Wine.com’s patent troll lawsuit a potential problem for rest of industry

By virtue of having been around since the early days of Internet wine sales, Wine.com, Inc. has faced year after year of travails.

It made huge progress back in April of this year when a Delaware chancery court approved Wine.com’s efforts to clean up all the shares, options, warrants and other financial instruments that had accumulated — somewhat haphazardly — during its chaotic years since it was incorporated in Delaware in 1999.

That was a huge step for the company.

Then, in July, Wine.com moved another step toward putting an unpleasant situation behind it when it announced the settlement of a class-action lawsuit over the terms of its free shipping plan. (Wine.com facing $1 Mil class action settlement, but impact may be less than it appears.)

Patent troll crawls out from under a bridge

On June 23 of this year, an Austin, TX company,  BSG Tech LLC filed a lawsuit against Wine.com alleging patent infringement of three patents that BSG had acquired in 2014.

The BSG patents at issue in the Wine.com lawsuit describe a number of database techniques that have been in common use for more than 30 years. Those patents also describe common prior art that had been in existence years before the patents were filed.

Wine Executive News (WEN) subscribers please click here to read the complete 1,879-word article.

The patents were acquired from inventor Robert D. Fish who, according to the U.S. Patent & Trademark Office [link for WEN subscribers],  has a number of other patents which have been assigned, sold or licensed to  third parties other than BSG.

An analysis of the troll’s litigation strategy, below, indicates that, like most other targets, Wine.com will probably settle. Wine.com has not responded to our requests for comment. A “no comment” confidentiality clause is often included in legal settlement agreements

Settlements often include a financial arrangement to license technology.

Full texts of the court filings and patents are included in the premium Wine Executive News version.

Wine.com is not alone: Most any business with an online shopping cart is a potential troll target

The common thread among all of BSG’s target victims is their use of an online shopping cart.

Because BSG’s claims involve elements of shopping carts that have been around for decades, most every shopping cart in existence is potentially a target.

Congressional attempts to prohibit trolling have been grinding on for years but have not yet succeeded as this article explains.

BSG Patent validity in question: Obviousness & the prior art

Government records indicate that the Fish patents acquired by BSG were filed in 1999 and appear to involve clearly obvious database structures and techniques for which prior art has existed since at least 1979 when Relational Software, now Oracle Corporation, released its blockbuster Oracle database product.

A historical look at web and database technology development, along with experience in the common practices used by programmers over the past 30 years ,indicate that the claims laid out in the Fish (now BSG) patents were both obvious to the least-experienced developers and in common use even before the advent of the World Wide Web. Those common and obvious practices were quickly adopted by the slew of search engines that had sprung up by 1992.

Long-defunct search engines such as Infoseek and Altavista which launched in 1994, were the first to employ many of the practices described in the Fish/BFG patents.

This history of search engines offers additional and similar examples of prior art. The development of online product search and shopping carts has a similar body of prior art and obvious practices.

Finally, the Fish/BSG patents are so dated and obvious that even I (a programmer who has not written decent code in 30+ years) spent time back in 1983 (well before the Fish patents were filed) using the same structures, features and techniques claimed in Fish patents newly acquired by BSG. My databases were coded using a  relational database — R:Base  — from MicroRim, a now defunct Seattle-based company.

Troll Tolls: The hidden tax paid by consumers & businesses

According to the Consumer Electronics Association, patent trolls cost every U.S. household approximately $700 per year in increased product costs.

In addition, even if businesses are not sued by trolls, the litigation or even the potential threats damages the economy in numerous ways including curtailed investment and R&D. For more, see: Patent Trolls Are Hurting Your Business

In addition, the troll burden on the tax-supported U.S. federal court system is immense. Unified Patents, which tracks patent litigation statistics, indicates that troll  lawsuits made up 68% of all District Court cases initiated in the first half of 2015, compared to 65.4% in the same period last year and 57.3% in the second half of 2014.

A  detailed study of patent trolls by the Boston University School of Law can be accessed here

Trolls lose 92% of the time when challenged in court

Significantly, a 2013 study by the Library of Congress’s Congressional Research Service found that if litigated, trolls lose 92% of the time.

One example of this involves a case in the same court in which Wine.com is being sued and involves a similar type of old technology in use long before the patent in question was filed: realty property searches.

But in that case, the defendant Realtor fought back and won. For more, see: A patent troll foolishly sued a REALTOR, and the REALTOR won.

4 danger signals of a troll infestation

Like most patent trolls, BSG is what lawyers call a “non-practicing entity” (NPE) meaning that it has invented nothing,  has not created any intellectual property of its own, and has not implemented the patented technology itself.

Second, BSG began filing lawsuits on Sept. 11, 2014, roughly four months after it bought the patents at issue on April 30, 2014. That strongly suggests that the patents had been acquired for the sole purpose of litigation, rather than to develop a product or system based upon the or the underlying technology.

Third, BSG has filed numerous lawsuits– least 48 to date (including the suit against Wine.com) — involving the same patents. The lawsuits were filed in two waves: 2014 and 2015.

An analysis of BSG’s litigation strategy results WEN premium link indicates that 31 of the 48 companies targeted have settled. The success of its efforts so far means that a third wave of companies is probably in BSG’s litigation crosshairs.

Fourth, the BSG lawsuits have not challenged the largest and most widespread users who may (or may not) users of the Fish patents’ so-called inventions — Google,  Microsoft, Oracle — who have the ability and resources to quickly shut down BSG’s scheme and who may have been practicing the claimed inventions for decades.

Instead, BSG has followed the usual patent troll path and gone primarily after small and medium-sized companies that it can easily (and profitably) intimidate into settlements rather than  face the expense and other risks of litigation (see graphic below).

Settlements feed the troll litigation machine, damage true innovation

“The common litigation strategy of NPEs is to initially pursue the easy targets — low hanging fruit — with an eye toward achieving quick settlements by way of payment into a war chest to keep feeding the litigation machine, said Chris Passarelli, an Intellectual Properties attorney with Dickenson, Peatman and Fogarty in Napa.

Passarelli added that, “From an economic and societal perspective this is highly inefficient, resource intensive, and highly detrimental to true innovation.”

Why Settlements? “If we go to court, you go out of business.” — patent troll AGIS

Source: CNBC: Patent trolls target US businesses, consumers ultimately foot the bill Right-click graph to view a larger image.

Companies settle for the same reason that a small store pays the neighborhood thugs not to break his windows: Money, aggravation, inconvenience, time and expense. This is known as  “nuisance value.”

This is why most patent trolls target small and medium-sized businesses. While it is true that some patent trolls do go after companies with deep pockets and massive revenues, trolls — like the schoolyard bully — avoid trying to shake down lunch money from the star defensive tackle.

Of course, some patent trolls start small and accumulate a war chest so they can go after larger targets.

Small businesses and start-ups are the most frequent targets

The illustration below from tech think tank Engine illustrates some of the issues involved.

The illustration is from a short book on the trolls epidemic and the harm it causes to companies, innovation and the overall economy.

The AGIS patent troll quote from the subhead, above, is on page 9

Right-click image to enlarge. Source: engine.is

Court Filings

As is usual in the opening phases of a patent troll lawsuit, the plaintiff’s complaint is mostly vague, cookie-cutter text cut and pasted from a “Trolls R Us” playbook.

As is also customary at this stage, the defendant’s response is a vigorous denial of all of the vague charges.

The full court filings are available below more to satisfy reader curiosity than to provide actual useful information.

• Complaint filed by BSG Tech [link for WEN subscribers]
• Wine.com Answer to the BSG Tech Complaint [link for WEN subscribers]

The patents in question and their various assignments since filing do contain interesting information.

Assignment files for the patents

• Patent: 6195652 [link for WEN subscribers]
• Patent: 6243699 [link for WEN subscribers]
• Patent 6035294 [link for WEN subscribers]

 Patent Links & Abstracts

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