Patent holders will file a lawsuit about anything under the sun these days, but a man named Martin Jones has embraced an alarming new strategy—suing cash-strapped American cities over their bus-tracking systems.
The most recent suit was filed last week, claiming that Portland's TransitTracker system infringes a patent owned by ArrivalStar, the patent-holding company that enforces Jones' patents. Two more, filed in February, claim that transit systems in Cleveland, Ohio and Monterey, California infringe three ArrivalStar patents.
Those new suits follow five lawsuits filed last year against King County (Seattle), Illinois Commuter Rail (which owns the Metra Chicago-area commuter trains), the Massachusetts Bay Transportation Authority, the Maryland Transit Administration, and the Port Authority of New York and New Jersey. With the exception of the Port Authority litigation, those suits all appear to have settled. And cities have paid up.
King County settled its ArrivalStar lawsuit last year for $80,000, according to Anh Nguyen, an attorney with the county prosecutor's office who was tasked with the case. To her knowledge, King County had never faced a patent suit before. "We aren't eager to see others," she added.
"What else is he to do?"
Suing over patents on which one is not actually building a product—commonly called "patent trolling"—has been a growing business for a decade now, but the strategy of going after the public sector is a new wrinkle. ArrivalStar and Jones are making a direct play for taxpayer money, something that most patent trolls have avoided until now. Cash-strapped US municipalities are in no position to defend a patent suit through trial, which can cost millions. Instead, they're likely to settle ArrivalStar's claims.
"The government can't just take property from someone, they have to pay for it."
In an interview, ArrivalStar attorney Anthony Dowell defended his client's actions, comparing them to a real estate owner seeking compensation after government intrusion.
"The government can't just take property from someone, and if they do, they have to pay for it," said Dowell. "Just because an entity is funded with taxpayer dollars doesn't give them the right to steal property. My client now owns 34 patents that are being infringed, and what else is he to do?"
As to the argument that the patents shouldn't have been issued at all, Dowell said the patent system has methods for making that argument, and they've been tried. For example, some ArrivalStar patents have been through re-examinations at the patent office. While some of its patents have been invalidated in that manner, at least one has survived, notes Dowell.
Dowell said his client typically looks for between $50,000 and $75,000 from the public transit systems. "We believe we're offering a reasonable license amount in each instance. We license public entities for less than private entities," he said.
ArrivalStar has racked up dozens of licensees, all without going anywhere near trial. Only one of its lawsuits even made it to the "claim construction" phase. This suggests the company is asking for relatively low payouts, though in the world of patent lawsuits, those could easily mean five-figure or low six-figure settlements. Patent defense lawyers often consider those kind of sums to be "nuisance settlements," even though the "nuisance" is more than most Americans earn in a year.
Most of ArrivalStar's lawsuits—it has filed more than 100 in the past few years—have been against private-sector transportation companies and big retailers like Home Depot, Best Buy, and Abercrombie & Fitch. Altogether, the litigation campaign demonstrates that Jones believes he's entitled to a royalty payment for almost any type of vehicle tracking.
ArrivalStar's lawyers don't give a pass to small companies, either. In 2010, the company squeezed a $15,000 settlement out of EarthSearch Communications, a company with just 11 full-time employees. If EarthSearch's sales ever get above $2 million, the company will have to pay an additional $25,000 to ArrivalStar; if sales top $4 million, EarthSearch pays $75,000.
ArrivalStar's demands are likely more widespread than even the extensive public record indicates, because the company sends out demand letters before litigating, and it sometimes reaches settlements without suing. The company has licensed several public transit systems, or the private companies that service their tracking systems, without any litigation being involved, said Dowell, including Clever Devices, the company that services the Chicago Transit Authority.
ArrivalStar has even taken the bold step of suing the US Postal Service for its vehicle-tracking system. That suit, filed in November, remains pending in a Colorado federal court.
From dot-com failure to offshore patent holder
Martin Jones had a real, operating company—also called ArrivalStar—back in the early 1990s. The company tracked "several thousand" vehicles, although Dowell couldn't identify where it operated. The original system involved tracking buses and notifying riders via an automated telephone call when the bus was about to arrive.
"They had been successful in the testing and first implementation of it," said Dowell. "But in the late '90s the dot-com crash just dried up funding, and they were a victim of that."
Today Jones, who lives in Vancouver, simply "owns other patents, and develops technology, and just invents," said Dowell.
A dot-com-era crash followed by a realization that money can be made through patent lawsuits instead has become a fairly typical story for a licensing company like ArrivalStar.
The ArrivalStar lawsuits look to have plenty of investors beyond Jones, but it's unknown who they are. Most of the settlement money that ArrivalStar takes in appears to be headed offshore; ArrivalStar's office is in Luxembourg. ArrivalStar also has a co-plaintiff in all its lawsuits, a company called Melvino Technologies, which maintains an "office" that's simply a PO Box in the British Virgin Islands.
By suing the public sector, ArrivalStar has gained the attention of advocates at the Electronic Frontier Foundation (EFF), which sometimes challenges patents it believes threaten the public. Earlier this month, EFF issued a call for prior art that could help bust one of the most-litigated Jones patents. The strategy might enable EFF to file a re-exam at some point, but re-exams have proven to be a very limited tool for stopping problematic patents. (The notorious Eolas software patents, for example, held strong through multiple re-exams before finally being knocked out at a Texas trial last month.)
Still, such a campaign could bring more attention to patents that seem to be a direct attack on public infrastructure. If ArrivalStar's new strategy goes unchallenged, it could mean cities become a favorite new target of patent trolls.
"I'm concerned there are folks out there who will think municipalities are ripe for the picking," says Julie Samuels of EFF. "These are services that are really good for people. Bus tracking means less people drive."
Joe Mullin is a reporting fellow at the Investigative Reporting Program of the UC-Berkeley School of Journalism.
City Hall photo by Bart Everson
Listing image by Photograph by Bart Everson
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