Stupid Patent of the Month

There’s an increasing insistence from the highest echelons of the patent world that patent abuse just isn’t a thing anymore. The Director of the U.S. Patent Office, Andre Iancu, has called patent trolls—a term for companies that do nothing but collect patents and sue others—mere “monster stories,” and suggested in a recent oversight hearing that it was simply name-calling.

But whatever you call them—trolls, non-practicing entities, or patent assertion entities—their business model, which involves stockpiling patents to sue productive companies rather than making goods or services, continues to thrive. It’s not hard to find examples of abusive patent litigation that make clear the threat posed by wrongly-issued patents is very real.

Take, for instance, the patents that Lawrence Lockwood owns. These patents have been used to sue companies, large and small, for nearly 20 years now. Through his company Landmark Technologies and his earlier company PanIP, more than 100 lawsuits have been filed against businesses—candy companies, an educational toy maker, and an organic farm, to name a few. Because these companies engage in “sales and distribution via electronic transactions,” or use an automated system “for processing business and financial transactions,” Landmark says they infringe one of its patents.

Those lawsuits don’t account for the other companies that have received licensing demands, but have not been sued in court. The numerous threats made with Lockwood’s patents are made clear both by news accounts of Lockwood’s activity, as well as the several small business owners that have reached out to EFF after being targeted by Lockwood’s patents.

Patent Office records show Lockwood first applied for a patent in 1984, but his litigation ramped up after he acquired U.S. Patent No. 6,289,319 back in September 2001. The document describes an “automatic business and financial transaction processing system,” which Lockwood has interpreted to give him rights to demand licensing fees from just about any web-based business. Upon receiving that patent, Lockwood promptly sent 100 letters to various e-commerce businesses, demanding $10,000 apiece. When that didn’t work, he started filing lawsuits.

For more than 15 years now, some companies have been paying thousands of dollars to license Lockwood’s patents rather than pay the legal fees required to defend themselves. Hiring attorneys to fight the patents would have cost far more, and Lockwood was keenly aware of this leverage.

“Do they really want to spend $1 million and two years of their life to invalidate a patent they can license for a couple thousand dollars?” Lockwood said in 2003, speaking to a Los Angeles Times reporter about his lawsuits. “People get divorced over this stuff. They have strokes over this.”

Sixteen years and more than 100 lawsuits later, stress and the expenses continue to mount for Lockwood’s targets. Through Landmark, Lockwood continues to demand money from businesses that provide basic e-commerce, although his price has gone up. Companies targeted by Landmark Technology patents in recent years have shown demand letters [PDF, PDF] indicating the company now demands around $65,000 to avoid a lawsuit.

Not a single court has ever weighed in on the merits of Lockwood’s patent claim, according to court papers [PDF] filed in 2017 by one of his targets.

Despite some court rulings that have helped cut back patent trolling over the years, nothing has slowed down Lockwood’s broad assault on Internet commerce. This year, through a newly created company called “Landmark Technology A,” Lockwood’s patent no. 7,010,508—related to the ‘319 patent that came before it—has been used to sue two more companies: a specialty bottle-maker in south Seattle, and an Ohio company that sells safety equipment.

Based on Landmark’s history, it’s unlikely these two lawsuits will be the last.

Continuations and Consequences

How did this happen, and how does it continue? Lockwood applied for his first solely-owned patent in 1984, getting it two years later. It describes a network of “information and sales terminals” that could “dispens[e] voice and video information, printed documents, and goods,” accepting credit card payments. There’s no evidence Lockwood developed any such network or even had the ability to do so. In fact, Lockwood, a former travel agent, reportedly admitted during a deposition that he had never used a personal computer “for any length of time,” according to the 2003 Los Angeles Times profile.

In the mid-90s, Lockwood sued American Airlines for patent infringement, seeking to collect royalties on its SABRE flight reservation system, which he claimed infringed three of his patents. He lost that case when, in 1997, an appeals court agreed with the district court that his patent claims were not infringed and were invalid.

That wasn’t the end of Lockwood’s efforts to make money through patent litigation, though. He continued to get more patents, acquiring Patent No. 6,289,319 in 2001, and 7,010,508 in 2006. Both patents have been used in more than 85 lawsuits, according to the LexMachina legal database. He was able to get those patents despite the fact that they were based on a patent that had been found invalid. Even better for Lockwood, he was allowed to use the “priority date” of the earlier patent. That means the only prior art that could be used to invalidate the patent would have to be from earlier than that priority date—May 24, 1984.

Led by a family-owned chocolate shop, a group of small businesses banded together to share legal costs and fight Lockwood’s PanIP. When they put up a website about PanIP’s abuse of the system, Lockwood sued the owner of the chocolate shop for defamation and trademark infringement.

The ‘319 patent, which is richly deserving of our “Stupid Patent of the Month” award, was issued because of a problem we’ve spoken about before—abuse of the continuation process.

The Patent Office allows applicants to file “continuation” applications with new claims, as long as they’re based on what was disclosed in previously-filed applications. This creates opportunities for applicants to game the system and get patents on advances they could not have developed. For example, even though Lockwood applied for the ‘319 patent in 1994, it’s a continuation of the original 1984 application—which means that only prior art from 1984 or earlier can be used to invalidate it.

Landmark’s complaints demand money from operating businesses, claiming that because their systems process “business and financial transactions between entities from remote sites,” they infringe the ‘319 patent. Their recent complaint [PDF] against Illinois-based Learning Resources, Inc. includes a claim chart [PDF] explaining the alleged infringement, which is a 42-page detailed chart that describes using a computer to order a toy on the defendant’s website.

That chart makes clear that Landmark’s patent doesn’t claim any particular technological advance—just the basic idea of transmitting data between networked computer terminals.

This patent should be invalid under Section 101 of the patent laws for failing to claim an actual invention. At best, it describes basic computer technology—like an “on-line means for transmitting said information, inquiries, and orders”— to exchange information, and respond to orders. That is a ubiquitous and essential part of e-commerce, not a patent-eligible invention.

Right now, lobbyists are pushing for a wholesale re-write of Section 101, which is the best chance of stopping patents like this one early enough in a case to avoid spending hundreds of thousands of dollars on lawyers and expert witnesses. Drastic alterations to Section 101 could leave targets of Landmark in an even worse position—in order to get out of a multi-million dollar lawsuit, they’ll have to find published, pre-1984 prior art describing the precise, nearly indefinable contours of Lockwood’s “invention,” and invest huge sums on prior art investigations as well as expert witness reports.

Before lawmakers distort Section 101 so that it’s nearly useless, they should consider campaigns like Landmark’s. It involves an “inventor” who’s long been focused on litigating patents, not creating new innovations—and who admits to leveraging the high cost of litigation defense against small businesses. Lowering the bar for patent-eligibility even further will do far more to threaten innovation than encourage it.