Patent Holder Admits To Extortion Tactic; Later Finds Out It Doesn't Even Own The Patent

Legal Issues

from the ooops dept

There are plenty of crazy patent stories out there, many of which we end up covering here on Techdirt — mostly in an attempt to highlight some of the problems with the patent system. John writes in with a fascinating story about Digeo’s misuse of the patent system. Digeo is a company whose biggest claim to fame is basically that it’s funded by Microsoft co-founder Paul Allen (and, a few years back, bought the incredibly overhyped, but never amounted to anything, Moxi, which built up a huge reputation as the stealthy “Rearden Steel”). Digeo has been in the set-top business, but apparently recently decided that suing for patent infringement could be more lucrative. The company says it’s not a patent troll because it actually makes a product, but as the article notes, that doesn’t mean you’re not trolling. In fact, when the company sued Audible for its downloaded audio offering, an executive at the company got angry at Audible for not settling, pointing out in an email that it’s cheaper to settle than to go to court. That’s often been the strategy of patent trolls — relying on companies to simply pay up, because it’s cheaper than the alternative. Of course, in some parts of the world, it’s also what’s known as extortion — which is why plenty of people have problems with the practice. However, the real kicker is Audible eventually discovered that Digeo didn’t even own the rights to the patent. The details aren’t entirely clear, but somewhere along the way, someone (outside of either company) forged something, allowing the patent to be sold to Digeo when the original owner had no intention of selling it. However, the situation still isn’t great for Audible. While it’s commendable that they stood up to the trolling attempt, they couldn’t convince a judge that Digeo should cover their legal expenses (which, as expected, greatly surpass how much Digeo wanted for the license fee).