East Texas Court Finally Issues Newegg Order Two Years Late; Judge Upset About How Newegg Handled Things

from the might-want-to-look-in-the-mirror dept

Last week we wrote about an incredible situation in East Texas, where Judge Rodney Gilstrap had not issued a ruling in 20 months on a filing by Newegg concerning a ridiculous jury decision. As we had noted, everything about the case was fairly ridiculous. The patent in question, 5,412,730, was ridiculous and never should have been issued in the first place. The troll who owned it, TQP, should never have been allowed to shake down hundreds of companies by claiming that anyone encrypting web traffic infringed. TQP was able to bring in $45 million in settlements from this one bogus patent alone. Newegg brought out the biggest names in encryption to point out that the patent was bogus, and also pointed out that even if the patent was valid, it clearly did not infringe. No matter, the East Texas jury still sided with the troll, because that's East Texas.

Newegg, in response, asked Judge Gilstrap to basically overrule the jury, and issue a "Judgment as a Matter of Law" (JMOL) which is basically the judge saying that the jury got the law wrong in determining its verdict. And then... nothing. As new things happened in related cases, Newegg filed updates with the court, as kind of a nudge. Newegg had vowed to appeal the case, but was procedurally unable to do so until Gilstrap ruled one way or the other on the JMOL. So, eventually, last week it took the somewhat extreme step of filing a Writ of Mandamus with the appeals court, basically asking it to order Judge Gilstrap to do his job and issue an order.

TQP quickly filed a weak and silly opposition to the writ, not addressing the actual issues raised (because what are they going to argue -- that the judge should never rule on the case?). And before Newegg could reply, it appears that someone in Judge Gilstrap's office finally woke up and issued an order, siding with Newegg in the JMOL. In short, after doing nothing for 20 months, leaving everyone hanging on a jury verdict over this bogus patent, and ordering Newegg to pay $2.3 million, the court said, "Oh yeah, jury wrong, no infringement":

The Court concludes that under either Newegg's or TQP's interpretation there was not a showing of substantial evidence that the claim limitation is infringed.

In other words, no infringement, the jury was just wrong, everyone get on with their lives. Seems like this could have happened quite a long time ago, no? At the end of the filing, Judge Gilstrap finally addresses this issue and rather than being apologetic, he appears to be pretty angry at Newegg. As for why this happened? Well, that gets buried in a footnote:

After Newegg’s Petition for Mandamus was docketed in this case, the Court, among other actions, immediately asked the District Clerk to investigate why its systems had failed in this case, both to understand the issue and to, hopefully, determine a way to prevent such an occurrence in future. District Clerk David Maland forwarded his findings to the Court:

I am responding to your inquiry of July 8th as to why defendant Newegg's posttrial motions have not been appearing on the 6 month CJRA pending motion report. Upon inquiry, it was discovered that an order staying Case No. 2:11-cv- 428, a case with a similar number, was inadvertently docketed in the instant case on June 7, 2013 (docket entry #242 - see attached screen shot; erroneous order also attached). A note was made by the docket clerk at that time that the stay order was filed in error, but she neglected to lift the stay flag in the database. The bottom line is that a stay was created when the erroneous order was entered in this case and the stay flag remained in place until it was discovered and removed on July 8, 2015. This prevented any pending motions in this case from showing on your pending CJRA motions report during that time period.

Please accept my deepest apology for this situation. We have advised the deputy clerk in question of her error and have taken curative actions designed to avoid repetition of this kind of error. Please contact me if you have any questions.

So, yes, there's an apology there from the court clerk, but you'd think that the judge might want to issue one as well. But, no, he goes... the other way, scolding Newegg.

The Court is aware that more time has passed since the briefing has been complete on Newegg’s Motion than is optimal. However, although approximately 20 months have passed since the trial in this case, the time at which Newegg’s Motion for JMOL was fully briefed and Newegg’s Supplements were before the Court—the point in time where these matters typically would have been decided—was approximately 12 months ago. While Newegg did file an electronic notice with the Clerk’s office during this time (approximately 8 months ago), this is the sole action that Newegg has taken. Never once in this time has counsel for Newegg directly contacted the Court’s staff inquiring about this matter. How this situation could simultaneously be so prejudicial that a resort to mandamus might be considered while, at the same time, Newegg could not be troubled to pick up a phone and call the Court’s staff is baffling.

Finally, the Court intends to address, by written opinions, the issues that it has carried within a reasonable time. The Court, like most courts, has a busy docket, which periodically may cause more time to pass in a particular case than is optimal. In the future, the Court suggests that the parties themselves would be better served (and costs reduced) if they elected not to shoot first and ask questions later.

This is both misleading and ridiculous. First of all, Newegg repeatedly (four times) had filed additional information with the court, which you'd think should be sufficient to remind the court that it has a pending issue to attend to. And while it is true that Newegg's lawyers did not call the court clerk to find out what's up, Newegg's chief legal officer, Lee Cheng, says that's because basically everyone warned them that the East District Court does not look kindly on parties reaching out to the court in such a manner. Cheng tells me:

I asked my counsel to do everything possible to expedite judgment. Since pretty much the verdict was delivered. I’d specifically inquired whether we could/should call and/or write and/or file a notice on a monthly basis politely reminding the Court that we were awaiting judgment, if for nothing else but to build a record. I was specifically advised by counsel and local counsel (based on his knowledge of local practice) that the Court would likely not look kindly on repeated reminders to issue a judgment. We reminded the Court as frequently as we dared—4 times.

We asked. We asked. We asked. We asked. We were advised strongly to avoid ex parte and/or repetitive (after 4 attempts) requests. Then we filed a very respectful Mandamus petition, almost 15 months after the final briefing on a renewed JMOL motion. Newegg did not attribute any ill intent or will as the cause of delay. Hardly a “shoot(ing)” and not even remotely, under any objective standard, premature.

Separately, Cheng responded to Gilstrap's closing whine that his docket is so busy that this one slipped through the cracks, by noting that there are ways to deal with that:

I would continue to suggest, with utmost respect, that his incredibly busy docket could be lightened if he were to grant venue transfer motions more frequently that are almost certainly supported under binding Supreme Court precedent, and if he and his clerks didn’t have to deal with extra motions seeking permission to file Section 101 challenges to patent validity permitted under Alice.

In other words, maybe it's time for East Texas to give up its reputation as welcoming patent troll lawsuits at every opportunity and send those lawsuits, that are clearly about jurisdiction shopping, to other courts where they can be handled more efficiently.

Filed Under: east texas, encryption, patent trolls, patents, rodney gilstrap, writ of mandamus
Companies: newegg, tqp

Newegg Asks Appeals Court For Help After Waiting Nearly Two Years For East Texas Judge To Actually Rule In Patent Case

from the get-moving-now dept

You may recall that back in November of 2013, we wrote about an absolutely insane ruling by a federal jury in East Texas, arguing that e-commerce vendor Newegg infringed on an absolutely laughable patent, held by a patent troll named TQP, which claimed to cover encryption. Newegg immediately promised to appeal the ruling -- so you may be wondering where that appeal is right now. So is Newegg. Yesterday, the company filed a petition for a Writ of Mandamus basically asking the appeals court to tell the district court to do its damn job and issue a final ruling (either on behalf of Newegg, or against it so it can appeal). Basically, Newegg has been stuck in limbo for nearly two years on this case for no clear reason. The judge in the case, Rodney Gilstrap, has just been sitting on the case, doing absolutely nothing for nearly two years, leaving Newegg unable to appeal.

The now-expired patent in question, 5,412,730, and here's the entirety of the claims:

1. A method for transmitting data comprising a sequence of blocks in encrypted form over a communication link from a transmitter to a receiver comprising, in combination, the steps of:

providing a seed value to both said transmitter and receiver,

generating a first sequence of pseudo-random key values based on said seed value at said transmitter, each new key value in said sequence being produced at a time dependent upon a predetermined characteristic of the data being transmitted over said link,

encrypting the data sent over said link at said transmitter in accordance with said first sequence,

generating a second sequence of pseudo-random key values based on said seed value at said receiver, each new key value in said sequence being produced at a time dependent upon said predetermined characteristic of said data transmitted over said link such that said first and second sequences are identical to one another a new one of said key values in said first and said second sequences being produced each time a predetermined number of said blocks are transmitted over said link, and

decrypting the data sent over said link at said receiver in accordance with said second sequence.

2. The method as set forth in claim 1 further including the step of altering said predetermined number of blocks each time said new key value in said first and said second sequences is produced.

TQP, a company controlled by notorious patent troll Erich Spangenberg (who now claims to have left the patent trolling business), claimed that this covered basically any encryption online and it sued hundreds of companies with most choosing to settle rather than fight -- with a variety of companies paying out over $45 million to settle TQP lawsuits. But, you know, that's not how NewEgg rolls, with its pledge to never settle with patent trolls.

The company went to court fighting this patent, even bringing out some of the biggest guns possible, having Whit Diffie and Ron Rivest appear as expert witnesses, explaining how ridiculous the patent in question was and how everything in the patent was in use in the market well before the "inventor" on this patent, Mike Jones, applied for it. And yet, because it's east Texas, back in November of 2013, the jury sided with the patent troll.

That's the stuff you already know. As mentioned, Newegg promised to appeal, but first it asked Judge Gilstrap to set aside the jury's verdict, as he is able to do. And then... nothing. As you can read in the petition for the Write of Mandamus and the even lengthier appendix to the petition, Newegg is getting pretty damn tired of waiting around. If Gilstrap rejects the company's request, then Newegg will appeal, but without him doing anything, the company is stuck in limbo, unable to actually move forward on appeal.

This Petition involves a case tried in November 2013 that still has not reached any appealable judgment. Although the jury found infringement and awarded $2.3 million in damages to TQP Development, LLC (“TQP”), it is beyond any reasonable debate that Newegg does not infringe the asserted claims, and Newegg sought appropriate post-trial relief on that basis. In the absence of a judgment, however, Newegg has been unduly burdened with an untenable $2.3 million liability on its books for 20 months and counting, which prejudices Newegg’s ability to make business decisions regarding that considerable sum.

Newegg has respectfully encouraged the district court to decide Newegg’s motion for judgment as a matter of law no fewer than four times, and has communicated the prejudice caused by the delay. It is now approaching two years after trial and no action has been taken by the district court on Newegg’s motion. This is several times longer than the time it has taken most other patent cases, tried before the same judge and around the same time, to reach final judgments. With no appealable judgment, and none ostensibly forthcoming, Newegg has no realistic recourse aside from seeking a writ of mandamus.

Newegg further points out that in the very same court, with a different judge, it was ruled that Intuit did not infringe on TQP's patent, despite using the identical encryption system on its site, and making the same arguments as Newegg.

Moreover, in a closely related case brought by TQP asserting the same patent and the same claims against Intuit, Inc., Judge Bryson of this Court (sitting by designation) granted Intuit summary judgment of non-infringement on the same grounds Newegg argued. Judge Bryson’s ruling applied to Intuit’s accused systems that were identical to Newegg’s, was based on testimony from the Newegg trial, and was made under a claim construction slightly broader (and thus more favorable to TQP) than the one given in Newegg’s case. Although Newegg was already entitled to judgment of non-infringement prior to Judge Bryson’s ruling, the force of collateral estoppel from the ruling further vindicates Newegg’s positions. This is not to mention the principles of comity that strongly encourage deference by Judge Gilstrap to Judge Bryson’s prior ruling on the exact same issue.

Newegg's filing goes through the full timeline, in which it has repeatedly asked the court to actually issue a final ruling one way or the other so it can get on with things. And... nothing.

Newegg notes that it's been sitting there with this giant $2.3 million liability that it can't do anything about and it also fears that the longer it waits, the more likely it is that TQP dissolves, leaving Newegg with no way to go after the company for fees and "other relief."

The failure of the district court to act while Newegg’s prejudice compounds cannot be remedied by awaiting the ordinary course of a final judgment and appeal. Nor can Newegg effectively do anything before the district court to avoid further delay. Indeed, Newegg attempted to encourage prompt resolution of this case in the district court no fewer than four times—twice requesting an oral hearing and twice submitting controlling dispositive supplemental authority—but can only do so much at the district court level to move things along. Newegg has been patient but firm, and filed the present Petition only as a last resort when no action from the district court appeared to be forthcoming 20 months after trial.

Newegg’s post-trial appealable judgment has already been delayed up to four times longer than other patent cases that went through trial around the same time as Newegg (November 2013) before the same judge. See, e.g., Hitachi Consumer Elecs. Co. v. Top Victory Elecs. (Taiwan) Co., No. 2:10-cv-260-JRG (5 months from April 2013 trial to appealable judgment); Wi-Lan Inc. v. HTC Corp., No. 2:11-cv-00068-JRG (5.5 months from October 2013 trial to appealable judgment); Cassidian Comms., Inc. v. microDATA GIS, Inc., No. 2:12-cv-00162- JRG (7.5 months from December 2013 trial to appealable judgment); Google Inc. v. Beneficial Innovations, Inc., No. 2:11-cv-00229-JRG (7 months from January 2014 trial to appealable judgment). Even considering the time from the close of post-trial briefing to judgment, the delay in Newegg’s case is still excessive— while Newegg has been waiting 15 months since briefing closed on its JMOL motion, the cases cited in the preceding sentence received judgments only two to five months after post-trial briefing closed. All told, data pulled from Lex Machina shows that Newegg’s case has been pending longer than 98.8% of cases filed before the same judge. Newegg’s case has taken far, far too long to reach an appealable final judgment.

In the filing, Newegg notes that it "makes no assertions" of "bad intent" by Judge Gilstrap. However, in an email from Newegg's Chief Legal Officer, Lee Cheng, you can sense his frustration:

Many have expressed concern and dismay about the rules, practices and rulings of various federal judges in the Eastern District of Texas (“EDTX”) in patent cases, including Judge Gilstrap. There is a common perception that the judges in EDTX adopt rules, engage in practices and issue rulings (or instructions that lead to jury verdicts) that favor plaintiffs, or which encourage or force defendants to settle even meritless cases to avoid the cost and risk of trial in EDTX. Some examples of such rules, practices and rulings are identified in the Petition. Commentators have speculated as to the judges’ motivations. Statistical evidence on patent infringement filings in EDTX generally, and with Judge Gilstrap specifically, seems to support the proposition that the venue and Judge Gilstrap are indeed favorites of the patent plaintiffs’ bar.

While he insists that the company does "not wish to speculate as to the motives or rationale" behind what's happening, "actions speak louder than words."

The facts of this matter are objectively egregious, and we have not received any guidance or reasonably acceptable explanations from Judge Gilstrap for almost 2 years for the incredibly prejudicial and extended delay in providing us with an appealable judgment. We need, and we deserve, justice and judicial relief in this matter now, under these exceptional circumstances.

This really is an incredible story. The whole thing is ridiculous and provides yet another reason why people should raise serious questions about the way in which the district court in East Texas handles its business.

Filed Under: appeal, cafc, east texas, erich spangenberg, patent troll, patents, rodney gilstrap, writ of mandamus
Companies: newegg, tqp

Insanity Rules In East Texas: Jury Finds Newegg Infringes On Ridiculous Encryption Patent

from the why-trolls-love-east-texas dept

There's a reason why patent trolls love east Texas -- and big part of that is that the juries there have a long history of favoring patent holders, no matter how ridiculous or how trollish. That was on display last night, when the jury in Marshall, Texas sided with patent troll Erich Spangenberg and his TQP shell company over Newegg. As we've been describing, Newegg brought out the big guns to prove pretty damn thoroughly that this guy Mike Jones and his encryption patent were both not new at the time the patent was granted and, more importantly, totally unrelated to the encryption that Newegg and other ecommerce providers rely on. Having Whit Diffie (who invented public key cryptography) and Ron Rivest (who basically made it practical in real life) present on your behalf, showing that they did everything prior to Jones' patent, while further showing that what Newegg was doing relied on their work, not Jones', should have ended the case.

But, apparently TQP's lawyers' technique of attacking Diffie's credibility somehow worked. The jury said both that the patent was valid and that Newegg infringed -- and they awarded TQP $2.3 million -- a little less than half of what TQP wanted, but still a lot more than TQP settled with many other companies (including those with much bigger ecommerce operations than Newegg). In other words, yet another travesty of justice from a jury in east Texas. Newegg will appeal, as it did in its last big patent troll lawsuit (which was much bigger), against Soverain Software. Again, Newegg had lost in East Texas, but prevailed big time on appeal. Hopefully history repeats itself.

Joe Mullin's coverage (linked above) has a bunch of little tidbits about how everyone responded to the verdict, but I think Diffie's response is the most honest. Asked how he was feeling:

"Distressed," he said. "I was hoping to be rid of this business."

Yeah, he's not the only one. The sheer ridiculousness of a jury simply not believing the very people who created the very building blocks of modern encryption, and instead buying the story of someone who did nothing special either with the concept behind his patent or with that patent once it existed, is just distressing. It shows how arbitrary jury trials can be, especially when you have jurors who simply don't understand the technology or the history at play. Blech. I think I may have to go buy an anti-patent troll t-shirt from Newegg.

Filed Under: cryptography, east texas, erich spangenberg, marshall texas, patents, whitfield diffie
Companies: ip nav, newegg, tqp

Newegg Brings Out Whit Diffie, Ron Rivest & Ray Ozzie To Debunk Patent Troll's Claim; Troll Attacks Diffie's Credibility

from the cue-laughter-now dept

Last week, we mentioned Newegg, a company that has publicly declared it won't settle with patent trolls, fighting in court against the world's most litigious patent troll, Erich Spangenberg. If you'd bet that's a recipe for some courtroom drama, it appears you would have won that bet. Joe Mullin continues his excellent reporting from East Texas, and talks about Newegg breaking out some heavyweights in support of its argument that some guy named Mike Jones didn't actually invent the cryptography that made e-commerce possible. Among those appearing on behalf of Newegg were three names that I hope all of you already recognize: Whitfield Diffie, Ron Rivest and Ray Ozzie. If not, look them up, but suffice it to say Newegg has credibility on their side.

They also had Alan Eldredge, a guy who worked on the original Lotus Notes to talk about how they implemented everything in Jones' patent (using Ron Rivest's RC4) before Jones filed for it. The interesting tidbit there is that Eldredge wasn't your typical expert witness hired by one of the parties in the case:

Eldridge wasn't paid, as expert witnesses were—he came down to testify against the Jones patent out of a feeling of "civic responsibility," he said. He didn't know who the defendants in this case were until he was told. "I hadn't even heard of New Age until Saturday," said Eldridge at one point, as laughs were stifled in the courtroom.

From the sound of it, Diffie oozed credibility on the stand, as he should, and Mullin believed the jury was eating it up (for more details on the specifics of the testimony, read Mullin's full article linked above):

Diffie's testimony went on some time, but he seemed to have the jury in the palm of his hand. A few jurors laughed at his jokes and smiled, and the more serious ones were certainly focused on his testimony. After about two hours, Albright passed the witness.

Spangenberg's lawyer, Marc Fenster, apparently decided the way to respond to this incredibly credible witness (the dude invented public key cryptography!) was to... attack his credibility. First, he attacked his credentials. Diffie never completed a master's degree, nor has he held a full time academic position -- which, of course, doesn't even remotely matter for anything, but Fenster tried to use it to make him seem like a charlatan, leading up to a claim that Diffie didn't actually invent public key cryptography. But, of course, that's not actually true. This story is well known in cryptography circles and you can find variations of it online. The UK's equivalent of the NSA, GCHQ, more or less figured out much of the same thing, but kept the whole thing secret. Fenster referred to James Ellis of GCHQ, who had conceived a similar idea, but wasn't able to do the math. The math was done later at a time much closer to Diffie's efforts (the exact timing here is somewhat in dispute). However, as many people have pointed out, none of that much matters, because the folks at GCHQ did absolutely nothing with this, and from all accounts, they didn't even think it was anything important or special.

And, more importantly, none of that actually takes away from the stuff that matters here: all the important work happened long before Mike Jones got his patent, and Spangenberg's company TQP's claim that Jones' work enabled e-commerce still looks like complete bunk. Even if GCHQ had figured out public key cryptography before Diffie, it doesn't change the fact that his version is the one that made it well known, RSA's implementation made it work, and that's actually what made secure e-commerce possible, not anything from TQP's patent.

It appears that Newegg is so confident that it's going to win the case completely that it didn't even bother having its final witness take the stand. That witness was going to challenge the $5.1 million damages claim from Spangenberg. But that only comes into play if the jury finds for TQP. While it may be a bit risky, Newegg seems to be betting big that damages aren't even going to be in play here at all.

Filed Under: encryption, erich spangenberg, patents, ray ozzie, ron rivest, whitfield diffie
Companies: newegg, tqp

Newegg Battles World's Most Litigious Patent Troll Over Bogus Claims Of 'Inventing' E-Commerce Encryption

from the good-luck,-newegg dept

Joe Mullin is down in an East Texas court room, covering all the details of a key patent lawsuit, pitting the world's most litigious patent troll, Erich Spangenberg, against well-known electronics retailer, Newegg, a company that has vowed never to settle with patent trolls -- a strategy that has been quite successful so far. Spangenberg is infamous for his "sue first, license later" approach to patent trolling, but the details revealed during the lawsuit show how profitable it is. Spangenberg has sued a ton of companies over this very patent -- with nearly all of them settling for much less than it would cost to fight a patent suit in court (fighting is estimated to cost upwards of $1 to $2 million). Nearly all the settlements are for much less:

Target had a website; Target got sued by TQP. It got out of the case by paying $40,000.

Some paid less than that—but most paid more.

Dodge & Cox, a mutual fund, paid a bit more than $25,000. Pentagon Credit Union paid $65,000. QVC paid $75,000. MLB Advanced Media paid $85,000. PetSmart paid $150,000. PMC paid $400,000. Cigna paid $425,000. Bank of America paid $450,000. First National paid $450,000. Visa paid $500,000. Amazon, Newegg's much larger competitor, paid $500,000. UPS paid $525,000.

IBM paid $750,000. Allianz Insurance paid $950,000. Microsoft paid $1,000,000.

All in all, Spangenberg has squeezed $45.37 million out of licenses for this one patent, which almost certainly does not actually cover the encryption used in online shopping, as Spangenberg claims. Oh yeah: Spangenberg's deal with the original inventor of the patent? The inventor gets 2.5% of the money, plus $350/hour for consulting. End result? He's made $588,000, while Spangenberg keeps the rest -- all on a patent he bought for about $750,000.

And, yes, the patent (which has since expired) is highly questionable in the first place. While Spangenberg's lawyers (representing his shell company called TQP) tried to claim that the inventor, Michael Jones, was some sort of visionary genius who predicted the world of e-commerce, there's no actual evidence to support this. Newegg (thankfully) has famed cryptography expert Whitfield Diffie on hand to call bullshit on the claims that Jones (a) invented anything special or (b) that his invention is even remotely in use on e-commerce sites today. Diffie, of course, is one of the inventors of public key cryptography, which happened prior to Jones' invention, and is what is actually used online.

Jurors got a short dose of the conventional historical record when Newegg lawyer Kent Baldauf gave them a preview of Diffie's testimony. "It's Dr. Diffie's invention that allows credit cards to be encrypted today," explained Kent Baldauf. "He's the one that figured out how you could send information to some remote server that you've never had any contact with before without these keys somehow being pre-set and pre-arranged in a closed system."

Baldauf also raised the basic themes of Newegg's defenses. The patent described symmetric cryptography—two hard-coded modems talking to each other. It wasn't that different in theory than the code books that have been exchanged since ancient times. It had nothing to do with public key cryptography that kept Internet data safe; Newegg therefore does not infringe, he argued.

To boot, to the extent Jones is an inventor at all, he isn't the first. The RC4 cipher was designed two years before Jones' patent filing and was combined with Lotus Notes by Ron Rivest of RSA Security.

Of course, with a patent jury trial in East Texas, you never now how things are going to turn out. But, this case is at least interesting in helping to open the books on how patent trolling works -- getting tons of companies to pay up on questionable patents by offering "settlement" rates below what a lawsuit would cost, even if the patent is totally bogus. And, kudos, once again, to Newegg for fighting this. It could have easily settled like all those other companies, but is fighting this one out on principle -- and in the hope that it will stop the next patent troll from doing the shakedown game.

Filed Under: e-commerce, encryption, erich spangenberg, michael jones, patents, whitfield diffie
Companies: newegg, tqp

Meet The Patent Troll Suing Hundreds Of Companies For Encrypting Web Traffic

from the the-system-is-broken dept

Ars Technica has the story on yet another patent troll -- though this one seems a bit special. TQP Development -- a typical patent troll in so many ways -- has apparently gone on something of a rampage over the last four years (and increased in the last year) suing hundreds of companies. The list is impressive. Its most recent lawsuit is against Intel and Wind River, but it's sued pretty much everyone you can think of. Apple, Google, Twitter and eBay? All sued. Target, Hertz and Mattel? Yup. The list goes on and on... and the company is able to get a bunch of companies to settle just to get rid of the lawsuit. Apparently not a single lawsuit has actually gone to trial.

The patent in question, 5,412,730 is quite simple, with just two claims:

1. A method for transmitting data comprising a sequence of blocks in encrypted form over a communication link from a transmitter to a receiver comprising, in combination, the steps of:

providing a seed value to both said transmitter and receiver,

generating a first sequence of pseudo-random key values based on said seed value at said transmitter, each new key value in said sequence being produced at a time dependent upon a predetermined characteristic of the data being transmitted over said link,

encrypting the data sent over said link at said transmitter in accordance with said first sequence,

generating a second sequence of pseudo-random key values based on said seed value at said receiver, each new key value in said sequence being produced at a time dependent upon said predetermined characteristic of said data transmitted over said link such that said first and second sequences are identical to one another a new one of said key values in said first and said second sequences being produced each time a predetermined number of said blocks are transmitted over said link, and

decrypting the data sent over said link at said receiver in accordance with said second sequence.

2. The method as set forth in claim 1 further including the step of altering said predetermined number of blocks each time said new key value in said first and said second sequences is produced.

Got it?

Of course, the patent actually expired back in May (17 years after it was granted), though the company is still suing, since there's a "look back" period of six years, and the company apparently intends to use as much of the next six years as it can getting people to pay up for encrypting their web traffic. Can anyone explain how this is a reasonable system?

What Ars leaves out of the story is that TQP is part of a much larger operation. TQP is one of Erich Spangenberg's companies -- he has hundreds of different patent trolling operations, and even had to pay a huge fine a few years back for shuffling around patents between companies and suing DaimlerChrysler twice over the same patent, even though the original settlement promised he wouldn't sue them over the same patent again. He's also the guy who got smacked down after sending "anonymous" threat letters in which he would not name the client or the patents -- but demanded the company he reached out to first sign a gag order to even find out what the patent was.

Spangenberg has also proudly stated that his mantra is "sue first, ask questions later," which might explain the hundreds of cases filed by TQP.

Andy Greenberg at Forbes actually got Spangenberg on the phone where he tried to defend TQP's actions:

“When the government grants you the right to a patent, they grant you the right to exclude others from using it,” Spangenberg says simply when I reach by phone him in his Dallas office. He makes no apology for the fact that TQP doesn’t use the encryption patent itself, or even have a website. “If you buy a hundred-foot lot in the middle of Manhattan, you’re not required to develop it…Companies have the right to protect their IP dollars.”

Greenberg also points out that many of TQP's lawsuits refer to sites that encrypt with the RC4 algorithm -- and RC4 predates the patent by two years. Apparently, despite other claims against various websites that use RC4, Spangenberg changes his story:

But when I point out to Spangenberg that RC4 was invented by MIT cryptographer Ron Rivest in 1987, two years before the filing date of TQP’s patent, he counters that defendants’ infringement actually has nothing to do with RC4. Instead he claims the infringement lies solely in the use of the SSL or TLS “handshake” that establishes a secure connection between a web browser and a web server, a technology invented in 1994 and used by virtually every secure web page.

Greenberg notes that basically the entire internet uses SSL or TLS for security these days, and Spangenberg, ridiculously, claims it's because of how great the "invention" in the patent is.

There's a lot more in Greenberg's interview, including Spangenberg trying to claim that the patent is valid, in part because famed security expert Bruce Schneier was "advising" him when they got the patent. But Schneier tells Greenberg a very different story:

Schneier says he worked with Michael Jones on a technology related to secure payment systems in the 1990s. But since Jones’ work was acquired by TQP and used for lawsuits, he’s actually consulted to a half-dozen defendants in Spangenberg’s cases, many of whom settled for undisclosed sums rather than risk an expensive trial.

Schneier describes TQP as a “really bad patent troll” and the intellectual property it’s using to cudgel defendants as a “crappy patent” that ought to be invalidated by prior art–evidence of previous invention of the same technology.

But, of course, none of that matters when there are hundreds of companies to shake down...

Filed Under: encryption, eric spangenberg, patent trolls, patents
Companies: tqp