Fixing Class Action Lawsuits

from the objecting-to-settlements dept

For a long time, we've noted that while class action lawsuits do serve a useful purpose, it seems like all too often they're abused. Quite frequently, we see the only "class" that really benefits from such lawsuits are the lawyers who file the lawsuit, who end up taking the bulk of any "settlement." In some cases, it's even worse -- where not only do lawyers get the bulk of the settlement, the rest of the class actually gets pushed into buying more products from the company that was sued. Such class action lawsuits not only make the lawyers richer, they actually act as marketing for the company that was sued. One of the worst such cases we can remember involved Netflix, which "settled" a class action lawsuit by giving current customers a "free" one-month upgrade -- but if you didn't manually downgrade your account, they started charging you the higher price the following month. That's not a "settlement" so much as a way to get a bunch of customers to upgrade. If I remember correctly, that settlement was actually thrown out.

Eric Goldman points us to an interesting profile of Ted Frank, a lawyer who is focusing on trying to stop such bad class action lawsuits and settlements by objecting to the settlements when they seem so far over the line. While, as the article notes, there have been a bunch of "professional settlment objectors" in the past, most have been doing it for money (getting some of the attorney's fees). Frank, however, hasn't taken attorney fees (though he says it's a possibility in the future), and is funded by a charity:

"The whole reason I started this is because there is a high probability of district courts rubber-stamping settlements," Frank says. "I think these are very bad settlements that the [9th U.S. Circuit Court of Appeals] will ... provide guidance for when judges should or shouldn't approve settlements."

Again, the concept of a class action lawsuit isn't bad, but it's definitely been widely abused -- so it's nice to see someone pushing back from within to try to stop the worst abuses.

Filed Under: class action lawsuits, settlements, ted frank

Woman Who Owned No Computer, But Got Sued By The RIAA, 'Settles'

from the some-kind-of-victory dept

With everyone talking about the Jammie Thomas case, someone who preferred to remain anonymous, alerted us to the fact that Mavis Roy, a woman who did not own a computer for a while, but was still sued by the big record labels, has "settled" her case with the record labels with neither side having to pay anything. We had written about this case earlier in the year. She did not own a computer on the dates she was accused of file sharing, and then when she got the legal threats from the RIAA she thought it was a joke and ignored them. Finally, some law students took up her case, and it appears they've worked out this "settlement." While Roy suggests this is a "victory" in that she didn't have to pay anything, she's right that it's not that much of a victory when the recording industry is still able to bring such bogus lawsuits to court with no penalty:

"I am still unsettled that the record companies are able to treat upstanding American citizens in this way. Invading people’s privacy and accusing people of things that don’t even make sense. It is such a sad waste of the courts time."

While it's great that she was able to get out of it without having to pay off the labels, nothing about this result provides any incentive for the labels to make sure they have actual evidence before filing future lawsuits.

Filed Under: lawsuits, mavis roy, music, settlements
Companies: riaa

Increasing Concerns Raised Over Google's Book Search Settlement

from the a-bad-deal-for-everyone dept

When the settlement between Google and authors and publishers, over Google's book scanning project, was announced, many saw it as a big victory for everyone -- as it allowed Google to continue moving forward with plans to scan books, while also creating a "business model" for authors and publishers. However, some of us were very troubled by the implications of the settlement. It seemed clear to us that Google had a strong argument for why its actions were perfectly legal. Settling did a number of dangerous things. It failed to clear up the legal issue at all (effectively making it cost prohibitive for anyone else to work on a similar project). It set in permanent place a business model which seemed hugely bureaucratic and inefficient. That business model is basically set in stone and set by the terms of this agreement, rather than any real market mechanism. Finally, it signaled (loudly) to the world that Google was plenty willing to pay a few million dollars to settle with opponents, even when it had a strong legal position, knowing that it would make life more difficult for competitors.

It appears that as the details have come out, more and more people are troubled by what the settlement actually will mean in the long run. Robert Darnton, the head of the Harvard library system (which had already complained about the settlement) has written a thoughtful piece, detailing his worries about how this creates an effective monopoly, and the many, many downsides that this causes.

Prior to this settlement, we had been one of the bigger defenders of Google's book scanning program against those who worried that it was creating a de facto monopoly. That's because there were no exclusive agreements. However, with the new settlement, while again others could enter in theory, Google has effectively priced the rest of the market out. Prior to this, there was a reasonable argument to be made that anyone could scan books and create an index, so long as they weren't displaying too much of the books. Now... Google has set a market price of $115 million, plus a set-in-stone business model, as the entry price. It's pocket change to Google, but it's a big barrier to others.

This is definitely raising concerns from a variety of other sources, who were at least cautiously optimistic when the deal was announced. The EFF now points us to James Grimmelmann's worries about the deal (pdf). While Grimmelmann does support the deal and say it will be net positive for society, he then goes through a pretty detailed list of problems with the deal, almost all of which go back to the idea that this deal gives Google effective monopoly power over digitized books.

Finally, as for my initial fear that this would signal something of an "open season" on Google, with demanding money from Google for Google daring to provide the service of helping others find their works, we're already seeing some of that in the early stages. Some in the newspaper business are using the book settlement as a template for how Google should pay them too.

In the long run, I think Google is going to regret this deal. Yes, in the short term it handed Google a monopoly and removed a distracting lawsuit from the table. But, it did some very dangerous things that will harm Google in the long term. It signalled Google's willingness to pay up even when it shouldn't have to. It set in stone a business model way before anyone knows what the best business model is for online books. And, finally, in knocking all competitors out of the market, Google has taken away its own best incentive to continue innovating and serving customers at the best of their ability in the book search realm. The end result may be a worse product that isn't nearly as useful (and revenue generating for Google) as it would have been if it had real competition in the market.

Filed Under: book scanning, book search, copyright, culture, settlements
Companies: google

Patent Battles Focusing On Third Parties To Push For Settlements

from the trying-to-force-a-settlement dept

Two recent patent battle lawsuits made news this week, and both highlighted one troubling aspect of patent lawsuits: patent holders trying to damage others beyond the company that infringed. Now, before the patent system defenders rush to post angry comments, this is not a new thing. It's been quite common for a while. Nor is it surprising. If you were a patent attorney representing one of these patent holders, you'd probably do the same thing: going after third parties is probably a good strategy to force the other company to settle. However, it does highlight how patent law is used in ways that clearly are outside of its intended purpose. That is, it's being used to punish plenty of innocent third parties by removing innovation from their grasps, rather than encouraging innovation.

The first case involves a patent lawsuit concerning Microsoft's Visual Studio. WebXchange claims it has patents that Visual Studio violates -- but rather than suing Microsoft, WebXchange sued three Microsoft customers, claiming that by using the software, they were violating the patent. This is clearly an attempt to scare Microsoft into settling, out of a fear that other customers won't use Visual Studio to avoid getting sued by WebXchange. Microsoft is fighting back, asking a judge to declare the patents invalid, but in the meantime, WebXchange has been able to drag Microsoft's customers into a patent battle, putting extra pressure on Microsoft to settle.

The second case involves Spansion suing Samsung for patent infringement concerning Samsung's memory chips. In this case, Spansion isn't just going after Samsung, but demanding an injunction that would block US sales of a variety of popular gadgets that use Samsung's memory chips -- including iPods and Blackberries. Once again, while it's unlikely that a court would order such a block, by dragging other companies such as Apple and RIM into the mess, Spansion is abusing the patent system's threat of an injunction to put extra pressure on Samsung to settle.

Filed Under: patents, settlements, third parties
Companies: apple, dell, fedex, microsoft, rim, samsung, spansion, webxchange

Short Term Profits Over Long Term Principles; Google's Caving On Book Scanning Is Bad News

from the unfortunate-reality dept

Today the tech/business press was filled with stories about how Google has settled the lawsuits from authors and publishers over its book scanning project. Google is paying $125 million, and will be changing some of how its book search system works. Authors and publishers will allow books to go online, but it locks Google in to a specific business model that might not be the most reasonable and, most importantly, it does not answer the legal question concerning the overall legality of book scanning. Pretty much any way you look at it, Google caved here -- and this is unfortunate for a variety of reasons.

Two years ago, there was a story in the NY Times about how Google's legal department saw all of these lawsuits against the company as a way to stand up on principle and make better law. Specifically, the company positioned itself as being willing to fight certain lawsuits on principle in order to get precedent setting rulings on the books in support of openness, fair use, safe harbors and many other important issues. The company suggested that, rather than settle, it would fight these lawsuits knowing that it alone, with its big war chest of money, could fight some of these battles that tiny startups could never afford.

It may not be surprising, but it's safe to say those days are long gone. We've been seeing it time and time again, from Google's decision to pay off entertainment companies not to sue YouTube to the decision to pay off the Associated Press for including its headlines in Google News. Perhaps one of the biggest legal battles, however, was over Google's book scanning project. Google took it upon itself to scan numerous books and make the results searchable online. The company put significant restrictions in place, such that it's almost impossible for someone to do a search and read the entire book that way. You can only see a few consecutive pages. You can't print. However, you can search and find new and interesting books that you might want to buy. I know I've bought dozens of books this way.

Not surprisingly, authors and publishers sued Google over this, and went around claiming how awful it was -- even though it was really not all that different than creating a much better card catalog for books. The purpose was to help people find more books that were useful, rather than to break any sort of copyright. And, in fact, studies showed that books that showed up in Google's search improved sales. In other words, it should have been a win-win situation all around. But, like so many content providers, authors and publishers falsely overvalue the content and undervalue services that make that content more valuable.

However, more important that was the simple principle of the whole thing. Last year the New Yorker ran a fantastic article explaining how having authors and publishers quibble over copyright issues while preventing the widespread archiving and sharing of information may turn out to be one of the most ridiculous arguments ever, while our culture get locked up and fades away.

So, it's quite upsetting to see Google cave on this. The settlement does not establish any sort of precedent on the legality of creating such an index of books, and, if anything pushes things in the other direction, saying that authors and publishers now have the right to determine what innovations there can be when it comes to archiving and indexing works of content. Unfortunately, this was really inevitable. As was the case with Google caving on YouTube and the Associated Press, it becomes a situation where Google realizes it can throw a little cash at the problem to make it go away -- while also creating a large barrier to entry for any more innovative startup. From a short-term business perspective this might make sense, but from a long-term business perspective (and wider cultural perspective) it's terrible.

It will only encourage more lawsuits against Google for trying to innovate, as more and more people hope that Google will settle and throw some cash their way. Furthermore, it greatly diminishes the incentives for making books more useful, and that's damaging to our cultural heritage. While it was always silly to believe that Google ever really operated on a higher principled stance, rather than a short-term business focus, this settlement is tremendously disappointing.

Filed Under: book scanning, book search, copyright, culture, settlements
Companies: google

Immersion Settles Up With Microsoft: Hands Over $20.75 Million Of Money It Got From Sony

from the patent-dealing dept

Apparently this is the week for force feedback "haptics" company Immersion to settle its various patent lawsuits. We already noted the infamous teledildonics case has been settled and now it's settled an ongoing lawsuit with Microsoft as well. We wrote about the details back in May. It's a case that highlights just how wasteful some patent lawsuits can be.

In this case, Immersion had sued both Sony and Microsoft for violating its patents, and it offered them a deal that's becoming all too typical: giving competitors a chance to settle first in order to join the other side of the case. It's a neat trick. Basically, you tell both sides that they can just pay up, and close out the case, while also getting the chance to claim some of that money back if Immersion wins against their competitor. Of course, Immersion took it to another level after Microsoft agreed to this deal, originally handing over to Immersion $26 million. After it got Sony to pay $130 million, it told Microsoft that the deal wasn't technically a "settlement," and thus it was excluded from the terms of the deal it gave Microsoft. Hence the lawsuit from Microsoft.

This latest settlement has Immersion apparently realizing it was never going to win the case, and forking over $20.75 million back to Microsoft, ostensibly from its winnings against Sony. It makes you wonder what's up that Immersion seems to be rushing to settle its various cases. Either way, it shows another aspect of how the patent abuse game is played these days, with patent holders pitting competitors against each other to pressure companies into settling.

Filed Under: patents, settlements
Companies: immersion, microsoft, sony

Quick! Who Else Has A VoIP Patent That Vonage Can Settle Over?

from the sue-and-settle! dept

We've covered in too much detail how it's some sort of "open season" on Vonage when it comes to VoIP patents. After dealing with ridiculous and expensive patent lawsuits from companies who failed to actually innovate in the same way Vonage did, the company was pressured by Wall Street to quickly settle the various patent lawsuits filed against the company. Of course, rather than settle matters, that simply opened the door for other companies to go searching through their patent portfolios to see if there was anything they could sue Vonage over. Indeed, following those settlements it didn't take long for AT&T to dig up a patent and sue -- which was quickly settled as well. Thought things were over? No such luck. Nortel just showed up last month to sue and it took all of about a week and a half for Vonage to settle that case as well.

The Nortel case is slightly different because Vonage actually already had a patent infringement lawsuit going against Nortel, but it wasn't really initiated by Vonage. Instead, it had been initiated by a patent holding firm that Vonage bought in 2006. The end result of the settlement doesn't involve money changing hands, but just a cross licensing agreement for the patents. So what's the big lesson that Vonage and others have learned from this? It's certainly got nothing to do with innovating. It's to hoard as many patents as possible so that you have your own nuclear stockpile for when someone else sues you. Want to know why the USPTO is overwhelmed? It's not because there aren't enough examiners (as some will claim) or that there aren't enough funds. It's because the way the system now works is that you are supposed to file patents on every tiny little advancement so you can use it to protect yourself against lawsuits from everyone else. That's not about innovation. It's about waste. In the meantime, since it's still open season at Vonage, who's going to be next? There are a ton of other patents in the VoIP space that can surely be used in a lawsuit, right?

Filed Under: lawsuits, patent thicket, patents, settlements, voip
Companies: nortel, vonage

Garmin, TomTom Settle One Fight, In Order To Concentrate On A Different Fight

from the just-merge-and-get-it-over-with dept

TomTom and Garmin have been involved in a really nasty intellectual property battle over the past few years, involving multiple lawsuits over multiple issues in multiple locations. It really was a case of patent nuclear war, where both sides were throwing whatever they could think of at each other. However, now that the two sides have something more concrete to fight over than market share, it seems they've decided to settle all of their intellectual property battles and simply focus on fighting over who gets to own Tele Atlas. Of course, as some people are beginning to notice, this may be a pointless battle, as both companies are going to face increasing competition from the mobile device arena -- especially from the likes of Nokia who forced Garmin to bid for Tele Atlas after announcing the acquisition of Tele Atlas competitor Navteq. So it really might not matter who wins the battle for Tele Atlas, as the market for standalone navigation devices may start to disappear.

Filed Under: location based services, mobile phones, navigation, patents, settlements
Companies: garmin, tele atlas, tomtom

Microsoft, Eolas Settle: It's Still Cheaper To Pay Up Than Fight Bogus Patents

from the such-is-life dept

Microsoft and Eolas have been involved in a patent infringement lawsuit for many years. Eolas claims a patent on the concept of embedding other applications within browsers -- basically for the concept of plugins. This patent was questioned by many people who note that plugins are a pretty common concept and it hardly seems reasonable to give a monopoly over that idea to one company. In fact, none other than web inventor Tim Berners-Lee showed prior art for browser plugins, and the Patent Office suddenly started saying that it may have made a mistake in granting Eolas the patent. Unfortunately, due to the ridiculously complicated process to get the USPTO to review a patent, it was eventually ruled that the patent could be valid. However, it recently had agreed to review the patent again.

Of course, as we've learned time and time again, since this process is so long, and the risk of losing gets costlier and costlier the longer you wait, it appears Microsoft has given up invalidating this highly questionable patent and has simply paid off Eolas in a settlement. The amount isn't defined, but Eolas is gleefully telling its shareholders to expect a dividend shortly. Once again, this highlights nearly everything wrong with the patent system and why it needs to be changed. A very broad and vague concept with plenty of prior art gets patented by a small firm that doesn't actually do anything. Then it holds up a large company that is actually offering a product to the market, and forces them to change their product, taking away functionality, while trying to collect hundreds of millions of dollars that could have gone towards further innovation. On top of that, it highlights how difficult, slow and convoluted the patent review process is that makes it so difficult to actually contest these questionable patents. In the end, it's often just cheaper to pay up, diverting money from actual innovation into the legal system. What a shame.

Filed Under: patent infringement, settlements
Companies: eolas, microsoft