After more than a year of litigation and battling it out on social media, comedian and famed podcaster Adam Carolla has settled his case with Personal Audio LLC, the company that sued him in January 2013 for allegedly infringing on their patent for a “system for disseminating media content representing episodes in a serialized sequence.”  Personal Audio considers itself to be a holding company, with their main activities being asserting and licensing the patents which they own.  This very activity, coupled with the fact that they do not currently manufacture any products or services, leads many people to consider them a “patent troll.”  The nonpracticing entity had initiated lawsuits against several podcasters, claiming that their patent covers all “episodic content” and therefore, others’ online distribution and queuing-up of podcast content is in direct violation of it.  (Interestingly, the patent originated with Personal Audio founder Jim Logan’s decidedly less-modern mail-order cassette tape distribution model.)

The Electronic Frontier Foundation (EFF), also calling foul, filed an inter partes review back in October 2013, petitioning the US Patent and Trademark Office to invalidate the patent, pointing out, among other things, the existence of prior art which should have barred the patent from being granted in the first place.  Over the last few months, Personal Audio dropped the claim against the podcasting defendants named in their lawsuit, once they understood that even Carolla, holder of the Guinness World Record for most downloaded podcast, was not making enough money off of their patent to warrant pursuing litigation in this case.  At least…they tried to drop the case.  In what some might perceive to be a “man bites dog” scenario, Carolla refused the offer to dismiss the suit against him, and even spearheaded an effort to take down Personal Audio, enlisting the aid of his international fan base and raising over $475,000 to help offset the legal fees involved.  His stance was centered on the assumption that Personal Audio would not truly let go of this claim, but would eventually circle back if and when podcasting matures to a point of profitability. 

Fearing that this posed a looming threat to the development and future business model of this growing field, Carolla—together with the parallel efforts of the EFF—decided not to go down without a fight.  Brad Liddle, Personal Audio’s CEO, called Carolla’s campaign “ludicrous” and “a cynical exploitation of the publicity power he enjoys as an entertainer,” considering that he was fundraising for a lawsuit that he didn’t need to defend anymore; Liddle wondered whether Carolla was hanging on to the case just to have more fodder for his podcasts, generate sympathy and ratings, or simply to “get his fans to fund his future.” 

The parties reached an agreement over the last week, and though the terms of their settlement are confidential and will likely remain under wraps until their agreed-upon “quiet period” concludes at the end of September, a number of things may be safe to assume.  First, Carolla’s counterattack might just be enough to keep Personal Audio at bay (for now), and make them think twice before bullying podcasters in the future.  Their very own press release specifically states that their discovery found podcasters’ profits to be so insignificant as to make it not worth litigating “over the smaller amounts of money at issue.”  The existence of that documented evidence alone might be enough deterrence against would-be lawsuits targeting podcasters.  Not all parties on the receiving end of a patent troll’s attention may have the fame and resources that Carolla does, but his tenacity still provides an effective lesson to those who might face similar lawsuits in the future. 

 Second, and perhaps more importantly, the fact that this was settled out of court deprived Carolla of the chance to actually invalidate the patent in question.  Furthermore, unlike the EFF’s challenge of the patent—which, according to the USPTO, is limited to presenting evidence “based on prior art patents or printed publications”—Carolla would have had the opportunity to present a wider array of evidence to prove prior art.  All this now leaves an opening for Personal Audio to try asserting this particular (and broadly-written) patent again against other parties for the remainder of their approximately two-decade hold on the intellectual property.  A Carolla victory would essentially have meant a victory for the general public, who would then be able to freely use (or continue using) the technology without fear of litigation. 

In the meantime, EFF’s petition is being actively reviewed by the Patent Trial and Appeal Board, which has preliminarily found that there is a “reasonable likelihood” that they will “prevail in showing unpatentability” of the claims they are challenging in Personal Audio’s so-called “podcasting patent.”  Nevertheless, Personal Audio is not letting its latest dead-end with podcasters deter them from continuing their licensing efforts elsewhere. They are still targeting the big three television networks, ABC, CBS, and NBC, over their release of “episodic [video] content” on the internet.  Podcasters may not have been worth their time, but in light of their past victory over Apple and other technology giants (including Samsung, Motorola and SanDisk) who are now licensees to some of the company’s patents, it is clear that Personal Audio is not afraid of pursuing “bigger fish,” particularly when their previous results have been so lucrative.

For the last three decades, there has been disagreement among the four departments of the New York Appellate Division regarding the conditions that must be met by a party wishing to subpoena a non-party in civil litigation.  This difference of opinion came as a result of a 1984 amendment to Section 3101(a)(4) of the New York Civil Practice Law and Rules (CPLR), which eliminated the requirement of procuring a court order prior to serving a non-party subpoena—as long as the substance of the discovery was deemed “material and necessary” to the case and the subpoenaing party clearly stated the reasons for their request to the non-party.  The First and Fourth Departments maintained that the party seeking discovery must only establish the relevance of the sought after information.  The Second and Third Departments, however, added a further stipulation that the subpoenaing party also demonstrate that it could not obtain the requested information from any other source.  A Court of Appeals decision earlier this year has finally resolved this divisional split . . . and made the discovery process a lot easier in New York.

In an attempt to gather evidence for his multi-million-dollar 2009 California case against Rudy Kurniawan, whom he suspected of selling him counterfeit vintage wines, William Koch served a subpoena on non-party John Kapon, CEO of Acker, Merrall & Condit (AMC), a New York retailer of fine wines.  Kapon moved to quash plaintiff Koch’s subpoena, claiming, among other things, that CPLR Section 3101 required Koch to take defendant Kurniawan’s deposition prior to subpoenaing non-party AMC.  New York State’s highest court, however, concluded that whether or not a party might be able to get information from other sources is irrelevant when it comes to seeking a non-party subpoena.  As long as the subpoenaing party explicitly states the "circumstances or reasons" for the subpoena, then the burden falls on the non-party to demonstrate that its testimony would be irrelevant to the litigation.  Koch’s subpoena met the CPLR’s “notice” requirement.  Therefore, the Court of Appeals sided with the First and Fourth Departments’ interpretation and rejected the petitioners’ motion to quash because the non-party “failed to meet its burden of establishing that its deposition testimony was irrelevant to the California action.”

While this decision clarifies New York law and removes one of the barriers to obtaining non-party discovery, this does not mean that non-parties have no recourse if they are served with a subpoena.  There are other valid objections to discovery that may apply.  For example, a subpoena that seeks a broad range of documents covering an expansive range of topics or time period may be quashed as overbroad, burdensome or oppressive.  See, e.g., In the Matter of Reuters Ltd. v. Dow Jones Telerate, Inc., 231 A.D.2d 337 (1st Dep’t 1999).  Additionally, a subpoena seeking confidential documents containing trade secrets or other proprietary information may also be quashed.  Finally, if the subpoena does not comply with the CPLR’s mandatory notice requirement, or if it is clear that the requested information is irrelevant to the litigation, those are additional grounds for objection.  It should also be noted that even where the information sought is proper, the non-party may be entitled to reimbursement of “reasonable and proper” expenses incurred while complying with a subpoena, but there is a split in authority as to the types of expenses that are reimbursable.

Until September 2012, Green Mountain Coffee Roasters (GMCR) owned the patent on the “K-Cup” design, a single-serve coffee brewing solution.  This meant that there was only one (legal) coffee-pod product on the market for consumers who had one of the company’s Keurig home-brewing machines.  Once GMCR’s patent expired, though, other companies were free to sell their own K-Cups, and legally advertise them as being compatible with the proprietary machines.  These generic pods often cost about 5-25% less than the brand-name K-Cups, and eventually appeared in reusable form with even more attractive pricing, thus forcing Keurig’s parent company to step up their game in the battle for market share.  A complaint filed against them last month by TreeHouse Foods, however, claims that GMCR is resorting to unlawful activities in order to “maintain a monopoly” over the single-serve coffee market.  According to the antitrust lawsuit, in addition to signing anticompetitive agreements with suppliers and distributors to lock third-party K-Cup manufacturers out of the marketplace, the company’s “Keurig 2.0” system effectively brings what some consider to be akin to DRM technology into every kitchen with a Keurig machine.

Larry Blanford, who was GMCR’s President and CEO at the time, alluded to those agreements, as well as to the new technology, in a 2012 earnings call when he said that their partners were “in a position to take advantage of future single-serve…innovations.”   One of those innovations turned out to be the next generation of Keurig brewers announced in their earnings call this past November, when current GMCR President and CEO Brian Kelley mentioned that the machines would incorporate “interactive readability” that would “deliver breakthrough benefits for the consumer.”  He later explained that the new system would not brew non-Keurig packs.  Much like the backlash from consumers who objected to similar tactics used by brand-named printers that required use of their own proprietary ink, many Keurig machine owners are furious about this development that would seemingly restrict them from using the cheaper unlicensed K-Cups.

As much as people are sounding off against the “digital rights management” of their coffee machines, there are proponents of the java giant’s decision, as well.  The crux of their argument is the fact that GMCR does not actually have a monopoly over the single-serve brew packs, and thus, their decision doesn’t necessarily result in undue influence on the market.  Just as customers are entitled to buy another comparable product if they dislike Keurig 2.0, so, too, can the brewer’s owner decide to pursue a business model that bolsters its bottom line.  There is no law stipulating that all electronic devices and appliances be “open source;” Keurig’s margins are made via their K-Cups, and not the machines, themselves.  If they decide that it is in their best interest to develop a system that they believe will keep their customer churn rate down, they are fully within their right to do so.  They hope that there will still be consumers who see the value in a system where the same company who makes the machine produces the pods.  Such customers would presumably be willing to pay a premium for the quality they’ve come to love, especially if there is a perception that the closed-loop system ensures a longer warranty on the product than if they’d be using third party (aka inferior) pods.

Even though there is a general expectation that there will be consumer drop-off due to the technology change, GMCR has reportedly found that Keurig-machine buyers are more likely to be brand-loyal customers.  So, with the company selling approximately 32 brands and 200 varieties (including co-branding with big names like Starbucks and Snapple), they are counting on their embedded consumer base sticking with their preferred products, and plan to partner with more customer favorites in the future.  Despite all the criticism, judging by Kelley’s boldly optimistic projections of consumer enthusiasm and adoption, coupled with the company’s stated intention of converting as many unlicensed coffee-pack producers to their system as possible, it is clear that GMCR expects their Keurig reboot to be a long-term success.  Given that their stock price has been rising since that November earnings call, it seems that investors aren’t too worried, either.  The Keurig makers undoubtedly have more in their patent portfolio than just the original (now expired) K-Cup platform design, and are ready to leverage whatever IP they have to strategically protect their standings on supermarket shelves and kitchen counters alike.

In late January of this year, one of the leading interactive mobile entertainment companies in the world published an open letter on its website, addressing the debate that has been brewing about its intellectual property protection practices.  In this press release, King’s cofounder and CEO, Riccardo Zacconi, discussed his company’s belief that developers “have every right to protect the hard work they do and the games they create,” and pledged that King would continue to take “right and reasonable” action to defend themselves against those they believe are ripping off their IP.  One of the company’s most valuable assets is their immensely popular “Candy Crush Saga.”  Though the game itself is free to download and play, with millions of people playing it on their mobile devices every day, the virtual items available for purchase within the game reportedly helped the company earn over $450 million in revenue in last year’s December quarter.  Those figures are pretty remarkable, especially considering that the game launched less than two years ago.  An independent developer named Albert Ransom, however, is not impressed. Two years before Candy Crush Saga entered the marketplace, Ransom’s company, Runsome Apps, released a mobile game entitled “CandySwipe” in memory of his late mother.  According to Ransom, King’s flagship game is causing much consumer confusion and significant harm to his business.  Though many others have made the accusation, Ransom stops short of calling Candy Crush Saga a blatant copy of his work, for which he filed for trademark in 2010.  After King tried to register the Candy Crush Saga mark two years later, Ransom opposed their application and had been fighting it since.   King retaliated this February by adding a counterclaim for cancellation of Runsome’s CandySwipe trademark registration.  Their case was further strengthened by the fact that, earlier that month, they had officially acquired the rights to the “Candy Crusher,” a game that predated Runsome’s CandySwipe by two years.  As it takes five years of commercial use before the USPTO will consider a term “incontestable,” King’s ownership of the Candy Crusher mark—which was established in 2008—essentially outweighs their need to continue pursuing their US application for the “Candy” trademark, which Runsome had been opposing.  (King has no plans of abandoning their trademark of the term in the EU, however.)  Now that it has legal claim to the precedential Candy Crusher title, King can use it as ammunition in any future cases against companies trying to capitalize on a candy-related mark.

In his own open letter to King in response to this latest development, Ransom begrudgingly concedes defeat, saying “you win…I hope you’re happy taking the food out of my family’s mouth… your move to buy a trademark for the sole purpose of getting away with infringing on the CandySwipe trademark and goodwill just sickens me.”  (The original letter has since been taken down, leaving only a message thanking the public for their outpouring of support.)  Even the International Game Developers Association has issued a statement qualifying King’s recent conduct as “overreaching,” “predatory,” and contradictory to Zacconi’s own January statement, and vows to look into the matter more comprehensively.  Presumably, the folks at King are hoping that they can put all of these concerns to rest before their IPO, which is expected to debut later this year.  However, the disputes above—together with a separate case that they’ve brought against another developer over its use of the word “saga”—have been garnering the mobile entertainment giant a lot of bad press, particularly amongst the extremely vocal gaming community.  Social media channels and comment sections on articles about the ongoing trademark clashes have been flooded with people saying that they are uninstalling the Candy Crush game and pledging never to buy a King app again.  This does not bode well for King’s investment prospects if they are drawing the ire of the very demographic they claim to serve.

As many of us do, Gilbert P. Hyatt–a Las Vegas–based inventor–decided at the beginning of this year that it was time to make a change.  In a bid to get the US Patent and Trademark Office (PTO) to stop procrastinating their approval of two of his pending patent applications, Hyatt sued the agency, demanding that they make a decision, one way or the other.  According to the PTO’s latest statistics on their website, there is a current backlog of over 600,000 unexamined patent applications; so clearly, they are very busy.  However, with that same dashboard showing that the average turnaround time for a patent request is currently a shade over 28 months, the 35- and 43-year waits in Hyatt’s case do seem a bit exaggerated.  In fact, the PTO has not granted Hyatt any patents at all since 1997, which he believes is indicative of their unofficial policy to keep him at bay in a never-ending loop of reopened prosecutions, examinations, and appeals, according to his January filing.  What could be holding them back?

The two long-pending patents in question are for technology relating to liquid crystal displays, and controlling machinery using electronic signals.  Much like the early microprocessor (the “single chip integrated circuit computer architecture” which Hyatt successfully—and very lucratively—patented in 1990 after a 20-year wait), these technologies are used so ubiquitously now, one would be hard-pressed to assign a value to the amount of money Hyatt stands to make via licensing if either or both of the unresolved patents were to be approved.  Hyatt has a fairly consistent history of getting his way in court, as well, and it seems as though the PTO is wary of setting down a judgment rejecting his applications, as they know he would immediately take it to the board of appeals.  He’s taken the agency itself to court 10 times, after they denied some of his patent requests; he even prevailed in a 2012 Supreme Court case against them regarding patent applicants’ evidentiary restrictions in district court cases.  It’s no surprise, then, that theirs is a strained relationship.  Furthermore, there is the argument that, while Hyatt may have put the ideas on paper, he did not follow that up with actual scientific development or invention.  Some allege that he staked claims on technological inevitabilities, and left the actual innovation to others until it was advanced enough to come out as finished products for which he could demand credit (and licensing fees).

Due to a law keeping older patent applications confidential, it is nearly impossible to research Hyatt’s two pending applications. And since Hyatt himself is reluctant to discuss their content, there is no good way to determine whether they were so broad as to have potentially-monumental impact on the entire technology industry, or if they involved more specifically-focused implementations of his then-(supposedly)-innovative technology.  Hyatt is due to turn 76 this month, which means that he has essentially spent over half his lifetime waiting for these patents to be granted.  Considering how long the PTO has been methodically giving him the runaround, it is unlikely that Hyatt’s recent lawsuit will suddenly put them in the mood to grant him any long-overdue birthday presents.