.A.
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We’ve spent time discussing the patent troll phenomenon in the past.  Patent trolls are less pejoratively referred to as non-practicing entities, because they do not make or use the inventions covered by their patents.  Instead, these non-practicing entities operate by purchasing patents on various technologies, accusing companies of infringing those patents, and demanding the companies pay licensing fees.  Faced with the threat of patent litigation, many companies—both large and small—will choose to simply pay the troll’s demand.  The infringement allegations might be thin, and the asserted patent might be invalid.  But the potential cost of litigation gives the patent troll great leverage over the companies they target.  Paying the demanded licensing fee is far more cost-effective than defending an infringement suit.

One company, however, is taking a different approach to what it views as a patent troll.  Cloudflare is an Internet security company and content delivery network.  Cloudflare is facing a patent infringement suit filed by patent owner, Blackbird Technologies.  The Complaint alleges Cloudflare is infringing the ‘335 patent, related to incorporating third-party data into existing Internet connections.  Cloudflare has vowed to fight the litigation, arguing both non-infringement and invalidity of the ‘335 patent.  To help in its efforts, Cloudflare is taking the creative approach of crowdsourcing its defense.   In a recent blog post, Cloudflare’s CEO offered up $20,000, to be divided among individuals who submit relevant prior art to invalidate the ‘335 patent.  In addition, and in an apparent effort to stop Blackbird from asserting any other patents against anyone, Cloudflare is offering another $30,000 for prior art submissions that invalidate Blackbird’s other 37 patents and patent applications.

Blackbird Technologies is . . . a law firm?  Blackbird’s website seems to offer legal services with “top law firm experience.”  But Blackbird is the plaintiff in the suit against Cloudflare.  Based on an assignment recorded with the U.S. Patent and Trademark Office, Blackbird purchased the ‘335 patent from the inventor in October 2016 for $1, and shortly thereafter initiated an infringement action against Cloudflare.  Blackbird is not merely representing a client, but instead appears to be stepping into the client’s shoes by purchasing the asserted patent and bringing suit as the plaintiff.

A little research reveals that this is a regular practice for Blackbird.  Blackbird owns at least 38 patents and published patent applications covering a broad range of technical fields.  Since September 2014, the firm has been named as the plaintiff in 109 federal patent infringement cases (107 in the District of Delaware, and 2 in the Central District of California).  The defendants in many of these cases were large corporations—Amazon, Wal-Mart, Petco, Uber, Lululemon, Target, and Netflix.

So, is Blackbird a patent troll?  Blackbird says its business model helps individual inventors and small companies by providing them with a low-cost solution to monetize their patents.  Blackbird also states that it is different from other companies labeled non-practicing entities, because Blackbird is “ready to litigate cases,” and is not merely looking “to settle cases quickly.”  Though it appears that most, if not all, of Blackbird’s suits have settled.

Cloudflare, however, views Blackbird as a pure patent troll, which led to Cloudflare’s crowdsourced effort to invalidate any and all of Blackbird’s patents.  Cloudflare’s CEO even went as far as a recent scathing blog post about the suit, accusing Blackbird of violating legal ethics rules.

Usually, infringement allegations asserted by non-practicing entities are quietly settled (see Blackbird’s 108 other cases filed since 2014).  Cloudflare’s approach to the infringement claims will be expensive, but also public.  Cloudflare’s response seems to include rallying its supporters and customers in publicly calling out Blackbird.  Cloudflare even invites supporters to “tell Blackbird Technologies what you think of their business practices” on Twitter.  It’s clear Blackbird has struck a nerve with this defendant.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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