YouTube Sued for Patent Infringement

On Friday, October 26, 2012, VideoShare, LLC, which is a Delaware Limited Liability Company, brought a patent infringement suit against YouTube, LLC, also a Delaware Limited Liability Company.  You might suspect that a patent infringement lawsuit between two Delaware LLCs would be litigated in Delaware, which would seem logical.  If you made such an assumption you would be incorrect. VideoShare filed this lawsuit in the United States District Court for the District of Massachusetts.

VideoShare alleges that YouTube has used and continues to use VideoShare’s patented technology in products and services that it makes, uses, imports, sells, and offers to sell. VideoShare seeks damages for patent infringement and an injunction preventing YouTube from activities that infringe the technology claimed by U.S. Patent No. 7,987,492.  VideoShare has demanded a jury trial.

In what can only be characterized as an extremely sparsely populated complaint, VideoShare gives little or no information about what they believe YouTube has done to infringe the ‘492 patent.  In fact, there are only 9 paragraphs in what is a 4 page complaint, with 1 entire page being devoted to a signature page and half of the first page being a caption.

[Patent-Litigation]

The complaint sets forth this “theory” of the case:

CLAIM FOR PATENT INFRINGEMENT

6. The United States Patent and Trademark Office issued the ‘492 patent on July 26,2011. Through assignment, VideoShare is the owner of all right, title, and interest in the ‘492 patent, including all rights to pursue recovery of royalties and all past and future damages for infringement of said patent. The ‘492 patent is valid and enforceable.

7. Without a license or permission from VideoShare, YouTube has infringed and is continuing to infringe one or more claims of the ‘492 patent and, unless enjoined, will continue to do so, by making, using, providing, selling, offering for sale, or importing infringing products and services. YouTube’s infringing products and services include, without limitation, its products and services for sharing streaming video, including those marketed as YouTube. Upon information and belief, YouTube, which has knowledge of the ‘492 patent, has also actively and knowingly contributed to and induced, and continues to actively and knowingly contribute to and induce, infringement by users of YouTube’s products and services.

I have been and continue to be extremely critical of these types of complaints. In the past I have written that these types of complaints should simply be dismissed by District Courts. I offered such an opinion when Paul Allen filed a patent infringement case against Apple, Google, YouTube and others.  That complaint was dismissed because it did not satisfy the basic requirements of pleading a theory with specificity.  In her ruling dismissing the Allen complaint Judge Pechman explained:

Plaintiff’s complaint does not satisfy Rule 8 or Form 18 because Plaintiff has failed to identify the infringing products or devices with any specificity. The Court and defendants are left to guess what devices infringe on the four patents. Plaintiff only indicates that Defendants have websites, hardware, and software that infringe on the patents or that they are encouraging third parties to use products that infringe on the patents. This fails to indicate to Defendants which of their myriad products or devices may be at issue. These allegations are insufficient to put Defendants on “notice as to what [they] must defend.” McZeal, 501 F.3d at 1357 (citing Twombly, 550 U.S. at 565 n.10). They are also too generic to satisfy Form 18. Plaintiff urges the Court and Defendants to have patience and simply await delivery of the infringement contentions as required by Local Rule. This ignores that Local Rules do not trump the Federal Rules of Civil Procedure or the Supreme Court’s mandate in Twombly and Iqbal. Fed. R. Civ. P. 83(a)(1); Iqbal, 129 S. Ct. at 1950, 1953. Plaintiff’s complaint is little more than labels and conclusions, which are inadequate under Twombly, Iqbal, and even Form 18. The Court GRANTS the motions to dismiss.

The Federal Rules of Civil Procedure as the Supreme Court has interpreted them most recently in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) and Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) require far more than what Form 18 of the FRCP authorizes as an acceptable complaint. There are some who have argued that by definition a complaint that satisfies Form 18’s requirements is sufficient. As non-informing as such a complaint is that would be true except for Iqbal and Twombly.  The Supreme Court seems fed up with the initiation of a federal complaint with little or no useful information conveyed to the defendant. This type of ambush is just not allowable any more.

District Court Judges are stepping up to the plate in one regard; they are increasingly dismissing these types of naked complaints. Unfortunately, it has become common for them to do so without addressing the sufficiency of Form 18.  For example, Judge Pechman did not find it necessary to rule whether the Supreme Court’s recent cases have rendered the model complaint for patent infringement inadequate.  She wrote:

The Court does not find it necessary to determine whether Form 18 is no longer adequate under Twombly and Iqbal because Plaintiff’s complaint fails to satisfy either the Supreme Court’s interpretation of Rule 8 or Form 18.

If you read her full decision it seems pretty clear (to me at least) that if she were forced to have addressed that issue she would have said that as a result of Twombly and Iqbal the model patent infringement complaint no longer satisfies the requirements of Federal Rule of Civil Procedure 8. Still, that is not how these cases are being decided, which means it may be quite a while before we get some kind of definitive answer.

Compounding the likelihood of a long wait for a definitive answer, plaintiffs are generally given broad latitude to file at least one amended complaint, and to my knowledge the cases that have dismissed these complaints have done so without prejudice, which means they can be brought back later with a sufficient complaint. Therefore, there seems to be no real penalty for initiating a naked patent infringement complaint, and between re-filing an adequate complaint and the right to file an amended complaint it seems unlikely that the Federal Circuit will be able to weigh in on these types of tactics in a meaningful way any time soon.

The trouble with these tactics is that they are used largely across the board.  They are used both by plaintiffs bringing legitimate patent infringement cases, but they are used by the bad actors who are simply trying to abuse the legal process to force smaller defendants to cave and pay for a license that they may not really need. The Federal Circuit has recognized that there is indeed “extortion like” behavior at play by some bad actors. Still, smaller defendants cannot afford to pay attorneys to fight even when a win would be certain, so they cave and literally pay pennies on the dollar (or less) to make these cases go away. Still, that can be many thousands of dollars. Talk about an unnecessary tax on small businesses that have the audacity to engage in a technology based company.

Something has to be done about these bad actors and the place to start is to require more substance in patent infringement complaints. These complaints need to articulate a discernible theory that puts the defendant on notice or the case should be dismissed with prejudice with respect to that defendant.  Naked patent infringement complaints cannot be tolerated any more and there should be consequences.  Of course, there needs to be latitude to some extent for the district courts to allow for an amended complaint where there is at least a good faith effort to put the defendant on notice of the claim.

This complaint filed by VideoShare should be an easy case.  It would be one that I would say should be dismissed with prejudice.  Why?  There is no way that VideoShare could prevail even if YouTube decided not to appear and fight.  The district court could not award VideoShare a win on this complaint because they do not even have enough information in the complaint to be entitled to a default judgment. Simply stated, it is not possible to infringe a patent. One can only infringe a patent claim.  Since no patent claim is identified as being infringed no court could ever enter an order that would allow VideoShare to prevail on this complaint.  This is the very type of naked complaint that should, in my opinion, be dismissed with prejudice and without the ability to amend.

Not that anyone would ever know it from the complaint filed, but the ‘492 patent covers a method and systems for sharing video segments over a network. The invention provides a user with the ability to automatically upload a video segment over a network onto a server without any specialized skill or knowledge on the part of the user. The invention also covers storing the uploaded video segment either on the server or remotely. The stored segment can then be streamed over the network, for example the Internet, to a destination computer such that a person at that destination computer can view the video segment.

Sure, you probably could have guessed that the ‘492 patent related to uploading, storing and streaming video segments given that this is what YouTube does, but in order to achieve the fundamental fairness required by the law the defendant has a right to have it spelled out in a complaint.  But even still, this is what the patent relates to not what the patent gives in the form of exclusive rights. The patent disclosure describes the invention first generally and then ever more specifically, but the claims define the rights granted by the U.S. Patent and Trademark Office.  Simply stated, a defendant can do what is described in the patent with impunity as long as they do not do what is specifically covered in one or more claims.  So knowing what the patent relates to or what the invention that is subject to the patent is or does is not enough.

There are two independent claims in the ‘492 patent.  That means that if there is going to be infringement at a minimum that YouTube must necessarily be doing something that literally is defined by one or both of these claims.  The independent claims are 1 and 12.  Claim 1 covers:

A method of sharing a streaming video to a plurality of computers on a network, the method comprising the steps of: (a) receiving, by a server via a first web page, a video file sent by a first user on a first computer of a plurality of computers communicating via a network; (b) executing, by the server responsive to identifying that the video file has been received, an automated function automatically performing: (b1) converting, via a format conversion module of the server, the video file into a streaming video file comprising a streaming video format; (b2) storing, by a storage module of the server, the streaming video file to a storage device; (b3) generating, via an identification module of the server, an identification tag identifying the stored streaming video file and comprising a video frame image selected from the streaming video file, the video frame image representing a subject matter of the streaming video file; and (b4) embedding, by the server, the identification tag comprising the video frame image into a second web page accessible to a plurality of users on the plurality of computers; (c) receiving, by a sharing module of the server via the identification tag, one or more requests to stream the streaming video file to one or more users on the one or more computers of the plurality of computers; and (d) transmitting, by the sharing module via the second web page, the streaming video file in the streaming video format to the one or more users on the one or more computers, the plurality of users comprising an affinity group associated with the identification tag.

Claim 12 covers:

A system for sharing a streaming video to a plurality of computers on a network, the system comprising: A server that receives, via a first web page, a video file sent by a first user on a first computer of a plurality of computers communicating via a network, the server executes an automated function responsive to identifying that the video file has been received; wherein the automated function automatically performs: converting, via a format conversion module of the server, the video file into a streaming video file comprising a streaming video format independent from receiving a command to perform such conversion: storing, by a storage module of the server, the streaming video file to a storage device; generating, via an identification module of the server, an identification tag identifying the stored streaming video file and comprising a video frame image selected from the streaming video file, the video frame image representing a subject matter of the streaming video file; and embedding, by the server, the identification tag comprising the video frame image into a second web page accessible to a plurality of users on the plurality of computers; a sharing module of the server that receives, via the identification tag, one or more requests to stream the streaming video file to one or more users on the one or more computers of the plurality of computers, the sharing module transmits, via the second web page, the streaming video file in the streaming video format to the one or more users on the one or more computers; and wherein the plurality of users comprise an affinity group associated with the identification tag.

Eventually if this case is going to move forward VideoShare will need to share it’s theory as to how and why YouTube is doing something that literally satisfies each and every limitation in the claims they ultimately identify as infringed. So what is the harm in requiring that this be done at the time the file the lawsuit? The answer, of course, is that there is absolutely no harm.  They eventually have to do it and should be required to do so upfront. This is particularly true because the benefit to society would be great. Those bad actors wouldn’t be able to so quickly and easily file frivolous lawsuits against defendants who are clearly not engaging in infringing activities.

Requiring patent infringement complaints to be adequate would benefit the system and make it more difficult for bad actors. It would also start to put to rest the nonsense that is so liberally thrown around regarding how patents and patent infringement lawsuits harm innovation.  That is ridiculous, but unless and until the system has an answer for the bad actors those with an agenda will embrace the bad actors and use them as some kind of proof that the entire system has run amok and needs to be destroyed.

The time to solve this problem has long since passed.