Patent Holder Admits To Extortion Tactic; Later Finds Out It Doesn't Even Own The Patent

from the ooops dept

Tue, Sep 19th 2006 4:09am — Mike Masnick

There are plenty of crazy patent stories out there, many of which we end up covering here on Techdirt -- mostly in an attempt to highlight some of the problems with the patent system. John writes in with a fascinating story about Digeo's misuse of the patent system. Digeo is a company whose biggest claim to fame is basically that it's funded by Microsoft co-founder Paul Allen (and, a few years back, bought the incredibly overhyped, but never amounted to anything, Moxi, which built up a huge reputation as the stealthy "Rearden Steel"). Digeo has been in the set-top business, but apparently recently decided that suing for patent infringement could be more lucrative. The company says it's not a patent troll because it actually makes a product, but as the article notes, that doesn't mean you're not trolling. In fact, when the company sued Audible for its downloaded audio offering, an executive at the company got angry at Audible for not settling, pointing out in an email that it's cheaper to settle than to go to court. That's often been the strategy of patent trolls -- relying on companies to simply pay up, because it's cheaper than the alternative. Of course, in some parts of the world, it's also what's known as extortion -- which is why plenty of people have problems with the practice. However, the real kicker is Audible eventually discovered that Digeo didn't even own the rights to the patent. The details aren't entirely clear, but somewhere along the way, someone (outside of either company) forged something, allowing the patent to be sold to Digeo when the original owner had no intention of selling it. However, the situation still isn't great for Audible. While it's commendable that they stood up to the trolling attempt, they couldn't convince a judge that Digeo should cover their legal expenses (which, as expected, greatly surpass how much Digeo wanted for the license fee).

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12 Comments

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Sanguine Dream, 19 Sep 2006 @ 5:22am

You know...
if I were the acutal owner of that patent I'd sue Diego and give the money to Audible.
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Rabid Wolverine, 19 Sep 2006 @ 7:21am

Somebody needs to go to jail...
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The Truth Beacon, 19 Sep 2006 @ 8:14am

May not be Diego's fault
It sounds like Diego may have also been the victim of fraud in which case I somewhat agree with the Judge. It's good to hear that Audible stood up, but if things were to happen how I feel they should, the forger would be caught and forced to pay all the fees plus jail time, and if Diego was caught as part of the fraud, THEN they also have to pay up.
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Anonymous Coward, 19 Sep 2006 @ 8:19am

Could someone clarify this:
"The details aren't entirely clearly,"
It's meaning is not entirely clear.
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Republican Gun, 19 Sep 2006 @ 8:31am

Karma
Everything will work its way out. Eventually. Of course, Audible will have to pay a license fee to the original patent holder.
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me, dammit, 19 Sep 2006 @ 8:38am

Re: May not be Diego's fault
Nope. It's called due diligence. Digeo had the responsibility to make sure their purchase of the patent was legit. Obviously they never checked with the original patent holder (very easy to do). If they had, they would have known the supposed seller was full of crap, and Digeo could have sued the jackass trying to sell it to them (and had him/her arrested).

In that they proceded against Audible without fact-checking thoroughly enough, they should in fact be held responsible for Audible's expenses. If Audible could discover the patent-ownership defect, surely Digeo could as well.
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when will they get a clue, 19 Sep 2006 @ 10:34am

stupid judges
Gotta start making the one who sues and loses pay the costs you f***ing dumba**es. If there is no pain they will never stop with this.
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JS, 19 Sep 2006 @ 10:42am

Re:
You're a dick, Rabid Wolverine. Stop commenting on this site and take your happy pills.
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scoop ace, 19 Sep 2006 @ 1:49pm

In other news..
SCO has purportedly filed a lawsuit against Diego for infringing on their patented business model of suing other companies for patent infringement of patents they never owned.

Darl the Snarl was seen shaking his fist as he divulged that they had mountains of evidence that Diego executives had overheard him at a hotel bar, ranting about SCO's lawsuits over Linux.

"Our IP has clearly been stolen and released to the public against our wishes. How do we get our IP back now that it's widely avaialble?" quipped Darl. "We know it was those louses over at Groklaw and IBM that put them up to it!"

scoop ace - daily news.....
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A chicken passeth by, 19 Sep 2006 @ 6:17pm

^ This just in: Leo Stoller, holder of a large amount of word patents, has sued both SCO and Diego for using his patented tactic of revenue through lawsuits. In a press interview, Leo said that he "might just go after the MAFIAA next". More at eleven.
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Tired of Half Knowledgable Responses, 20 Sep 2006 @ 9:31am

Article full of Half Truths
It's interesting that every one who's commented only has the facts that were presented in the article but not the whole story....stay tuned....Nocera biased the article since he is a friend of Katz's; the judge's actions speak louder than Nocera's words....if Digeo were guilty of what Nocera and all of you claim, the verdict would have been very different....tsk tsk....i didn't think this readership was such a bunch of lemmings
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Tom Tom Makoo, 2 Oct 2006 @ 2:18pm

If you can't build a good product, try litigagion
If this Digeo company used the patent in their own product, the original owner could begin litigation against Digeo and its customers. That could get interesting.
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