As noted in my interview of the creator of The Patent Scam movie, spurious patent litigation costs U.S. entrepreneurs billions, every year. Nearly 90% of the businesses approached in such suits decide to settle out of court, as it is typically less expensive and more expeditious.
However, a handful of companies choose to fight the litigation on principle. In even fewer instances, the defendant companies go on the offensive and turn the tables on the companies which sue them. One such company is Cloudflare, an edge internet service provider which delivers cybersecurity protection and enhances transmission speeds for millions of websites.
Cloudflare’s General Counsel, Doug Kramer
Rather than settle, Cloudflare initiated Project Jengo, for the purposes of invalidating all of the patents held by the lawyers who sued them, not just those cited in the settlement offer.
Jengo The Prior Art Bounty Hunter
To better understand the strategy and tactics underlying Project Jengo, I connected with Cloudflare’s General Counsel, Doug Kramer.
John Greathouse: Doug, I’m sure some of my readers are familiar with Cloudflare’s IP saga, but for those who are not, please recap the events that led to you launching Project Jengo.
Doug Kramer: In March 2017, Cloudflare was sued by a patent troll called Blackbird Technologies, a group of lawyers that made a business of buying up dozens of broadly-written patents and then suing a bunch of companies for alleged infringement.
There is a problematic incentive structure that allows patent trolls to collect licensing fees or settlements from companies because settlements in the tens or hundreds of thousands of dollars are usually quicker and cheaper outcomes for companies than facing years of litigation and millions of dollars in attorney’s fees.
But Cloudflare didn’t want to play that game, where short-term incentives drive a really bad long-term problem. So, we decided to fight back by turning this incentive structure on its head and making patent trolls think twice about taking advantage of this system.
We created Project Jengo as a way to defend Cloudflare against the lawsuit, fund awards for crowdsourced prior art that could be used to invalidate any of Blackbird’s patents – not just the one they were using to sue us, and ask relevant bar associations to investigate what we considered to be Blackbird’s violations of the rules of professional conduct for attorneys.
Greathouse: That was a few years ago. What was the outcome of the lawsuit and what role did Jengo play in that process?
Kramer: We were as victorious as you could be at both the trial and appellate levels. In early 2018, the District Court for the Northern District of California dismissed the case Blackbird brought against us on subject matter eligibility grounds in response to a motion to dismiss on the pleadings.
In a mere two-page order, Judge Vince Chhabria held that “[a]bstract ideas are not patentable” and Blackbird’s assertion of the patent “attempts to monopolize the abstract idea of monitoring a preexisting data stream between a server and a client.” Essentially, the case was rejected before it ever really started because the court found Blackbird’s patent to be invalid.
Blackbird appealed that decision to the Court of Appeals for the Federal Circuit in DC, which summarily affirmed the lower court decision, dismissing the appeal just three days after the appellate argument was heard. Our briefs before both the District and Appellate courts cited to prior art submitted by Project Jengo participants.
Although we won the litigation easily and it seemed obvious to the judges, the process still lasted nearly two years, involved filings of more than 1,500 pages, and considerable legal expenses. The case is now officially over.
Greathouse: I understand you awarded a bit more than $100,000 to some of Jengo’s contributors. Is it true that one of the awardees was a homeless man who conducted his patent research in a public library? Though the financial incentive is a nice bonus, I would suspect most participants invested their time for reasons that go beyond the cash prizes.
Kramer: We did spend more than $100,000 on Jengo. Most went to awards to those who submitted prior art, but some donated funds were also spent on fees to bring a separate action to invalidate another of Blackbird’s valuable patents in an administrative proceeding.
Most of the people we heard from who were involved in the process, did so because they wanted to push back against patent trolls, that seemed to be as much of a motivator as the money, along with the t-shirts. And yes, one of the award recipients said that this made his day because he was homeless at the time he made the submission and was researching in the library.
It was great to see folks like him as energized as we were about taking down a patent troll. Patent trolls are truly awful entities and many companies have been delayed or deterred in their rise to success by patent litigations that they just can’t fight, and this has truly stifled innovation. It’s a huge problem within our patent structure, yet we were really surprised and blown away by how creative and passionate people were about the project.
Greathouse: You mentioned donations, even though you weren’t soliciting funds, you received one particularly large, anonymous cash donation to further your efforts.
Kramer: As we mentioned in a blog post, we received an anonymous donation of $50,000 in 2017. This gift allowed us to expand Jengo by using some of the prior art to directly challenge other Blackbird patents in administrative proceedings.
Greathouse: You went on the offensive, which is rare, especially for a startup. My research indicates that about 87% of such suits are settled out of court. I understand that the firm that sued you was, at the time, one of the ten most active IP litigation firms in the US. Was their business model impacted by Jengo?
Kramer: In the one-year period immediately preceding Project Jengo, (mid-2016 through mid-2017) Blackbird filed more than 65 cases. Since Project Jengo launched, the number of cases Blackbird has filed has fallen to an average rate of ten per year.
Not only are they filing fewer cases, but Blackbird as an organization seems to be operating with fewer resources than they did at their peak. When we launched Project Jengo in May 2017, the Blackbird website identified a total team of twelve: six lawyers, including two co-founders, four litigation counsel, as well as a patent analysis group of six. Today, based on a review of the website and LinkedIn, it appears only three staff remain: one co-founder, one litigation counsel, and one member of the patent analysis group.
Greathouse: What has the overall reaction been? I assume you haven’t been named in any other IP suits? Have any unforeseen, beneficial business connections resulted from Jengo?
Kramer: We’ve heard from a number of colleagues at other companies, both large and small, facing these issues. I don’t think we’ve found a response that works for every circumstance, but they’ve been eager to think about their own approaches and bounce them off us. They’re certainly thinking about doing more than rolling over. And your assumption is correct, we haven’t seen any other patent cases since we launched Project Jengo.
Greathouse: The company said from the start that it would only operate Jengo for the duration of the lawsuit. However, given the positive impact it has made so far, have you given any consideration to turning it over to an organization that could continue its mission?
Kramer: There are a number of really thoughtful groups operating in this space to pool resources and be creative. Although we didn’t want to endorse any one of them to the exclusion of the others, we hope they will continue to expand. I think we’ve provided a blueprint that may not work for everyone but can be used to make patent trolls think twice before sticking their hands into too many litigation matters.
Greathouse: What do you make of the fact that Congress is contemplating legislation that would make it easier, and potentially more profitable, to sue startups for alleged patent infringement? In particular, it appears that the STRONG act would significantly rollback some of the recent IP-related Supreme Court rulings.
Kramer: The problematic incentive structure that makes patent trolling a profitable enterprise involves abuse of public facilities and the court system, so I welcome debate and discussion in government about how to make sure those systems are working the right way. There’s been a strong push in the right direction over the past several years, including a series of executive orders issued by President Obama in 2013 and important Supreme Court rulings that have supported more effective options for litigants.
It’s naive to expect that those who have benefited richly from the patent troll system over the years would let it die without a fight, so we continue to see a number of efforts at the federal and state level pushing in both directions to address this issue. Based on what we’ve seen in response to Project Jengo, I do think there’s a broad base of passionate support that will push back on any efforts to reinvigorate patent trolls.
Greathouse: If you had the power, what changes would you make to the US patent system to level the playing field for tech companies in general and startups in particular?
Kramer: That’s a hard one. I don’t think we have specific proposals that we are advocating; we created Project Jengo to solve our own problem. But I would say it would be a good start to make sure the USPTO is issuing narrowly-tailored software patents and making it very easy to invalidate or narrow previously issued broad software patents, many of which were issued before the technology was fully understood.
Greathouse: What advice do you have for startups that have been sued for infringement but don’t have the technical chops to launch a Jengo type counter-strategy?
Kramer: Take the longest-term approach you can afford to. I’ve been impressed by the consistent way Cloudflare’s founders have always done what they think is right for the long-term, rather than giving in to short-term expediency… no matter how tempting that may seem.
We know that we were able to take an approach in this case that wouldn’t have been available to Cloudflare just a few years earlier in our development, and there certainly was a sense that we were paying it forward, or backwards, based on the fact we were fortunate such a case hadn’t been filed against Cloudflare when we were smaller and more vulnerable.
Greathouse: Are there proactive measures a startup can take before they are embroiled in an IP suit that will increase their chances of a successful outcome?
Kramer: The existence of broad software patents creates a minefield that can be impossible to maneuver, so trying to avoid it altogether may be a fool’s errand involving a lot of time, money, and distracting from your core efforts. Continue to be bold and innovative. Hopefully, the lawyers and policy makers can make things better and clear the road for you.
You can follow John on Twitter: @johngreathouse.