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November 7, 2019 02:55 pm

How Cloudflare Stood up to a Patent Troll -- and Won

Cloudflare was sued by a notorious patent troll Blackbird Technologies in 2016. Instead of giving up to its demands, Cloudflare employed a different strategy. From a blog post: In October 2016, Blackbird was looking to acquire additional patents for their portfolio when they found an incredibly broad software patent with the ambiguous title, "PROVIDING AN INTERNET THIRD PARTY DATA CHANNEL." They acquired this patent from its owner for $1 plus "other good and valuable consideration." A little later, in March 2017, Blackbird decided to assert that patent against Cloudflare. [...] Companies facing such claims usually convince themselves that settlements in the tens or hundreds of thousands of dollars are quicker and cheaper outcomes than facing years of litigation and millions of dollars in attorneys fees. We decided we would do our best to turn the incentive structure on its head and make patent trolls think twice before attempting to take advantage of the system. We created Project Jengo in an effort to remove this economic asymmetry from the litigation. In our initial blog post we suggested we could level the playing field by: (i) defending ourselves vigorously against the patent lawsuit instead of rolling over and paying a licensing fee or settling, (ii) funding awards for crowdsourced prior art that could be used to invalidate any of Blackbird's patents, not just the one asserted against Cloudflare, and (iii) asking the relevant bar associations to investigate what we considered to be Blackbird's violations of the rules of professional conduct for attorneys. As promised, we fought the lawsuit vigorously. And as explained in a blog post earlier this year, we won as convincing a victory as one could in federal litigation at both the trial and appellate levels. In early 2018, the District Court for the Northern District of California dismissed the case Blackbird brought against us on subject matter eligibility grounds in response to an Alice motion. In a mere two-page order, Judge Vince Chhabria held that "[a]bstract ideas are not patentable" and Blackbird's assertion of the patent "attempts to monopolize the abstract idea of monitoring a preexisting data stream between a server and a client." Essentially, the case was rejected before it ever really started because the court found Blackbird's patent to be invalid. Blackbird appealed that decision to the Court of Appeals for the Federal Circuit, which unceremoniously affirmed the lower court decision dismissing the appeal just three days after the appellate argument was heard. Following this ruling, we celebrated. As noted in our earlier blog post, although we won the litigation as quickly and easily as possible, the federal litigation process still lasted nearly two years, involved combined legal filings of more than 1,500 pages, and ran up considerable legal expenses. Blackbird's right to seek review of the decision by the US Supreme Court expired this summer, so the case is now officially over. As we've said from the start, we only intended to pursue Project Jengo as long as the case remained active. Even though we won decisively in court, that alone is not enough to change the incentive structure around patent troll suits. Patent trolls are repeat players who don't have significant operations, so the costs of litigation and discovery are much less for them.

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