A little bit-known patent infringement lawsuit might have huge implications for Uber — and probably dozens of different corporations.
Carma Know-how, an organization shaped in 2007 by serial entrepreneur and SOSV founder Sean O’Sullivan, filed a lawsuit earlier this yr towards Uber alleging the corporate infringed on 5 of its patents which can be associated to the system of matching riders (or packages) with capability in automobiles. In different phrases, ridesharing — a enterprise Carma operated in some kind for a decade till it modified its enterprise mannequin and utilized its tech to road-pricing companies like GPS tolling and HOV verification.
Carma has requested a jury trial and is looking for a everlasting injunction towards the corporate, obligatory 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 approach by the U.S. District Courtroom for the Japanese District of Texas, is comparatively new. The allegations have been swirling for practically a decade.
Carma attorneys first contacted Uber about its ridesharing and floor transportation patents in 2016, in accordance with the criticism. That was an auspicious time for Uber. The startup, which was based simply seven years earlier than, had shot into the stratosphere — when it comes to 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 Center 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 may need had the enterprise mannequin and the market share, but it surely didn’t have the precise ridesharing patents, O’Sullivan informed TechCrunch in a latest interview. Carma does — plus a couple dozen others. Uber was allegedly conscious of that truth as early as 2015 when the U.S. Patent and Trademark Workplace rejected one in all its functions as a result of it ran up towards present patents held by O’Sullivan and Carma, in accordance with the lawsuit.
No less than 4 of Uber’s patent functions — and in some circumstances quite a few revisions to these patents — have been rejected between 2016 and 2019 for a similar cause. The rideshare big would finally abandon a few of these functions.
Uber nonetheless holds a whole bunch of different patents masking a broad swath of expertise and concepts which were utilized to its enterprise.
O’Sullivan argues the core service of what Carma’s patents describe is precisely how the trendy day ridesharing 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 an advanced one, mental property lawyer Larry Ashery informed TechCrunch. (Ashery will not be concerned within the case.)
“What’s important to understand here is Carma isn’t just asserting five patents,” mentioned Ashery, whose apply is predicated within the Better Philadelphia space. “They have had a very sophisticated strategy of patent procurement that they’ve been working on for the past 18 years.”
He famous the 5 patents are a part of a 30-patent household which can be all associated and linked 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 towards Uber.
Which means Uber should deal with and defend towards every asserted declare, making the litigation extra advanced and tough to defeat, he famous. Ashery mentioned Uber’s technique will doubtless be to attempt to invalidate these patents, which will probably be a problem.
A nine-year hole
Whereas Carma may need been armed with these particular patents, it took 9 years for the corporate to truly sue Uber. Bunsow De Mory, a Redwood Metropolis-based legislation agency, is representing Carma within the case.
“When any business starts, it’s all about just actually capturing the market and winning in the marketplace,” O’Sullivan mentioned. “Patents are meant to protect against aggressors from stealing the idea, but it’s not the main focus of your business to get patent revenue. It’s more as a protective mechanism.”
Carma, he mentioned, has been “very busy building a multimillion-dollar business and getting to profitability.” However there are different causes for that nine-year time hole, O’Sullivan defined. For one, the associated fee.
“It’s incredibly expensive to sue a large company over IP and Carma is a relatively small organization,” he mentioned in a latest interview. “To come up with the $10 million-plus to take on a big patent suit, which is what it takes these days, is not a small task.”
O’Sullivan mentioned the corporate did attain out to Uber way back to 2016 “in the hopes that they would do the right thing and license our patents.”
“It really took us a while to come to terms with the idea that we actually had to sue Uber in order for them to respond,” 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 need for the case to be litigated within the Northern District of California, the place it’s primarily based, slightly than in Texas.
Notably, the lawsuit is geared toward Uber, not Lyft or different corporations utilizing ridesharing. O’Sullivan defined Carma is “going after the biggest player first” and famous that about 60 different corporations are doubtless infringing on its patents.
The five-patent argument
The first argument within the lawsuit ties again to 5 patents which were granted to O’Sullivan and Carma, which was initially named Avego.
It began with O’Sullivan’s frustration with site visitors congestion, which finally led to ideas about carpooling and the way an automatic system utilizing smartphones might assist folks coordinate rides. That concept would flip into the startup Avego and turn into the premise of the primary patent — No. 7,840,427.
The primary patent, which O’Sullivan utilized for in 2007 and was granted in 2010, created a shared transport system that matches empty house in a automobile with riders or items. The system established a set of pick-up and drop-off factors after which matched customers and drivers touring alongside the same route.
Earlier than the patent was granted Avego’s ridesharing app debuted on Apple’s App Retailer in 2008, the identical yr 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 journey request. As soon as accepted, the rider was notified as the motive 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 ridesharing (as in carpooling) and never taxis, in accordance with O’Sullivan. The corporate operated the carpooling enterprise till October 2016, when the app was withdrawn from the App retailer. Nonetheless, it nonetheless had different types of ridesharing, like its partnership with Toyota, till phasing it out altogether in April 2018.
“If you look at the definition of ridesharing in federal legislation, it is carpooling,” O’Sullivan mentioned, noting that Carma constructed up a multimillion-dollar ridesharing enterprise in its early days.
When Uber and Lyft got here in and tried to co-opt the time period ridesharing to imply taxi-hailing it prompted confusion available in the market, prompting Carma to alter its enterprise mannequin and apply its tech in new methods. “Uber and Lyft really took ridesharing in the direction of taxi services, but our company Carma didn’t want to,” O’Sullivan mentioned.
Carma remains to be targeted on lowering site visitors congestion, however its tech is utilized to a unique enterprise mannequin.
Right now, 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. As an example, the app can be utilized by a driver on a toll street and even monitor automobile occupancy for HOV lanes. The app is designed to get extra riders into automobiles and reward these folks by lowering tolls or giving drivers entry to the HOV lane.
The thought, O’Sullivan mentioned, is to supply toll authorities a method to scale back capital expenditure by as much as 20 occasions by not utilizing massive gantry-based infrastructure methods. And it has paid off.
O’Sullivan says Carma is worthwhile, though pursuing this lawsuit will reduce into its backside line. Nonetheless, he mentioned it’s value the associated fee.
“I think there’s a danger in society where we can’t rely on our patents to protect the rights of the inventors, and the patent system exists specifically to protect the rights of investors, not to reward copycats that just happen to have deeper pockets,” he mentioned, pointing to Uber’s makes an attempt at its personal patents and the rejection of them by the USPTO.
“We think it’s something that’s important to recognize that the rights of a relatively small inventor are being trampled upon. But it’s not just for Carma, really. We think of this as a problem for the entire system. It’s a test of whether the rule of law still applies when a powerful tech giant is involved.”
