In previous stories about the FotoMedia suits, TPA detailed the litigation’s effect on San Francisco-based Fotki.com, which has about 25 employees, and the three-man, Texas-based software company FotoTime.
As the new year starts, some of the FotoMedia defendants are breathing a sigh of relief—and the rest may be doing the same soon. That's because reexamination requests filed with the United States Patent and Trademark Office by Yahoo Inc. appear to have knocked out nearly all the patent claims at issue. FotoMedia's lawyers at McKool Smith have reacted to that development by offering to either stay the suits or have them dismissed without prejudice (leaving FotoMedia able refile the claims at a later date.)
In court filings, Fotomedia says it wants to conserve judicial resources while continuing to contest the reexam results. It’s a bit surprising, since one of the traditional attractions of filing suit in the Eastern District of Texas is that judges tend not to stay litigation just because re-examinations are underway. (And as those reexams can indeed drag on.)
But at least two defendants named in one of the four FotoMedia suits aren’t in any hurry to drop the litigation at this point—Zazzle.com, and Scripps Networks (which owns Food Network and a few other cable channels). In court papers, Scripps' lawyers note that they've already spent considerable time and money trying to fend off FotoMedia’s claims. Now, they want the chance to invalidate the patents instead of leaving open the possibility of being dragged back to court.
The reexam results represent a significant setback for McKool Smith. Perhaps more than any other law firm, the Dallas-based McKool showed in 2009 that the Eastern District of Texas is still a go-to venue for wringing big verdicts out of technology companies: a recent press release shows the firm is responsible for some of the year's biggest verdicts.
McKool's promotional material doesn’t emphasize its work for FotoMedia, a patent-holding company whose only apparent business is filing infringement lawsuits. As part of its litigation campaign, FotoMedia has been demanding royalty payments from more than 60 companies with photo-sharing websites. The McKool lawyer in charge of the FotoMedia cases was not available for interviews on Friday, and FotoMedia has not responded to TPA interview requests in the past. FotoMedia is also represented by Ward & Olivo, a firm out of New York that frequently represents patent-holding companies.
(See the TPA reference page on FotoMedia for more details about the patents, companies, and law firms involved.)
Among those breathing easier thanks to the reexam results is Chris MacAskill. MacAskill is co-founder of SmugMug, the family business he runs with about 25 employees—nine of them MacAskills—in Mountain View, California. He said he feels like a black cloud has been lifted from over the company.
"It's an enormous relief for us," MacAskill said. "It just means we have more money to develop features and advance our technology, as opposed to spending it on lawsuits."
In the end, SmugMug hasn’t had to spend a fortune in legal fees, mainly because Yahoo took the lead with an aggressive defense, filing for ex-parte reexaminations on all three of FotoMedia’s asserted patents. (It's not clear if Yahoo will fully reap the benefits of the favorable reexam results; the company reached a settlement with FotoMedia in August.)
MacAskill founded SmugMug with his son Don in 2002. Like other photo-sharing entrepreneurs targeted by FotoMedia who TPA has interviewed, MacAskill didn't think to get patents for his business because it didn't seem to involve anything new enough to be patentable—just a better execution of existing technology (combined, he ways, with scrupulous customer service).
During the first four years SmugMug was in business, nobody bothered the company about patents. But in the past three years, MacAskill has been hit with patent threats from no less than seven different parties—only one of whom is an actual competitor. FotoMedia is one of three patent-holders to actually file suit against SmugMug between 2007 and 2009.
MacAskill said the suits have changed the way SmugMug does business--and not for the better.
"Every time we write an e-mail now,” he said, “we have to ask ourselves, if discovery happened here and this e-mail gets read in front of a jury, what are they going to think? It's amazing how much that slows down and hampers doing business.”
Even if MacAskill had hired someone to do a search to find patents relevant to the business he was launching, it’s unlikely he would have identified the ones that have been wielded against him. For example, patent number 7,032,030, which is owned by holding company Easyweb, relates to receiving information by fax or audio and converting it into a Web page.
"I can't believe they would see that patent and say, that would somehow apply to Smugmug," MacAskill said. Still, he felt compelled to reach a settlement with Easyweb rather than face the high cost of discovery, which could easily have run into the mid-six figures.
"I can start a whole company with $500,000," notes MacAskill. "I can pay a handful of engineers and do a great website... but when it comes to defending against a lawsuit on a 'digital postcard' patent, it's not enough."
Igor Shoifot, CEO of Fotki.com, is another FotoMedia target who is elated to hear that the lawsuit against his compay seems to have ground to a halt—at least for now. When TPA first interviewed Shoifot, he was contemplating leaving the country as a result of all the patent litigation he faced.
"I feel relieved," said Shoifot. "But I wouldn't say that I feel that the system really worked. It was our luck that the trolls were going after not just us, but after some big guys. And when you go after big guys, they can shoot back... But one thing is for sure, we're no longer thinking about moving to Canada.”
Photo via Wikimedia