Why Have So Many Companies Settled Over Ridiculous Patent For 'Online Music Distribution'?

from the cheaper-to-settle dept

A company going by the name Sharing Sound LLC, which of course does not appear to do anything, got hold of some exceptionally broad and absolutely ridiculous patents on "distributing musical products by a website over the internet" (6,247,130 and 6,233,682). Go ahead and read the claims on both of those, and realize they were filed in 2000, well after online sales of digital goods was available (I should know, I worked for a company focused on selling software online through nearly identical means described in the patents -- in 1998).

Earlier this year, however, Sharing Sound sued a whole bunch of companies over these patents. Included was Apple, Microsoft, Napster, Rhapsody, BDE (Kazaa), Sony, Sony/Ericsson, Amazon, Netflix, Wal-Mart, Barnes & Noble and Gamestop. Late last week, the news came out that Apple had settled and paid up. Along with that, people noted that most of the other companies had already settled.

I defy anyone to explain how this patent is a valid patent. The folks at M-CAM broke down a whole bunch of prior art when the lawsuits were first filed. Anyone who was anywhere near the online web store world for digital content would look through the (very, very, very simple) claims in the patent and just laugh. There's no "invention" there at all. It's a joke.

So why did so many companies settle? The easy guess is that the settlement terms were simply less than going through with the lawsuit. Lawsuits are expensive, even over totally bogus patents. So it's often just easier and cheaper to pay up. Of course, now that gives Sharing Sound more ammo to say "look at all these big companies who settled" when they continue to go after lots of other companies. This is a perfect example of how bad patents still "win" lawsuits.


Reader Comments (rss)

(Flattened / Threaded)

  •  
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    Hulser (profile), Oct 4th, 2010 @ 10:43am

    Long term

    I know that expecting long-term thinking from a publicly-traded company is asking a bit much, but wouldn't the best approach for a big company be to fight any and all bogus patents to the last breath? After a while, the patent trolls would just move on to easier targets. It's like that old joke about two guys being chased by a bear.

    Guy 1, "This is crazy! We can't outrun a bear!"
    Guy 2, "I don't have to outrun the bear. I just have to outrun you."

    If you're Apple, Microsoft, or Google, why wouldn't you just use the "Guy 2" model and let the other guys get sued? No, it wouldn't solve the overall problem, but you'd end up with at least a fewer bad patents out there and your company would be getting some long-term gain for some short-term pain.

     

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      Chronno S. Trigger (profile), Oct 4th, 2010 @ 11:00am

      Re: Long term

      I agree completely, but you're missing a bonus. It would piss off people like Weird Harold who would insist that the big corporation was just shitting on the little guy.

       

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      Anonymous Coward, Oct 4th, 2010 @ 11:01am

      Re: Long term

      Notice that many of these companies also have broad and damaging patents. If too many patents start being challenged, someone might start having crazy ideas and, I dunno, start thinking on patent reforms. Can't have that. Better just pay some loose change to those guys, settle and pretend that nothing happened.

       

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        Hulser (profile), Oct 4th, 2010 @ 11:33am

        Re: Re: Long term

        If too many patents start being challenged, someone might start having crazy ideas and, I dunno, start thinking on patent reforms.

        That's a good point. But when has hypocritical thinking stopped a company from pursuing a legal tactic? If you're Apple, you can invoke the "moron in a hurry" criteria as a defense and then turn around an sue someone else for patent infringement that wouldn't pass this test. Right now, I'm still thinking it has more to do with short-term thinking.

        It's kind of (not exactly!) like the thinking used in kidnapping cases. If everyone held their ground and never paid a ransom, then kidnapping would stop being a profitable business. But when your family member is the one who has been kidnapped, you're not really thinking about solving the overall problem of kidnapping.

         

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          identicon
          Jose_X, Oct 4th, 2010 @ 1:34pm

          Re: Re: Re: Long term

          No, it smells to me just fine: nice and rotten.

          -- The backdoor funds patent attacks. Now this company can go after others so that Apple and others don't have to get their hands dirty, while knowing the bar has just been raised for all the other folk. I expect some of this was discussed or implied among those settling. There might have even been a deal involving large co selling some patents to them later on. In any case, this firm might now have a warchest to go after stubborn smaller folks.

          -- If such a bad patent is "so good" says these giants with lots of money, then everyone fear the wrath of what Apple and the other giants have in their patent briefcases. This example can help bring in line those from whom Apple seeks money quickly and quietly.

          Propping up patents help the large because they have the most numbers and that works under current law.

          -- Bilski has just weakened many of these types of patents (post States Street, with hints that progress might not be promoted, and where many more people are collaborating and gaining ground in that fashion yet threatened by patents, etc.) Anything that helps support the system of taxation and winner picking currently in place is perhaps great for these companies. They might really fear many more "bad" examples being set post Bilski. In particular, they might have chosen to bend down to a very horrible patent (and not to all patents) for that effect.

          There is also an attack on open source. Make it hard for the very little firm to compete and/or to avoid paying licensing taxes/subsidies to these giants. If the small can scale quickly, then other bars must be placed in front of them. Software patents would be much more useful to them than copyright protections: prevent them from going around you (patents are still expensive to take out and not something small groups are likely to entertain).

           

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      Paul (profile), Oct 4th, 2010 @ 11:33am

      Re: Long term

      "...wouldn't the best approach ... be to fight any and all bogus patents?"

      The answer.... No.

      1) If you fight the bogus patent, you spend money that your competition does not have to spend because you get the patent thrown out.

      2) Settling doesn't cost very much. You are a big company, so you can afford both to beat down the cost of settling, and paying what ever amount you negotiate.

      3) Bad Patents become a much bigger barrier to entry for new comers to a market, and to start ups. Even a big company has a hard time standing by a commitment to a market that is new to them. Start ups don't have leverage to negotiate settlements, and have less money to pay.

      Last, an observation. Corporate America arguably has the most powerful tool for influencing legislation: Money. So given this obvious advantage, why don't they pressure congress to change the law if patent lawsuits are bad for big business?

      The answer is the generalization of the 3 observations above. No matter how much the occasional patent might annoy big business, the system favors big companies and allows them to avoid competition from startups, reduces innovation, limits disruption in their market, and thus extends the profit gained through their current business practices.

      We don't get patent reform, and we don't see big business fighting stupid patents for the same reason: The status quo benefits the status quo.

       

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        Hulser (profile), Oct 4th, 2010 @ 12:06pm

        Re: Re: Long term

        the system favors big companies and allows them to avoid competition from startups

        Ah, now you're on to something. I think that's at the heart of the real answer to my question. It may be cheaper to fight patent lawsuits in the long term, but since the big companies really don't want patent reform, they don't want to do anything that would upset the status quo and view settlements as just a cost of doing business.

         

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          Paul (profile), Oct 4th, 2010 @ 3:07pm

          Re: Re: Re: Long term

          Absolutely. And do not neglect the fact that getting a patent voided amounts to a removal of part of the barrier to entry into that market by a competitor.

          In fact, as noted, settling is taken to imply the patent is valid, raising the barrier to entry for a competitor.

          Consider: Today, NOBODY has secured all the patent rights required to build a smart phone. Not Microsoft, Not Apple, not Google, not Palm, not RIM, not HTC, not Nokia, not Motorola, etc. Everyone of these groups (and plenty of others) hold patents that could certainly be used (and are being used) in lawsuits against products in the market today.

          If you believe in patents, and you believe nobody should sell a product that infringes on a patent, you are a hypocrite if you use a smart phone of any kind. I'd go further and say you shouldn't drive a car, fly in a plane, or order anything over the web.

          Actually, it would be interesting to figure out if it is even possible to avoid patent infringing products short of becoming a hermit.

           

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        Ronald J Riley (profile), Oct 5th, 2010 @ 6:37pm

        Re: Re: Long term

        "Last, an observation. Corporate America arguably has the most powerful tool for influencing legislation: Money. So given this obvious advantage, why don't they pressure congress to change the law if patent lawsuits are bad for big business? "

        They do pressure, but inventors have put together a coalition which keeps coming up with creative ways to torpedo their efforts.

        Ronald J. Riley,

        Speaking only on my own behalf.
        President - www.PIAUSA.org - RJR at PIAUSA.org
        Executive Director - www.InventorEd.org - RJR at InvEd.org
        Senior Fellow - www.PatentPolicy.org
        President - Alliance for American Innovation
        Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
        Washington, DC
        Direct (810) 597-0194 - (202) 318-1595 - 9 am to 8 pm EST.

         

        reply to this | link to this | view in chronology ]

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      Beta (profile), Oct 4th, 2010 @ 11:46am

      Re: Long term

      "...wouldn't the best approach for a big company be to fight any and all bogus patents to the last breath?"

      Yes, if the company can thereby convince the trolls that it is not a good target. There is always the temptation to settle, to take the easy way out in the short term at the cost of ruining that hard-won reputation; Apple has done that this time. And small companies that can't survive a fight don't get the chance to establish such a reputation at all.

      If only there were a way for a company to burn its bridges beforehand, to legally -- and publicly bind itself: "we will never settle in any patent litigation against us"...

       

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      Ronald J Riley (profile), Oct 5th, 2010 @ 6:33pm

      Re: Long term

      "wouldn't the best approach for a big company be to fight any and all bogus patents to the last breath?"

      All the long term planners were either tossed out or left over short term management. Those are often the people who are inventing and suing the crap out of big companies when they misappropriate inventions.

      Microsoft, RIM, Apple, Google have all tried scorched earth litigation tactics. Every company who does this eventually gets the tar kicked out of them. Google will learn this in due time.

      A better approach would be for these companies to license before use.

      Ronald J. Riley,

      Speaking only on my own behalf.
      President - www.PIAUSA.org - RJR at PIAUSA.org
      Executive Director - www.InventorEd.org - RJR at InvEd.org
      Senior Fellow - www.PatentPolicy.org
      President - Alliance for American Innovation
      Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
      Washington, DC
      Direct (810) 597-0194 - (202) 318-1595 - 9 am to 8 pm EST.

       

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  •  
    identicon
    out_of_the_blue, Oct 4th, 2010 @ 11:03am

    A good argument for old notion of "unearned" income.

    Where and how income is gotten *does* matter. Patents and copyrights are essentially *unearned* because don't produce any net gains to humanity such as physical goods do. So let's apply higher tax rates -- *much* higher than on wages -- to unearned income so that we get fewer of these grifters.

    As to why companies pay up: probably a trivial amount, doesn't come out of executive pockets, may in fact go to *pals*, and there are no doubt tax advantages, if done right.

     

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      Ronald J Riley (profile), Oct 6th, 2010 @ 10:12am

      Re: A good argument for old notion of "unearned" income.

      "Patents and copyrights are essentially *unearned* because don't produce any net gains to humanity such as physical goods do."

      Big transnational companies float the same red herring arguments all the time. An invention is a product just like when someone buys engineering. No one can produce a product without both the inventions which define the product and the engineering which allows the product to be produced.

      Ronald J. Riley,

      Speaking only on my own behalf.
      President - www.PIAUSA.org - RJR at PIAUSA.org
      Executive Director - www.InventorEd.org - RJR at InvEd.org
      Senior Fellow - www.PatentPolicy.org
      President - Alliance for American Innovation
      Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
      Washington, DC
      Direct (810) 597-0194 - (202) 318-1595 - 9 am to 8 pm EST.

       

      reply to this | link to this | view in chronology ]

  •  
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    cc (profile), Oct 4th, 2010 @ 11:11am

    All those companies should have pooled their funds together and fought the lawsuit. Surely, that would have been cheaper than each settling individually.

     

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      Beta (profile), Oct 4th, 2010 @ 11:21am

      Re:

      IANAL, but I think these were separate suits, one against each target. Why should one company help another defend against such a suit?

       

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        cc (profile), Oct 4th, 2010 @ 11:40am

        Re: Re:

        Bogus patents would have been thrown out.

         

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        Hulser (profile), Oct 4th, 2010 @ 1:03pm

        Re: Re:

        IANAL, but I think these were separate suits, one against each target. Why should one company help another defend against such a suit?

        Companies which are potentially targets of bogus patent lawsuits could pay into a common fund which would act as an insurance policy, if you will. The criteria for when this insurance policy would pay for your defense would be based on sensible definitions of patentability and not the patent office's definition. Can you find any prior art? If yes, the fund pays. Is the patent on an obvious idea or concept? If yes, the fund pays. Is there a hint that the lawsuit is legitimate, then the fund wouldn't pay.

        Of course, the definition of what is bogus is subjective, but if you established clear guidelines, I would think that this would work. Maybe something like this is already in place. There's insurance for everything else; why not bogus patent lawsuits?

         

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      Ronald J Riley (profile), Oct 5th, 2010 @ 6:26pm

      Serial Infringers & RICO

      "All those companies should have pooled their funds together and fought the lawsuit."

      This sounds like the making of a good civil RICO case.

      Ronald J. Riley,

      Speaking only on my own behalf.
      President - www.PIAUSA.org - RJR at PIAUSA.org
      Executive Director - www.InventorEd.org - RJR at InvEd.org
      Senior Fellow - www.PatentPolicy.org
      President - Alliance for American Innovation
      Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
      Washington, DC
      Direct (810) 597-0194 - (202) 318-1595 - 9 am to 8 pm EST.

       

      reply to this | link to this | view in chronology ]

  •  
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    Jay (profile), Oct 4th, 2010 @ 11:21am

    Let's remember

    I view it as similar to the guy that made the red laser or whatever. Around the time that DVD Players were getting large, there was one man that started complaining about his invention being used.

    The main thing this does is force the companies using the technology to "make the problem go away"

     

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    identicon
    Anonymous Coward, Oct 4th, 2010 @ 11:23am

    Since companies never have any money to sue over "bad patents" this one must be RJR's definition of a "good patent."

     

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    identicon
    Anonymous Coward, Oct 4th, 2010 @ 11:44am

    It should be noted that once a patent is issued it enjoys by law a presumption that it is valid. Thus, in litigation it is never the burden of the patentee to prove validity, but on the alleged infringer to prove invalidity.

    To challenge someone here to prove that either or both of the patents are valid misses the point since one can only act on what they know to be prior art and not what they do not know. Of course, any patentee with half a brain should entertain conducting a comprehensive, pre-litigation search of prior art to try as best they can to determine if there exists prior art that was not considered during the prosecution of the application. If previously unknown and relevant prior art is identified, prudence dictates seeking the issuance of a Reissue so that should a lawsuit be deemed necessary all of the likely prior art will have been presented to, and considered by, the USPTO. This is what I have always done in advance of any filing of a lawsuit against a competitor so that the patent to be asserted is in as strong a condition as possible.

    Is this what so-called "trolls" likely do? Likely not.

     

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      Mike Masnick (profile), Oct 4th, 2010 @ 6:58pm

      Re:

      It should be noted that once a patent is issued it enjoys by law a presumption that it is valid. Thus, in litigation it is never the burden of the patentee to prove validity, but on the alleged infringer to prove invalidity.

      Indeed, and as we've pointed out countless times, that makes no sense. A patent is approved after just a few hours of review by a patent examiner who is unlikely to be aware of the state of the art. There is no attempt to ask those who are aware of the state of the art and there is no "advocate" for the other side to point out all the prior art and reasons why a patent is obvious. This is why the presumption of validity makes no sense -- and it's highlighted in this very case.

       

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        Ronald J Riley (profile), Oct 5th, 2010 @ 6:56pm

        Mike Has It Wrong Again

        "It should be noted that once a patent is issued it enjoys by law a presumption that it is valid. Thus, in litigation it is never the burden of the patentee to prove validity, but on the alleged infringer to prove invalidity."

        Not so. Companies who are defendants virtually always challenge patent validity through reexamination.

        "A patent is approved after just a few hours of review by a patent examiner who is unlikely to be aware of the state of the art."

        Again, not true. Hundreds of hours, sometimes many thousands of hours go into presenting a patent application. Then the examiner gets an average of twenty hours to weigh the merits of the submission. They are experts in the art of the submitted application. If they don't have enough time they reject the application, forcing the applicant to pay again and they have another twenty+ hours.

        "This is why the presumption of validity makes no sense"

        What doesn't make sense is Mike Masnick's constant misrepresentation of facts.

        Ronald J. Riley,

        Speaking only on my own behalf.
        President - www.PIAUSA.org - RJR at PIAUSA.org
        Executive Director - www.InventorEd.org - RJR at InvEd.org
        Senior Fellow - www.PatentPolicy.org
        President - Alliance for American Innovation
        Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
        Washington, DC
        Direct (810) 597-0194 - (202) 318-1595 - 9 am to 8 pm EST.

         

        reply to this | link to this | view in chronology ]

  •  
    identicon
    Jose_X, Oct 4th, 2010 @ 1:44pm

    And Apple is a company where juries might say, "why not, let Apple pay since they have made so much money."

    However, these companies have fought patents before and can make it expensive on the other party. I think they want to help create precedent and support for weak patents. Also as metioned near the top, the next person down (their competitors) will have a tougher fight if this patent appears legitimate and with this company having extra cash (and the terms of settlement may not have been too bad for Apple and friends).

    There could be many possibilities.

     

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  •  
    identicon
    Anonymous Coward, Oct 5th, 2010 @ 12:48am

    Perfectly Simple Fix

    The cause of these never-ending legal troubles is the whole idea of patent infringement, which is a totally unnecessary concept. Consider what happens with open source software -- truly vast numbers of people do hard intellectual work, then give it away for free. The only "payment" they want (sometimes) is to be given credit for the work they did do. The government was never so foolish as to grant them a monopoly privilege for doing that work. The same thing will work just fine for patents. Do not give patent owners any monopoly privileges. Monopolies are bad in general. Repeal the part of the law which says patent infringement is illegal. Get rid of the concept. Encourage people to use patents freely, just like people are encouraged to use open source software. There will be no lack of invention, just like there is no lack of open source programming. Anybody who thinks there might be some lack of programming should go and check out how many packages there are in Debian. Also note how fast the number of packages has been increasing year-by-year. Liberty works well, and it is so much nicer for decent people. When will Congress wake up?

     

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  •  
    identicon
    hmm, Oct 5th, 2010 @ 8:06am

    solution:

    If a company deliberately approaches companies claiming to be about to sue, but is hoping the victim will settle because its cheaper, this adversely affects the victim, in that there is less cash for research&developement or job creation etc...

    Wouldn't this technically be a case of treason because the patent troll (for their own profit) is deliberately harming US companies and interests, which in turn harms the US government and citizens?

    Let's hold the trials in Texas (for a very different reason than normal!!!) and bring out the electric chair/injection tables....

     

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  •  
    icon
    Ronald J Riley (profile), Oct 5th, 2010 @ 6:23pm

    Serial Infringers & Capital Punishment

    "Apple, Microsoft, Napster, Rhapsody, BDE (Kazaa), Sony, Sony/Ericsson, Amazon, Netflix, Wal-Mart, Barnes & Noble and Gamestop."

    A group of serial infringers, capitalists when they are selling and socialists when they are dealing with inventors.

    Now, capital punishments for infringers does have some merit.

    Ronald J. Riley,

    Speaking only on my own behalf.
    President - www.PIAUSA.org - RJR at PIAUSA.org
    Executive Director - www.InventorEd.org - RJR at InvEd.org
    Senior Fellow - www.PatentPolicy.org
    President - Alliance for American Innovation
    Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
    Washington, DC
    Direct (810) 597-0194 - (202) 318-1595 - 9 am to 8 pm EST.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    staff, Oct 6th, 2010 @ 6:42am

    whine

    your definition of "Ridiculous Patent"...

    Someone else's

    Stop whining!

     

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  •  
    icon
    Ronald J Riley (profile), Oct 6th, 2010 @ 10:07am

    Dead Wrong Again

    You are wrong. Townes most certainly made those claims but he had signed Gordon Gould's invention notebook and ultimately lost the case. It was proven that Gould produced the invention, Gould was inducted to the Inventors Hall of Fame and became a Nobel laureate for being the inventor of the Laser. See:

    http://www.invent.org/hall_of_fame/69.html,
    http://web.mit.edu/invent/iow/gould.html,
    http://electronicdesign.com/article/components/gordon-gould-the-long-battle-for-the-laser-patent1. aspx

    There has been a problem for some time with professors and others trying to claim student's inventions as their own. It is a shame that Townes did this, because he already had his place in history for the invention of the Maser. As it is, he sullied his reputation.

    A good book about this is:
    Laser: The Inventor, the Nobel Laureate, and the Thirty-Year Patent War [Hardcover]
    http://www.amazon.com/Laser-Inventor-Laureate-Thirty-Year-Patent/dp/0684835150

    Ronal d J. Riley,

    Speaking only on my own behalf.
    President - www.PIAUSA.org - RJR at PIAUSA.org
    Executive Director - www.InventorEd.org - RJR at InvEd.org
    Senior Fellow - www.PatentPolicy.org
    President - Alliance for American Innovation
    Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
    Washington, DC
    Direct (810) 597-0194 - (202) 318-1595 - 9 am to 8 pm EST.

     

    reply to this | link to this | view in chronology ]

  •  
    identicon
    Randall Arias, Feb 1st, 2012 @ 5:26pm

    Patent Infringement

    We at IP Holdings LLC are ready to provide advise and much more to anyone in need! Please visit our site for more information on Patent Infringement:

    http://www.ip-holdings.com/patent-infringement

     

    reply to this | link to this | view in chronology ]


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