ICYMI- Rackspace Battles Patent Trolls

Silicon Hills
Rackspace Battles Patent Trolls
Posted: April 15, 2013 16:20

Rackspace wants to wipe out so called “patent trolls.”

And as Alan Schoenbaum, chief counsel at San Antonio-based Rackspace, detailed in a blog post titled “Kill The Patent, Kill The Troll” last Friday, that’s a difficult task.

“Despite our efforts, these patent troll lawsuits keep popping up like weeds. It’s like a never-ending game of whack-a-troll,” Schoenbaum wrote.

Patent trolls often work as shell companies that buy patents and then “extort settlements from well-meaning businesses,” according to Schoenbaum.
“Most of these patent troll cases are brought by shell companies whose only asset is the patent itself,” Schoenbaum said.

He said the latest patent infringement lawsuit against Rackspace is another frivolous one. It was filed last week by a “known Patent Assertion Entity called Rotatable Technologies, which claims to own the patent to a type of screen rotation technology – you know, when you turn your iPhone and the screen shifts orientation from portrait mode to landscape mode? It is the functionality we use in our Cloud Notes mobile app, which is the same functionality used by virtually every app in the app store.”

In addition to Rackspace, Rotatable has also sued Apple, Netflix, Electronic Arts, Target and Whole Foods Market.  In response, Rackspace is fighting back. It has challenged the validity of the patent with the U.S. Patent and Trademark Office and is seeking to have it declared invalid.

Rackspace chose to fight the patent instead of paying a fine to the company, even though the fight would be more expensive, because it wants to put an end to patent trolls extorting payments from companies for flimsy patents that hinder innovation, Schoenbaum said.  Patent trolls clearly hamper innovation, especially in the open source community, Schoenbaum said. The Internet was built on Open Source software and Rackspace created OpenStack, open source cloud computing software, which depends on open source innovations.

“Virtually every website is reliant on open source software,” Schoenbaum said.

In addition to the litigation costs, small businesses and technology companies also have to spend time dealing with patent troll demands and that hampers innovation, Schoenbaum said. Rackspace has been vigilant in its fight against patent trolls.  Last week, Rackspace filed a complaint against IP Nav and Parallel Iron in federal court in San Antonio.  Rackspace has seen a 500 percent spike in legal spending to combat patent trolls since 2010.

Overall, patent trolls cost the U.S. economy about $29 billion in 2011, up from $7 billion in 2005, according to a 2012 Boston University study.
So far, Rackspace has fought a patent troll in court and won and also sued one.

Patent trolls not only affect Rackspace, but they affect the company’s customers as well, Schoenbaum said.

“We think it’s an unfortunate use of the patent system and the law needs to be changed so that developers, small business and tech companies don’t have to defend themselves against these kinds of lawsuits,” he said. “We’re not saying there shouldn’t be patent litigation.”
Schoenbaum said the patent trolls play a game simply intended to extract small settlements from numerous companies. And that’s an abuse of the patent system.

“I think it’s gotten worse because more entrepreneurs have gotten into the game and seen how easy it is to make money,” Schoenbaum said.
The U.S. Patent and Trademark Office issues half a million new patents every year and patent trolls often buy up old patents and then seek to enforce them.

Lawsuits against patent trolls cost $5 million to $6 million to defend, Schoenbaum said. That’s why so many small businesses are forced to settle, he said.

To combat patent trolls, Rackspace supports the Shield Act, which stands for “Saving High-tech Innovators from Egregious Legal Disputes.” The bill, HR 6245, introduced by Congressman Peter DeFazio, D-Oregon, seeks to protect technology companies from frivolous patent lawsuits that costs jobs and resources.

“The SHEILD Act will put the financial burden on so-called “patent trolls” that buy patents soley to sue the American tech startups that created the products,”according to a statement from Congressman DeFazio.

Rackspace is also supporting efforts to stomp out patent trolls through its memberships in the Coalition for Patent Fairness, Internet Association, Internet Infrastructure Coalition, App Developers Alliance and the Electronic Frontier Association.

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