Most business owners sued by patent trolls don't talk about it to anyone other than their lawyer; a typical response is to cross one's fingers and hope the problem goes away. It won't, of course. Often they do the next best thing—hope it will go away for as little money as possible.
FindTheBest CEO Kevin O'Connor, who also cofounded online ad giant DoubleClick, decided several weeks ago he would talk about it—publicly, and often. O'Connor wrote to tech sites like PandoDaily telling them of his determination to "slaughter" the troll, the "scum of the earth." And in August, he pledged $1 million of his own money to fight the troll that went after his company.
Now, we're getting a vision of how FindTheBest is putting that money to use. The company has made a novel legal claim, saying that the troll that came after it is so reckless, it has engaged in outright extortion, violating racketeering laws.
The claim follows an investigation of the troll that sued the startup, Lumen View Technology. The investigation started when O'Connor and FindTheBest Director of Operations Danny Seigle simply started making phone calls. "The first thing you think is, who the hell are these guys?" O'Connor ultimately called the lead inventor listed on the patent, which describes a system for "multilateral decision-making."
That set in motion a bizarre series of events. Lumen View's lawyer accused O'Connor of committing a "hate crime" by calling the inventor, Eileen Shapiro of Hillcrest Group. ("I didn't know patent trolls were a protected class," quips O'Connor.) Then the lawyer threatened criminal charges (again, for calling an inventor). From there, it got personal.
Instead of kowtowing to the troll's demand for $50,000, O'Connor decided to pledge to spend $1 million fighting. He knows it's not the rational business decision... and he doesn't care.
"From a business perspective, it makes 100 percent sense to settle," he said. "I decided to take it out of the business realm, and into the personal. There's one thing I love and that's technology, and there's one thing I hate, and that's injustice—people abusing the system."
Spending that kind of cash to fight a patent suit would be devastating to a young startup like FindTheBest, which has received $17 million in venture capital over its short life, according to a recent VentureBeat profile. O'Connor, who sold DoubleClick to Google in 2008, felt like he's in a position to use some of his personal wealth to push back.
The suit, filed late Monday, marks only the third time a major effort has been mounted to lasso a patent troll with the law known as the Racketeer Influenced Corrupt Organizations (RICO) act. Cisco tried it against Innovatio, a patent troll that was threatening coffee shops and small hotel chains, but it didn't work.
It's a long shot any way you look at it. But O'Connor's tangle with Shapiro, her co-inventor, their lawyers, and any other shadowy investors that may exist, is now set to be a knock-down, drag-out fight. It's the kind of battle rarely seen in patent troll litigation, where trolls often want to settle for "nuisance" settlements that can be in the high five-figures.
Offer of a $50,000 settlement goes up, then down
Lumen View is owned, at least in part, by Eileen Shapiro, a Boston executive who works at a company called the Hillcrest Group. She has a co-inventor named Steven Mintz, who FindTheBest also believes is involved with the operation.
It's one of several shell companies connected to the two. Neither Shapiro nor Lumen View's lawyer of record, Damian Wasserbaur, returned phone calls requesting comment for this story.
Lumen View and its related patent-holding companies have been controversial ones from the start. In part, that's because the Shapiro-linked companies own patents they claim read on stunningly broad "do it on the Internet" type ideas—like one on sending out a press release online, used to sue several PR companies in 2010, including some very small ones. Shapiro wouldn't talk then either, saying only that she was "under NDA" about anything regarding the sale of her patents.
The Gooseberry patent was asserted against several online media companies back in 2011—sites like TechCrunch, Slashdot, and Reddit. That led to a kind of crowdsourced research project on Reddit, but other than names of various shells connected to the same inventors, like Kolomoki Mounds LLC, not much was discovered. Shapiro got back to me for the 2010 story, saying she was "under NDA" about anything involving the patent sale. When O'Connor spoke to Shapiro, she dodged questions about her role in Lumen View, saying simply "I'm the inventor of the patent," and refusing to talk about whether she had any economic interest in it.
Lumen View has filed 21 lawsuits in New York and Delaware. The company's initial demand to FindTheBest was $50,000; but that would explode to $85,000 if it fought back at all, filing any motion in court whatsoever. Then FindTheBest was offered a "one-day-only" settlement offer, discounted by $30,000 if they would avoid filing an answer.
At some point, it became clear that Wasserbaur just wants to collect a check without doing anything. "It was clear Damian [Wasserbaur] only wanted to talk about the settlement," said O'Connor. "He refused to tell us how we were infringing. Every sentence ended in, let's settle."
Perhaps not coincidentally, $50,000 is just about what it costs to hire a lawyer and file the initial set of paperwork to defend a patent case, noted O'Connor. The Lumen View demand letter specifically threatened to raise the settlement amount if FindTheBest chose to fight back.
"Should Company engage in early motion practice, however, we must advise that it will force us to reevaluate and likely increase Plaintiff's settlement demand," wrote a lawyer from Aeton Law Group, the firm representing Lumen View. For every motion filed by FindTheBest, Lumen View would "incorporate an escalator into its settlement demand to cover the costs of its opposition papers and argument."
Many other Lumen View defendants have settled within just a few months of a lawsuit being filed, suggesting the patent troll is accepting settlements below $50,000. The list of defendants includes Monster, as well as small job sites like SnagAJob, TheLadders.com, and JobVite. But just about any site collecting user preferences would seem to be a potential target. College search site CollegeBound Network was sued along with internship research site InternMatch and Zimride, an online ride-sharing tool.
FindTheBest's director of operations, Danny Seigle, contacted every other company defending against a Lumen View lawsuit. "We learned a lot," Seigle told Ars. "We spoke to one CEO who had already settled, and he described the process as 'complete terrorism.' He didn't want to settle, but they went after his customers and clients, and the company would have gone out of business."
"They're all really dedicated to fighting it, and then they discover the cost," said O'Connor.
O'Connor has also spoken with well-known troll-fighters like Newegg's Lee Cheng about possible solutions to the problem. "We had the same view—he's brilliant," said O'Connor. "It was really cool that Newegg took these guys on, knowing that going on the offense was the best defense."
Pointing out a “patent troll” becomes a “hate crime”
FindTheBest's RICO lawsuit uses language like "extortion" to describe Lumen View's business practices.
The suit has several tacks. First, it claims that FTB couldn't possibly infringe a patent that clearly describes two or more people entering a preference—FindTheBest's system only handles the preference of one user at a time.
In fact, Lumen didn't do "any meaningful pre-filing investigation," the suit alleges, and that's part of the problem. Lumen simply did "a broad internet search for companies that offer any type of matching service... Because the concept of matching two parties is as old as Adam and Eve, this general search reveals numerous company websites." The company's expert witness not only hadn't investigated FindTheBest's services—he'd never heard of the target company, according to O'Connor.
The threat letter is also full of barely veiled threats that Lumen will make the lawsuit as expensive as possible. In fact, the majority of the letter describes how the defendant company must take drastic steps to collect all its electronic and other documents now that it has been sued—if it doesn't, sanctions may occur, says Lumen.
FindTheBest also argues that Lumen's attorney made the claim that calling someone a "patent troll" was actually a "hate crime" under “Ninth Circuit precedent." After O'Connor contacted Shapiro, Lumen View attorney Wasserbauer threatened to file criminal charges—unless FindTheBest settled the civil case immediately, apologized, and gave financial compensation to Shapiro. The offer was "good until close of business that day," Wasserbauer allegedly said.
Finally, The letter makes technological demands that would be almost impossible to meet without shutting down one's business. In the Lumen View letter, it instructs the target company to immediately preserve "the complete contents of each user's network share and e-mail accounts," writes Lumen. That's in addition to "system sequestration," meaning that any accused "systems, media, and devices" should be "remove[d]... from service to properly sequester and protect them."
In other words, to comply with the demands of litigation, Wasserbauer actually suggested that FindTheBest had to immediately stop using its computers.
That's further demonstration of Lumen's extortionate intentions, states FTB in the RICO suit. "[Lumen] use[s] the discovery process, not to investigate and prove their patent infringement claims, but to merely harass, intimidate, injure, and annoy FTB (and their other targets)."
O'Connor hopes he'll encourage other entrepreneurs to speak out.
"There's a lot of outrageous stories, but everyone's so damn afraid of coming forward—It's like going against the Mafia," he said. But the idea that trolls may retaliate against those who speak out is overblown, he thinks. "If they want to try to teach me a lesson, go for it. This will be my retirement. I'll fight them."
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