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Netflix Sued Over Fradulently Obtained Patents 193

Posted by Zonk
from the dirty-pool dept.
An anonymous reader writes "Techdirt has a story about a new class action lawsuit against Netflix, claiming that the patents the company is using to sue Blockbuster were obtained fraudulently. Specifically, the lawsuit claims that Netflix was well aware of prior art, but did not include it in its patent filing, as required by law. The lawsuit also claims that Netflix then used these fraudulently obtained patents to scare others out of the market, in violation of antitrust law. 'Certainly, it makes for an interesting argument. Patents grant a government-backed monopoly -- which should get you around any antitrust violations. However, if that patent is obtained fraudulently, then I can see a pretty compelling claim that you've abused antitrust law. It would be interesting if other such cases start popping up (and, indeed, the lawyer who sent it to us said his firm is looking for additional patents to go after in this manner).'"
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Netflix Sued Over Fradulently Obtained Patents

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  • About time... (Score:2, Insightful)

    by astonishedelf (845821)
    that someone found a way to sue the bejesus out of patent trolls and their BS patents...
    • Re:About time... (Score:4, Insightful)

      by plover (150551) * on Friday May 18, 2007 @04:34PM (#19184279) Homepage Journal
      What, because one patent troll sues another patent troll we should celebrate?

      Now, if someone were to invalidate all software patents, that would be a reason to celebrate. This is just the (hopeful) invalidation of two patents out of two million, and perhaps the spanking of yet another company acting evil.

      In the time it's taking me to write this response, I imagine three other software patents are being granted. Even if this moves forward (which it hasn't yet) we're still moving backwards.

      • by Mahjub Sa'aden (1100387) <msaaden@gmail.com> on Friday May 18, 2007 @04:54PM (#19184567)
        Instead of invalidating software patents, we could shorten their term to a reasonable period (two or three years generally ensures obsolescence for most software products), and drastically expand the criteria against which a particular software patent is judged invalid. Would that not be at least a workable compromise?
        • by Qzukk (229616)
          Would that not be at least a workable compromise?

          It would be a reasonable thing to do, and doing reasonable things seems to be anathema to most governments.
          • Re: (Score:3, Insightful)

            Most governments and most people, it would seem.

            Maybe the problem is that lawmakers simply don't understand that software is not an analog to the real world. They don't understand that it moves faster, and that software development often simply doesn't have to bear the cost of traditional inventions and innovations. Not to say that there aren't software products or implementations worthy of patenting, but rather to say that patents in a software world are simply different.

            Or maybe, just maybe, non-tech
            • Re: (Score:3, Funny)

              by plover (150551) *

              Maybe the problem is that lawmakers simply don't understand that software is not an analog to the real world. [...] Or maybe, just maybe, non-technical people are so used to being explained things in terms of analogy they tend to lose sight of the fact that simply because an analogy is the most useful or expedient method of explaining a concept the concept itself isn't bound by the realities an analogy might suggest.

              So if I understand you correctly, software patents should be treated like soft wax sculpt

              • YES! (Score:3, Funny)

                So if I understand you correctly, software patents should be treated like soft wax sculptures that don't last very long, but hardware patents are more like durable cast iron hammers. That means we can melt software patents into candles, using them for lighting and ending the energy crisis, while we can use hardware patents to pound legal textbooks into pulpwood to burn for heat, ending the energy crisis. Both end up solving the energy crisis, so shouldn't we treat them the same?

                Have you considered running for Congress? Because you are ready to make laws!

        • Re: (Score:3, Interesting)

          by PsychosisC (620748)

          Instead of invalidating software patents, we could shorten their term to a reasonable period (two or three years generally ensures obsolescence for most software products), and drastically expand the criteria against which a particular software patent is judged invalid. Would that not be at least a workable compromise?

          That is simply absurd. Two or three years seems like a reasonable period a junk patent, but this is terribly unfair for meaningful discoveries which arguably justify a patent, like RSA.

          Hypo

          • by rubycodez (864176)
            two or three years of exclusivity versus a thousand years of widespread use? better yet, zero years of exclusivity for math (algorithms)
          • MOD PARENT UP (Score:4, Insightful)

            by cronius (813431) on Friday May 18, 2007 @06:53PM (#19186017)

            (No, I am not endorsing patents on algorithms. RSA shouldn't have been patentable. It's just shortened patent periods is not a reasonable compromise, and far from 'Insightful')
            I agree completely. Programming is math, and patenting math is meaningless and definitely does not help the progression of science. Saying that patent laws should be rewritten as a "compromise" does not make the original idea of software patents any better.
            • Re: (Score:3, Insightful)

              by Rakishi (759894)
              Programming is math, and patenting math is meaningless and definitely does not help the progression of science.

              What isn't math then? I can describe almost anything as a set of formulas, even complex machines are just self-computing "programs" made out of physical material.
      • by iamwahoo2 (594922)
        If Netflix loses, it creates a precedent. Anyone whom files for an obvious patent or a patent in which there is clear and obvious prior art can be sued for exploiting the patent system to create an anti-competitive environment. In the context of software patents, this would be huge because so many software patents are junk.
  • One Click Shopping (Score:4, Insightful)

    by popo (107611) on Friday May 18, 2007 @04:29PM (#19184201) Homepage
    Plenty of video games featured in-game stores with one click shopping. That should constitute prior art. Amazon knew about these but discounted them because the transactions were virtual.
    • by snooo53 (663796) *
      The problem with these types of prior art is that you have to prove that it is obvious how a person who is skilled in the art could implement ALL the aspects of the invention that Amazon or whomever is claiming. Yeah, the idea of "one-click to buy" is pretty basic, but the steps they lay out in their claims are more involved:

      A method of placing an order for an item comprising: under control of a client system, displaying information identifying the item; and in response to only a single action being per

      • Re: (Score:3, Insightful)

        by GooberToo (74388)
        A method of placing an order for an item comprising: under control of a client system, displaying information identifying the item; and in response to only a single action being performed, sending a request to order the item along with an identifier of a purchaser of the item to a server system; under control of a single-action ordering component of the server system, receiving the request; retrieving additional information previously stored for the purchaser identified by the identifier in the received req
        • by snooo53 (663796) *

          It's easy to say "look! prior art", but what I'm getting at is to prove it in court it takes a lot more of an argument, since the video game example doesn't specifically show combining all those aspects together.

          So essentially you have the uphill battle of showing me as a judge or jury something that proves that the idea of a single click to order something has been published before, all the aspects of the client-server communication have been published before, and that those documents have hinted that th

          • Yes, showing that something is prior art is difficult and expensive. Which is a huge problem: There's no incentive for the inventor to find prior art, as it would limit his patent. There's no incentive for the USPTO to find prior art, as it makes them less "productive" (fewer patents / dollar). Which means that the burden of proof is on every programmer. We all must be able to prove in court at any time that any of the probably thousands of patents we unknowingly violate are invalid due to prior art.
      • Well the patent doesn't tell you how to do the client-server part either. All it says is that client and server code is needed (duh), and that if you actually do figure out how to write it, you're SOL, because the government granted Amazon a monopoly on it.

        In other words, in practice, software patents really only protect the obvious part. Any idiot could look at one-click shopping and think, "I bet the browser is displaying it, and sending a request to the server with an identifier, etc." In contrast to
  • by zappepcs (820751) on Friday May 18, 2007 @04:31PM (#19184227) Journal
    patent troll troll?

    It would be nice to see this force reasonable patent reform.
  • I don't care about suing people or companies, what I care about is the ambulance chacing all these friggin' vampire lawyers do.

    Without lawyers I am quite certain the world be a better place.

    (Before anyone starts, yes I know there are good decent lawyers who do their jobs really well who practice criminal law, not this corporate bullshit)
    • Re: (Score:3, Interesting)

      by orclevegam (940336)

      Without lawyers I am quite certain the world be a better place. (Before anyone starts, yes I know there are good decent lawyers who do their jobs really well who practice criminal law, not this corporate bullshit)

      This is semi-offtopic at this point, but here's a good start, ban lawyers from holding political office. 90% of the problems we have with lawyers stem from the fact that almost all politicians started as lawyers, and so it's impossible to pass any laws that have a negative impact on the income of lawyers, and laws pass all the time that improve the income of lawyers.

      • Re: (Score:2, Insightful)

        Ban lawyers from holding political office?? Of course! It makes perfect sense to stop those who spend years studying law from actually making laws. That would be like outlawing doctors from doing medical research. I for one like the idea that most of the people creating and managing our laws are people who are actually certified to do so.
        • Re: (Score:3, Insightful)

          by nebaz (453974) *
          The difference between law and medicine is that medicine is a discipline of discovery. Law is that of human creation. Lawyers can shape laws for their own benefit, whereas doctors could only discover what actually exists. Being a lawyer only makes you familiar with the current state of law. There is no absolute requirement that
          laws be written the way they are. Harder to change the realities of science.
        • It makes perfect sense to stop those who spend years studying law from actually making laws.

          The problem is you have a conflict of interest. The lawyers make their money by exploiting loopholes in the legal system, so it's in their best interest to keep those loopholes in place. You don't have to be a lawyer to study law, but people seem to assume that politicians MUST be lawyers because they know the law. It's the same principle as banning people on a sports team from placing bets on their games, it's a conflict of interest.

        • by Schemat1c (464768)

          Ban lawyers from holding political office?? Of course! It makes perfect sense to stop those who spend years studying law from actually making laws.
          It makes perfect sense to stop those that spend years learning a language that the average person cannot understand and clog the system with libraries of useless laws meant only to benefit the wealthy.
      • by bhmit1 (2270)
        Considering they are supposed to be writing the laws, I don't know how wise it is to have people that don't understand the law in that position. It's like banning economist from holding a position at the federal reserve.

        What would help is to end the special interest influence. Law firms are huge donors to political groups. Make it so that people are the only ones able to donate, and put a cap on how much they can donate per year. No golf trips, no vacations, no planes, etc. Make politicians go back to
  • by RingDev (879105) on Friday May 18, 2007 @04:33PM (#19184261) Homepage Journal
    "and, indeed, the lawyer who sent it to us said his firm is looking for additional patents to go after in this manner"

    Forget IT, go to law school.

    1) Help company get patents
    2) Profit
    3) Help company threaten to sue infringers
    4) Profit
    5) Defend company against other lawyers representing other patents
    6) Profit
    7) Sue other companies for bogus patents
    8) Profit

    Heck, even if the company they represent gets burned and goes under, they still walk away with no penalty. It's like all the financial benefits of inventing something, with out the work or risk!

    -Rick
    • by Mahjub Sa'aden (1100387) <msaaden@gmail.com> on Friday May 18, 2007 @04:40PM (#19184363)
      I have patented several products and have a patent pending (in manufacturing, not in software, so please no-one try to dissolve me in acid) for products and techniques I think are at least fairly innovative. That said, it's no use blaming the lawyers for the state of affair in the US and Canada. The fact that they're needed at every step of the process -- truly and absolutely needed -- is a testament not to lawyers greed but to legislative bloat.

      Now, you can argue that lawyers and lawmakers form a recursive loop, but I'll leave that for people smarter than I.
      • by mazarin5 (309432)
        George Washington once held an opponent's wife's hand... in a jar of acid... at a party.
      • is a testament not to lawyers greed but to legislative bloat.

        You are aware that the majority of legislators are, in fact, lawyers?
      • int main(int argc, char **argv)
        {
        /*Some code goes here*/
        BuyoffLawmakers();
        /*Some more code goes here*/
        return 0;
        }

        bool BuyoffLaymakers()
        {
        /*Some code goes here*/
        HireLawyers();
        /*Some code goes here*/
        return true;
        }

        bool HireLawyers()
        {
        /*Some code goes here*/
        BuyoffLawmakers();
        /*Some more code goes here*/
        return true;
        }

        So I prototyped the situation above, and all I get is "Out of stack space" :(

  • Hard to prove (Score:4, Insightful)

    by umStefa (583709) on Friday May 18, 2007 @04:35PM (#19184297) Homepage
    While successful lawsuits of this type could result in patent reform, since having a weak patent (with clear prior art) could end up costing company's money instead of being used as corporate weapons, an instantanious problem arises.

    You need to be able to prove that the company ignored prior art and if a case comes down to two people saying different things the courts will generally find in favor of the defendant.

    I can see it now:

    Lawyer 1: "You knew about the prior art before you filed for the patent because your secretary told me so!"

    Defendant: "No I didn't!"

    Judge: "Case dismissed"

    In order for this cases to be sucessful, hard evidence needs to found (i.e. an e-mail saying "Lets ignore the prior art"). Otherwise the only ones who will win are the lawyers (as always).
    • Re: (Score:3, Insightful)

      by kebes (861706)

      You need to be able to prove that the company ignored prior art

      That's part of patent law I've never understood. I've been told by people (who have patents) that it is in their best interest to *NOT* do a patent search before applying for a patent, since that search could be used against them later, to prove willful infringement, which carries a stiffer penalty (I guess) than mere incidental infringement.

      But, why the heck is the system run this way? A patent application is supposed to be a legal documen

      • by geekoid (135745)
        Those people are wrong.

        They take a great risk if they wait to find out later there patent is invalid.

        Now, I don't pay for a search, I do it myself. Still risky, but I can claim I did the search.
      • That's part of patent law I've never understood. I've been told by people (who have patents) that it is in their best interest to *NOT* do a patent search before applying for a patent, since that search could be used against them later, to prove willful infringement, which carries a stiffer penalty (I guess) than mere incidental infringement.

        I don't know about for patents, but failure to practice due diligence will get you into trouble in other legal circumstances.
      • At least the way I've been told it works is this:

        If you are filing for a patent, you do need to perform searches for prior art. However, you always do so with your company's lawyer present (and maybe even let them work the mouse and give you advice about things on the fly).

        No law requires that you explain what you did or said while consulting with your attorney. Thus, you can legally testify that you never searched for the patent, even if you did know about it the whole time. If the truth somehow came ou
      • by 1ucius (697592)

        That's part of patent law I've never understood. I've been told by people (who have patents) that it is in their best interest to *NOT* do a patent search before applying for a patent, since that search could be used against them later, to prove willful infringement, which carries a stiffer penalty (I guess) than mere incidental infringement. But, why the heck is the system run this way?

        They are trying to distinguish between the innocent infringer and the one who says 'I don't care, let them care.'

        Obvio

        • You should *at least* research common, similar, technology. It's not about being perfect, it's about being reasonably honest. To make things short: When our reason tells us something is unreasonable to expect, it is.
      • That's part of patent law I've never understood. I've been told by people (who have patents) that it is in their best interest to *NOT* do a patent search before applying for a patent, since that search could be used against them later, to prove willful infringement, which carries a stiffer penalty (I guess) than mere incidental infringement.

        Other posters have presented a number of reasons why an inventor might not do a search. Here's another one.

        If you search for prior art, you are obligated by law to dis
  • by LOTHAR, of the Hill (14645) on Friday May 18, 2007 @04:35PM (#19184299)
    Someone would sue the patent office, charging negligence. Maybe get an injunction against them from issuing any patents until they can issue them properly.

    now that's an amusing thought.
  • I'm curious how this could be a class-action suit. I thought that's when a huge group of people band together to fight a company. This looks like Blockbuster v. Netflix.
    • Re: (Score:3, Informative)

      by DragonWriter (970822)

      I'm curious how this could be a class-action suit.

      Probably because the lawyer filing the case is going to claim a wide range of potential victims constituting a valid "class" through the antitrust allegations.

      I thought that's when a huge group of people band together to fight a company.

      No, when people band together, you get a big direct action suit with lots of plaintiffs (like the one depicted in Erin Brockovich). A class action suit is when a lawyer and a small number of plaintiffs allege the existence of

  • That this is a sign of things to come.
  • by jandrese (485) <kensama@vt.edu> on Friday May 18, 2007 @04:46PM (#19184431) Homepage Journal
    Even as a person who has used Netflix for years now and absolutely love their service, I can say that if this is true they should be nailed to the wall over it. This is the sort of Patent System BS that must not be allowed to stand if we are to maintain our technology superiority as a country.

    It's said that no great idea ever comes out of nowhere. All of the greats stood of the shoulders of giants. However, if people get it into their head to abuse the patent system like this, then there will be no shoulders to stand on and in the end no great achievements.
    • by plierhead (570797)

      Even as a person who has used Netflix for years now and absolutely love their service, I can say that if this is true they should be nailed to the wall over it. This is the sort of Patent System BS that must not be allowed to stand if we are to maintain our technology superiority as a country.

      yeah, except that if NetFlix hadn't done what they did, they might have been taken down themselves by someone else doing exactly the same thing - to them.

      The patent system is a nuclear standoff. Everyone would be

  • by Kelz (611260)
    But it seems to me these lawyers have to prove that Netflix "knew something" about the prior art.

    So unless they can subpeona some emails from WAY back when they got the patents talking about something like that, all Netflix has to do is claim ignorance.
    • But it seems to me these lawyers have to prove that Netflix "knew something" about the prior art.

      So unless they can subpeona some emails from WAY back when they got the patents talking about something like that, all Netflix has to do is claim ignorance.

      Sure, direct evidence would be nice, but circumstantial evidence works to. And, in a civil case, the standard of proof is "preponderance of the evidence" (that is, the jury must merely be conviced that it is more likely than not that the charge is true), not

      • You are right on both points. But I'm having a hard time imagining what sort of circumstantial evidence might exist in a case like this. In a criminal case, it might be something like "witnesses saw suspect walking away from the scene of the crime with what appeared to be blood stains on his clothing". In this case, what? "Netflix employee was spotted at library"?

        It's kind of interesting; patent attorneys at corporations often tell the engineers not to do patent searches on their own. If the company subsequ

      • Proving fraud on the patent office to the point where you can get a patent declared unenforceable requires a showing of "clear and convincing" evidence, which is a higher standard than preponderance of the evidence, but a lower standard than "beyond a reasonable doubt."

        Also, to show "inequitable conduct," you have to show two things. First, that the art is both "material to patentability" and "not cumulative." In other words, if the "prior art" in this case is either less pertinent than the art that was c
    • Re: (Score:3, Informative)

      by Todd Knarr (15451)

      Actually it's "knew or should reasonably have known". That second part is the kicker. When applying for a patent an applicant's required by law to do certain due-diligence research (including the prior-art search) first and include the results in the application. If a reasonable person doing the research required by law would've discovered the prior art, then whether Netflix actually knew about it doesn't matter.

      Or that's the theory, anyway. In practice you get into extended argument about what's reasonabl

  • Who's in the class? (Score:5, Interesting)

    by jfengel (409917) on Friday May 18, 2007 @04:48PM (#19184469) Homepage Journal
    I can see Blockbuster suing them, or some other company whom Netflix threatened. But I can't imagine that there are enough of those companies to form a "class".

    The article is pretty vague on exactly what the evidence is. The actual lawsuit [scribd.com] is more informative, but harder to read.

    The class (as I finally figured out on page 17 of the lawsuit) is Netflix customers, of whom Dennis Dilbeck is the representative sample. They're suing based on the idea that Netflix's prices are higher than they should be, because competition by Blockbuster should have brought prices down. I just can't see a judge buying it; these people all paid for Netflix's service at the asking price voluntarily.

    From what I've read so far, I'm just not buying their claim. They are citing one patent in particular, which is about delivery of resources based on people making requests on a computer, but that's considerably different from Netflix's rental queue.

    (I'm assuming that patents are not a completely stupid idea. Please, if you're in the "all patents are inherently evil" category, can you just assume that I agree with you and go preach to the choir in some other thread?)

    I don't consider Netflix's idea at all obvious. I thought it was pretty neat when I came up with it: the idea of a rental service which doesn't have a due date is pretty cool and I'd never heard of it.

    I know we hate patents, but I hate idiot class-action lawsuits even more. I've been involved in dozens of them; I literally throw them away unopened when they arrive in the mail. The lawyers always make money and I always get a coupon for 30 cents off my next bag of Chex Mix.

    Sometimes, I'm even suing myself. Some of those lawsuits were shareholders suing the company. Well, I'm still a shareholder, so I'm suing myself.

    All the lawyers need to find is one fool member of the class to make a claim, and the company will often settle rather than fight. It's free money for class-action lawyers.
    • Okay. You are suggesting that it's not worth suing to learn whether Netflix holds this patent legitimately (as in "no prior art") because Netflix isn't actually using what it has patented?
      I myself am not against class action lawsuits absolutely. In this case, if Netflix loses, we get rid of a pesky patent.
      So, if the patented method could be useful for anyone else in Internet DVD rental, then if this patent is (especially) illegitimate, Netflix not using the method makes things worse.
      • You are suggesting that it's not worth suing to learn whether Netflix holds this patent legitimately (as in "no prior art") because Netflix isn't actually using what it has patented?

        A class action suit isn't going to find that out. It is going to end up either (a) dismissed, or (b) with a settlement in which Netflix will not admit wrongdoing but will give a pile of money to the lawyers and some token discount or payout to the class members.

        Its more likely that Blockbuster v. Netflix will actually end up wit

        • Thanks for clarifying, and for reminding me of certain facts.
          I'd like to believe that a "class" could actually win a class-action lawsuit. You'd think that, after "people who bought Sony CDs vs. Sony & its rootkits," I'd know better.
          And a patent that the holder is using is better, or less bad, than a patent that's just being sat on.
  • Well, (Score:2, Interesting)

    by romland (192158)
    this comes as no surprise to any big corporation, I think. There's a reason why, at Microsoft (for instance), you are told to *not* investigate whether something is patented or not. Just do it. That way, should it go to court, they can honestly claim that they had no idea about prior art and thus be in line with law.

    Slightly ironic. :)
    • IANAL, but...
      Isn't there a positive obligation to investigate prior art before filing. Just like you have a positive obligation to keep your walkway free of ice, protect children from attracive nuiscences and pay your taxes?

      Wait, I have a car analogy too! If you're driving your car, and you close your eyes and speed through every stop sign, then shouldn't you still be ticketed (AFAIK, not seeing a stop sign is a legitimite, although difficult to prove, defense. But I'm not very sure as I made up the fact
      • Re: (Score:3, Interesting)

        by onemorechip (816444)
        The attorneys and the patent office are supposed to do due diligence when a patent is applied for. The fear is that an engineer, searching for prior art, may uncover a patent that the company is unknowingly infringing. Then the unknowing infringement becomes a willful infringement from that point forward, with a potential treble damage award. Whereas, an attorney might find the same patent but would not know that the company he represents is infringing the patent.

        Nobody (that I'm aware of) does a patent se

  • by HaeMaker (221642) on Friday May 18, 2007 @04:49PM (#19184495) Homepage
    What company HASN'T done this?

    This isn't fraud, this is standard operating procedure.

    • by Pop69 (700500)
      This isn't fraud, this is standard operating procedure.

      Just because everybody does it doesn't mean it isn't fraud.
  • by hellfire (86129) <deviladv&gmail,com> on Friday May 18, 2007 @06:35PM (#19185803) Homepage
    However, if that patent is obtained fraudulently, then I can see a pretty compelling claim that you've abused antitrust law.

    I continue to be amazed at how technology people are so astonishly bad with understanding Anti-trust law.

    Patents grant you a type of monopoly over the technology you are using, but they do not automatically grant you a monopoly over the marketspace you are in. Therefore you are not in violation of anti-trust laws if you lose a patent. You simply lose the ability to sue someone if they come along and copy your technology. How can you be abusing power you no longer have?

    Is netflix in hot water over abusing patent laws? You betcha, but anti-trust laws are not their problem.
    • Those patents which wholly define the market that you're in do in fact grant a monopoly over the entire market you're in. If I got a patent on "a method for offsetting the cost of bread manufacture, by locating a plurality of interested humans, conveying the bread to the aforementioned humans, receiving from each in return a token or tokens of generally recognized value, and entreating the owners of bread manufacturing equipment and supplies and bread manufacturing laborers to transfer their ownership to,
  • Netflix then used these fraudulently obtained patents to scare others out of the market, in violation of antitrust law

    Which is exactly what Microsoft is doing with their 'Open Source Software infringes our (most bogus) patents' FUD. And MSFT has already been found guilty of abusing its monopoly. I really hope Netflix to lose this lawsuit in order to make a precedent, so MS shall be more careful of using their patents to keep its monopoly status.

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