Dealing With Patent Trolls

Freight forwarders, Customs brokers, and carriers always provide shipment tracking to their customers. There are a variety of ways to do this; they may use their own software to track shipments, or they may track shipments by linking to another carriers’ website. There is nothing magical about this, yet this type of technology may be covered by patents or copyright. Logistics professionals deal with threats of patent infringement lawsuits asserted by patent owners, especially so-called patent trolls, increasingly.  Patent trolls are those who seek to enforce patent rights, but do not actually manufacture or supply services based on the patents.  They make a living just by demanding payment for the supposed infringement upon a right they themselves are unlikely to use.

The most aggressive company presently following that template in the shipping industry is ArrivalStar.  ArrivalStar is incorporated in the tax haven of Luxembourg, and it is one of the most litigious patent plaintiffs in the U.S.  In 2013 alone, it lodged 137 lawsuits across the country.   Defendants in its suits include the biggest names in logistics and transportation, such as FedEx, UPS, DHL, American Airlines, American Express, Continental Airlines, Delta Airlines, the Port Authority of New York and New Jersey, and others. Our brief analysis of ArrivalStar’s lawsuits indicate that none have actually gone to trial; most are settled quickly for an undisclosed sum.  In certain cases where the defendants vehemently fought back, ArrivalStar withdrew from the lawsuit, dropping its claims.  In some cases, its patents had been infringed and it did collect sizable license or other payments.

Trolls usually avoid active lawsuits, either because they are afraid that their patent allegations will not withstand a challenge, or because they believe that there is actually little or no infringement by the defendants. They also avoid extensive litigation because they are concerned with the costs: simply mounting a patent infringement suit can cost $100,000 in a few short months, and actually taking a case to trial can easily exceed a million dollars in legal fees and costs over a period of years.  Since trolls are often bankrolled by investors whose sole purpose is to engage in litigation, or by law firms which work on contingency, they do not have the litigation motives of a normal business competitor. When defendants fight back, trolls often retreat because they would rather go after the targets who may give in more easily.

Conventional wisdom on how to best defend a patent case does not apply in the case of trolls, because that would be conservative, expensive, and time-consuming.  Small carriers, freight forwarders, or Customs brokers do not readily have the wherewithal to finance those suits. We have helped several logistics companies avoid suits by doing a proper analysis of their tracking systems and respective data components, and then responding clearly under the U.S. Patent Act with the defenses available to both patent troll and/or ArrivalStar-type demands. Alternatively, we have settled infringement claims without extended suit.  Any such demand must be taken very seriously, but with the knowledge that a mere demand does not mean infringement actually occurred.

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