How a dispute on old decade patents could upset Uber’s affairs

A little -known patent counterfeit trial could have great implications for Uber – and potentially dozens of other companies.

Carma Technology, a company trained in 2007 by the serial entrepreneur and founder of Sosv, Sean O’Sullivan, has put a legal action earlier this year against Uber alleging that the company violated five of its patents linked to the correspondence system (or packages) with a vehicle capacity. In other words, carpooling – a corporate business has worked in one form or another for a decade until it changes its business model and applies its technology to road prices such as GPS toll and flight check.

Carma asked for a trial before jury and requests a permanent injunction against the company, future compulsory fees on all Uber products which harm these patents as well as damages and other costs related to the trial.

The trial, which has quietly made its way by the American district district court of Texas, is relatively new. The allegations have been swirling for almost a decade.

Carma lawyers contacted Uber for the first time about its carpooling and land transport patents in 2016, according to the complaint. It was a conducive period for Uber. The startup, which was founded only seven years ago, had shot the stratosphere – in terms of evaluation, growth and severity.

Uber was estimated at $ 66 billion at the time and had the reputation of making large legally sticky oscillations in new markets that helped him reach hundreds of cities in the United States, Europe, Canada and the Middle East. He had raised more than $ 12.5 billion in venture capital and used it to launch new products and even push in autonomous vehicles.

Uber might have had the business model and the market share, but he did not have specific carpooling patents, O’Sullivan in Techcrunch told a recent interview. Carma does – more dozen others. Uber would have been aware of this fact as early as 2015 when the American Patent and Brands Office rejected one of its requests because it clashed against the existing patents held by O’Sullivan and Carma, according to the trial.

At least four of Uber’s patent applications – and in some cases, numerous revisions to these patents – were rejected between 2016 and 2019 for the same reason. The carpooling giant would eventually abandon some of these applications.

Uber still holds hundreds of other patents covering a wide band of technologies and ideas that have been applied to his business.

O’Sullivan supports the basic service of what Carma patents describe is exactly how the modern carpooling experience works. And he maintains that Uber breaks these patents even if the business model of the company works more like a taxi company.

The case is complicated, told Techcrunch, a lawyer for intellectual property, told Techcrunch. (Ashery is not involved in the case.)

“What is important to understand here is that Carma does not only assert five patents,” said Ashery, whose practice is based in the Grand Philadelphia region. “They have had a very sophisticated strategy of patent supply on which they have been working for 18 years.”

He noted that the five patents are part of a family of 30 sellers who are all linked and connected to the original deposit date. This counts because each of the five stated patents contains multiple complaints from patents, which define the legal limits of the invention. These individual claims – not just patents as a whole – are what Carma affirms against Uber.

This means that Uber will have to attack and defend itself against each assertive complaint, which makes the dispute more complex and more difficult to overcome, he noted. Ashery said Uber’s strategy will probably be trying to invalidate these patents, which will be a challenge.

A nine -year gap

Although Carma was able to be armed with these specific patents, it took the company nine years to continue Uber. Bunsow from Mory, a law firm based in Redwood City, represents Carma in the case.

“When a business begins, it involves capturing the market and winning on the market,” said O’Sullivan. “Patents are supposed to protect themselves from attackers against the flight of the idea, but it is not the main objective of your business to obtain patent income. It is more as a protective mechanism. “

Carma, he said, was “very busy building a business of several million dollars and accessing profitability”. But there are other reasons for this nine -year gap, explained O’Sullivan. On the one hand, the cost.

“It is incredibly expensive to continue a large company on IP and Carma is a relatively small organization,” he said in a recent interview. “To find the $ 10 million and more to assume a big patent costume, which is needed today, is not a small task.”

O’Sullivan said that the company had contacted Uber in 2016 “in the hope that they would do the right thing and would concede to our patents.”

“It really took us a while to accept the idea that we really had to continue Uber so that they answer,” he added.

Uber refused to comment on the trial. Uber lawyers made two procedural requests this week, including a sealed request to reject for an inappropriate place or alternately to transfer the place of convenience. This procedural movement signals the desire to Uber that the case is disputed in the northern district of California, where it is based, rather than in Texas.

In particular, the trial is for Uber, not Lyft or other companies using carpooling. O’Sullivan explained that Carma “goes first after the biggest player” and noted that around 60 other companies probably break his patents.

THE argument of five patients

The main argument in the trial is linked to five patents which were granted to O’Sullivan and Carma, which was initially appointed Avego.

It all started with the frustration of O’Sullivan in the face of traffic congestion, which finally led to reflections on carpooling and how an automated system using smartphones could help people coordinate. This idea would turn into Avego startup and become the basis of the first patent – n ° 7 840 427.

The first patent, for which O’Sullivan applied in 2007 and was granted in 2010, created a shared transport system which corresponds to an empty space in a vehicle with cyclists or goods. The system established a set of pickup and deposit points, then corresponded to users and pilots traveling along a similar route.

Before the patent was granted by the Avego carpooling application made its debut on the Apple App Store in 2008, the same year, the iPhone was launched. Avego showed its so-called shared transport application during the demonstration conference in 2008, which showed how a driver with an iPhone 3G could use the application to accept or reject a driving request. Once accepted, the rider was informed as the driver approaches, then was invited to enter a PIN code to prove their identity and authorize an electronic payment.

Avego, which would later change its name to Carma, was focused on promoting carpooling (as in carpooling) and not taxis, according to O’Sullivan. The company operated the carpooling sector until October 2016, when the application was withdrawn from the App Store. However, he still had other forms of carpooling, such as his partnership with Toyota, until the leaflet completely in April 2018.

“If you look at the definition of carpooling in federal legislation, it is carpooling,” said O’Sullivan, noting that Carma has been a carpooling company of several million dollars at its beginnings.

When Uber and Lyft arrived and tried to coopte the term carpooling to signify the taxi, he caused confusion on the market, which prompted Carma to change his business model and apply his technology to new ways. “Uber and Lyft really took carpooling in the sense of taxi services, but our company Carma did not want,” said O’Sullivan.

Carma is still focusing on reducing traffic congestion, but its technology is applied to a different business model.

Today, Carma uses its application to help the authorities in transit to manage tolls and expressways – a range of products that the company was deployed for the first time in 2013. For example, the application can be used by a driver on a toll road or even the occupation of track vehicles for HOV tracks. The application is designed to bring more runners to cars and reward these people by reducing tolls or giving drivers access to the HOV track.

The idea, said O’Sullivan, is to offer the toll authorities a means of reducing capital spending up to 20 times by not using major portico -based infrastructure systems. And he paid.

O’Sullivan says that Carma is profitable, although the continuation of this trial cuts in its results. However, he said it was worth it.

“I think there is a danger in society where we cannot count on our patents to protect the rights of inventors, and the patent system exists specifically to protect the rights of investors, so as not to reward copies that just have deeper pockets,” he said, pointing to Uber attempts to his own patents and their rejection by the USPTO.

“We believe that it is something that is important to recognize that the rights of a relatively small inventor are trampled on. But it is not only for Carma, really. We consider this as a problem for the whole system. It is a test of the question of whether the rule of law always applies when a powerful technological giant is involved.”