Fastly Settles With Patent Troll & Cloudflare Fights Backs, Wins and Gets Patent Thrown Out

Over the last decade, there has been a growth in patent-holding plaintiffs known as non-practising entities, or what critics prefer to call a patent troll.

Blackbird Technologies, a recently founded Boston and Chicago-based firm who have amassed a portfolio of nearly 40 patents it has used to file over 100 lawsuits to date. The firm was founded by two ex-attorneys who previously worked for some of the world’s top tech companies, litigating intellectual property cases. TechCrunch describes the motivation behind these types of firm as profit driven; “launched by attorneys who’ve been on the other side of the table, [who] were presumably well paid by their prestigious firms, yet who left to pursue what can apparently be even more lucrative work, chasing after their old clients”. Firms like Blackbird, founded by attorneys, do not need to pay for outside legal help, so only need to invest their time in researching the right patents to buy from brokers, then invest in the $1,000 (or thereabouts) that it costs to file a lawsuit.

Blackbird separately accused Fastly and Cloudflare of violating the same patent, U.S. Patent No. 6,453,335, “Providing an internet third party data channel”. The patent inventor is Oliver Kaufmann, the owner of a web hosting company in Germany, who registered the patent in 1998, but doesn’t seem to have used it to create anything. Last October, Kaufmann sold it for $1 plus “other good and valuable consideration” to Blackbird.

Non-practicing entities (holders of a patent for a product or process, which they don’t intend to develop) tend to assume that if sued, companies will prefer to settle than pay legal charges to reach a courtroom. Fastly did indeed settle with Blackbird last month. Blackbird filed a patent infringement lawsuit against Fastly back in March of last year in the U.S. District Court for the District of Delaware. In October, the case was transferred to the U.S. District Court for the Northern District of California.

In response to the settlement, Wendy Verlander, President and CEO of Blackbird Technologies, said, “This case was about technology that addressed shortcomings in Internet communications, and changed the way the Internet worked. We are so pleased that the inventor of this important technology was finally rewarded for his contributions.”

Cloudflare was sued by Blackbird at the same time last year, but took a very different approach and decided to fight back. CEO Matthew Prince decided to use it as an opportunity to publicly take on this “dangerous new breed of patent troll”. One of his key criticisms of firms like Blackbird was how cheap their costs are to sue compared to how much it costs a company to defend itself. Prince told TechCrunch his primary goal was working out how to increase Blackbird’s cost, asking, “How can we make it more symmetric? And every minute that they spend having to defend themselves somewhere else is a minute they aren’t suing us or someone else.”

Cloudflare launched a multi-faceted attack they called Project Jengo, which other companies may well now also be inspired to use. Partly they launched a campaign to highlight the backgrounds of the Blackbird co-founders to “pro innovation” state legislators. They went after them ethically, pointing out that all lawyers must take an ethics exam, which states it is a violation for an attorney to ‘acquire a cause of action”, then to sue someone for it. The argument has begun to gain some traction. Furthermore, Cloudflare crowdsourced prior art to invalidate the patent that Blackbird was using to go after them and other companies. And they had the case moved from Delaware – where Cloudflare is incorporated – to California.

On February 13th, the U.S. District Court for the Northern District of California dismissed Blackbird’s case against Cloudflare.  Judge Vince Chhabria noted in a two page order that “[a]bstract ideas are not patentable” and held that Blackbird’s bid to assert the patent “attempts to monopolize the abstract idea of monitoring a pre-existing data stream between a server”, and is invalid as a matter of law.

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