Ditto is a 15-person eyewear startup that utilizes remarkable software — a 3D modeling system that  replicates the buyer's face — to let customers try on glasses virtually before purchasing them. Unfortunately for Ditto, its innovative software has put the company in the crosshairs of Glasses.com. 

Glasses.com is owned by 1-800 Contacts, a much larger online eyewear retailer that recently purchased an old patent from a defunct company (U.S. Patent 7,016,824 covers selling glasses online based on 3D models) and announced its own version of 3D try-on software for glasses - while simultaneously filing a patent-infringement lawsuit against Ditto.  

1-800 Contacts claims that it plans to its own service as an iPad app sometime soon. But this plan was first publicized on April 17, 2013, while Ditto launched its version a year ago. 

David vs. Goliath

"It's a game-changing event, truly. It's terrifying," sighed Ditto CEO Kate Endress. "We've had to stop all marketing, every dollar has to go into this litigation." 1-800 Contacts refuses to license the patent to Ditto; instead it's seeking an injunction to stop Ditto from using the software. The only option, as Ditto sees it, is to lawyer-up and try and win the suit. 

Making things even more expensive, 1-800 Contacts is suing California-based Ditto in its home state of Utah. Whatever the outcome of the suit, the most likely result is the depletion of Ditto's cash reserves and the destruction of the company. 

That's because this battle is far from equal. 1-800 Contacts was founded in 1995 and took off thanks to a partnership with Wal-Mart started in 2008. In 2012 it was bought by WellPoint for close to $900 million. Yeah, that WellPoint, the largest for-profit, managed health care company in the Blue Cross and Blue Shield Association, with revenue in 2012 of $61.7 billion and more than 43,000 employees.

"If we win this infringement case, we're still out the millions of dollars we spent winning. That's why it has become punitive for companies to innovate," Endress said. "The patent systems is structured in a way where it lets corporations act like patent trolls where they can buy things they didn't invent." And in this case, "we are literally going up against a giant corporation," Endress noted. 

1-800-Not-Our-Fault

When reached for comment, 1-800 Contacts told ReadWrite:

1-800 CONTACTS and its Glasses.com division have invested significant time and resources into the development of the interactive try-on platform technology and acquiring the appropriate patent rights to protect it. However, we do not comment on pending litigation.  

The EFF was not impressed: "1-800-Contacts says it is not a patent troll. Sure, the company is not a classic patent troll - a shell company that does nothing but buy patents and sue - but it's little better." 

What Makes A Patent Troll?

Could this entire issue be a misunderstanding, where 1-800 Contacts actually spent years pouring money into this concept, only to see a brash startup steal its lunch? Maybe, but 1-800 Contacts' history of aggressive litigation doesn't inspire confidence in that interpretation.

In 2002, the company pursued WellU.com over pop-up advertisements that displayed competitors' products. 1-800 Contacts was granted a preliminary injunction, but WellU won on appeal. In 2008, the company fought with Google over controversial search-related provisions of a Utah trademark law that were eventually repealed. And in 2010, 1-800-Contacts sued Contact Lens King, Inc. over key-word advertising. 

Despite the odds, Endress vows that, "We're going to vigorously defend ourselves. We're so proud of what we built. Maybe we can become cash flow positive and survive." The EFF is asking for help in trying to invalidate the patent in question, but no matter how the legal complications unfold, the road Ditto faces will certainly be long and expensive.

Images courtesy of Ditto.

Guest author Don Marti is a technical marketing manager at Perforce, and a Git user since 2007.

Key parts of the America Invents Act (AIA), which passed in 2011, came into effect on March 16, 2013. These changes in U.S. patent law can help all companies that use software to protect themselves from patent trolls — those annoying boiler-room operations that shake down software developers and users for software patent licenses without actually producing anything with the patents they own.

(See also A Patent Troll By Any Other Name Still Stinks.)

Fortunately, many of the best practices for tracking new versions of software and other digital assets can also help protect you against patent trolls. It’s a good time to talk to your lawyer about a defensive strategy, and to connect that strategy to your version control and deployment systems to make sure you’re collecting and retaining all of the information that could help you under this new law.

Understanding Prior Art

The AIA has a lot of changes, starting with the expansion of what counts as prior art. Prior art is any public information that shows the patented invention was not original. Patent examiners were always supposed to take prior into account when granting a patent in the first place. However, especially in the software field, the understaffed and overworked patent office misses a lot of details.

Sometimes the patent system’s definition of an invention does not match our own idea of what’s new or inventive. Take for instance the System and method for providing reservations for restroom use. In this case, the U.S. Patent database granted a patent for queuing up for the restroom on airplanes. For every silly patent that makes headlines there are many others that could threaten your business.

Track Your Work

Patents also cover the use of components in combination. You will need to document not just what you wrote and when, but what combination was ultimately deployed. And since you can’t tell what will get a patent, you need to keep a good version history of everything — code, deployment data and the text and media assets that go with it.

Fortunately, creating prior art ties in with many typical work tasks, such as participating in open source projects, running a development blog and publishing online documentation. How you track software releases and fix bugs can also be a low-pain way to publish prior art.

Implement Litigation Alternatives

What happens when the patent office misses some prior art and issues a patent anyway? That’s where a second change in the law comes in. Post-grant challenges are, according to attorney Michael Bednarek, “a quick, low-cost alternative to litigation.”

If a bogus patent in your field is issued, you’ll be able to challenge it at the Patent Office directly with a simpler process than would be required in court. Although it might seem like a lot of work, industry organizations such as the Linux Foundation could play a major role by tracking patents as they are issued and in organizing efforts to challenge patents that threaten their members. Nobody wants to take on this time-consuming cleanup work alone.

(See also How Patent Trolls Use Economies Of Scale To Force Settlements.)

Prove A Prior-User Defense

The AIA gives you one last defense. Under the old law, a new patent could potentially take away your right to do something that you had already been doing, if you didn’t file for your own patent or otherwise made it public. Now, if a troll comes after you for something you made “commercial use” of before a patent was issued, you may be protected by the new prior-user defense, which lets you rely on your own non-public uses. If you have a solid history that shows not only the innovation process but the production date, it can help significantly. The prior-user defense is harder than using public prior art, though, so it’s still better to make things public when you can.

Still More To Do

There’s still more work to be done on the software patent problem. The proposed SHIELD Act is a good example of another way to deter trolls by making them pay legal fees if they lose. Supporters believe this would reduce the incentive to bring nuisance patent lawsuits. In the meantime, software developers get quite a bit of help from the new AIA law — especially if they keep histories of all their work and when it was used, publish it defensively when possible, and work together to challenge anyone who seeks bogus patents.

(See also Why The New SHIELD Bill Can't Stop Patent Abuse.)

On the Internet, nobody really likes to be called a troll. Especially the people who absolutely know they are trolls. It is a derogatory term meant to denigrate somebody who is deliberately provocative to produce the maximum amount of disruption to other parties' goals. We think of trolls as people that flame message boards and comments sections on news articles. Throughout the technology industry, especially in mobile, there are also patent trolls, whose goals are much larger than just upsetting people in a message board.

Patent trolls are also deliberately provocative to produce the most amount of disruption possible. The end goal for patent trolls, however, is to line their wallets. They may think of themselves as purveyors of fine intellectual property, but they are not actually creating anything or delivering useful items to the innovation economy. Patent trolls, by definition, are Non-Practicing Entities (NPEs) – they do not practice what they preach (or litigate over). 

InterDigital: A Fine Line In The Sand

A very fine line has been drawn in the sand on what constitutes a patent troll and what does not. A company called InterDigital, an “innovator” of 3G/4G wireless solutions, straddles that line. On one hand, InterDigital has a large engineering team that works to create patentable material on wireless technology. On the other hand, InterDigital does not create anything with those patents. It doesn't build the networks, the hardware, the base stations, servers or processors. It takes its patents and attempts to license them to mobile manufacturers and when those manufacturers refuse, InterDigital sues them. 

Nokia, Samsung, RIM, ZTE and Huawei have all run afoul InterDigital in the last year. In particular, the Nokia vs. InterDigital battle has been going on for a long time and has grown contentious over the last months. Today, InterDigital brought new patent suits regarding wireless technology against Samsung, Huawei, ZTE and Nokia, alleging that products from the companies using 3G/4G technology violate InterDigital’s patents.

From the complaint:

"The wireless devices at issue operate as, for example, cellular mobile telephones (including “smart phones”), cellular PC cards, cellular USB dongles or sticks, personal computers such as laptops, notebooks, netbooks, tablets and other mobile internet devise with cellular capabilities, cellular access points or “hotspots”, and cellular modems."

Basically, this covers anything you could possibly think of that might connect to the Internet in any way using cellular connections. InterDigital proposes an import ban for the four companies for any products that allegedly violate its patents. 

This is where the line between a company looking to protect its own intellectual property and status in a marketplace and a patent troll exists. Though many patent lawsuits from the likes of Apple, Samsung, Nokia, RIM, Motorola or others in the mobile manufacturer ecosystem are looking to hurt their rivals by keeping smartphones and other devices off retail shelves, InterDigital has no such marketable product to protect. 

In other words, this looks like a shakedown. 

InterDigital threatens import bans from these manufacturers with the hopes that the companies will back down and eventually license the patents in question. RIM has already succumbed to InterDigital and extended an agreement it had with the company to cover 4G technology like LTE and LTE-Advanced. 

“[InterDigital] is a patent licensing organization, not a technology licensing operation,” said James Bessen, a lecturer at the Boston University School Of Law and an expert on NPEs. “I do know people that study trolls who do consider it a patent troll … [InterDigital] is definitely considered a non-practicing entity.”

Lawyers like Bessen are not technically supposed to use the word “troll” when defining companies that act like patent trolls. The preferred technical term is “patent assertion entity.” A variety of companies fit into this category, notably the RockStar Consortium backed by the likes of Apple and Microsoft that deals with the leftover patents from the Nortel auction. InterDigital has the fifth largest holding of patents among companies considered to be NPEs in the United States with 3,138 patents, according to PatentFreedom. Intellectual Ventures is considered the biggest troll of them all, with 15,000 – 20,000 patents held. 

Manufacturers' Drag Fishing

InterDigital and its NPE cohorts are, of course, not the only companies that make news in patent litigation these days. The biggest tech story of 2012 was the patent fight between Samsung and Apple in which a jury awarded the Cupertino-based iPhone maker $1.05 billion in damages. Another top story of the year was the Google and Oracle smack down over the use of Java in Android. Apple and HTC got into a patent dispute and we learned that Apple and Microsoft have a patent settlement in place that required no litigation from either party. Ericsson has just filed a patent claim against Samsung in the U.S. with the International Trade Commission. Nokia and Research In Motion have had their patent battles. Such a complicated web patents weave.

Would you call Apple a patent troll? Google? Some people have and will continue to do so while the lawsuits continue to fly around courts. Technically, of course, they are not considered patent trolls under the definition of NPEs. These are definitely practicing entities, putting patented technology to work in products that people can actually buy. 

Yesterday, the U.S. Federal Trade Commission ruled on its 19-month investigation of Google’s antitrust case. While Google escaped mostly unscathed from the unfair search practices, the FTC did come down on Google-owned subsidiary Motorola for its patent-wielding practices. Motorola (even before the Google acquisition became final) had been suing rivals using patents that were considered SEP – Standard Essential Patents. SEPs are the type of patents commonly used by many companies because the ecosystem could not function without that particular technology. Think of Wi-Fi or cellular patents and you get the idea. 

SEP patents are supposed to be licensed on fair, reasonable and non-discriminatory terms (FRAND), meaning that companies like Motorola are not supposed to use these patents to sue other companies or seek injunctions and import bans. To a certain extent, that is what Motorola was doing and the FTC put a kibosh on the practice, hoping to create a template for future patent licensing between manufacturers. 

Where Does That Leave InterDigital?

InterDigital has seven specific patents pertaining to 3G/4G technology in its most recent suit against the four major manufacturers. InterDigital could be hurt by the FTC’s ruling on Motorola’s patent practices because of the SEP nature of InterDigital’s patents. In its complaint, InterDigital says that the FRAND defense would not apply to its patents. It also says that barring devices from the four listed manufacturers would not harm competition in the U.S. because InterDigital's other licensees (which now includes RIM), "would easily meet market demand with non-infringing devices." 

Seems like a convenient argument, no? InterDigital claims it is neither subject to FRAND nor would it provide a negative impact on competition. The latter might be true if Samsung was not listed in the complaint, but the Korean mobile manufacturer is largest smartphone supplier by volume in the U.S. 

In the end, InterDigital may find the Motorola ruling from the FTC will harm its ability to litigate going forward. We will also see in 2013 how courts end up treating other NPEs, like Intellectual Ventures. 

InterDigital is clever, though. It rides that fine line between patent troll and innovator with a large research and development department. But, as Bessen put it, InterDigital still looks like a troll by any other name. 

Top image courtesy Shutterstock

Since 2010 Apple has been suing everybody in sight for allegedly infringing on its intellectual property. Apple hasn't just been suing its rivals but also portraying itself as a beacon of innovation and depicting its rivals as cloners and copycats -- thieves, basically.

So perhaps there is some satisfaction in seeing Apple get smacked for the very thing it keeps accusing others of doing.

Yesterday a federal court in Dallas ruled that Apple must pay $368.2 million to a patent troll called VirnetX because its FaceTime videoconferencing software infringes on some patents owned by VirnetX.

That's pocket change to Apple, which posted $41.7 billion in net profit on $156.5 billion in revenues in the fiscal year that ended in September.

But VirnetX wants more -- it has filed a complaint with the International Trade Commission asking to have a bunch of Apple products (iPhone, iPad, Macs) banned from the market. 

Apple has no comment. But of course Apple will appeal, and of course the case will drag on.

What Is The Point?

And of course this is all lunacy. The real lesson to this and all of the other Apple-related cases is that the patent system is ridiculous and has become an obstacle to innovation, one whose ultimate victims are customers.

In the tech world it's considered depicable when trolls like VirnetX use patents to shake companies down for money.

But is it any less despicable to cynically use the legal system to put a spoke in the wheel of your rivals? Or to use the legal system as a kind of marketing tool, a way to smear your opponents?

Because that's what Apple is doing with its cases against Samsung, HTC and Motorola. 

Apple doesn't want to set up licensing agreements. Apple just wants to distract its opponents and slow them down. 

Marketing By Lawsuit

Apple's patent lawsuits are also a form of marketing, albeit an expensive one, whose goal is to generate lots of stories in the media and to hammer home, via repetition, the notion that everyone else in the smartphone market is simply copying Apple, producing me-too clones that are poor imitations of the iPhone and iPad.

One court in England saw through the charade and resented the notion of being used as a propaganda tool by a large multinational corporation.

Consequently the court ordered Apple to apologize publicly to Samsung for making false allegations and buy advertisements declaring that Samsung did not, in fact, copy Apple.

Apple shamelessly and brazenly tried to turn that to its advantage, creating an "apology" that was really just another ad taunting Samsung. The annoyed judges ordered Apple to do the apology again, only this time to follow their instructions. 

The good news is that these lawsuits, all of them, are just speedbumps that will not stop the mobile revolution and probably won't affect the balance of power in the smartphone market.

Back in 2010, when Apple first launched its legal jihad against Android phone makers, Android had 23% market share and Apple had 15%. Today Apple still has the same 15% share -- but Android now holds 75%.

So much for the efficacy of lawsuits as competitive weapons. Someday, I hope, companies will figure out that these things don't work. And someday the patent laws in this country will be updated for the 21st century. Fingers crossed.

Image courtesy of Shutterstock.