Somewhat-known patent infringement lawsuit might have huge implications for Uber — and probably dozens of different firms.
Carma Technology, an organization shaped in 2007 by serial entrepreneur and SOSV founder Sean O’Sullivan, filed a lawsuit earlier this 12 months in opposition to Uber alleging the corporate infringed on 5 of its patents which are associated to the system of matching riders (or packages) with capability in automobiles. In different phrases, ride-sharing — a enterprise Carma operated in some type for a decade till it modified its enterprise mannequin and utilized its tech to road-pricing providers like Global Positioning System tolling and HOV verification.
Carma has requested a jury trial and is searching for a everlasting injunction in opposition to the corporate, necessary future royalties on any Uber merchandise that infringe on these patents in addition to damages, and different prices associated to the lawsuit.
The lawsuit, which has been quietly winding its method via the U.S. District Court for the Eastern District of Texas, is comparatively new. The allegations have been swirling for almost a decade.
Carma attorneys first contacted Uber about its ride-sharing and floor transportation patents in 2016, in accordance with the grievance. That was an auspicious time for Uber. The startup, which was based simply seven years earlier than, had shot into the stratosphere — by way of valuation, progress, and gravitas.
Uber was valued at $66 billion on the time, and had a popularity for taking huge, legally sticky swings into new markets that helped it develop to a whole bunch of cities within the U.S., Europe, Canada, and the Middle East. It had raised greater than $12.5 billion in enterprise capital, and was utilizing it to launch new merchandise and even push into autonomous automobiles.
Uber might need had the enterprise mannequin and the market share, however it didn’t have the precise ride-sharing patents, O’Sullivan advised TechCrunch in a current interview. Carma does — plus a pair dozen others. Uber was allegedly conscious of that truth as early as 2015 when the U.S. Patent and Trademark Office rejected considered one of its functions as a result of it ran up in opposition to current patents held by O’Sullivan and Carma, in accordance with the lawsuit.
At least 4 of Uber’s patent functions — and in some instances quite a few revisions to these patents — had been rejected between 2016 and 2019 for a similar motive. The ride-share large would finally abandon a few of these functions.
Uber nonetheless holds a whole bunch of different patents masking a broad swath of know-how and concepts which have been utilized to its enterprise.
O’Sullivan argues the core service of what Carma’s patents describes is precisely how the trendy day ride-sharing expertise operates. And he contends that Uber is infringing on these patents even when the corporate’s enterprise mannequin operates extra like a taxi enterprise.
The case is a sophisticated one, mental property lawyer Larry Ashery advised TechCrunch. (Ashery just isn’t concerned within the case.)
“What’s vital to grasp right here is Carma isn’t simply asserting 5 patents,” stated Ashery, whose follow is predicated in Greater Philadelphia space. “They have had a really refined technique of patent procurement that they’ve been engaged on for the previous 18 years.”
He famous the 5 patents are a part of a 30-patent household which are all associated and related to the unique submitting date. That issues as a result of every of the 5 asserted patents accommodates a number of patent claims, which outline the authorized boundaries of the invention. These particular person claims — not simply the patents as a complete — are what Carma is asserting in opposition to Uber.
That means Uber must handle and defend in opposition to every asserted declare, making the litigation extra complicated and troublesome to defeat, he famous. Ashery stated Uber’s technique will seemingly be to attempt to invalidate these patents, which might be a problem.
A nine-year hole
While Carma might need been armed with these particular patents, it took 9 years for the corporate to truly sue Uber. Bunsow De Mory, a Redwood City-based regulation agency, is representing Carma within the case.
“When any enterprise begins, it’s all about simply really capturing the market and profitable within the market,” O’Sullivan stated. “Patents are supposed to shield in opposition to aggressors from stealing the concept, however it’s not the primary focus of your enterprise to get patent income. It’s extra as a protecting mechanism.”
Carma, he stated, has been “very busy constructing a multi-million greenback enterprise and attending to profitability.” But there are different causes for that nine-year time hole, O’Sullivan defined. For one, the price.
“It’s extremely costly to sue a big firm over IP and Carma is a comparatively small group,” he stated in a current interview. “To provide you with the $10 million-plus to tackle an enormous patent go well with, which is what it takes as of late, just isn’t a small activity.”
O’Sullivan stated the corporate did attain out to Uber way back to 2016 “within the hopes that they might do the best factor and license our patents.”
“It actually took us some time to return to phrases with the concept that we really needed to sue Uber to ensure that them to reply,” he added.
Uber declined to touch upon the lawsuit. Uber’s attorneys did make two procedural motions this week, together with a sealed movement to dismiss for improper venue or alternatively to switch venue for comfort. This procedural movement indicators Uber’s want for the case to be litigated within the Northern District of California, the place it’s primarily based, moderately than in Texas.
Notably, the lawsuit is geared toward Uber, not Lyft or different firms utilizing ride-sharing. O’Sullivan defined Carma is “going after the most important participant first” and famous that about 60 different firms are seemingly infringing on its patents.
The five-patent argument
The main argument within the lawsuit ties again to 5 patents which have been granted to O’Sullivan and Carma, which was initially named Avego.
It all began with O’Sullivan’s frustration with visitors congestion, which finally led to ideas about car-pooling and the way an automatic system utilizing smartphones might assist folks coordinate rides. That thought would flip into the startup Avego and turn out to be the premise of the primary patent — No. 7,840,427.
The first patent, which O’Sullivan utilized for in 2007 and was granted in 2010, created a shared transport system that matches empty area in a car with riders or items. The system established a set of pick-up and drop-off factors after which matched customers and drivers touring alongside an analogous route.
Before the patent was granted Avego’s ride-sharing app debuted on Apple’s App Store in 2008, the identical 12 months the iPhone launched. Avego confirmed off its so-called Shared Transport app on the DEMO convention in 2008, which confirmed how a driver with an iPhone 3G might use the app to simply accept or reject a trip request. Once accepted, the rider was notified as the driving force approached after which was prompted to enter a pin code to show their identification and authorize an digital cost.
Avego, which might later change its title to Carma, was targeted on the promotion of ride-sharing (as in carpooling) and never taxis, in accordance with O’Sullivan. The firm operated the carpooling enterprise till October 2016, when the app was withdrawn from the App retailer. However, it nonetheless had different types of ride-sharing, like its partnership with Toyota, till phasing it out altogether in April 2018.
“If you take a look at the definition of ride-sharing in federal laws, it’s carpooling,” O’Sullivan stated, noting that Carma constructed up a multi-million greenback ride-sharing enterprise in its early days.
When Uber and Lyft got here in and tried to co-opt the time period ride-sharing to imply taxi-hailing it brought on confusion available in the market, prompting Carma to vary its enterprise mannequin and apply its tech in new methods. “Uber and Lyft actually took ride-sharing within the route of taxi providers, however our firm Carma didn’t need to,” O’Sullivan stated.
Carma remains to be targeted on decreasing visitors congestion, however its tech is utilized to a unique enterprise mannequin.
Today, Carma makes use of its app to assist transit authorities handle tolls and categorical lanes — a product line the corporate first rolled out in 2013. For occasion, the app can be utilized by a driver on a toll street and even monitor car occupancy for HOV lanes. The app is designed to get extra riders into vehicles and reward these folks by decreasing tolls or giving drivers entry to the HOV lane.
The thought, O’Sullivan stated, is to supply toll authorities a option to cut back capital expenditure by as much as 20 occasions by not utilizing giant gantry-based infrastructure methods. And it has paid off.
O’Sullivan says Carma is worthwhile, though pursuing this lawsuit will lower into its backside line. Still, he stated it’s value the price.
“I feel there’s a hazard in society the place we are able to’t depend on our patents to guard the rights of of the inventors, and the patent system exists particularly to guard the rights of traders, to not reward copycats that simply have occur to have deeper pockets,” he stated, pointing to Uber’s makes an attempt at its personal patents and the rejection of them by the USPTO.
“We suppose it’s one thing that’s vital to acknowledge that the rights of a comparatively small inventor, are being trampled upon. But it’s not only for Carma, actually. We consider this as an issue for your complete system. It’s a take a look at of whether or not the rule of regulation nonetheless applies when a strong tech large is concerned.”
