A New Target for Tech Patent Trolls: Cash-Strapped 
American Cities
By Joe Mullin
Ars Technica
March 15, 2012
http://arstechnica.com/tech-policy/news/2012/03/a-new-low-for-patent-trolls-targeting-cash-strapped-cities.ars

Patent holders will file a lawsuit about anything under
the sun these days, but a man named Martin Jones has
embraced an alarming new strategy-suing cash-strapped
American cities over their bus-tracking systems.

The most recent suit was filed last week, claiming that
Portland's TransitTracker system infringes a patent
owned by ArrivalStar, the patent-holding company that
enforces Jones' patents. Two more, filed in February,
claim that transit systems in Cleveland, Ohio and
Monterey, California infringe three ArrivalStar patents.

Those new suits follow five lawsuits filed last year
against King County (Seattle), Illinois Commuter Rail
(which owns the Metra Chicago-area commuter trains), the
Massachusetts Bay Transportation Authority, the Maryland
Transit Administration, and the Port Authority of New
York and New Jersey. With the exception of the Port
Authority litigation, those suits all appear to have
settled. And cities have paid up.

King County settled its ArrivalStar lawsuit last year
for $80,000, according to Anh Nguyen, an attorney with
the county prosecutor's office who was tasked with the
case. To her knowledge, King County had never faced a
patent suit before. "We aren't eager to see others," she
added. "What else is he to do?"

Suing over patents on which one is not actually building
a product-commonly called "patent trolling"-has been a
growing business for a decade now, but the strategy of
going after the public sector is a new wrinkle.
ArrivalStar and Jones are making a direct play for
taxpayer money, something that most patent trolls have
avoided until now. Cash-strapped US municipalities are
in no position to defend a patent suit through trial,
which can cost millions. Instead, they're likely to
settle ArrivalStar's claims.

    "The government can't just take property from
    someone, they have to pay for it."

In an interview, ArrivalStar attorney Anthony Dowell
defended his client's actions, comparing them to a real
estate owner seeking compensation after government
intrusion.

"The government can't just take property from someone,
and if they do, they have to pay for it," said Dowell.
"Just because an entity is funded with taxpayer dollars
doesn't give them the right to steal property. My client
now owns 34 patents that are being infringed, and what
else is he to do?"

As to the argument that the patents shouldn't have been
issued at all, Dowell said the patent system has methods
for making that argument, and they've been tried. For
example, some ArrivalStar patents have been through re-
examinations at the patent office. While some of its
patents have been invalidated in that manner, at least
one has survived, notes Dowell.

Dowell said his client typically looks for between
$50,000 and $75,000 from the public transit systems. "We
believe we're offering a reasonable license amount in
each instance. We license public entities for less than
private entities," he said.

ArrivalStar has racked up dozens of licensees, all
without going anywhere near trial. Only one of its
lawsuits even made it to the "claim construction" phase.
This suggests the company is asking for relatively low
payouts, though in the world of patent lawsuits, those
could easily mean five-figure or low six-figure
settlements. Patent defense lawyers often consider those
kind of sums to be "nuisance settlements," even though
the "nuisance" is more than most Americans earn in a
year.

Most of ArrivalStar's lawsuits-it has filed more than
100 in the past few years-have been against private-
sector transportation companies and big retailers like
Home Depot, Best Buy, and Abercrombie & Fitch.
Altogether, the litigation campaign demonstrates that
Jones believes he's entitled to a royalty payment for
almost any type of vehicle tracking.

ArrivalStar's lawyers don't give a pass to small
companies, either. In 2010, the company squeezed a
$15,000 settlement out of EarthSearch Communications, a
company with just 11 full-time employees. If
EarthSearch's sales ever get above $2 million, the
company will have to pay an additional $25,000 to
ArrivalStar; if sales top $4 million, EarthSearch pays
$75,000.

ArrivalStar's demands are likely more widespread than
even the extensive public record indicates, because the
company sends out demand letters before litigating, and
it sometimes reaches settlements without suing. The
company has licensed several public transit systems, or
the private companies that service their tracking
systems, without any litigation being involved, said
Dowell, including Clever Devices, the company that
services the Chicago Transit Authority.

ArrivalStar has even taken the bold step of suing the US
Postal Service for its vehicle-tracking system. That
suit, filed in November, remains pending in a Colorado
federal court. From dot-com failure to offshore patent
holder

Martin Jones had a real, operating company-also called
ArrivalStar-back in the early 1990s. The company tracked
"several thousand" vehicles, although Dowell couldn't
identify where it operated. The original system involved
tracking buses and notifying riders via an automated
telephone call when the bus was about to arrive.

"They had been successful in the testing and first
implementation of it," said Dowell. "But in the late
'90s the dot-com crash just dried up funding, and they
were a victim of that."

Today Jones, who lives in Vancouver, simply "owns other
patents, and develops technology, and just invents,"
said Dowell.

A dot-com-era crash followed by a realization that money
can be made through patent lawsuits instead has become a
fairly typical story for a licensing company like
ArrivalStar.

The ArrivalStar lawsuits look to have plenty of
investors beyond Jones, but it's unknown who they are.
Most of the settlement money that ArrivalStar takes in
appears to be headed offshore; ArrivalStar's office is
in Luxembourg. ArrivalStar also has a co-plaintiff in
all its lawsuits, a company called Melvino Technologies,
which maintains an "office" that's simply a PO Box in
the British Virgin Islands.

By suing the public sector, ArrivalStar has gained the
attention of advocates at the Electronic Frontier
Foundation (EFF), which sometimes challenges patents it
believes threaten the public. Earlier this month, EFF
issued a call for prior art that could help bust one of
the most-litigated Jones patents. The strategy might
enable EFF to file a re-exam at some point, but re-exams
have proven to be a very limited tool for stopping
problematic patents. (The notorious Eolas software
patents, for example, held strong through multiple re-
exams before finally being knocked out at a Texas trial
last month.)

Still, such a campaign could bring more attention to
patents that seem to be a direct attack on public
infrastructure. If ArrivalStar's new strategy goes
unchallenged, it could mean cities become a favorite new
target of patent trolls.

"I'm concerned there are folks out there who will think
municipalities are ripe for the picking," says Julie
Samuels of EFF. "These are services that are really good
for people. Bus tracking means less people drive."

Joe Mullin is a reporting fellow at the Investigative
Reporting Program of the UC-Berkeley School of
Journalism.

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