19-year-old Giuseppe Cuozzo’s drawing of his idea, from 2000.USPTO
Patent trolls don’t fare well at the Supreme Court. When they show up, their cases tend to result in decisions that are ruinous for the profit margins of their industry.
Two prominent examples: the 2006 eBay v. MercExchange case effectively ended trolls’ abilities to get injunctions, and the 2014 Alice Corp. case made it far easier for patent defendants to invalidate abstract software patents.
And yet, the cases keep coming.
The most recent example is Cuozzo Speed Technologies LLC v. Lee, a case that was resolved earlier this week with an 8-0 opinion dismantling arguments presented by Cuozzo, a patent-holding entity controlled by two New York patent lawyers, Daniel Mitry and Timothy Salmon.
The two attorneys own dozens of other patent shell companies through their consultancy, Empire IP.
What were Mitry and Salmon hoping for? Using the Cuozzo case as their vehicle, they hoped to tweak changes in the rules for “inter partes reviews,” or IPRs, a proceeding created by Congress in 2012 that allows the patent office to take a second look at patents to see if they should never have been issued in the first place. While the tech sector still seeks legislative reform to end the spate of “patent troll” lawsuits, IPRs have been an effective way to shut down some patent cases at a fraction of the cost of a full-blown court trial.
The two patent lawyers didn’t get the rule change they were looking for.
Instead, they were on the receiving end of a resounding 8-0 slap-down written by Justice Stephen Breyer, arguably the justice most incensed by the patent troll business model.
The main issue in the Cuozzo case was a wonky one about standard of proof. When the US Patent and Trademark Office takes a second look at a patent through the IPR process, it uses a standard called the “broadest reasonable interpretation” (or BRI) to decide what the claims mean. Under the “broadest reasonable” standard, a whole lot of prior art can be brought in to potentially beat the patent.
Cuozzo’s lawyers argued that the Patent Office shouldn’t be allowed to use that standard and instead should use a narrower one used in district courts.
The fact that the Cuozzo case even went this far says more about the business of patent trolling than it does about the state of the law. Lawyers like Mitry and Salmon, who specialize in finding old patents that can be enforced against modern products, are still making plenty of money.
But there’s mounting evidence that the IPR process, combined with recent legal rulings that favor patent defendants, has cut into their profits.
In fact, IPRs have been effective enough that any opportunity to limit or destabilize them looks good. The Cuozzo attack failed completely, and the status quo will stand.
But it’s worth taking a look at the origins of this patent and how the high court sent the trolls home.
A speeding ticket, an idea, a patent
On November 28, 1999, a young New Jersey auto technician named Giuseppe Cuozzo got a speeding ticket. “I was driving my VW in New York on an unfamiliar road,” he explained in a 2013 declaration used during the IPR proceeding. “I did not see any speed limit signs indicating the speed limit, however, I was pulled over and ticketed by a police officer for speeding.”
That, he says, spurred an idea: combining GPS technology with a speedometer to let a driver know whether he or she was speeding, “without requiring the driver to refer to roadside speed limit signs.”
In October 2000, Cuozzo, then 19 years old, walked into the office of a local company called Invention Services Corporation.
ISC promised it could help him get a patent, and the company charged $875 for a patentability search and opinion.
Cuozzo didn’t have the cash, so he put $250 down and signed an agreement to pay the rest in installments, with 10 percent interest. (In all, he paid $1,522.43 for the search and opinion.)
Together with the down payment, Cuozzo submitted a four-page document outlining his invention.
Cuozzo had seen GPS navigation systems in certain BMW cars he’d worked on. He described combining a GPS system with a CD-ROM database of street names and speed limits; the speedometer would then change color to red when a driver was over the limit.
The hand-written “Description of Invention” is earnest and heartfelt, although riddled with spelling and grammatical errors.
Cuozzo writes that his invention will be created with “wireing, lighting and progaming” and will “keep you for speeding or from geting a summons,” and thus “will pay for its safe.”
That was good enough for the Kaardal law firm, which told Cuozzo that “patent protection could potentially be obtainable for your invention.” The patent referral service would cost $9,945—far more than Cuozzo could pay. “My only option was to use money that was in a trust account set up by my parents when I was a child,” he explained in the declaration. “Gathering that money from the trust account and convincing my parents that I needed to do that took a few months.”
On March 18, 2002, Cuozzo filed a patent application, with his mother covering the $370 filing fee.
Two years later, it would issue as US Patent No. 6,778,074.
There’s no record Cuozzo did much with his patent for the next eight years. In 2012, he sold it to Salmon and Mitry, who put it into Empire IP, their growing patent trolling company.
They created Cuozzo Speed Technologies LLC, a shell company whose sole asset was Cuozzo’s patent.
Cuozzo Speed Technologies promptly filed several lawsuits in New Jersey, saying that modern GPS navigation systems infringed Cuozzo’s patent rights. JVC, TomTom, Garmin, GM, and Mazda were all named as defendants.
In 2014, a new batch of lawsuits was filed in the patent hotspot of East Texas, seeking royalty payments from Motorola, Verizon, and Fullpower Technologies over navigation products.
Mitry and Salmon didn’t respond to requests for an interview for this story.
Salmon also declined an interview from Ars earlier this year when the Supreme Court agreed to take up the Cuozzo case.
Cuozzo couldn’t be reached.
Cuozzo Goes to Washington
The IPR process was created in 2012, and Garmin, one of Cuozzo’s targets, wasted no time in asking the US Patent Office to reconsider Cuozzo’s patent.
After considering the briefs and hearing a day of argument from lawyers on both sides, the Patent Trial and Appeal Board issued its very first IPR opinion, throwing out claims 10, 14, and 17 of Cuozzo’s patent.
The panel of three administrative patent judges held that combinations of claims in earlier patents all should have blocked Cuozzo’s ‘074 patent from ever issuing.
The judges also denied Cuozzo’s motion to amend his claims.
Lawyers for Cuozzo appealed to the Federal Circuit, but Garmin was upheld on a 2-1 decision.
Cuozzo asked for the whole court to reconsider its argument, but Federal Circuit judges voted 6-5 to let the decision stand. Perhaps seeing that stark division, the Supreme Court agreed to take up the case, where it was argued in April. (Garmin reached a settlement with Cuozzo, but Cuozzo’s challenge to IPR rules continued, with USPTO head Michele Lee as the defendant.)
Pharmaceutical and biotech trade groups, afraid that the IPR process may damage their most valuable patents, filed briefs siding with Cuozzo.
So did various groups of IP lawyers and heavy patent litigants like Interdigital, Tessera, and Trading Technologies Inc.
A large group of tech and Internet companies, including Dell, Cisco, Google, and Intel, supported the patent office’s current standards, and they asked the court to reject (PDF) Cuozzo’s challenge.
The case was argued on April 25.
On Monday, the court published the 8-0 opinion shutting down Cuozzo.
The IPR process is “less like a judicial proceeding and more like a specialized agency proceeding,” wrote Breyer for a unanimous court.
Anyone can initiate an IPR, even if they haven’t been sued or threatened by the patent owner; that’s quite different from challenging a patent in court, where proper standing is a strict requirement. He continued:
“Construing a patent claim according to its broadest reasonable construction helps to protect the public,” Breyer noted. “A reasonable, yet unlawfully broad claim might discourage the use of the invention by a member of the public.”
“There’s no absolute right to amend,” nor should there be, Breyer states.
Even considering all that, the process “is not as unfair as Cuozzo suggests.”
The Cuozzo case means that the status quo stands for the IPR process.
Even if Cuozzo had somehow won, it’s debatable how much difference the changed standard would have made.
But the fact that the Patent Office’s procedures now have the Supreme Court’s seal of approval means that IPRs are here to stay and are being run correctly.
That’s bad news for patent trolls and their allies and good news for everyone else.
19-year-old Giuseppe Cuozzo’s drawing of his idea, from 2000.USPTO