On February 1, 2017, Blackbird Technologies, a company based out of Boston; Chicago; and Concord, Massachusetts; filed suit against Los Gatos, California-based Netflix, Inc. in Delaware federal court for patent infringement. Blackbird, a company that does not create software, purchased the patent in question from a prior patent holder. The founders of Blackbird, Wendy Verlander and Chris Freeman, are former big firm attorneys who seek to recover damages in the form of a royalty.
The common term for a company that does not innovate but files patent infringement suits in hopes of settling is a patent troll. There has been argument in the engineering world as to the true definition of this term. Some view a company as a patent troll only if the company is not serious about following through with a lawsuit and has no reasonable chance of succeeding in court. Many in the intellectual property rights (IPR) community consider Blackbird to be a patent troll because it has settled many of its more well-publicized lawsuits. Yet Blackbird has a decent chance of winning this suit.
Blackbird holds U.S. Patent No. 7,174,362, titled, “Method and System for Supplying Products from Pre-stored Digital Data in Response to Demands Transmitted via Computer Network.” In simple language, the patent amounts to downloading content and viewing it offline. This patent has been used a number of times to induce settlements from large companies. The question comes down to how similar the technology described in the patent is to the technology Netflix is using.
Blackbird is going after the feature of Netflix’s service that involves downloading videos for offline viewing. It was originally issued to Sungil Lee, a San Jose-based businessman. Lee described his process as allowing a customer to order data on a website, then custom-make a CD-R containing the data and finally ship the CD-R. The key to the patent’s success is vague language. The patent describes the system of copying material as involving different modules that make up a computer-implemented method of data duplication. It is likely that Lee modeled his patent on Netflix’s service of sending DVDs through the mail.
Blackbird still stands to get a big payout because the ‘362 patent has also been used successfully to threaten a number of other companies, including Target and DirecTV. In addition, Blackbird has leverage by bringing Netflix’s mindset under consideration. A court can consider a patent infringer’s mindset when deciding the amount of damages. Although intended for egregious situations, if the court finds willful infringement, it can triple the amount of damages to the patent holder.
Several recent measures to curb patent trolls may not apply to this case. Blackbird’s suit, on its face, does not appear to be frivolous. In addition, Blackbird’s patent appears to contain some elements of human ingenuity. This renders the technology described in the document patent-eligible rather than a patent-ineligible abstract idea.
Netflix is not the only company that is likely to settle. On the same day, Blackbird filed similar suits against Soundcloud, Vimeo, Studio 3 Partners, Mubi, and Starz. How those companies choose to handle their suits may influence Netflix’s decision. In-house attorneys and directors can take away a great deal from watching the Blackbird/Netflix interaction. The lawsuit reveals in-house attorneys should carefully consider vague and ambiguous language in patents that may conflict with technologies their company plans to release. They should also have a patent attorney and an engineer work together to review how similar the technology the company plans to utilize is to that of existing patents like the ‘362 patent.
