One Entrepreneur’s Story: Snapizzi Gets Caught in the Section 101 Snare

By Paul Morinville
January 5, 2021

“On the patent’s government-issued cover, it stated that Snapizzi would have the ‘right to exclude others from making, using, offering for sale, or selling’ the invention. This meant the patent would protect their company from infringers and give them enough time to carve a toehold in the market. Randy trusted the U.S. government, and this made the burden of huge risk much more tolerable.”

Section 101 snare - https://depositphotos.com/188290210/stock-photo-man-caught-in-mouse-trap.htmlRandy dela Fuente was an entrepreneur and a photographer for 25 years. His company did high volume photographs for large events—things like high school graduations and other events with hundreds of participants.

Managing thousands of photographs for hundreds of people can be a complicated affair. The object is to sell pictures, but to sell them, the subject of the picture must be able to find the picture. If the process is too difficult, customers get frustrated and sales are lost.

A Neat Idea

Randy needed to find a solution that would improve his customers’ experience and thereby increase sales. But the market for digital photographs was still relatively new and there were no solutions. Randy even tried to build his own, with limited success.

Finally, in 2010 Randy found Snapizzi, which had developed a powerful solution for managing high volume photography. Snapizzi was founded in 2009 and filed their first patent application in 2010. It was a hot product in the photography space. A competitor, called PhotoLynx, featured Snapizzi in a blog post saying that Snapizzi is “a really neat idea. Randy became one of Snapizzi’s first customers.

Startups crash for a myriad of reasons. By 2011, Snapizzi ran into trouble and was going out of business. Randy knew why Snapizzi’s solution was unique and what value it provided to customers. He was, after all, a customer. He also knew that Snapizzi’s unique value was protected by pending patents. So, Randy bought the company.

At first, he continued using Snapizzi for his own business. But by the end of 2012, Randy figured out how to redeploy Snapizzi in a different business model, one that photographers would find easier to consume. Randy started investing in his new vision of a redeployed Snapizzi.

Betting on Patents

In 2015, Randy launched Snapizzi with its shiny new business model. It worked. Snapizzi was attracting customers and growing. Like most startups, Snapizzi was operating at a loss, so Randy poured in profits from his photography business.

After four years of hard work and hefty financial risk, Snapizzi was finally profitable. Randy closed his photography business and turned his focus completely to Snapizzi. These were exciting times. Randy had bet it all, risking hundreds of thousands of dollars. But finally, he could relax. The business Randy had envisioned was becoming a reality and he was living his American dream.

Randy had bet big, putting his career, savings, and company at risk. Later, Randy brought in a business partner, Chris Scoones, who cleaned out his savings and mortgaged his house. But they believed in the patent. On the patent’s government-issued cover, it stated that Snapizzi would have the “right to exclude others from making, using, offering for sale, or selling” the invention. This meant that U.S. Patent No. 8,794,506 would protect their company from infringers and give them enough time to carve a toehold in the market.

That patent cover also said that the patent was “granted under law”, which meant that it was a legally granted and presumed valid property right. In America, we are a nation of laws. Randy trusted the U.S. government, and this made the burden of huge risk much more tolerable.

The U.S. Patent System: An Invitation to Infringe

Snapizzi had two major competitors: PhotoLynx and ImageQuix. PhotoLynx is the company that blogged about Snapizzi’s solution, saying it is “a really neat idea”, so they were aware of the customer value that the Snapizzi solution provided as early as 2009 and, as a competitor in the market, they knew about Snapizzi’s patents. ImageQuix also knew of Snapizzi’s product and patents.

All three companies are in an industry built on intellectual property protection; photographs are copyrighted. Yet, PhotoLynx and ImageQuix infringed the Snapizzi patents.

In 2018, Randy sent invitations to PhotoLynx and ImageQuix to license Snapizzi patents. PhotoLynx admitted infringement and took a license.

But not ImageQuix. ImageQuix responded to Randy’s invitation within seven days and included vague assertions that they had invented it first. Shortly thereafter, ImageQuix was acquired by Alpine SG, a well-funded SaaS acquisition company. Once acquired, ImageQuix sought a declaratory judgment claiming that Snapizzi’s patent is ineligible subject matter under 35 U.S.C. § 101 because the claims are directed to an “abstract idea” under Alice v. CLS Bank.

In December 2019, a district court held that the claims are all ineligible for patenting because they are “abstract ideas”.

There can be no question that Snapizzi technology was unique and useful. A PhotoLynx’ blog confirmed that and further provided a link to Snapizzi and recommended that their customers take a look. ImageQuix assertions that they had done it first proved unsubstantiated, which ironically shows there was nothing in the market before Snapizzi. Randy’s photography business was one of Snapizzi’s earliest customers, and when Snapizzi ran into trouble, Randy and Chris bought Snapizzi and invested hundreds of thousands of dollars to regear it for a new business model. The industry turned on Snapizzi’s invention; it is now a standard industry practice. All of this shows that the Snapizzi patents are unique and useful and would pass the threshold of Sections 102 (novelty) and 103 (non-obviousness).

None of those things is abstract. They are tangible results of actual trust placed in the U.S. government to uphold a patent granted by the U.S. government.

The Abstraction Distraction

The very definition of an abstract idea, as defined by the courts, is an abstract idea. As such, it is not possible to overcome an abstract idea argument with concrete analysis. Therefore, any determination that an invention is an abstract idea can only be arbitrary and, as such, capricious. It makes fools of attorneys and judges, paupers of inventors and investors, and technological kings of other nations, like China, because nobody can invest in something that can so easily be taken away.

Randy has appealed to the Federal Circuit. Oral arguments are January 6, 2021.

Image Source: Deposit Photos
Image ID:188290210
Copyright:Elnur_ 

The Author

Paul Morinville

Paul Morinville is the Founder and former President of U.S. Inventor, Inc., which is an inventor organization in Washington D.C. that advocates strong patent protection for inventors and startups. Paul has been as executive at multiple technology startups including computer hardware, enterprise middleware and video compression software in the U.S. and China, and now medical devices.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 19 Comments comments.

  1. Anon January 5, 2021 4:24 pm

    Perhaps worth noting (given the context of this article) a position often advanced by Greg DeLassus in relation to the Oil States case: patents are a form of personal property that can be characterized as a Public Franchise.

    Under that ‘theory,’ duties and responsibilities of the US Government as the FranchisOR call into question how the FranchisOR can turn around and disrupt the established financial expectations of the FranchisEE with seeming impunity.

    Mr. DeLassus has never been willing to admit to this necessary view of Patents as a Public Franchise.

    IF the Supreme Court wants its way of viewing the property right in a certain way, then the repercussions should follow.

  2. Pro Say January 5, 2021 9:21 pm

    . . . and yet another innovation-killing, inventor-crippling ruling added to the large, painful pile of ends-justifies-the-means cases.

    Including; in direct contravention of the SCOTUS explicit directive to (if such even exists) identify ONE (and therefore ONLY ONE) alleged abstract idea / concept to which ALL the claims are directed . . . multiple different abstract ideas / concepts are instead alleged by the infringer and Dist. Ct.

    Randy and Chris were robbed.

    Robbed.

  3. TFCFM January 6, 2021 9:24 am

    Article: “Randy had bet big, putting his career, savings, and company at risk. Later, Randy brought in a business partner, Chris Scoones, who cleaned out his savings and mortgaged his house. But they believed in the patent.

    The lesson here appears to be that one should consult with knowledgeable professionals prior to making can’t-afford-to-lose investments in fields one understands poorly, if at all.

    By 2012, any patent attorney worth even a fraction of his or her salt would have advised these investors of the extreme risks (and the reasons for that risk) surrounding patents claiming a “method-of-doing-business-on-a-computer.”

    (And this was true regardless of the attorney’s personal feelings at the time about whether such patents ought to be risky.)

    Buyer beware.

  4. Paul F Morgan January 6, 2021 12:52 pm

    Yes it would be more honest of the PTO to print on patents that it only provides the “right to sue to try to exclude others from making, using, offering for sale, or selling without compensation” since that is all it has ever provided.
    And more honest of patent attorneys to tell that to inventors in writing.

  5. Ineligible January 6, 2021 1:27 pm

    Should the USPTO be required to refund Applicant’s prosecution costs when a patent is invalidated by PTAB?

  6. Anon January 6, 2021 1:56 pm

    since that is all it has ever provided.

    Talk about LACK of honesty – such revisionist history coupled with spin should be sanctioned.

  7. Anon January 6, 2021 1:57 pm

    Translation of TFCFM:

    “How dare you tread into the sport of Kings.”

  8. David Lewis January 6, 2021 2:57 pm

    Possibly you are correct about buyer beware, and about what their attorneys should have advised. However, it is easy to say buyer beware, when it is not your money doing the buying or that needed to beware. Especially considering that hindsight is always 20/20.

    Note that Alice was decided in 2014, and although the law suite was filed in 2018, much of the business activity occurred before then.

    Prior to Alice, most attorneys were relying on the machine-transformation test for software, despite the implications of some of the earlier Supreme Court decisions, such as Mayo (and even Mayo was decided in 2012, which is also in the middle of all of this).

    It is extremely disruptive to business, when the case law you are relying upon (assuming you consulted an attorney), is totally upended by the Supreme Court in the middle of what you were doing.

  9. Anon January 6, 2021 5:02 pm

    Mr. Lewis, You err – and grievously so.

    Prior to Alice, most attorneys were relying on the machine-transformation test for software, despite the implications of some of the earlier Supreme Court decision

    I certainly hope that NOT A SINGLE patent attorney was relying on the machine-transformation test as that test was thrown out 9-0 by the Supreme Court rejecting the en banc CAFC panel in In re Bilski.

  10. TFCFM January 7, 2021 11:15 am

    DL@#8: “Alice was decided in 2014

    This is surely true, but only the latest (widely-regarded-as-poor) description of a ‘test’ for eligibility.

    By 2008, the Federal Circuit — sitting en banc had already splashed its handwriting in blood upon the walls in Bilski, and the Supremes second their motion when they issued their Bilski opinion in 2010.

    Any REMOTELY competent patent attorney should have had flashing red lights and sirens going off in his/her head when thinking about patent eligibility of a method-of-doing-business-on-a-computer.

    If the investors here were poorly advised in 2012, they may have a cause of action for malpractice. If they merely suffered from dollar-signs-in-their-eyes and twin desires to wear an eyepatch and a parrot on their shoulder as they considered asserting their clearly-questionable patent against real businesses, then they got their just desserts.

  11. Pro Say January 7, 2021 12:07 pm

    . . . with the innovation-killing CAFC today affirming the injustice:

    http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/20-1531.RULE_36_JUDGMENT.1-7-2021_1713707.pdf

  12. Anon January 7, 2021 12:13 pm

    and the Supremes second their motion when they issued their Bilski opinion in 2010.

    For the second time in just a few short days, the Supreme Court opinion in Bilski was NOT a ‘second their motion.’

    Let’s get things correct here.

  13. __tr__ January 7, 2021 3:12 pm

    It’s simple; the CAFC had no other option than to affirm the opinion out-of-pocket with absolutely no explanation and only a day after oral argument. Look at all the mega-cap tech companies utilizing this same image-sorting technology in wildly-popular free apps and products. They couldn’t just force them to license the technology like the patent system is supposed to work.

    That would leave too much room for inventors and small companies to actually make a livable income instead of letting FAANG Co.’s dominate literally the entire software industry.

  14. George January 12, 2021 6:19 pm

    That’s why we need to start replacing examiners & judges with computers & AI! Those decisions will NOT be arbitrary or capricious, they WILL ALWAYS BE consistent and objective and will be fully transparent.

    This will also make possible the issuance (or denial) of a patent in as little as ONE DAY (not years) and at a cost of as little as $100 (or even free). It will also allow inventors to do super-deep and comprehensive searches before even filing for a patent and to also get ‘honest’ and almost immediate feedback on the chances for allowance, as well as a ‘quality’ and ‘broadness’ grade, all in minutes and for free! Who wouldn’t like that?!

    Inventors could then quickly continue to ‘iterate’ (as in days) their inventions, until they were able to achieve a ‘passing allowance grade’, whereupon they could formally file for a patent with reasonable confidence it may be approved in as little as 24 hours (or the ability to fix any problems detected – including spelling & grammar problems)!

    Again, 24 HOURS for ‘definitive’, ‘thorough’, ‘robust’, ‘deep’ and ‘incontrovertible’ analysis and examination, as only a computer could do . . . with a speed at least 1000 times faster than any human examiner(or even a MILLION times faster and much more accurate too). By the way, this automated search & examination could include EVERYTHING KNOWN TO MAN (and women), from the beginning of time! There could be NO better search possible (so don’t even try)I A computer could challenge any ‘human examiner’ to do that, even if given a lifetime! LOL!

    Who’s with me, that we now need to DEMAND that Congress and the PTO ‘begin to transition to’ computerized search, analysis and examination – resulting in the saving to inventors of billions of dollars a year in application fees, legal fees, maintenance fees and judicial costs, that could be made possible by the ‘almost instant’ resolution of almost all IP issues and disputes? And, if we don’t do this, I predict (and guarantee) the Chinese WILL within 10-15 years (and we might even offer to help them do it)!

    So, what would be best? That we get there first, or that the Chinese do?! Can we afford to wait and find out?

    Anyone interested in joining our efforts, let me know. We will commence these efforts in earnest, next year (after the pandemic). The USPTO won’t even need to cooperate. But we think if IBM gets involved with their Watson capabilities, they might want to (rather than have IBM license a product to the Chinese first). Let’s get the USPTO of their butts. Instead of hiring an army of more examiners, just have them a get a big computer and a really high-speed internet connection (so it can search everything on the internet, including text books and all academic papers ever written)!!! No more ‘guessing’! No more ‘surprises’! No more ‘human failures’. IP rights are far to important to be left in the hands of 1-2 (fallible) humans.

    If programmed correctly, computers DON’T MAKE MISTAKES (or if they do, everyone can see them, understand them and then fix them and make things right)! Computers also don’t get tired, don’t need to be paid $500/hr., don’t get paid anything (except in the form of electricity), and can work 24/7 without mistakes or complaints! Again, what’s not to like??? – George S., 01/12/2021

  15. Anon January 13, 2021 9:17 am

    George – fully transparent…?

    I am not sure what your level of interaction is with AI (but based on that statement); I suspect only a passing – and not nearly deep enough level.

    “If only programmed correctly — don’t make mistakes…”

    Now I know your understanding is not sufficient.

  16. George January 13, 2021 1:25 pm

    @Anon (whoever that is)

    You know NOTHING about computers or how they work (that is clear)! It was part of my profession to know how they work and to program them and make them solve problems that humans couldn’t.

    We now TRUST computers to ‘safely’ get astronauts to the Moon and back and have for 50 years already! It is simply a FACT that they rarely if ever make a mistake and if they do, those mistakes can be fixed so that they never happen again. We now TRUST computers and AI to drive cars and trucks across the country, with NO humans involved at all (and soon all our cars will have this capability)!

    Computers can now beat ANY human in the ‘human-created’ game of Jeopardy and the ‘human-created’ games of chess and even ‘Go’ (the most difficult game in the world). Computers and AI can now exceed radiologists having years of professional training and experience in reading X-rays!

    Just last year, computers figured out how to ‘fold proteins’, that was a problem which previously too humans years to solve, if an when they could! This will usher in more incredible medical breakthroughs now, just as computers now allow decoding DNA in hours, not decades! Everyone can now have their entire DNA decoded for less than $1000 (something that just 20 years ago would have cost millions).

    I therefore believe (and we will soon prove) that they are ready to go ‘mano-a-mano’ against ANY lawyer (which should be even MUCH EASIER than any of the above examples). Law is ‘supposed to be’ an exercise in objectivity, logic and freedom from bias. This is the perfect ‘game’ for computers to play . . . and WIN!

    Let the games begin! Let IBM’s Watson and Google have at it. One thing is sure . . . close-minded people like you will always lose! I’ll place my bets on computers and AI any day, and I sure wouldn’t plan on becoming a patent examiner anymore!

    By the way, AI as applied to IP and IP law, will become another multi-billion dollar (if not trillion dollar) business opportunity!

    You snooze – you lose!

  17. George January 13, 2021 1:30 pm

    @Anon

    “If only programmed correctly — don’t make mistakes…”

    Where did you get the “only”? Learn to quote people accurately Anon!

    I said: “If programmed correctly, computers don’t make mistakes”

  18. George January 13, 2021 1:34 pm

    @ TFCFM

    I have to agree (especially post AIA).

  19. Angela Bartels January 16, 2021 2:43 am

    Randy De La Fuente sold me a lifetime membership for over a thousand dollars when he first started. After a clue of years all of a sudden he ghosted all his clients! I am disgusted with the way he flipped. At least have some respect for your clients and explain the situation so we can take our business elsewhere. Totally unprofessional!