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Patent trolls storm the podcasting industry

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Trolls

Podcasting has become a lucrative business.  The increasing popularity of podcasts has in its wake advanced an army of patent trolls.

Comedian and acclaimed podcaster, Adam Carolla recently commented, during a patent lawsuit, that these trolls “make a business of buying technology that they didn’t create and then find ways to sue to extract money.” Many in the podcasting industry will likely agree.

Consider the source:  In the podcasting world, Adam Carolla is a pioneer. He began his first podcast in February, 2009 and shot to the number 1 spot on iTunes by the third episode. From March, 2009 to March, 2011, Adam’s podcast received nearly sixty million unique downloads and won a Guinness World Record for the most downloaded podcast ever. Even with such verified success though, not everyone was a fan.

As with many other technological phenomena, it was only a matter of time until the trolls reared their ugly heads. While internet trolls disrupt online discussions and provoke readers for their amusement, patent trolls try to “enforce a patent far beyond its actual value or contribution to the prior art,” according to a leading federal court of appeals judge.

Patent trolls are often non-practicing entities (NPEs) who do not use the patent, but enforce their right to exclude others from using it by engaging in costly litigation or negotiating licenses.  Essentially, patent trolls seek litigation-cost settlements through legalized extortion. Although patent holders are free to use their exclusion rights as they desire, this type of instigation can stifle innovation and increase the costs and risks of manufacturing.

To help put the effect of patent trolls in perspective, it is important to understand how they emerged. The U.S. Commerce Department released a report in 2016, which found that “IP-intensive industries support at least 45 million U.S. jobs and contribute more than $6 trillion dollars to, or 38.2 percent of, U.S. gross domestic product.” Thus, the rise of intellectual property industries in America’s economy gave birth to the issue of patent trolls.

Furthermore, according to unifiedpatents.com, 2015 held the record for most patent disputes and the second highest number of patent cases filed ever. A Boston University study found that businesses in the United States suffered $29 billion in costs directly related to patent trolling. Furthermore, while trolling was once only a problem that unsympathetic, gigantic software or pharmaceutical companies had to face, patent trolls have been increasingly targeting smaller companies and many different industries.

Following the money, patent trolls have now set their sights on popular podcasts like Adam Carolla’s. In 2013, Personal Audio LLC, a Texas-based company, filed a patent infringement lawsuit against the producers of the Adam Carolla Show and other podcasts on his network. Personal Audio’s claim relied on a patent dating back to 1996. The patent granted Personal Audio rights for a “system for disseminating media content representing episodes in a serialized sequence.”

This incredibly far-reaching patent was, for some reason, granted by the USPTO in 2012.

Before their battle with Carolla, Personal Audio had successfully sued Apple in 2009, using a similar broadly worded patent. Personal Audio was awarded 8 million dollars in that case. Coming off that win, the company set its sights on the number one podcast on iTunes- Carolla’s show. Instead of writing a quick check to avoid an expensive legal battle, Carolla decided to fight back. He used a crowdfunding website to finance his legal defense. Carolla enlisted the help of fellow podcasting heavy hitters such as Marc Maron, Joe Rogan, and Chris Hardwick to raise almost $500,000 from fans. Combined with $200,000 of his own money, Carolla raised almost three quarters of the million dollars to litigate the lawsuit.

Unfortunately, the money did not last long. Carolla spent nearly $75,000 trying to change the venue to East Texas, where most of these patent cases were heard – a costly, yet worthy course for Carolla as most patent suits garnered favorable rulings there.

Although it could be considered a rough start, Personal Audio underestimated the power of the bully pulpit. After months of unflattering media attention focused on Personal Audio, which in turn drove thousands of fans to donate to the legal defense fund fearing that they would otherwise lose their favorite podcasts, Personal Audio settled in the summer of 2014.

The company released a statement alleging that during discovery, it realized that Carolla wasn’t making enough money from podcasting to make a lawsuit financially worthwhile. If the number one podcaster wasn’t making enough money for Personal Audio to continue litigation, then it didn’t make much financial sense for them to sue other podcasters. While this was a win for the podcasting community, it did not come cheap. By the end, Adam Carolla’s legal team was operating at a $200,000 deficit. After settling with Carolla, the company continued its fight against CBS based on the patent, as applied to podcasts, and was awarded 1.3 million dollars at trial in September of 2014.

For a company that claimed it essentially invented podcasting, it was ironic how little understanding it appears to have of how the business works. Yes, Carolla gave up his chance to argue for attorney’s fees and to challenge the validity of the patent. However, the Electronic Frontier Foundation (EFF) continued the fight and challenged the patent, arguing prior art. The EFF is a non-profit digital rights group that helps defend individuals and emerging technologies from, what it sees as, abusive legal actions. In April of 2015, the U.S. Patent and Trademark Office invalidated five provisions of Personal Audio’s patent and essentially stripped the company’s ability to litigate using it.

Now that its patent is, for all intents and purposes, useless, this troll has retreated back into its cave. While the threat of patent trolling is far from over, a recent change has made things much more difficult for the trolls. Congress created inter partes reviews (IPRs) that allow a panel at the U.S. Patent and Trademark Office to look at patents for a second time and see if they should have even been issued in the first place. This review process has saved a lot of money in comparison to litigation. The Supreme Court upheld IPRs’ review process last year, meaning that they are not going anywhere soon and it’s one more roadblock to discourage patent trolls.

While this alone won’t be enough to stop patent trolls, it is a step in the right direction. The recent attack against podcasting has helped to get the attention of the mainstream media and educate people about the threat patent trolls pose. Hopefully, this will create more support for patent reform legislation that will end the threat that patent trolling poses to an intellectual property industry that is vital to America’s economy.

Sources

  • Patent Personal Audio used to sue Carolla.

Fletcher Alford Fletcher Alford, a 2L at the USF School of Law, is especially interested in intellectual property law. This is fueled by his passion for emerging technology and experience dj’ing at clubs, bars, and parties throughout the Bay Area. In his spare time, Fletcher enjoys playing basketball, Warriors games, and exploring/making music.