Patent Troll Forces Online Music Sellers, Buyers to Pay a Toll

 Cross-posted at Forbes.com’s “On the Docket”

Is a patent troll toll built into the .99 ¢ or $1.29 you pay for a song online? 

The troll responsible for this toll, unlike the cranky but harmless Dora the Explorer character depicted to the left, is an actual company, Sharing Sound, which holds an actual, government-approved patent.  Improbably issued in 2001, Sharing Sound’s absurdly broad patent covers “distribution of musical products by a web site vendor over the internet.”  Instead of creating a product or service with the patent, Sharing Sound lied in wait and finally this past May filed patent infringement lawsuits in the U.S. District Court for the Eastern District of Texas against Apple, Sony, Microsoft, Rhapsody, Brilliant Digital Entertainment (BDE) and Napster, and separately also sued Amazon, Netflix, Barnes and Noble, Wal-Mart, and GameStop. The patent (here is a good summary of it) essentially describes how these companies sell music online.  Other than BDE, all of the companies have reportedly settled, the latest being Apple and Rhapsody. 

Sharing Sound’s patent, and the litigation arising from it, are a sad commentary on the quality of federal patent examination.  As one commentator noted, online selling of digital goods was well underway before the Patent Office issued the Sharing Sound patent.   

Although the terms of the settlements remain private, Sharing Sound no doubt kept its monetary demand below the defendants’ anticipated cost of litigation.  Is such a “feeding the troll” strategy viable, however, in the long term?  As Winston & Strawn attorneys Gene Schaerr and Jacob Loshin argued rather convincingly in a September 22 Washington Legal Foundation Web Seminar, the risk-benefit analysis on litigating vs. settling more often comes out on the side of fighting patent trolls.

14 thoughts on “Patent Troll Forces Online Music Sellers, Buyers to Pay a Toll

  1. Glenn, have you read the patent? Because it doesn’t sound like you have, or else you are making the common mistake of thinking that the abstract of a patent actually describes what is being patented.

    Sharing Sound’s patent does not broadly cover the distribution of music products over the Internet, despite what it may say in the abstract. The actual idea is documented in the claims of the patent, which reveal that the invention specifically includes the generation of a user-specific key that is inserted into the music file at the time of purchase and used in conjunction with keys on the user’s computer to verify authorization.

    So it’s actually a patent covering the implementation of digital rights management for the purposes of music sales over the Internet, a system essentially identical to that used by Apple and others for their DRM’d content. The inventor was Bernhard Fritsch, whose short-lived MCY.com music service launched in early 1999 does appear to have been the first to employ this type of system.

    The Patently Obvious document simply provides a list of possibly-related patents that preceded the Sharing Sound patent application and makes no judgment about whether their existence should invalidate Sharing Sound’s patent. Patently Obvious’ goal is simply to foster discussion of the broader patent landscape that may or may not impinge on Sharing Sound’s claims.

    • To supplement Adam’s point and response to Eric, we add some information and thoughts. One can certainly debate what constitutes a “patent troll” and whether their rent-seeking lawsuits are positive or negative for commerce and innovation. But there is little doubt that Sharing Sound LLC was set up for the sole purpose of lawsuit trolling or “patent monetization” as some call it. Sharing Sound is listed on the complaint as a company with its principal place of business in Longview, Texas, which resides within the Eastern District of Texas, a federal judicial district which has earned its repuatation as a haven for patent troll suits. Sharing Sound possesses the patent by assignment, and there is no record that it has sought to innovate based on the patent. The company is represented by Andrew Spangler, an accomplished champion of patent monetization. One entirely plausible reason why Sharing Sound waited until now to sue Apple, Microsoft, Rhapsody, and others is that those companies’ reliance on they type of system to which Sharing Sound claims a patent has become so complete that the financial payment which Sharing Sound required as a toll was a pittance compared to the harm those companies would suffer should they lose in court. In Washington Legal Foundation’s opinion, innovation and economic growth are chilled by this type of litigation, not encouraged by it.

      • I certainly don’t disagree that there is some shadiness here, but there is at least a history of the patent’s inventor doing something with the technology, if not terribly successfully.

        If he truly did have the original idea of how to implement digital keys embedded in music files for the purposes of DRM, then more power to him. His business centered around it never came close to the success of iTunes, but Apple and others were just in a better position to take advantage of it, and it seems that the inventor should ultimately be recognized (yes, even financially, which is one of the major reasons for the patent system) for his contribution to the field.

        I don’t know the details of who is behind Sharing Sound and whether Fritsch has any remaining involvement, but if not he clearly assigned the rights of the patent to another party, presumably for a financial consideration based on what the new owners believed they could do with it.

        As for why it took nine years for this to pop up, that’s of course a valid question. But again, I don’t know the details of the situation. How has the intellectual property changed hands that could have delayed an action? Were there notifications and negotiations between Sharing Sound and the defendants that went nowhere and ultimately led to the suits being filed only after some time?

        I honestly don’t know and it certainly seems suspect, but it may not be as cut-and-dried as a simple patent troll lying in wait for Apple and others to make it big with digital music sales.

  2. Pingback: Alist Patent

  3. Pingback: Online Business Marketing: Improve Your Roi | Marketing Information Blog

  4. Pingback: World Wide News Flash

  5. Pingback: Last Week At WLF « The Legal Pulse

  6. Pingback: The Technology newsbucket: music tolls, Korean tablet wars, Facebook cash | All PC Games Site

  7. Now that everyone’s jumping on the NPE bandwagon, being an NPE (or “patent troll”) has almost become downright respectable lately. There is one reason that the NPE business model has become increasingly popular: it works. It is also legal, and often helps protect independent inventors and SMEs from exploitation of their intellectual property by larger, more powerful entities. Like it or not, NPEs are here to stay.

  8. Pingback: The Technology newsbucket: music tolls, Korean tablet wars, Facebook cash and more

  9. Pingback: Nortel Auction: Will Google Become the Next Big Patent Troll? « The Legal Pulse

  10. Pingback: Update: Copyright Trolling Becomes Increasingly Financially Hazardous « The Legal Pulse

  11. Pingback: The Technology newsbucket: music tolls, Korean tablet wars, Facebook cash and more | Richard Hartley

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s