
Why Rackspace Is Suing The Most Notorious Patent Troll In America - grimey27
http://www.rackspace.com/blog/why-rackspace-sued-the-most-notorious-patent-troll-in-america/
======
rayiner
> In actuality, it is a bit more complicated. Our dealings with this
> particular troll reach back to December 2010 when IP Navigation Group (IP
> Nav), as agent for a supposedly secret patent owner, now known as Parallel
> Iron, accused Rackspace of patent infringement. IP Nav told us that they
> could not divulge the details of their infringement claims – not even the
> patent numbers or the patent owner – unless we entered into a “forbearance
> agreement” – basically, an agreement that we would not sue them. IP Nav was
> worried that as soon as we found out what their patents and claims actually
> were, Rackspace would sue to invalidate their patents or for a declaration
> that Rackspace does not infringe. We were unwilling to enter into such a
> one-sided agreement, so we negotiated a mutual forbearance agreement that
> required either party to give 30 days’ notice before bringing suit.

That's some shady shit right there.

~~~
notahacker
I can't understand why anyone would sign away their right to counter-sue in
order to obtain information on something which can't possibly damage them
until the information is disclosed anyway (IANAL)

~~~
rayiner
It might be the plaintiffs way of identifying targets that don't have the will
or money to litigate. A larger company isn't going to sign one of these--it
doesn't buy you barely anything.

~~~
chatmasta
So does it by you a lot of something, or nothing?

------
ChuckMcM
Interesting, patent trolls have reached the level of public relations foil. I
think its great that Rackspace is suing these guys but I found the press
release made me feel like I do when somebody is trying to impress me with all
of the charities they've donated money to. Mutual forbearance agreement?
Seriously? Why not sue them right then and there when they foisted that bit of
"strategy" on you and charged them with criminal extortion?

My reasoning is like this, either you infringe or you don't. So the patent
holder can say "We believe you infringe claims x, y, and z on patents q, r,
and s." Or they can't. So if someone tells you infringe but they won't tell
you the patent or the claims, and they are threatening to sue anyway, that is
a protection racket and actionable under the RICO statutes as far as I can
tell.

~~~
VanL
We couldn't sue because we didn't know what we would sue on. They wouldn't
even tell us the patent numbers - so we didn't have the knowledge necessary to
even file a complaint.

As for suing because of the forbearance agreement, they try to write these
things so they are _just_ on the side of the line, and it is really hard to
make a RICO suit stick (see Cisco and Innovatio).

We, of course, think that it is just BS. Now we are on record saying so.

\- Van (Rackspace VP of IP)

~~~
ChuckMcM
Excellent reference, thanks Van. This comment from the judge in the WSJ
coverage[1] of Cisco _""It is enough for now to determine that Innovatio at
least has a plausible argument that its infringement claims are still viable,"
wrote Judge Holderman. The "licensing campaign is therefore not a sham," he
said."_ So did Innovatio include the patent numbers? I have read in other
cases that legal test for extortion was "credible but not actionable" threat
of exposure. (Crosby vs Upshaw as an example, she wouldn't provide paternity
data)

FWIW I've added you to the list of technology companies being harmed by patent
extortion (I try to keep my congressional representatives informed in order to
disallow them the excuse that they had no idea how bad the problem is)

[1]
[http://online.wsj.com/article/SB1000142412788732490600457828...](http://online.wsj.com/article/SB10001424127887324906004578288370005621206.html)

~~~
mitchellhislop
Could I talk you into sharing that list?

I have been thinking I should be more proactive with my congresscritters. It
seems I am always sending reactive messages.

------
codesuela
It is awesome to see a company put their money where their mouth is, the good
will with the dev community they are building with this will easily exceed the
costs of fighting a troll in court.

~~~
mcherm
This builds up LOTS of good will with me. But still, I'm not sure you are
right. The cost of fighting a troll in court can be shockingly large. If it
were worth MORE in public relations than it cost in legal fees then it would
obviously be an investment they should make, just to become more profitable. I
doubt that... I think it is worth a lot in public relations, but less than the
same amount of cash would buy in advertising. Nevertheless, it is worth it for
two reasons: (1) because it scares patent trolls off of Rackspace in the
future, and (2) because it's good for the world, even if it isn't profitable.
Sometimes you just have to do things that aren't profitable.

~~~
krichman
I feel obliged to do business with Newegg and now Rackspace whenever I am
looking for something they provide. Maybe their prices are higher than some
other companies. If that's the cost of defending against patent trolls, well
it's minuscule compared to the benefit.

Also Newegg and Rackspace are incredibly cheap so I haven't found anyone that
beats their prices anyway. In fact, unless I miscalculated, after I switch
from Amazon to Rackspace next week my monthly bill will be lower.

This is above and beyond the "do no evil" motto that Google pretends to
uphold. This is actively fighting to improve society.

------
51Cards
I host at Rackspace. I'm glad (sincerely) that they are using some of my money
for things like this. This makes me happy.

------
kevinalexbrown
Whenever I see several different groups behaving in a manner I find obnoxious,
I wonder incentives encourage this kind of behavior, and how those incentives
might be reduced.

One such way is countersuit, which Rackspace is doing. If everyone
(successfully) countersued, the incentive to be a patent troll would diminish.

There might be other ways. Is there some common property patent trolls depend
on that might be penalized or forbidden? I've noticed that patent trolls
rarely seem to produce anything. Perhaps some sort of "use it or lose it"
clause, in which patent holders have a certain amount of time to effectively
license their technology to some degree of effectiveness before they can't
enforce infringements.

It works in other areas. For instance, in my home state, many people would
love to live in the country extremely cheaply, so there's an incentive to set
up dubious Christmas tree farms to get nice tax rates. To combat this, you
have a certain number of years to turn a profit, and if you don't, you lose
the farm credit.

(here's an example of why they do this:
[http://www.huntingnet.com/forum/wildlife-management-food-
plo...](http://www.huntingnet.com/forum/wildlife-management-food-
plots/9023-tax-breaks-starting-tree-farm.html))

~~~
hkmurakami
_> One such way is countersuit, which Rackspace is doing. If everyone
(successfully) countersued, the incentive to be a patent troll would
diminish._

I was under the impression that these patent troll shell companies are set up
so that they have virtually no assets under them. Does countersuing even hurt
these shell companies significantly? The only thing I can see countersuits
costing patent trolls is time in court (maybe that costs the parent of the
shell company money if they operate on a scale where they're hiring lawyers to
go sue companies?)

~~~
TallGuyShort
Rackspace is more focussed on having the patents declared invalid than hurting
the troll any other way. Eventually you'd run out of patents that are even
remotely defensible, because they would have to have been filed long before
HDFS became as ubiquitous as it is.

~~~
btilly
_Eventually you'd run out of patents that are even remotely defensible..._

The problem is that more are being assigned all of the time. And if the
assignee goes bankrupt, trolls can buy the patent rights for a song.

~~~
TallGuyShort
Right, but a patent X can only be used to attack technology Y if X predates Y.
So once all the pre-Y patents have been struck down you're a lot safer. Even
though X might be a totally unoriginal patent, if it predates the technology
it's attacking, it might still be hard to defend against. Strike down the
patent and it's done - and you cnan't assign another patent in the past.

~~~
btilly
Technologies continue changing. Your core technology may be older, but if
you've integrated with some recent Z, you can still be attacked by patent X,
even though your core technology is older.

Look at Apple for instance. It is older than all of the patents it is being
sued with. Many of the lawsuits that it faces are for cases where the patent
is younger than Apple's technology. Apple still gets sued for it though.

------
robomartin
I've said this here before more than once. The solution is for tech companies
to fund a massive entity who's only purpose in life is to mercilessly sue
patent trolls. Destroy them. Go after their patents. Invalidate them. Make it
so costly to even attempt to enforce a bullshit patent that they will only
dare take that step if they have a really good solid patent.

If the top 100 companies in tech donated just ten million dollars a year to
this effort you would instantly have a one billion dollar "kill the trolls"
fund. If the fund is not fully consumed during the first year it could become
three or four billion in five to seven years. How many trolls are going to be
willing to go up against any company with that kind of a war chest to protect
it?

Small entities would contribute less. The way I see it, in the US alone, this
kind of protection is easily worth $50K to $100K per year for a small entity.

Yes, we are at a point where you might have to consider paying a membership
fee to a troll protection association that is equivalent to the salary of a
full-time employee. Sad.

The US government ought to also provide a sizable chunk of money to this fund
as well as tax-exempt status. Say, a billion dollars a year. Considering the
economic damage being done this is chump change. Now you have a kill-the-
trolls association that, through public and private funding, could end-up with
nearly ten billion dollars in five to seven years. Scary enough?

I am not one for government getting involved in private matters, much less
blowing money like they did in Solyndra and others. However, this is a
government-sponsored monopoly that they crated. You and I did not create this.
This mess is 100% on government hands. And, like most things government does,
it eventually went off the rails. It's an absolute mess. They have a
responsibility to fix it.

The first step is to grant a sizable amount of money to a private entity that
will shield entrepreneurs from trolls. They should hand over the money and get
out of the way. Consider it reparations for running such a fucked-up patent
office. Then they can go off and take ten years to reform the system.

Oh, yes, they should also make the patent invalidation process 100% free. In
other words, anyone should be able to file a patent invalidation action and it
should be 100% free. Then we could crowd-source patent invalidation runs on
all the patents held by trolls. Form crowd-sourced teams that target trolls
and file away.

Seriously folks, this is war. And in war you have to have more powerful
weapons than your enemy. The enemy has the power of the monopoly they were
granted by the US government. What they don't have is unlimited and massive
capital. An association of practicing entities --no trolls allowed-- with
billions of dollars available to mount a shield and defend members would be
massively intimidating.

The association's mission statement should state that all engagements will
have, as a goal, the invalidation of the patents in question. In other words,
if you screw with us we will go directly to rip those patents out of your
hands. No middle ground. No deals. No mercy. Attacking us means you, as the
attacker, risk it all and you better have a real patent.

How many trolls are going to risk that? How many will do it after one, two or
several are absolutely decimated in court and their patents invalidated.

One more thing. If a non practicing entity has a patent invalidated they are
also put through a bankruptcy style procedure whereby a trustee takes a look
at what moneys were derived from licensing the invalid patents. The idea is to
refund ill-gotten funds to those who paid the fees.

In other words, hit them with a nuke.

EDIT: Also, on the subject of patent invalidation. This should be ripped out
of the hands of the government and run just like a trial. I don't know exactly
how it works today, but this is what I have in mind: A judge is appointed to
oversee the process. A jury of people well-qualified in the patent's subject
matter is assembled. Both parties present their case. The jury deliberates and
decides. Fast, efficient and 100% in private hands with the blessings of the
US government. Rough strokes.

~~~
trhtrsh
You are overlooking the fact that patent trolls do have real patents.

From the blog post, for example: """ Until Congress reforms the patent laws,
companies of all sizes and industries could – and likely will – find
themselves in the crosshairs of a greedy patent troll looking for a quick
cash-grab. No company is immune, and, sadly, small companies can’t afford to
fight. If they don’t succumb to the troll’s demands by settling, they face
certain ruin. """

Patent trolls are on the right side of the law. The law is the problem.

And invalidating a worthless patent doesn't harm the troll at all -- no harm
in trying, right? They can always get another patent. As non-practiciing
entities, they don't have any business at risk. It's asymmetric.

~~~
robomartin
No, I am not overlooking that fact. A "real" patent is simply a document that
says you were granted one. It says nothing about the quality of the patent or
the merit of it at all. I have read through hundreds and hundreds of patents
over the years. I can say that the vast majority of them have been gut-
wrenching bullshit patents. Yes, yes, an attorney will argue that there are
subtleties to the claims that make them unique and patentable. I'm sorry, an
engineer knows the real meaning of obvious. Lawyers and the patent examination
process obviously don't. For example, the infamous patents on using PWM to
modulate LED intensity in order to mix RGB LEDs and create various colors.
Utter bullshit. None of them should have been granted. Not one of them. Read
them all.

So yes, patent trolls have real patents. That does not mean they are real
inventions that were deserving of a patent.

My point is that I would hit NPE's with bullshit patents as hard as possible
if they stick their heads out of the sand. If they know you are backed by a
multi-billion dollar legal fund with a mandate to invalidate bullshit patents
they will only stick their heads out when they have real patents for real
inventions. And, you know what, at that point I don't mind. Real invention can
be laborious and risky at many levels. And, being that technology has advanced
so far, real invention is harder and harder every day because engineering and
other disciplines continue to advance.

Practicing or not, if you have a real patent covering a real, no-bullshit
real, invention, then that's different. Trolls with bullshit inventions that
should have never been granted deserve to have the sewers of Los Angeles
dumped into their breakfast each and every morning for the rest of their
lives. Since we can't do that, attack them with a multi-billion dollar legal
organization that mercilessly goes after their IP assets and seeks nothing
less than invalidation.

To me "not obvious to those skilled in the art" means something that has been
lost from the process for a long, long time. We need to restore that. The
problem is, government will likely take decades to do so, if ever. They can't
even pass a damn budget or keep us out of bullshit wars. Now you want them to
modify the entire patent system? Right.

The only solution I see is some form of massive legal threat that unifies
companies against trolls. It can perhaps go beyond that (some kind of
reasonable cross-licensing mechanism between members, etc.). I don't know.
Regrettably we need lawyers to craft some of the finer points of something
like this.

As an engineer this is incredibly frustrating. I see it as a bunch of lawyers
and government bureaucrats fucking with our ability to innovate. I want to
create and I want to create with absolute freedom. I want to be a fee man. We
are not free at all these days.

I went fishing with my kids today. I had to pay a $50 license fee to be able
to go fishing. I have to pay the government for permission to fish. If I
needed to fish to feed my family the government could arrest me and fine me
further for not having paid them a fee. Luckily I don't need to fish to feed
my family. But it is almost surreal to think that the most fundamental act of
man, to feed yourself in order to remain alive, requires a license fee paid to
government or risk being incarcerated.

Yes, yes, I know about conservation and all of that. The point is that no
government agency should be able to get in the way of a person feeding
themselves and their family. If that is not a fundamental law of the universe
I don't know what could be.

Not the same subject, I know, but it is one of those surreal things to help
point out that government actions can have really bad unintended consequences.
When it comes to the way patents are being grated what this means is that I am
not free to use my brain to create and invent.

If I was completely isolated from society after graduating from college and
independently "invented" the idea of sliding a graphical button on a screen I
could be sued because I did not apply for a patent. The fact that, as a human
being, I can put one idea together with another to create a third idea is
being grotesquely violated by bullshit government-grated monopolies. That, is
wrong.

That is as much wrong as having to pay the government a license to be able to
feed myself or my family. Outside of being able to hunt and forage for food
--something every species on this planet does without the need for government
authorization and fees-- the one fundamental evolutionary trait that has
gotten us here is that we can INVENT. And invent we have. Gloriously. For
hundreds of thousands of years. Only now this thing we call government has
actually come up with a way to take that from us, regulate it and even have
others prevent us from using the fruits of our own mental abilities if they
use theirs to come up with the same thing before us.

Have we really evolved?

~~~
gmac
_But it is almost surreal to think that the most fundamental act of man, to
feed yourself in order to remain alive, requires a license fee paid to
government_

Slightly OT but in this case, given that unrestricted fishing might well cause
the fish to go extinct in short order, so nobody can benefit from them to feed
their families (see: tragedy of the commons), some form of government
regulation might be a pretty good idea, 'fundamental laws' notwithstanding.

~~~
robomartin
I think this is where we might differ. I believe that people are fundamentally
good. Yes, there's an ass in every crowd, but I really believe most people are
good and would voluntarily follow reasonable rules.

That said, I don't have a problem with having carefully chosen and crafted
laws that punish bad behavior. In other words, I should be able to go fishing
without having to pay the government for a permit.

I'll give you a concrete example of the "people are fundamentally good" idea.
Yesterday, as I said, I took the kids fishing to a local lake. When we got
there we saw a sign that said something like "<name> Cove closed due to
spawning. No boat or fishing". We actually motored by the cove en-route to our
spot. There were no signs there and only a couple of buoys marking low
submerged rocky formations. Not one person was fishing there. Not one boat
entered. There must have been dozens of boats on the lake. This area is very
isolated. The closest ramp is nearly five miles away. You could go in there
and do as you wish, yet people responsibly respected the request to not do so.

I really don't think most sports fishermen would go out and fish at an
industrial scale if permits were not required. Today, you'd easily let
everyone know of limits, seasons and issues via email/web methods and the vast
majority of people would comply. That's what I believe. I could be wrong.

~~~
pavel_lishin
But if ten thousand fundamentally good people go fishing in a river with nine
thousand fish, that fish still goes extinct.

And that doesn't account for the one ass who decides to overfish.

~~~
robomartin
And a cow is a uniform sphere full of milk.

There's a difference between real life and academic experiments.

------
rdl
I was hoping it was Intellectual Ventures.

~~~
tomjen3
No such thing. It is vultures, as it correctly describes what they are.

------
recloop
The most notorious patent troll in America is Intellectual Ventures. It's just
that because of their clout and their team, they don't get called out.

------
at-fates-hands
I'm curious why more smaller and medium sized businesses haven't banded
together to form some kind of larger entity to combat these trolls.

There's security in numbers. If I was a patent troll and knew if I was going
to sue a company like RackSpace and knew they had 25-50 companies standing
behind them with a large pool of legal and financial resources, I'd be more
apt to try and find an easier target.

~~~
mcherm
> why more smaller and medium sized businesses haven't banded together to form
> some kind of larger entity to combat these trolls

Well, one reason is that it may be illegal. We have antitrust laws that
prohibit companies that make up a large percentage of an industry from
coordinating in certain ways... this is an edge case but might be a problem.

But the main reason is just that it is prohibitively expensive. It's really,
really expensive to fight a patent troll, and if you win then they turn out to
be a shell company with no assets so you can't be reimbursed for your costs
(and probably wouldn't be eligible for that anyway in the US). So for small
companies, flying under the radar and hoping they won't notice you seems to be
the way to go.

~~~
camus
yet US has no problem with one company owning the majority of a market ( MS ,
Google ... ) so much for anti trust ... Small Companies could fund a non
profit to help them against trolls, would it be illegal ?

~~~
mcherm
I'm not saying that the antitrust laws are written the way _I_ would write
them if I were king, but they are rational, if you understand where they are
coming from.

They prohibit independent actors from colluding to form a monopoly, but they
do not prohibit a company from being successful enough in the marketplace to
become an effective monopoly. However, if a company IS that successful, then
the laws restrict what the company with monopoly power can do (for instance,
they cannot leverage that monopoly to increase their power and market share in
a different area of business).

My guess is that funding a nonprofit, something like the EFF or the ACLU but
focused specifically on providing legal representation to those sued by patent
trolls, would probably be allowed under the law as long as the nonprofit
assisted ANY company attacked by a patent troll, not only contributors. If it
assisted only contributors, perhaps it could work as some sort of legal
insurance policy?

------
danielpal
Can anyone explain if it's possible for this patents to just go from one
company to another? Like what's is stopping IP Nav and Parallel Iron from just
creating a new corporation and transferring their IP if Rackspace succeeds in
this lawsuit?

Seems like they can just start shell companies in order to avoid being
counter-sued.

~~~
jstalin
Not exactly sure what you're going for, but you sue based on facts as they
were at a particular point in time. Transferring a patent or doing a hide the
ball move doesn't work so well in court, particularly federal court.

Res judicata is the concept that once a party in a suit has facts determined
of a particular situation in one court, that party can't then go into another
court and argue the opposite.

------
A1kmm
I'd love to see a patent troll lose a case, but their breach of contract case
seems a bit weak (without seeing the actual contract, since they didn't
include 'Exhibit B' in the PDF).

As I understand it:

* Parallel Iron owns IPNav.

* IPNav and Rackspace signed a contract saying that IPNav won't sue Rackspace without giving 30 days notice first.

* Parallel Iron sues Rackspace without giving notice first.

* Rackspace sues Parallel Iron and IPNav for breach of contract.

But IPNav and Parallel Iron are separate legal entities, and so unless
Rackspace can argue that they can 'pierce the corporate veil' (which might be
difficult if they followed appropriate standards to separate the companies,
which I presume lawyer heavy patent trolls would be careful to do) and treat
them as the same legal entity, IPNav isn't responsible for Parallel Iron
filing the suit, and Parallel Iron isn't subject to the contract entered into
by IPNav.

Disclaimer: IANAL

~~~
coldpie
Judges aren't stupid. I'd expect a judge to ignore the letter of the contract
in such a brazenly obvious case of abuse.

------
austenallred
It would be awesome to see this trend continue; I wouldn't mind seeing big
companies suing patent trolls for every possible misstep available.

~~~
rainkinz
Definitely! Until this do nothing congress gets its act together, it's the
only hope we have.

------
ams6110
I'm all in favor of fighting groundless patent infringement claims, but a bit
surprised to see so much commentary from Rackspace about a pending legal
matter. The normal lawyer response would be "we don't comment on pending
litigation."

~~~
reeses
It's definitely out of the norm. Especially when the VP of IP (I'm guessing
also general counsel) participates in a forum discussion on the topic. Then
again, he's the one who can, and is supposed to, speak on such matters for the
company.

It could also be an attempt to get Google juice for anyone else looking for
info on these jokers.

~~~
malbiniak
> It could also be an attempt to get Google juice for anyone else looking for
> info on these jokers.

It's not that. Schoenbaum (who is General Counsel) has been largely focused on
this for Rackspace in DC for a while, and vocal on it over the last year.

[http://www.rackspace.com/blog/author-post-
list/?articlesbyau...](http://www.rackspace.com/blog/author-post-
list/?articlesbyauthor=alan.schoenbaum)

------
avaku
Respect Rackspace! Maybe I should switch to you from AWS :)

------
eykanal
Question for someone who knows something about patent law: does Rackspace have
a chance of actually making any money here? Simply based on seeing other
stories like this, it seems that all these trolls operate through shell
companies, which can simply declare bankruptcy without (1) every paying any
actual fees and (2) without hurting the parent. Is that true here as well?

------
gesman
+1 for Rackspace.

------
saraid216
Somewhat OT, but I'd love to see the term "patent troll" entered as official
legal jargon.

~~~
Atropos
It already is, at least IP lawyers should be aquainted with the term, even
some scholarly articles at ssrn.com use it. But it probably wouldn't be a
prominent term in judgements, because it is too broad and doesn't describe
"what the troll did and why it is bad", so it isn't really useful in that
sense. I guess the standard formulations would be more like "abusive conduct"
etc. (My own jurisdiction isn't angloamerican)

------
ceautery
I like the use of "duck test" in this. Just like the notorious Interplay
manager decreed for the queen animations in Battle Chess... we should get rid
of the duck.

------
jarmitage
Where's the petition against patent trolls, America? (Or has this been tried
already / would it fail?)

------
ropman76
Is there a nice legal term for "I hope Rackspace gives them hell"?

~~~
chris_wot
Yes. "Litigation".

------
dannowatts
scream it from the mountains:

"GET 'EM RACKSPACE!!!"

------
kislayverma
GO RACKSPACE!!!

------
yoster
Patent trolls are useless. These people do not innovate at all. They purchase,
or file for useless patents, and turn around and sue everyone for the almighty
dollar. There has to be a stop, and I applaud Rackspace!

