Patent Troll Claims Ownership of Interactive Web – And Might Win

The mother of all patent troll trials unfolds in Texas where Google, Amazon and Adobe are fighting a patent claiming ownership over online video, image rotation and search auto-complete. We explain and start a series.

TYLER, Texas — The city of Tyler, Texas, is better known as the nation’s “rose capital” than as a hotspot of the technology industry. It’s a quiet, conservative city of about 100,000, full of wide streets and big trucks.

This week, though, Tyler is the site of a remarkable battle over the history of the World Wide Web — a trial that could affect the future of e-commerce. The federal courthouse downtown is packed to the brim with dozens of lawyers, representing the world’s biggest internet companies, including Yahoo, Amazon, Google and YouTube.

A succession of pioneers of the early web — including the web’s father, Tim Berners-Lee himself — have flown in from around the world to denounce two software patents they believe threaten the future of web innovation. East Texas has transformed itself into something of a haven for patent suits over the past several years, but by any standard, the trial now underway is an extraordinary circus of dark suits.

How did all the trouble start?

Michael Doyle, a low-profile Chicago biologist, claims that it was actually he and two co-inventors who invented — and patented — the “interactive web” before anyone else, while they were employed by the University of California back in 1993. Doyle argues that a program he created at the UC’s San Francisco campus, which allowed doctors to view embryos over the nascent World Wide Web, was the first program that allowed users to interact with images inside of a web browser window. The defendants hotly contest that, saying that it was programs like Pei-Yuan Wei’s pioneering Viola that first offered this functionality.

Today, Doyle and his lawyers say he’s owed royalty payments for the use of a stunning array of modern web technologies. Watching online video, having a “search suggestion” pop up in a search bar, or even rotating an image of a sweater you might want to buy on an online shopping site — all are said to infringe on the idea-space of Doyle and his company, Eolas Technologies.

To those who follow high-profile tech litigation, the name Eolas may sound familiar. The company sued Microsoft back in 1999, winning a $521 million jury verdict in 2003 that shook the tech world. While that verdict was overturned on appeal, Microsoft ultimately settled rather than re-try the case. The full settlement amount wasn’t disclosed, but the University of California revealed that its cut was $30.4 million; since an Eolas lawyer at one point described UC’s take as 25 percent, minus expenses, it suggests the company got well over $100 million from that case.

The Microsoft verdict got the attention of tech community in a big way. Eolas was denounced in some quarters as a “patent troll” — the company has never launched its own web browser, or any commercially successful technology that’s well known, for that matter.

Groups that felt the impact of the patent started to take action. The W3C, the global web standards group, contacted the patent office directly, sending a letter signed by Berners-Lee warning that unless the Eolas patent was invalidated it would cause the “disruption of global web standards” and cause “substantial economic and technical damage to the operation of the World Wide Web.”

But while the PTO initially rejected the Eolas patent claims in reexams, Doyle and his lawyers were dogged in insisting they had the right to some kind of patent claim. The office ultimately reversed course — a fact now being trumpeted to an East Texas jury by Eolas’ lawyers.

Eolas’ lawyers have actually used the struggle against the patent to bolster their claim that it’s an important invention. Mike McKool, the lead lawyer for Eolas, told the jury during opening statements that tech companies have been attacking the patent ever since 1995 — when it was still three years away from issuing.

Eolas Becomes Texan to Pursue a New Suit

By the time Eolas settled its case against Microsoft in 2007, the business of “patent trolling” had begun to coalesce around a few popular venues, most notably the small towns of East Texas.
While the Microsoft suit was underway, the company applied for a second patent, which it received on Oct. 6, 2009. The same day, Eolas filed suit — in East Texas — against more than 20 big companies, including Apple, Playboy, Perot Systems, Blockbuster, Citigroup, eBay, and Frito-Lay — all for using the “interactive web.”

Most of those companies settled; eight remain as defendants. In addition to the internet companies mentioned above, GoDaddy, JC Penney, Staples, and CDW Corp are in the case. In documents filed last month, Eolas lawyers said they will seek damages of more than $600 million against those eight companies, with more than half of it coming from Google and Yahoo.

By 2009, although Doyle continued to live in Chicago, Eolas had transformed itself into a Texan company, at least on paper. It incorporated in the state, and moved its headquarters — just two rooms in a small office building — to Tyler. The company moved one full-time employee, its licensing officer, to Tyler as well, and hired some part-time nursing students at the University of Texas’ Tyler campus to work on a product it was beta-testing.

The tech companies in the case asked to transfer the case to California, but Judge Leonard Davis, who is overseeing the case, refused to allow it. After all, Davis reasoned (.PDF), Eolas picked six defendant companies that were based in Texas, including four — Perot Systems, Frito-Lay, JC Penney, and Rent-A-Center — that were headquartered in Plano, a Dallas suburb which is within the Eastern District of Texas. Davis also declined to let the case be divided up, saying it wouldn’t promote “judicial economy.”

And that’s how Berners-Lee ended up testifying to an eight-person jury in East Texas on Tuesday morning, restating to some degree an argument he made in Scientific American in 2010 — that patents could be a serious threat to the future of the Web. In the Eolas case, it looks like Berners-Lee’s nightmare may be about to come true.

The new Eolas suit has also put the University of California in an unprecedented and awkward situation, as a not-so-silent partner to Eolas’ increasingly widespread, and controversial, business. While the UC could reap many millions from an Eolas win, it is suing the world’s biggest internet companies — the same companies that recruit its students, and are enmeshed with the UC in many other ways. The plaintiff’s lawyers have been referring to the patents as the “university patents” and make reference to the innovative history of the UC to make their case to the jury.

What Happens Next

The Eolas trial is actually scheduled to be four back-to-back trials in Tyler. In the first, a jury will determine whether the patents are valid or not; if Eolas survives that stage, it will get to go on to sue the eight remaining defendants in three successive infringement and damages trials. The jury may get the first case by Thursday, and could have a decision before the weekend.

And if Eolas and the UC are successful, the companies gathered in Tyler this week will likely be just the beginning of a long list of targets who will end up paying Eolas millions of dollars to use the web.