Cloudflare beat a patent troll

In the summer of 2017, we wrote about a battle between Cloudflare, the San Francisco-based internet security and content delivery network, and two attorneys who’d previously litigated intellectual property cases on behalf of some of the largest tech companies. The attorneys had come together to form Blackbird Technologies, a Boston- and Chicago-based firm that quickly amassed dozens of patents, then began using them to file dozens of patent infringement lawsuits against companies, including Cloudflare.

The suit was typical in every way, except how Cloudflare responded to it. Rather than quietly settle, as have some targets of Blackbird and other so-called patent trolls, Cloudflare decided to fight back in a very public way, blogging extensively, talking with news outlets like ours, and, most crucially, turning to anyone and everyone who could help it locate prior art. The idea wasn’t merely to invalidate the patent that Blackbird was using to sue Cloudflare — but to invalidate all of Blackbird’s patents. Cloudlfare declared war.

Cloudflare won, too. At least, the case against Cloudflare itself was eventually dismissed, and in a postmortem published yesterday, the company described in detail its game plan and many more specifics around its efforts to crowdsource prior art that might invalidate Blackbird’s patents.

It revealed, for example, that it had received 275 total unique submissions from 155 individuals on 49 separate patents, and multiple submissions on 26 patents. Roughly 40% of these related to the patent asserted against Cloudflare, but these individuals also turned up prior art submissions that could help protect Niantic (which also is trying to bat back Blackbird), as well as Lululemon and New Balance, both of which have been sued previously by Blackbird over a patent Blackbird owns relating to a “sports bra having an integral storage pouch.”

Cloudflare also went hard after the founders of Blackbird, filing ethics complaints against both of them based on Blackbird’s self-described “new model” of pursuing intellectual property claims, and taking these arguments to the bar association in Massachusetts and Illinois, as well as approaching the United States Patent and Trademark. Cloudflare stressed in these complaints rules that prohibit lawyers from acquiring a cause of action to assert on their own behalf, or in the alternative, rules prohibiting attorneys to split contingency fees with a non-attorney. Where those complaints lead is a question mark for now, at least publicly (disciplinary proceedings are mostly confidential).  But it’s worth noting that only one of those founders is now featured on Blackbird’s website. The other, Chris Freeman, formerly of Kirkland & Ellis, has decamped to a company that funds litigation in Chicago called Burford.

It’s a feel-good story in a vast sea of bad news. The question now is: what’s next? Though some might hope Cloudflare will somehow continue its campaign against injustice, Cloudflare has said from the outset that once its legal tangle with Blackbird had ended, it was getting out of the patent-troll-fighting business, a decision that the company’s general counsel, Doug Kramer, reaffirmed to us in conversation late last week about the case. As he put it, Cloudflare’s crusade was never meant to become “life-long advocacy” given the company’s other, more pressing concerns — including going public in September. 

Still, Kramer acknowledges that he has received “a lot of phone calls from other general counsels or IP lawyers and CEOs [who are also the targets of patent lawsuits] who’ve said, ‘Isn’t there something we can here other than roll over and write a check?’”

They’re understandably trying to piggyback off Cloudflare’s learnings. “I don’t know that I’ve seen anything to the extent that we’ve done it.”

Which brings us to the point of yesterday’s post, which wasn’t simply to crow about its win over Blackbird, no pun intended. It was also to thank “the community” on which Cloudflare “relied so much.” And it was to “make clear there are other ways forward here,” says Kramer, who hopes other companies will use part of its blueprint, as well as establish their own. As Kramer observes, once a patent case is filed against a company, “the options are all bad options, and a lot of companies take the least bad option,” which is to write a check to settle the thing. It’s why companies like Blackbird gain momentum. “They face very little resistance.”

Kramer doesn’t necessarily blame companies for folding easily. Even when things go a company’s way, as with Cloudflare, litigation can take years and can cost a company many hundreds of thousands, if not multiple millions, of dollars. “As a litigation matter, we knocked this out of the park on the first pitch,” he says, “but it cost us more than if we’d just written a check.”

Still, Kramer hopes to see more companies “introduce more resistance,” and he hopes that Cloudflare’s refusal to “roll over” will inspire them to fight, too.

One tool at their disposal, he notes, are “very active, smart, thoughtful people who’ve organized themselves across in-house positions and third parties dedicated specifically to pushing back again these practices.”

Another are sympathetic politicians like Eric Lesser, a state senator in Massachusetts who views patent trolls as a threat to his state’s economy and is doing what he can to banish them and their infringement claims.

Another, of course, are engineers and others who build things and don’t like the rise of firms profiting by means of licensing or litigation rather than by producing their own goods or services. Indeed, Kramer acknowledges that not every company has the financial muscle of a Cloudflare, which raised more than $300 million from investors before going public, as well as attracted an anonymous donation of $50,000 to support its efforts against Blackbird. But the support of communities outside a company shouldn’t be underestimated, he suggests.

“We really came to understand that there a lot of people out there — colleagues and friends and like-minded folks in the commercial sector and really just the man on the street at a lot of tech companies — that are really bothered” by the abuse of patents by companies that obtain them not to use them but to demand royalties and sue for damages.

Cloudflare “didn’t fix [this broader issue]. It still exists,” Kramer continues. But “we were able to leverage that sentiment. Hopefully, it’s evidence for others that there is support out there.”

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