Tag Archive for: patent

Stupid Patent Of The Month: Veripath Patents Following Privacy Laws

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What if we allowed some people to patent the law and then demand money from the rest of us just for following it?

As anyone with a basic understanding of democratic principles can see, that is a terrible idea. In a democracy, elected representatives write laws that apply to everyone, ideally, based on the public interest. We shouldn’t let private parties “own” legal principles or use technical jargon to re-cast those principles as “inventions.” 

But that’s exactly what the U.S. Patent Office has allowed two inventors, Nicholas Hall and Steven Eakin, to do. Last September, the government proclaimed that Hall and Eakin are the inventors of “Methods and Systems for User Opt-In to Data Privacy Agreements,” U.S. Patent No. 10,075,451. 

The owner of this patent, a company called “Veripath,” is already filing lawsuits against companies that make privacy compliance software. With Congress and many states actively engaged in debates over consumer privacy laws, Veripath might soon be using this patent to extract licensing cash from U.S. companies as well.

Privacy-For-Functionality isn’t an “Invention,” it’s a Policy Debate

Claim 1 of the ‘451 patent describes a basic data privacy agreement. An API provides personal information from a software application; then the user is asked for a “required permission” for the use of that information. There’s one add-on to the privacy deal: in exchange for the permission, the user gets access to “at least one enhanced function.”

The next several claims go on to describe minor variations on this theme. Claim 2 specifies that the “enhanced function” won’t be available to other users. Claim 3 describes the enhanced function as being fewer advertisements; Claim 4 describes offering the enhanced function in exchange for a monetary payment.

To say this “method” is well-known is a major understatement. The idea of exchanging privacy for enhanced functionality or better service is so widespread that it has been codified in law. For example, last year’s California Consumer Privacy Act (CCPA) specifically allows a business to offer “incentives” to a user to collect and sell their data. That includes “financial incentives,” or “a different price, rate, level, or quality of goods or services.” The fact that state legislators were familiar enough with these concepts to write them into law is a sign of just how ubiquitous and uninventive they are. This is not technology this is policy.

(An important aside: EFF strongly opposes pay-for-privacy, and is working to remove it from the CCPA. Pay-for-privacy undermines the law’s non-discrimination provisions, and more broadly, creates a world of privacy “haves” and “have-nots.” We’ve long sought this change to the CCPA.) 

Follow the Law, Infringe this Patent

Veripath has already sued two companies that help website owners comply with Europe’s General Data Protection Regulation, or GDPR, saying they infringe its patent. Netherlands-based Faktor was sued [PDF] on Feb. 15, and France-based Didomi was sued [PDF] on Feb. 22

Some background: Venpath, Inc., a company with a New York address that appears to be a virtual office, assigned the rights in the ‘451 patent to VeriPath just days before the patent issued in September last year. As it happens, the FTC began enforcement proceedings against VenPath last September. The FTC’s complaint [PDF] alleged that VenPath’s website represented that “VenPath participates in and has certified its compliance with the EU-U.S. Privacy Shield Framework.” The FTC alleged a count of “privacy misrepresentation.” It claimed that VenPath “did not complete the steps necessary to renew its participation in the EU-U.S. Privacy Shield framework after that certification expired in October 2017.” The FTC issued a Decision and Order [PDF] requiring VenPath to remove the misrepresentations. 

An exhibit [PDF] attached to the complaint shows that one of the named inventors on the patent, Nick Hall, contacted Faktor to ask what its prices were. Hall identified himself as the CEO of VenPath. Once Faktor responded, Veripath sued Faktor in federal court in New York.

In its lawsuits, Veripath claims that basic warnings about cookies on websites, a now-common method of complying with the GDPR, violate its patent. The lawsuit against Faktor notes that Faktor’s own website “might not work properly” unless a user consents to having her browser accept cookies.

Veripath and its legal team argue that this simple deal—accepting cookie use, in order to visit websites—is enough to infringe the patent. They also claim that Faktor’s Privacy Manager software infringes at least Claim 1 of the patent, and facilitates infringement by others. 

The ‘451 patent should never have been granted. In our view, its claims are clearly ineligible for patent protection under Alice v. CLS Bank. In Alice, the Supreme Court held that an abstract idea (like privacy-for-functionality) doesn’t become eligible for a patent simply because it is implemented using generic technology. Courts have struck down similar claims, like a patent on the idea of conditioning access to content on viewing ads. 

Even when a patent is invalid, defendants face pressure to settle. Patent litigation is expensive and it can cost tens or hundreds of thousands of dollars just to get through the early stages. To really protect innovation we have to ensure that patents like the ‘451 patent are never issued in the first place. The fact that this patent was granted shows the Patent Office is failing to apply the law.

We are currently urging the public to tell the Patent Office to stop issuing abstract software patents. You can use our Action Center to submit comments.

Republished from the EFF’s Stupid Patent of the Month series.

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What Do Pot And Software Have In Common? Stupid Patent Thickets Based On A Lack Of Patented Prior Art

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Recently Reuters had a fascinating article all about the new patent thicket in pot that is appearing, thanks to legalization efforts in the US and around the globe.

With marijuana now fully legal in Canada and at least partially legalized in the majority of U.S. states, companies are rushing to patent new formulations of the age-old botanical. This year, the U.S. Patent and Trademark Office has issued 39 patents containing the words cannabis or marijuana in their summaries, up from 29 in 2017 and 14 in 2016.

And, of course, with patents come the inevitable lawsuits:

The first U.S. case is now winding its way through the courts. In a July lawsuit, Colorado-based United Cannabis Corp accused Pure Hemp Collective Inc of infringing its patent covering a liquid formulation with a high concentration of CBD, a non-psychoactive cannabis ingredient touted for its health benefits.

One of the key issues in this case and others, experts say, is whether the patent is overly broad or obvious in light of “prior art,” the existing level of science or technology against which an invention’s novelty can be judged.

Basically, there hasn’t been that much official prior art because pot was considered illegal for so many years, and no one was rushing to patent anything. And, of course, patent examiners are somewhat limited in what they’re set up to research regarding prior art, and they often rely on earlier patents and scientific articles as the basis for prior art searches. And, with pot, there aren’t so many of those.

Of course, this is actually quite reminiscent of the mess that came with software patents. For a long time, most people didn’t consider most software to be patentable (this is not entirely accurate, as there are software patents going back many decades, but many people considered it limited to a few special cases of software). However, in 1998, we got the State St. Bank case, in which the Court of Appeals for the Federal Circuit basically threw open the doors on patenting almost any software. And those doors remained completely wide open until the Alice v. CLS Bank decision in 2014 (which hasn’t totally cleaned up the mess of the State Street ruling, but has certainly helped dial back the insanity).

But, for nearly two decades after the State Street ruling, the US Patent Office was patenting software willy nilly — often despite much of it having tons of prior art or being completely obvious. A big part of the problem was that examiners, again, focused on mainly looking at earlier patents and scientific journals for evidence of prior art. But because so many people didn’t think that most software was patentable, there were very few patents to look at, and it’s pretty rare for anyone to write up the details of software in scientific journals (they just make the damn software).

That resulted in tons of broad software patents that covered things that had been done for decades or that were entirely obvious. And thus, we had huge patent thickets and massive patent fights that cost billions of dollars, caused innovative companies to go out of business, and generally were a massive tax on innovation, where almost all of the proceeds went into a few patent lawyers’ pockets. To this day it is a huge black mark on how the patent system works, and how it actually did significantly more to harm innovation than to help it.

I’m reminded of this mess in reading about the situation with patents around pot. While the situations are not entirely the same — the reasons for a lack of earlier patents are quite different — the overall impact is similar. The lack of earlier patents is creating an open field where things that have been done for years, or that are considered obvious, are still getting through the patent office with a stamp of approval. And it’s only going to create a pretty big mess with lawsuits. You would have hoped that the USPTO would have caught on by now, but apparently not.

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Stupid Patent Of The Month: Upaid Sues ‘Offending Laundromats’ For Using Prepaid Cards

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When patent trolls threaten and sue small businesses, their actions draw the public’s attention to the worst abuses of the patent system. In 2013, a company called MPHJ Technology got called out in a U.S. Senate hearing as a “bottom feeder” engaged in “garden-variety extortion” after it sent out thousands of demand letters demanding payments from small businesses that dared to use printers with “scan-to-email” functions. Lawmakers, understandably, found it incomprehensible that broad, stupid patents were being used to sue burger stands and grocery stores.

There’s a good reason for that concern. It’s hard to see how lawsuits against small businesses using basic technology do anything to “promote the progress of science and the useful arts.” By contrast, it is easy to see how these lawsuits harm companies and consumers by increasing the costs and risks of doing business.

But the intermittent public attention hasn’t stopped this most basic abuse of the patent system. Upaid Ltd., a shell company based in the British Virgin Islands, has been filing patent infringement lawsuits throughout 2018, including 14 against laundromats—yes, laundromats—from California to Massachusetts.

Upaid says that laundromats are infringing U.S. Patent No. 8,976,947. Claim 1 of the patent describes a computer system that performs “pre-authorized communication services and transactions,” after checking an account to see if a user “has a sufficient amount currently available for the … transaction.” It’s essentially a patent on having a prepaid account for—well, anything.

Right now, Upaid lawyers are focused on systems run by Card Concepts, Inc., a service provider that markets a system called Laundry Card to laundromats. Many of the Upaid’s complaints simply point to online photos of the laundromats and the relevant card dispensers as evidence of infringement.

This incredibly broad patent was granted in 2015, but dates to a series of applications stretching back to 1998. Even in 1998, a prepaid account was not an inventive concept. It’s a basic and longstanding idea, that isn’t improved by adding verbiage about a “plurality of external networks” and a “computer readable medium.”

And that’s exactly the argument that lawyers for Card Concepts Inc. made [.pdf] when they got sued by Upaid last year. CCI has rightly argued that the patent should be invalidated as abstract under the Alice decision. CCI’s motion may well succeed in defending their customers—at some point.

Meanwhile, though, Upaid has unleashed 14 lawsuits against laundromats in different states, and has promised more. Faced with the prospect of paying a lawyer, even if just to buy time, some of those small businesses are likely to pay unjustified licensing fees for this patent.

In fact, it has begun to happen. Last week, UPaid put out a press release boasting that a Houston-based facility called 24 Hour Laundry had agreed to pay them. Laundromats in Kansas, Massachusetts, and Monterey, California are next up on the list.

“When required, we will strenuously enforce our rights through litigation against offending laundromats,” warned Upaid CEO Simon Joyce. “Our recent settlement reveals that many parties are not aware that the card equipment critical to their successful laundry business infringes our patents.”

Upaid’s behavior is brazen, but it is not an anomaly. Other patent trolls have waged campaigns against small businesses that merely use off-the-shelf technology. For example, Innovatio IP Ventures sent thousands of letters targeting hotels and cafes that provide Wi-Fi for customers. In Upaid’s case, the company’s website doesn’t list any products or services, but states that it is engaged in “ongoing development” of “intellectual property related to mobile commerce systems.”

Lawsuits against small, non-technology business show how trolls exploit the patent system. The costs to challenge a wrongly granted patent are high—defending a patent lawsuit through a jury trial can cost millions of dollars. Faced with the possibility of that kind of “winning,” small businesses will often fold.

Yet this year, patent maximalists are actually talking about rolling back the key changes to patent law that give small businesses a fighting chance. The Alice Corp. v. CLS Bank decision has stopped hundreds of “do it on a computer” style patents in their tracks. Meanwhile, inter partes review, a process that can get wrongly issued patents thrown out at a lower cost, are also under attack.

Instead of considering patent bills that move in exactly the wrong direction, like last year’s STRONGER Patents Act, Congress should consider legislation focused on how to help the smallest businesses from being roped into unjustified and expensive patent disputes.

Reposted from EFF’s Stupid Patent of the Month series.

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