SC business

Columbia software developer vows to fight lawsuit filed by ‘patent troll’

Case filed in Texas also ensnares big-name gamemakers as patent disputes increase in the technology industryCase filed in Texas also ensnares big-name gamemakersas patent disputes increase in the technology industry

nophillips@thestate.comDecember 24, 2012 

The email flashed onto Austin Meyer’s phone in the middle of a July air show in Osh Kosh, Wis.

The message was from a Texas lawyer, offering to represent Meyer in a lawsuit. Meyer, a Columbia resident who makes flight-simulation software, thought the lawyer was mistaken.

“I e-mailed back, ‘You’ve obviously got me confused with somebody else,’” Meyer said. “I thought, ‘I’m in Osh Kosh, Wisconsin. I live in Columbia, S.C. I’ve never been to Texas.’

“I got home and some guy comes to the door with the suit.”

Sooner or later, this sort of lawsuit was bound to happen to Meyer, especially since his X-Plane flight simulator software is so well-known among the aviation community. He was being sued for patent infringement, a growing issue in the tech industry.

In 2011, 2,150 companies were involved in 5,842 lawsuits over patents, according to a paper released in June by James Bessen and Michael J. Meurer of the Harvard School of Law. Those lawsuits cost an estimated $29 billion to defend.

Bessen, who has written extensively on patents as an economist at Harvard, said as recently as 2008 he and Meurer concluded in a book that patent lawsuits were a minor problem. But their opinion has changed.

“In the space of a few years, things changed drastically,” Bessen said. “There’s been an explosion of litigation.”

The companies that file the lawsuits have become known as “patent trolls,” an unflattering nickname bestowed upon them by the tech industry. Typically, patent trolls do not make a product or sell a service but own multiple patents that they defend in court.

Most companies that are sued settle out of court. It’s just too much trouble, and too expensive, to fight.

The lawsuit filed against Meyer’s company, Laminar Research, accuses Meyer of violating a patent owned by Uniloc, a Luxembourg-based company. In the complaint, Uniloc said that Meyer was infringing on its patent by using Android-based phone and tablet apps that require communication with a server to perform a license check.

The lawsuit asks a jury to award Uniloc damages and a royalty for use of the technology.

Uniloc’s website referred press inquiries to an email address for Brad Davis, who also was listed as the company’s business development officer.

Davis declined comment through an email message: “It’s our policy not to comment regarding ongoing litigation.”

The company’s website says, “Uniloc is in the business of finding big ideas.” It also says its development model is to “Look at many ideas. Pick an outstanding one. Patent it. Commercialize it. Reap the rewards.”

Meyer isn’t the only company Uniloc slapped with a lawsuit. Eight other companies, including Electronic Arts, which owns popular video games such as Madden NFL, and Mojang, the maker of Minecraft, have been sued by Uniloc for the same reason.

This time, the companies have joined forces to fight the lawsuits.

X-Plane has been wildly successful for Meyer. He created the flight simulator while a college student and began selling it shortly after graduation. X-Plane is one of the top flight simulators for professional pilots and is popular with aviation enthusiasts who use it as a video game. The latest version sells online for $69.99, and apps are available for iPhones, iPads and Androids.

Meyer admits to using the technology he is being sued over. Whenever one of his X-Plane clients logs onto the program, the simulator sends a message from the user’s phone or tablet to an outside server to make sure that person has paid for the program.

But it’s technology that has been in use since Meyer created X-Plane in 1994.

In a response to the lawsuit, Meyer’s attorneys said the video game industry has been using that technology since the 1980s to control illegal copying and distribution.

The patent in dispute did not originate with Uniloc but was owned by another software company. Uniloc acquired it in 2012, “and promptly thereafter initiated the instant lawsuit,” the defense attorneys wrote.

Bessen, the Harvard Law School economist, said the lawsuit is ridiculous. He read over the disputed patent and said it was typical for one of these lawsuits.

“It’s just a big word game,” Bessen said. “They’re claiming abstract concepts. It’s really hard to distinguish what it really does concern.”

But the challenge for attorneys representing Meyer and the other defendants will be guiding a jury through complicated technical concepts and convince them to rule in their favor.

Uniloc filed the lawsuit in East Texas for a reason, Bessen said. The area has earned a reputation as being a “patent-friendly place,” and patent lawsuits have turned into a cottage industry there, he said.

It also is unusual for people like Meyer to fight back.

“Patent law is extremely expensive,” Bessen said.

A patent lawsuit defense can cost millions. But Meyer and the other defendants have agreed to share legal fees, which means Meyer will spend an estimated $200,000 to fight the case.

About 95 percent of patent lawsuits filed are settled out of court, Bessen said.

That’s part of the strategy behind many patent lawsuits and the way the companies that file the suits make money, Bessen said. They file the suit and follow up with a letter offering to settle for a few hundred thousand dollars, he said. The parties typically sign non-disclosure agreements so no one else ever learns how much was paid out.

But Meyer refuses to settle. He says he will go it alone if the other companies later decide to settle with Uniloc. If that happens, he could wind up spending more than $1 million to defend his company.

“I believe that Uniloc and other companies like Uniloc file lawsuits with the knowledge that the cost to defend the lawsuit is so high that many companies would rather pay the amount demanded than defend themselves in court,” Meyer said. “And that’s wrong.”

Besides the direct expense of legal fees, Meyer said the lawsuit is costing his company, his customers and his community.

Meyer recently created a new company called Xavion, which makes an iPad app that backs up flight controls in an airplane cockpit. He launched the app earlier this month, but it’s only available on Apple products. That’s because of the lawsuit.

Meyer does not want his new company to get tied up in the lawsuit, which only complains about the use of Android apps. He believes Xavion has the potential to save lives if pilots can use it to land a plane during instrument or engine failure. But pilots with Android-based devices won’t have access to it.

“What happens to the pilot and the people in the back of his plane?” Meyer said.

Meyer is well-known in the Columbia community for his generosity with animal welfare agencies.

Earlier this year, the Meyer-Finlay Pet Adoption Center opened on Bower Parkway, thanks to a $1.5 million donation from Meyer and his wife. Now, the couple have pledged to match up to $1 million for a new animal shelter in Kershaw County.

The legal fees potentially will suck up money that could have gone to other local charities, Meyer said.

“What could I have done with the money?” he said. “I don’t know. But I have a history of doing some pretty cool things.”

But Austin said he would rather spend the money and stand up to a lawsuit that he believes is wrong.

“I want to tell my side of the story so that they know there’s at least one person who’s not going to roll over and let himself be intimidated and say, ‘OK, I won’t say anything. I’ll sign your non-disclosure agreement. Just make it stop.’”

Reach Phillips at (803) 771-8307.

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