How a decade-old patent dispute may upend Uber’s enterprise
A little bit-known patent infringement lawsuit may have huge implications for Uber — and probably dozens of different firms.
Carma Expertise, an organization fashioned in 2007 by serial entrepreneur and SOSV founder Sean O’Sullivan, filed a lawsuit earlier this 12 months in opposition to Uber alleging the corporate infringed on 5 of its patents which can be associated to the system of matching riders (or packages) with capability in autos. In different phrases, ridesharing — a enterprise Carma operated in some type for a decade till it modified its enterprise mannequin and utilized its tech to road-pricing providers like GPS tolling and HOV verification.
Carma has requested a jury trial and is in search of a everlasting injunction in opposition to the corporate, necessary future royalties on any Uber merchandise that infringe on these patents in addition to damages, and different prices associated to the lawsuit.
The lawsuit, which has been quietly winding its means via the U.S. District Court docket for the Japanese District of Texas, is comparatively new. The allegations have been swirling for almost a decade.
Carma attorneys first contacted Uber about its ridesharing and floor transportation patents in 2016, in accordance with the grievance. That was an auspicious time for Uber. The startup, which was based simply seven years earlier than, had shot into the stratosphere — by way of valuation, progress, and gravitas.
Uber was valued at $66 billion on the time, and had a fame for taking huge, legally sticky swings into new markets that helped it develop to a whole lot of cities within the U.S., Europe, Canada, and the Center East. It had raised greater than $12.5 billion in enterprise capital, and was utilizing it to launch new merchandise and even push into autonomous autos.
Uber may need had the enterprise mannequin and the market share, however it didn’t have the particular ridesharing patents, O’Sullivan informed TechCrunch in a current interview. Carma does — plus a pair dozen others. Uber was allegedly conscious of that reality as early as 2015 when the U.S. Patent and Trademark Workplace rejected one in every of its purposes as a result of it ran up in opposition to present patents held by O’Sullivan and Carma, in accordance with the lawsuit.
At the very least 4 of Uber’s patent purposes — and in some instances quite a few revisions to these patents — had been rejected between 2016 and 2019 for a similar cause. The rideshare large would ultimately abandon a few of these purposes.
Uber nonetheless holds a whole lot of different patents masking a broad swath of expertise and concepts which have been utilized to its enterprise.
O’Sullivan argues the core service of what Carma’s patents describe is strictly how the trendy day ridesharing expertise operates. And he contends that Uber is infringing on these patents even when the corporate’s enterprise mannequin operates extra like a taxi enterprise.
The case is a sophisticated one, mental property legal professional Larry Ashery informed TechCrunch. (Ashery shouldn’t be concerned within the case.)
“What’s vital to grasp right here is Carma isn’t simply asserting 5 patents,” mentioned Ashery, whose apply is predicated within the Larger Philadelphia space. “They’ve had a really subtle technique of patent procurement that they’ve been engaged on for the previous 18 years.”
He famous the 5 patents are a part of a 30-patent household which can be all associated and related to the unique submitting date. That issues as a result of every of the 5 asserted patents comprises a number of patent claims, which outline the authorized boundaries of the invention. These particular person claims — not simply the patents as a complete — are what Carma is asserting in opposition to Uber.
Which means Uber must handle and defend in opposition to every asserted declare, making the litigation extra advanced and tough to defeat, he famous. Ashery mentioned Uber’s technique will possible be to attempt to invalidate these patents, which might be a problem.
A nine-year hole
Whereas Carma may need been armed with these particular patents, it took 9 years for the corporate to truly sue Uber. Bunsow De Mory, a Redwood Metropolis-based regulation agency, is representing Carma within the case.
“When any enterprise begins, it’s all about simply really capturing the market and successful within the market,” O’Sullivan mentioned. “Patents are supposed to defend in opposition to aggressors from stealing the concept, however it’s not the primary focus of your small business to get patent income. It’s extra as a protecting mechanism.”
Carma, he mentioned, has been “very busy constructing a multimillion-dollar enterprise and attending to profitability.” However there are different causes for that nine-year time hole, O’Sullivan defined. For one, the associated fee.
“It’s extremely costly to sue a big firm over IP and Carma is a comparatively small group,” he mentioned in a current interview. “To provide you with the $10 million-plus to tackle an enormous patent go well with, which is what it takes lately, shouldn’t be a small activity.”
O’Sullivan mentioned the corporate did attain out to Uber way back to 2016 “within the hopes that they’d do the suitable factor and license our patents.”
“It actually took us some time to come back to phrases with the concept that we really needed to sue Uber to ensure that them to reply,” he added.
Uber declined to touch upon the lawsuit. Uber’s attorneys did make two procedural motions this week, together with a sealed movement to dismiss for improper venue or alternatively to switch venue for comfort. This procedural movement indicators Uber’s need for the case to be litigated within the Northern District of California, the place it’s based mostly, reasonably than in Texas.
Notably, the lawsuit is geared toward Uber, not Lyft or different firms utilizing ridesharing. O’Sullivan defined Carma is “going after the most important participant first” and famous that about 60 different firms are possible infringing on its patents.
The five-patent argument
The first argument within the lawsuit ties again to 5 patents which have been granted to O’Sullivan and Carma, which was initially named Avego.
It began with O’Sullivan’s frustration with site visitors congestion, which finally led to ideas about carpooling and the way an automatic system utilizing smartphones may assist folks coordinate rides. That concept would flip into the startup Avego and develop into the premise of the primary patent — No. 7,840,427.
The primary patent, which O’Sullivan utilized for in 2007 and was granted in 2010, created a shared transport system that matches empty house in a automobile with riders or items. The system established a set of pick-up and drop-off factors after which matched customers and drivers touring alongside an analogous route.
Earlier than the patent was granted Avego’s ridesharing app debuted on Apple’s App Retailer in 2008, the identical 12 months the iPhone launched. Avego confirmed off its so-called Shared Transport app on the DEMO convention in 2008, which confirmed how a driver with an iPhone 3G may use the app to just accept or reject a journey request. As soon as accepted, the rider was notified as the motive force approached after which was prompted to enter a pin code to show their id and authorize an digital cost.
Avego, which might later change its identify to Carma, was targeted on the promotion of ridesharing (as in carpooling) and never taxis, in accordance with O’Sullivan. The corporate operated the carpooling enterprise till October 2016, when the app was withdrawn from the App retailer. Nonetheless, it nonetheless had different types of ridesharing, like its partnership with Toyota, till phasing it out altogether in April 2018.
“In the event you take a look at the definition of ridesharing in federal laws, it’s carpooling,” O’Sullivan mentioned, noting that Carma constructed up a multimillion-dollar ridesharing enterprise in its early days.
When Uber and Lyft got here in and tried to co-opt the time period ridesharing to imply taxi-hailing it triggered confusion available in the market, prompting Carma to vary its enterprise mannequin and apply its tech in new methods. “Uber and Lyft actually took ridesharing within the route of taxi providers, however our firm Carma didn’t need to,” O’Sullivan mentioned.
Carma continues to be targeted on lowering site visitors congestion, however its tech is utilized to a unique enterprise mannequin.
At the moment, Carma makes use of its app to assist transit authorities handle tolls and categorical lanes — a product line the corporate first rolled out in 2013. As an illustration, the app can be utilized by a driver on a toll street and even monitor automobile occupancy for HOV lanes. The app is designed to get extra riders into vehicles and reward these folks by lowering tolls or giving drivers entry to the HOV lane.
The concept, O’Sullivan mentioned, is to supply toll authorities a strategy to scale back capital expenditure by as much as 20 occasions by not utilizing giant gantry-based infrastructure methods. And it has paid off.
O’Sullivan says Carma is worthwhile, though pursuing this lawsuit will minimize into its backside line. Nonetheless, he mentioned it’s price the associated fee.
“I feel there’s a hazard in society the place we are able to’t depend on our patents to guard the rights of the inventors, and the patent system exists particularly to guard the rights of buyers, to not reward copycats that simply occur to have deeper pockets,” he mentioned, pointing to Uber’s makes an attempt at its personal patents and the rejection of them by the USPTO.
“We predict it’s one thing that’s vital to acknowledge that the rights of a comparatively small inventor are being trampled upon. However it’s not only for Carma, actually. We consider this as an issue for all the system. It’s a check of whether or not the rule of regulation nonetheless applies when a robust tech large is concerned.”