Somebody forgot to tell inventor Martin Kelly Jones, who runs ArrivalStar SA and Melvino Technologies, that it doesn’t pay to be a so-called patent troll anymore.
Patent troll is the derogatory term used for companies that make money from bringing patent infringement lawsuits rather than making something with the patent. The more neutral term for such companies is non-practicing entity or NPE.
Jones, the inventor of technology that allows the tracking and messaging of the arrival status of vehicles including school buses and taxis, believes detractors unfairly attack people who are simply trying to defend their interests.
To be sure, ArrivalStar and Melvino have filed more than 1,100 patent claims within 32 patents and have filed hundreds of infringement lawsuits against municipalities and companies, earning undisclosed profits, a reputation as a patent troll and much criticism from the technology industry.
Jones said he invented the technologies in 1985 while at company called Global Research Systems, which eventually assigned the patents to ArrivalStar and Melvino.
“In 1985, I was driving and I passed a girl waiting for a school bus,” Jones said in an interview. “She was just standing just off the curb so I had to swerve by. When I came back half an hour later, she was still waiting. It’s one of those things that just stays with you. I thought I can design a system that notifies her when the bus is close.”
That was the impetus for Jones to event the technology for tracking the arrival status of school buses. He said he created the technology in 1992, filed the first patents in 1993 and received the first ones in 1995.
Jones continued developing the patents and in 1997 it eventually evolved into a service people could buy through their telephone company for $5 a month, and even beta-tested in in Bemidji, Minnesota.
Eventually, a service for notification of the arrival of school buses and taxis was offered through a joint venture called Noticon, which was owned 50% by Global Research and 50% by LaBarge Inc. of St. Louis, Missouri.
“Media was heavy on us at the time,” he said. “We were American pie, safety for kids.”
Jones was also deploying a company in the Spring of 2000 for racking and messaging packages/shipments called e-Trac-Mail.
As Jones and Noticon were getting close to raising capital to deploy their bus call service commercially, they were overtaken by the dot com bust.
“The turbulence in the market made it difficult for new tech companies seeking capital,” he said. “After the dot com bust all the money went away. It put everything on hold.”
Unable to raise money, Jones and his team watched helplessly as his inventions were being widely used by other companies, which made capital raising even harder.
“We found infringement so widespread. People took what we were doing. No longer could we tell investors we had exclusivity. So in 2003, we realized we couldn’t raise any money.”
So with no other choice, Jones said “in late 2003 we started putting the first companies on notice that they were infringing and we were seeking licensing fees.
“My intent was to serve a need, to keep kids safe,” he said. “At this stage I’ve got so many people running with my patents I had no choice but to bring infringement actions.
ArrivalStar was created in 2002 and in 2003 began to manage the licensing of patent assets assigned by Global Research.
A British investor, who Jones would not name, provided financial backing through Melvino. Melvino was incorporated offshore in the Channel Islands to protect the interests of the British investor.
“I’m not a majority owner of ArrivalStar or Melvino,” he said. “I’m not even a 50% owner. If I had control it would have stayed in the U.S.
The British investor is “a passive investor,” Jones said. “I call the shots” with regard to litigation.
Jones declined to say how much money ArrivalStar and Melvino have made from their licensing efforts.
ArrivalStar’s biggest critics include the Electronic Frontier Foundation. The foundation is a nonprofit organization that defends civil liberties in the digital world and champions user privacy, free expression, and innovation through impact litigation, policy analysis, grassroots activism, and technology development, has aggressively tried to derail ArrivalStar’s infringement campaigns with limited success.
Vera Ranieri, a staff attorney for the EFF, said in a telephone interview, that a recent demand letter ArrivalStar sent to a company called The RealReal Inc., a luxury consignment online shop, highlighted the possibly frivolous nature of its behavior.
“What we try to do is bring light to persons who bring patent infringement cases,” Ranieri said. “If that derails ArrivalStar’s infringement activity so be it. ArrivalStar is an example of how patents can be used in a potentially frivolous way.”
Ranieri cited a letter from an attorney for Fedex Corp. to ArrivalStar, which appears to suggest that ArrivalStar’s decision to go after its clients violates its licensing agreement.
“FedEx insists that you cease your assertions against FedEx’s licensed activity,” says the March 2 letter signed by Jason Melvin, an associate at Finnegan Henderson Farabow Garrett & Dunner LLP in New York, who represents Fedex. “Failing to do so would constitute a breach of the license agreement between FedEx and ArrivalStar.
Melvin couldn’t be reached for comment for this article.
Ranieri said based on the known facts it appears that ArrivalStar has already exhausted its claims.
For his part, Jones described the EFF’s efforts to derail ArrivalStar’s infringement campaigns as full “of erroneous allegations.”
“We haven’t really defended ourselves publicly because it’s propaganda,” he said. “If you’re the victim of propaganda, it’s often too hard to fight back. No matter what you say or do, you get criticized. It’s fruitless.”
Jones explained that as part of its propaganda campaign, the EFF solicited the public for prior art to fight against one of ArrivalStar’s patents.
Because of that effort, Jones said “we had a total of 8 patents go to re-examination by the U.S. Patent Office and we lost two of them. We didn’t agree with that.”
The patent that EFF challenged was not invalidated. Yes, we lost claims but having a patent confirmed makes it stronger than ever
Jones said the EFF led re-exam took place in 2012.
“Even after they looked at the prior art, the Patent Office said these patents are valid,” he said. “They didn’t narrow the claims. The patents are stronger than ever.”
More recently, ArrivalStar and Melvino have launched a new patent infringement litigation campaign in U.S. District Court in the Southern District of Florida against 15 companies including Demandware Inc., Urban Outfitters, L’Oreal USA and Pizza Hut of America, who allegedly infringe on its patents for tracking packages.
The reemergence of ArrivalStar comes at time when defendants and other critics of so-called patent trolls thought such behavior was ebbing.
To be sure, patent infringement litigation has been on the decline over the past several years following the American Invents Act of 2012, which created the Inter Partes Review (IPR) process and made it easier to invalidate patents.
Moreover, a recent string of decisions by the Court of Appeals for the Federal Circuit eviscerated a $368 million award to VirnetX Holdings Corp. (VHC) and a $30 million award to Vringo Inc. (VRNG), leaving many patent market observers thinking that such large awards may relegated to the ash heap of history.
Moreover, the U.S. Supreme Court has signaled its willingness to allow defendants to recoup legal costs for the most egregious examples of predatory troll behavior.
With such big awards on the decline, critics say ArrivalStar and Melvino seem to have gone back to the future by seeking out relatively small licensing settlements in the range of $50,000 to $75,000. File enough suits for $50,000 and pretty soon ArrivalStar is bringing in real money.
ArrivalStar and Melvino are represented in the new wave of infringement suits by Jason Dollard, a Palm Beach, Florida-based attorney. Dollard declined to comment on how he was being compensated for his work. Patent attorneys typically work on a contingency basis.
Solstice Marketing Concepts was named in a complaint filed March 4, while Solmar-Universal Tanker Chartering and MGN Logistics were named in separate complaints filed Feb. 23. Linea LA LLC, Oriental Trading Co., Zullily Inc. and Sole Technology were named in separate complaints Feb. 19. Demandware was named in a complaint filed Jan. 28, while Urban Outfitters and L’Oreal USA Inc were named in complaints filed Jan. 23. Deckers Outdoor Corp. was named Jan. 20, while Pizza Hut of America was named Jan. 2. Spencer Gifts was named Dec. 19.
“ArrivalStar and Melvino have filed over 440 patent infringement lawsuits against at least as many defendants over the past eight years, many involving the parents in suit,” said Demandware, a Burlington, Massachusetts based software maker that provides cloud-based e-commerce platforms to retailers, in its answer to the complaint filed March 4.
“Hundreds if not thousands of additional defendants have received threatening demands or cease and desist letters from ArrivalStar and Melvino regarding the patents in suit.”
Demandware is represented in the dispute by Donald Freeman, a partner with Freeman & Jones in West Palm Beach, Florida, and Michael Strapp, a partner with Goodwin Procter LLP in Boston.
The firms “have created a business model around knowingly filing frivolous and meritless complaints of patent infringement against businesses, municipalities and individuals with de minims or no pre-filing investigation, claim chart preparation, comparison of the accused products or services to patent claims or the like…..ArrivalStar and Melvino have created such a business model with the malicious intent to extort a substantial amount of money from the accused defendants asa settlement or license fee; such substantial amount of money being carefully selected by ArrivalStar and Melvino to be significantly less than the average cost of hiring an attorney to file dispositive motions and argue the same.”
Demandware further asserts that ArrivalStar and Melvino in many instances including in the complaint against Demandware have filed their complaints “with full and actual knowledge of non-infringement “ on behalf of the defendants.
“On literally hundreds of occasions, ArrivalStar and Melvino have asserted patents against entities practicing technologies that are afield from the patented technology.”
While ArrivalStar and Melvino own patents on vehicle status reporting systems, Demandware asserts that it doesn’t make, use or sell any of the systems that are covered by the patents.
“Although ArrivalStar and Melvino had actual knowledge that Demandware does not infringe the patents-in-suit,” they “have maintained their efforts to misuse the patents-in-suit in efforts to impermissibly and inappropriately broaden the scope of protection afforded by the patents
-in-suit in this lawsuit.”
In its answer and counterclaim, Demandware is seeking declaratory judgments of non-infringement and invalidity on three patents. The company also is accusing ArrivalStar and Melvino of monopolization and attempted monopolization, as well as combination and conspiracy in restraint of trade.
In addition, Demandware accuses ArrivalStar and Melvino of civil violations of the Racketeer Influenced and Corrupt Organizations Act.
Demandware is seeking damages, enhanced damages of at least $500,000, plus and attorneys’ fees, as well as a ruling that the case is exceptional, which would allow for fee shifting.
Pizza Hut, which is represented by Mark Stein of Mark Stein Law in Aventura, Florida, also has answered ArrivalStar and Melvino’s amended complaint seeking declarations of non-infringement, invalidity, damages and a ruling that the case is exceptional.
Dollar General, which is represented by Eleanor Barnett, a partner at Heller Waldman P.L. in Coconut Grove , Florida, also is seeking declarations of non-infringement, invalidity, damages and a ruling that the case is exceptional.
Goodwin Procter’s Strapp said in an interview ArrivalStar and Melvino have a well developed business model of approaching companies with outrageous licensing demands and when defendants balk they immediately offer to settle for a fraction of the original demand.
Strapp said the typical demand letter from ArrivalStar asks for about $150,000 before offering to settle for half or a third of that.
“An unknown number of companies may have fallen prey to such tactics,” Strapp said.
“It’s quite likely they’ve approached many multiples of the number of companies we mentioned in our amended complaint.
Demandware “is unwilling to lie down because we believe the case has no merit,” he said. “That’s a position Demandware feels strongly about.”
“ArrivalStar recognizes some companies will not pay. That’s why they’d rather extract quick settlements or quickly move on.”
Moving on when confronted by an immovable opponent by dismissing claims with prejudice also may allow ArrivalStar to never face the scrutiny of the courts and the possible sanction of those same courts for egregious behavior.
To be sure, Strapp said “if you look at the docket on all the claims they’ve filed they’ve never faced a claims construction hearing.”
“It’s the classic case of a schoolyard bully. When someone stands up to them they back down.”
For his part, Jones dismissed Strapp’s allegations as antagonistic propaganda.
“Spreading such propaganda seems a little antagonistic,” he said. “They’re claiming to have info about us that they can’t have. They don’t know how much we settle for. They haven’t looked at our records.”
While Jones said that ArrivalStar has never taken a suit to trial, he noted it has gone through three Markman hearings for claims construction. The hearings were held in cases against U.S. Global Sat, Fedex and UPS.
As far as settling litigation goes, Jones said ArrivalStar always prefers to settle rather than litigate.
“We offer a discount, though not always, to settle things more quickly,” he said. “Mostly, they’re going to settle for a higher amount than” Strapp said they ask for. “Most of the people who deal with us would say we’re fair, we’re easy to deal with. We’re not the monsters some say we are.”
Jones said ArrivalStar and every other non-practicing entity get criticized for whatever they do, whether its sending a letter to possible infringers, filing a suit, settling one, or winning and/or losing a verdict.
“Anyone who has a patent and asks for a license has to be wrong,” he said. “I find that preposterous.”
To reach the reporter responsible for this story, please contact Dan Lonkevich at 707 318-7899 or at email@example.com