Yesterday, Shopify filed a motion in a Texas court in an attempt to crack down on so-called “patent trolls”.
These are usually shell companies that own a vast portfolio of patents and file hundreds of patent infringement lawsuits every year against businesses that cannot afford to fight a legal battle, who end up coughing up a hefty license payment.
The Ottawa-based ecommerce company filed the motion against Lower48 IP LLC, a patent owner that slapped Shopify with a patent infringement suit in September last year. Shopify is requesting that the patent owner disclose all its third-party interests in the litigation.
The aim, Jess Hertz, the company’s general counsel said in a LinkedIn post, is to identify the “funders, interests, and decision-makers who hide cowardly in the shadows,” and dictate the actions of the patent trolls.
“Litigants deserve to know who they’re litigating against and judges need to know who’s before them to ensure there is no conflict of interest,” she wrote.
According to a report in the Canadian Press, Shopify said it sent a letter to Lower48 on May 5, requesting it reveal information about third-party interests, but the company did not respond. According to Shopify, both parties met and conferred on May 30, at which point Lower48 said that it would not be providing the requested information.
“Our builder DNA outright refuses to accept dealing with patent trolls as the normal course of doing business,” Hertz affirmed. “We want to build up, and build forward. They want to destroy and stifle.”
She also noted that the patent trolls often target small businesses and start-ups, which hinders innovation and entrepreneurship – especially in emergent technologies. The company points to research by the Harvard Business Review which shows that companies settling or losing patent troll cases reduce investment in research and development by an average of more than US$160 million over the two years following the case.
And 90 per cent of patent litigation cases filed each year, Hertz added, are abandoned or settled.
“Shopify and our entrepreneurs are builders and innovators,” said Hertz. “They spend years, sometimes their entire lives, creating products designed to improve the world. Patent trolls? They lazily sit back, burying hard working entrepreneurs in piles of legal paperwork.”
This motion, Shopify said, is just the beginning. It said that it intends to continue amplifying the voices of its merchants and supporting legislation and organizations exposing patent trolls, so that elected officials take action.