Patent Lawsuits against Indian Technology Companies

In the previous article, we discussed why Indian SaaS companies face patent lawsuits abroad. Non-Practicing Entities (NPEs; also called patent trolls) are the biggest patent infringement lawsuit filers in the USA. They are patent assertion entities that sue companies for patent infringement. Asserting a patent means declaring an infringement (i.e. use of patented technology without permission from the patent holder). They make money by asserting their patents on potential infringers. Since this is their business model, companies of all sizes and domains get trapped in lawsuits by NPEs. Also, since they do not themselves manufacture anything, it is not possible to counter-sue them. We will look at some case examples of Indian SaaS companies in this article.

Here are the cases discussed in this article:

1. Zoho vs. Versata
2. Hike vs. Uniloc
3. Infosys vs. mCom
4. Freshdesk vs. Pherah

While Zoho was able to defend the lawsuit by invalidation of the patent, others had to settle the case outside the court. Read on to find out what these cases were about:

Case-1: Zoho vs. Versata

Zoho, an Indian MNC that makes web-based business tools, faced a lawsuit from the NPE Versata. Versata alleged that Zoho and other software companies infringed three of its patents. Two of these patents were US6834282B1 and US6907414B1. They claimed a hierarchical data display and a file system interface, respectively. Zoho was able to dodge the first two patents. But Versata alleged that Zoho’s mobile apps violated the third patent. This was US7092740B1, which was on how data appears on “space-constrained” displays. The dispute came to light when Zoho started making and selling software known as ManageEngine Applications.

A common strategy adopted by NPEs is to get an accused company to settle outside the court. They settle for amounts less than the cost to pursue and defend the lawsuit to bring the company to negotiation. But Zoho did not give in to this. Instead, Zoho tried to fight it out.

The concept of the patent was to display information on a screen. So there were chances that the idea must have been in use before the grant of this patent. With this awareness, Zoho first tried to invalidate the patent. They found prior art that included a laptop as a device for the kind of same display. A patent becomes invalid if anyone has practiced the invention before the filing date of the patent. Secondly, Zoho said that the patent was invalid because “space-constrained display” lacks clarity. Based on these, Zoho demanded compensation for  attorney fees of close to $1.1 million and other costs of about $70,000.

The verdict:

The court, however, concluded that laptops were not handheld, portable devices. So they could not invalidate the patent on this basis. But since the patent did not clearly define “space-constrained display,” Versata lost the case, and the patent became invalid. This meant that they could no longer use the patent to sue someone. Finally, the court awarded Zoho some cost fees and not the attorney fees. This ruling by the Supreme Court of the United States encouraged companies alike to stand up against NPEs.

Case-2: Hike vs. Uniloc

Uniloc is another NPE company. It has filed many patent lawsuits against Microsoft, Google, Huawei, among others. Uniloc Luxembourg owns patents in the field of text/voice instant messaging. And as we know, Hike is also an instant messaging app and service provider across platforms. Uniloc found that Hike offers its products that infringe on its patent to users in Texas. So Uniloc filed a patent infringement lawsuit against the Delhi-based company.

The patent that Hike allegedly infringed was US8995433B2, issued on 31st March 2015. The patent discloses a system and method of instant voice messaging. The homegrown company had an app, “Hike Messenger,” on Google Play and the Apple App Store. The app also used associated servers to service the voice and mobile messages from the app. Uniloc claimed that Hike Messenger works on the technology that the patent claims.

The app asks for personal information, uses a file manager to store, retrieve and delete messages. It sends messages when the recipient is available, much like the technology disclosed in the patent. So the app infringed several claims of the patent.

Fig. 2 below shows an example of Hike Messenger’s use for sending a voice message.

Uniloc also holds another patent, US7535890B2, which broadly covers the same technology. The mobile app infringed this patent as well. Thus, Uniloc demanded attorney fees, cost, and interest for damage from Hike for the patent infringement. The court finally dismissed the case after a settlement between the two parties.

The curious case of Eastern District of Texas

The judicial Eastern District of Texas is known for being a haven for patent-holding NPEs/companies. Courts like the Texas court are called Rocket Docket Courts. It is because of the speed with which they handle patent infringement cases. SaaS patent-holding companies tend to win 88% of the cases compared to the other regions in the USA.

Case-3: Infosys vs. mCom

The third case is the Texas LLC, mCom vs. Indian IT giant Infosys patent infringement lawsuit. MCom asserted one of its patents, US8862508B2, on Infosys for infringement. The ’508 patent relates to novel systems and methods for constructing a unified banking system. It is a method of simplifying e-banking. The system provides many e-banking touchpoints for the customer in one place. This enables financial institutions to deliver and maximize the impact of e-banking options. According to mCom, Infosys sold infringing products or services to companies in Texas. MCom demanded compensation for damages due to lost profits and legal procedures.

Fig. 3 below shows that Infosys marketed a mobile app with PC and mobile browsing. The highlighted portions in the image show which parts of the app infringed the claims in the patent.

mCom further accused Infosys of instructing users on how to use its products and services (e.g., construction of a unified banking system). The case remains pending in the US court.

Case-4: Freshdesk vs. Pherah

One of the leading homegrown SaaS companies in India is Freshworks. It has a brand Freshdesk, based in Delaware, US, which was involved in the lawsuit. Freshdesk builds and delivers SaaS for IT, customer service, sales, marketers, and HR. Pherah LLC of Texas sued Freshdesk for infringing its patent. The patent of concern is USRE44652E1. Pherah accused Freshdesk of using the same patented technology in its software. The patent talks about software for managing product information of the products sold by an entity.

Further, the system has a processing unit and a memory unit. These units together relate data of the product as defined by the user. E.g., Companies have used databases to store information on their products like part numbers, graphics, brochures, price, cost, etc. 

But different departments within the company define the same product differently. So this technology manages the information together and presents it to the user. Freshdesk’s software seemed to infringe on some claims of the patent. Finally, the two parties settled the case. They bore the respective attorney fees.

Three ways to tackle a lawsuit by an NPE

Patent litigation, i.e., the procedure of pursuing a lawsuit in court, is a costly and tedious affair. As we see from Zoho’s case, an attorney's fee alone ranges in millions, and then there are other costs related to the system. NPEs, therefore, try to threaten companies large and small to extort money from them. Out of this fear, more than 90% of patent infringement cases settle outside the court in the US. 

Some companies fall prey to frivolous lawsuits, while some dare to challenge false accusations. So to overcome this, there are three things you can do:

1. If possible, don’t fight the patent; fight the infringement. Infringement is easier to tackle, but patents are difficult to change.
2. Make it clear from the beginning that you don’t have the money to give to them. Or that you will use the money for an attorney to fight the case. This will demotivate the NPE from pursuing the matter further.
3. Assure them that once you start pursuing the case, you will make it annoying and painful for them.

Seeing that they won’t be able to extort much from the company, the NPE loses interest and you can save yourself from such lawsuits.

Prevention is better than cure. A better idea still is to prevent the lawsuit rather than bear the expenses of the lawsuit. You can also use defensive strategies to avoid infringing a patent.