Patent Trolls after Foursquare and Buzzfeed

Patent trollNon-practicing entities continue to take it to young companies with a vengeance. Jeff John Roberts at GigaOM reports that a Nevada-based non-practicing entity (aka Patent troll) shell company that claims to own basic navigation technology wants Foursquare to pay up. The patent troll Silver State Intellectual Technologies Inc  has filed a lawsuit in Las Vegas, seeking an injunction and damages related to U.S. Patent 7475057 (“System and method for user navigation”) and U.S. Patent 7343165 (“GPS Publication Application Server”), claiming the popular app is violating these two patents.

foursquareThe article says both patents describe the process of pushing information from a remote server to a user based on the location of that user and show diagrams. The Foursquare app relies on location tracking technology to offer a service that lets users and their friends “check in” to restaurants, merchants and other physical locations. Silver State’s short legal filing doesn’t describe how Foursquare infringed on the patent according says the blog.  Applications for the two Silver State patents were filed in 2000 and 2001 and were granted in 2008 and 2009. The article says the named inventor, Michael Obradovich, transferred the patents to a shell company shortly after he received the patents.

In another case, Mobile Transformation LLC a shell company is suing the popular viral news site BuzzFeed. The patent troll says its patent gives it the exclusive right to place certain ads in online videos. The non-practicing entity is suing BuzzFeed over the video “Romney vs Boris.” Mr. Johnson at GigaOM says the patent troll claims the video violates its technology by showing a static ad at the same time the video is streaming.

BuzzfeedThe shell company’s suit is reportedly relying on US Patent 6,351,736 which was issued in 2002 and covers a “system and method for displaying advertisements with played data.” The “method” described in the patent refers to the idea of showing a visual ad while music is playing explains GigaOM.

The BuzzFeed video, which shows London mayor Boris Johnson slamming Presidential candidate Mitt Romney, is not an audio clip. Mobile Transformation LCC claims, however, that it violates the patent because it uses an “embedded flash player to present a first data type of a video file of “Boris v Romney” along with the presentation of advertising data of a second type that includes a static image advertisement.” Records show the patent passed through a chain of shell companies before it became the basis of the current troll suit.

NothingThe author points out that the lawsuit comes at a time when so-called patent trolls like Silver State and Mobile Transformation LLC  have become aggressive about suing promising young companies. In addition to Foursquare and BuzzFeed, Etsy and Hipmunk, were “mugged on payday” when they were hit with patent suits. This is the second time Foursquare has been hit by a patent suit. GigaOM speculates that BuzzFeed is unlikely to roll over for the patent troll. Last year another shell company sued The website, which makes highly-sharable content like “The 25 Happiest Animals in the World,” for allegedly infringing on a method for mobile shopping. Last year, BuzzFeed countered-sued copyright troll Righthaven.

According to GigaOM, patent trolling involves shell companies that don’t make anything but instead acquire patents to demand money from companies that do make things. The article says Mobile Transformation LLC has already sued 21 companies and settled with a dozen of them.

Law suitSince they have no tangible assets, the shell companies are not vulnerable to countersuits, meaning their victims often fold their cards and pay a licensing fee for the troll to go away and not risk the expense of a prolonged lawsuit even though recent research suggests doing so may be a mistake.

The shell company structure is advantageous to the patent holders because
it’s typically impossible to tell who is collecting on the patent payouts and because their lack of assets or a real business makes them impervious to countersuits.

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Buzzfeed is no long a guilty pleasure, they are hero’s for standing up against the patent troll business model.

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