Patent troll Innovatio IP goes after small businesses

Patent lawsuits used to be aimed exclusively at big companies. Now, they're coming after small-to-medium sized businesses as well. Will you be next?
Written by Steven Vaughan-Nichols, Senior Contributing Editor

Ask not for whom the patent troll sues, he sues you. It used to be patent trolls only bothered to sue large companies. After all, that's where the big bucks were. Now, however, Innovatio IP, a new company that exists solely to shake money down for its Wi-Fi patents, is targeting individual branches of hotel, coffee shops and restaurant chains. You, with your home Wi-Fi access point, may be next.

None of these franchised businesses, which include Hyatt, Marriott, Wyndham, Ramada Inn, Best Western, Days Inn, Super 8 Hotels, Travelodge, Caribou Coffee, Cosi and Panera Bread, make or develop technology. All they do is offer Wi-Fi services. That's enough, as reported by Patent Examiner, for Matthew McAndrews, a partner at Chicago-based law firm Niro, Haller & Niro, and the lnnovatio lead litigator, to state, "We want you to continue to use this technology, we just want our client to get his due share. This is not a seat-of-the-pants, fly-by-night shakedown."

Oh sure. Of course not.

Specifically, if you offer Wi-Fi to your customers, according to McAndrews you owe Innovatio a one-time lump sum licensing payment of between $2,300 and $5,000. Niro, Haller & Niro is taking patent trolling from the realm of big business patent wars such as those between Oracle and Google to small businesses.

Why are they doing this? To make money of course. No, they won't see the millions and billions that big patent lawsuit can bring in, but those cases can take years. By suing small businesses for using a technology, they're picking on companies without the first clue on how to deal with a patent lawsuit.

If you do know what to do, you also know that fighting a patent lawsuit is a very expensive proposition. A small business franchise owner will find it cheaper to pay up than to try to fight the lawsuit in court. Indeed, that may be the whole point. Paralegals can churn our lawsuits by the hundred and even if a few companies pay up, lnnovatio can still net a profit.

I asked several intellectual property (IP) lawyers what they made of this new business strategy of targeting small businesses that merely use a technology. Andrew 'Andy' Updegrove, a founding partner of Gesmer Updegrove, a top technology law firm, finds this approach "offensive. He added, "It needs to be squashed. The word 'cockroach' springs to mind."

John Ferrell, founding partner of Carr & Ferrell, a leading Silicon Valley technology law firm, thinks that "Ray Niro [a founder of Niro, Haller & Niro] is a smart patent broker, and he apparently believes he can make money by picking up nickels off the street." Of course, "Proving up a patent infringement case is a lot more expensive than collecting statutory damages from someone who illegally downloads a copyrighted MP3 of Lady Gaga," but "A few defendants may rollover and pay."

That said, Ferrell continued, "Suing mom and pop coffee bars on a patent case would seem to me to be a fool's errand, unless your goal is to pay your lawyers to shut down the business. You may be able to close down Main Street using this strategy, but it's hard to imagine that you could ever collect enough in damages to break even financially."

In the end though, Ferrell thinks that "if this starts to look like a shake-down, I predict that a significant number of businesses will stand up and fight. There are just too many lawyers in this country, and Ray has too many enemies."

In the meantime, the shake-downs continue. Motorola and Cisco are taking Innovatio to court, (PDF link) and asking for a declaratory judgment that Innovatio's patents are invalid and that, in any case, their Wi-Fi devices do not infringe.

But, hey you don't have to worry about this right? McAndrews has said "Innovatio has made a strategic and business judgment at this stage that it doesn't intend to pursue [lawsuits on the basis of] residential use of Wi-Fi." Of course, he then added, that it's Innovatio's "plan is to license this portfolio to the fullest extent possible. That would include anyone who's wireless networking."

So, if you don't think software patents really matter to you, just wait. You may open your mail sometime soon to find a demand for a three-figure licensing fee for your use home Wi-Fi use.

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