Stupid Patent Of The Month: How 34 Patents Worth $1 Led To Hundreds Of Lawsuits
from the the-monster-is-dead,-but-damage-is-done dept
One of the nation’s most prolific patent trolls is finally dead. After more than a decade of litigation and more than 500 patent suits, Shipping & Transit LLC (formerly known as Arrivalstar) has filed for bankruptcy. As part of its bankruptcy filing [PDF], Shipping & Transit was required to state how much its portfolio of 34 U.S. patents is worth. Its answer: $1.
We are recognizing Shipping & Transit’s entire U.S. portfolio as our latest stupid patent of the month. We agree that these patents are worthless. Indeed, they have always been worthless, except as litigation weapons. In the hands of their unscrupulous owners, they caused enormous damage, costing productive companies more than $15 million in licensing fees and untold legal expenses. That’s tens of millions of dollars that won’t be used to invest in new products, reward shareholders, or give raises to workers.
Dozens of worthless patents
All patent troll stories start with Patent Office. You can’t be a patent troll without patents. And you can’t have patents unless with Patent Office grants them. We have found many occasions to write about problems with patent examination. The Patent Office spends only a few hours per application and regularly issues software patents without considering any real-world software at all. This helps explain how an entity like Shipping & Transit could end up with dozens of valueless patents.
Shipping & Transit claims to be “one of the pioneers of determining when something is arriving and being able to message that out.” Its patent portfolio mostly relates to tracking vehicles and packages. Of course, Shipping & Transit did not invent GPS tracking or any protocols for wireless communication. Rather, its patents claim mundane methods of using existing technology.
Consider U.S. Patent No. 6,415,207. This patent claims a “system for monitoring and reporting status of vehicles.” It describes using computer and software components to store status information associated with a vehicle, and communicate that information when requested. In other words: vehicle tracking, but with a computer. It doesn’t disclose any remotely new software or computer technology. Rather, the patent claims the use of computer and software components to perform routine database and communications operations. There is nothing inventive about it.
Given that it was aggressively filing lawsuits as recently as 2016, it is striking to see Shipping & Transit now admit that its patent portfolio is worthless. While many of its patents have expired, that is not true of all of them. For example, U.S. Patent No. 6,415,207 does not expire until 2020. Also, the statute of limitations for patent infringement is six years. An expired patent can be asserted against past infringement so long as the infringement occurred before the patent expired and within the last six years. Many of the patents Shipping & Transit have asserted in court expired less than six years before its bankruptcy filing. Yet Shipping & Transit valued all of its U.S. patents at $1.
A decade of patent trolling
When it was known as Arrivalstar, Shipping & Transit sued a number of cities and public transit agencies claiming that transit apps infringed its patents. (While the exact legal relationship between Arrivalstar S.A. and Shipping & Transit LLC is unclear, Shipping & Transit has itself said that it was “formerly known as Arrivalstar.”) Its litigation had all the hallmarks of classic patent trolling. When transit agencies banded together to defend themselves on the merits, it quickly abandoned its claims.
Shipping & Transit’s campaign continued for years against a variety of targets. In 2016, it was the top patent litigator in the entire country, mostly targeting small businesses. One judge described its tactics as “exploitative litigation.” The court explained:
Plaintiff’s business model involves filing hundreds of patent infringement lawsuits, mostly against small companies, and leveraging the high cost of litigation to extract settlements for amounts less than $50,000.
For many years, this strategy worked. Shipping & Transit/Arrivalstar is reported to have collected more than $15 million from defendants between 2009 and 2013.
Finally, after more than a decade, Shipping & Transit’s exploitative tactics finally caught up with it. First one, then another federal judge awarded attorneys’ fees to the defendants in cases brought by Shipping & Transit. With defendants successfully fighting back, it stopped filing new cases.
The end: Shipping & Transit files an inaccurate bankruptcy petition
Shipping & Transit filed its bankruptcy petition [PDF] on September 6, 2018. The petition discloses that Shipping & Transit’s gross revenue in the two-year period of 2016 and 2017 was just over $1 million dollars. Of course, this does not include the legal costs that Shipping & Transit imposed on its many targets. It claimed to have no revenue in 2018.
Other than its 34 U.S patents (valued at $1), and its 29 worldwide patents (also valued at $1), Shipping & Transit claims to have no assets at all. Where did more than $1 million dollars it received go? The application doesn’t say.
The bankruptcy petition, submitted under the penalty of perjury and signed by Shipping & Transit’s Managing Member Peter Sirianni, contains at least one false statement. A bankruptcy petition includes Statement of Financial Affairs (Form 207). Part 3 of this form requires the debtor to list any “legal actions ? in which the debtor was involved in any capacity?within 1 year before filing this case.” Shipping & Transit said “none.”
But that isn’t true. On July 23, 2018, a writ of execution [PDF] was issued as to Shipping & Transit in the amount of $119,712.20. This writ was issued in Shipping and Transit, LLC v. 1A Auto, Inc., Case No. 9:16-cv-81039, in the Southern District of Florida. The judge in that case had issued a final judgment [PDF] on April 3, 2018, awarding fees and costs to the defendant. Both of these orders, and many other court filings, took place within a year of Shipping & Transit’s bankruptcy petition. Yet Shipping & Transit still affirmed that it had not been involved in litigation “in any capacity” within a year of the bankruptcy filing.
Shipping & Transit’s petition does list 1A Auto as an unsecured creditor. Even though a court has issued a writ of execution with a precise six-figure amount, Shipping & Transit stated that the amount of 1A Auto’s claim is “unknown.”
It is not surprising that a decade of abusive patent trolling would end with an inaccurate bankruptcy petition. To be clear, our opinion that Shipping & Transit’s bankruptcy petition includes a false statement submitted under oath is based on the following disclosed facts: its answer to Part 3 of Form 207 of its petition, and the public docket in Case No. 9:16-cv-81039 in the United States District Court for the Southern District of Florida.
A monster story for Halloween
UPSTO Director Andrei Iancu recently gave a speech where he suggested that those who complain about patent trolls are spreading “scary monster stories.” It may finally be dead, but Shipping & Transit was a patent troll, and it was very, very real. We estimate that its lawsuits caused tens of millions of dollars of economic harm (in litigation costs and undeserved settlements) and distracted hundreds of productive companies from their missions. Research shows that companies sued for patent infringement later invest less in R&D.
A patent system truly focused on innovation should not be issuing the kind of worthless patents that fueled Shipping & Transit’s years of trolling. Courts should also do more to prevent litigation abuse. It shouldn’t take an entire decade before an abusive patent troll faces consequences and has to shut down.
While it lived, Shipping & Transit/Arrivalstar sued over 500 companies and threatened many hundreds more. That might be a “monster story,” but it is true.
Reposted from the EFF’s Stupid Patent of the Month series.
Filed Under: patent trols, patents, shakedown, stupid patents
Companies: arrivalstar, shipping & transit llc
Comments on “Stupid Patent Of The Month: How 34 Patents Worth $1 Led To Hundreds Of Lawsuits”
Hundreds of lawsuits? More leads for the police to find Masnick’s smaer campaign army. I’ll be waiting.
Re:
a) Masnick didn’t write that; Daniel Nazer did.
b) It’s actual provable fact. The article itself references several of them.
c) Since when do the police ever get involved in taking down an alleged “smear campaign?” (unless it involves criticism of the police force itself)
At least try to put the effort into reading the article before you blindly comment on it.
Re: Response to: John Smith on Oct 31st, 2018 @ 8:32pm
Is there a planet where any of tbat makes sense?
a fortress built of deception
Much like Prenda Law, when people stop paying extortion and finally start fighting back, their business model soon unravels and their house of cards collapses.
And just like Prenda, their ill-gotten fortune is probably squirreled away in shady overseas accounts, making recovery difficult if not impossible.
View from the cynical seats
Let’s see, that would mean the entire portfolio of patents could be bought by a successor patent troll…for just $1. Anyone want to take bets on whether one is already being incorporated?
Well, duh, into the parent shell corporation. (Which is busy incorporating the successor troll.) The bankruptcy is obviously tactical, to avoid paying judgments.
Shipping & Transit LLC is obviously tapped out reputation-wise, so ash-can it and start over with a clean slate and a new troll…and maybe even recycling the same crappy patent portfolio.
Whack-a-mole.
Re: View from the cynical seats
Another of Masnick’s minions wi5h a filthy mouth. So patent h9lders can’t use shell companies but pirate sites can steal millions from authors? I think the police will br very interested to see where that money went. Investigations are ongoing.
Re: Re: View from the cynical seats
Aren’t you the guy who claims to be a professional writer? Wow.
“I think the police will br very interested to see where that money went”
I think they’d be more interested in proving it existed first. If I read the first page of your poorly written text and decide not to buy it, that doesn’t mean I stole the retail cost of a copy of your failed manuscript. The police have actual theft to investigate, where the “victim” can at least prove that they lost something.
Re: Re: Re: View from the cynical seats
Of course it does! Theft is theft! Don’t you know anything?
Re: Re:
No, patent holders cannot use shell companies to hide their money. No, pirate sites cannot steal millions from authors. Police are not currently involved with anything here, unless you’re hiding information. Or rather, just making it up.
Re: Re: Re: Re:
Who said anything about hidden?
One of the main features of corporate law is limited liability of shareholders:
Shell companies are used for stop-loss. In this case Shipping & Transit LLC (STL) was probably owned by a company we will call X, and the $1 million was probably paid to X as a dividend. Now STL is bankrupt and X is not liable for STL’s debts. The $1 million is safe.
The only thing X can lose is it’s share value in STL, and since that usually amounts to something nominal like a single $100 share,…meh.
This kind of thing is done all the time.
Re: View from the cynical seats
Does it still count as cynicism if it’s based on historical actions by similar scum? Wouldn’t that just be a view from the experienced seats?
That aside, I strongly suspect that you’re right. They’re trying to duck out of any judgements by claiming that they’re dead broke, and valuing the patents so low so that what will certainly be a complete stranger can come by and scoop them up for reasons which will have absolutely noting to do with what the previous pack of parasites used them for.
Upto is a bad joke
It’s a farce as well.
Missing not?
Nuh-uhh!!
Nuh-uhh!! Patents only make owners "invest in new products, reward shareholders, or give raises to workers"! Anti-Mike told me so!
Annoying ADDS today, keep shifting the page unexpectedly
Research also shows that patent trolls invest absolutely nothing in R&D unless you count Myrvhold’s shady op as “research” for anything but trolling.