PublishedMay 19, 2017

The Patent Troll’s New Clothes

You might have been reading a bit about Blackbird Technologies lately. Not the Blackbird Raytheon bought in 2014 (cybersecurity) or the Blackbird Etsy bought in 2016 (AI algorithms). (It’s a popular name, apparently.) This one’s a troll.

Tailoring a Patent Troll

Blackbird was formed in 2014 by attorneys who worked for two major law firms. Everyone involved in Blackbird used to work on the defensive side of patent litigation; often, they were defending their clients against trolls. (A disclaimer: I used to work with some of the Blackbird attorneys, and I think well of them personally, despite their descent under the bridge.)

They formed Blackbird with the intention of “bringing top law firm experience to bear with small company efficiency,” providing a way “for individual inventors and small companies to monetize their intellectual property.” Of course, that’s the same story trolls like Acacia have been trying to tell for years. It turns out jurors are a lot more sympathetic to inventors than they are to companies that buy patents with the sole purpose of enforcing them — it’s one reason trolls fight so hard in court to prevent defendants from talking about their business models.

The reality is, Blackbird buys patents from people and gives them a small amount of any money recovered, then Blackbird goes off and asserts the patents for their own benefit. While not strictly a contingency fee (because Blackbird actually owns the patents), one of the co-founders said it’s “a similar arrangement.” The main difference between Blackbird and prior trolls is that Blackbird doesn’t even pretend to have engineers, and the lawyers standing up in court are the same ones that own the troll.

Blackbird Suing in the Dead of Night

In the last few years, Blackbird has made a business out of suing companies on patents that have little to no resemblance to what they’re claiming infringes. Mostly, they settle early on. It’s a familiar story, because it’s the same story as every other troll.

This year, they’ve stirred up a bit more attention for themselves. First, they sued Netflix, among others, claiming that Netflix’s offline-download feature infringed their patent, US7174362. (The patent is about burning CDs and shipping them.) Then, in March, they sued Cloudflare. Their claim this time was that Cloudflare’s attack prevention and content delivery platform infringed another patent, US6453335. (The patent is about modifying the actual content being transmitted by pulling new content from a third server.)

Cloudflare doesn’t think much of Blackbird’s claims. They think the patent has nothing to do with what they do, that the infringement claim is bad, and that there was nothing innovative or new about the patent when it was filed. I agree with Cloudflare — this is a shakedown, trying to get Cloudflare to settle for nuisance value. Cloudflare’s not interested in that, and is taking a page from Newegg — they won’t settle, ever. They’re also filing bar complaints against Blackbird’s lawyers in Massachusetts and Illinois, because Blackbird’s structure creates some ethical questions.

Charities, Pirates, and Close Connections

Cloudflare also notes that Blackbird represents a new form of troll (they’re similar to previous lawyer-owned trolls like Azure or Stragent, but previously, trolls have always used outside counsel.) On the other hand, trolls have been trying out novel corporate structures in order to shield their activities for quite a while now. Other than the use of shell companies (brought to a peak by Intellectual Ventures), it hasn’t really worked.

For instance, once upon a time, a patent troll (Azure Networks) tried to hide behind a Texas charity (the Tri-County Excelsior Foundation) in order to keep their cases in the Eastern District of Texas. They gave the charity the patent, except the charity then gave them all the rights to the patent (and presumably were granted some portion of any money the troll made.) The court said that the charity didn’t have any real connection to the patent and stripped them out of the case.

Then, of course there have been a number of instances of patent privateering, such as Conversant/MOSAID’s deal with Nokia. But that business model hasn’t necessarily worked out so well, with large privateers like Rockstar essentially folding.

And there’s even been some trolls structured somewhat similarly to Blackbird. For example, back in 2008, a lawyer (John Desmarais) owned a patent troll (Round Rock). His law firm (Desmarais LLP) sued Dell on behalf of the troll. But the judge ordered that Desmarais was not allowed to see Dell’s confidential information because he was involved in decision-making for Round Rock, and having access to Dell’s confidential information would place him in a situation where he couldn’t help but behave unethically.

Now, Blackbird claims there’s nothing wrong with the way they’ve structured their company. I’m neither a Massachusetts or Illinois attorney, nor am I a legal ethics expert, so I’m not going to hazard a guess one way or another regarding the bar complaints. But since Blackbird is basically just 7 lawyers, I do wonder exactly how they plan to keep confidential information away from anyone connected to Blackbird’s business activities. I also wonder how the attorney-client privilege protects them, if at all, or if they’re figuratively naked.

But even if they can get past the ethical and practical questions, my guess is that this newest attempt to use a different business structure isn’t going to fix Blackbird’s fundamental problem — they’re a patent troll with weak patents. That explains why Cloudflare is standing up to them.

Josh Landau

Patent Counsel, CCIA

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

Follow @PatentJosh on Twitter.

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