In the legal battle that Shopify called “just the beginning”, the e-commerce giant has filed a motion in a Texas court against ‘patent trolls’. Shopify General Counsel Jess Hertz informed that the motion has been filed in the United States District Court for the Western District of Texas. Shopify has pleaded for the disclosure of third-party interests in the case of patent infringement against it.
In September, Dallas-based Lower48, filed a complaint against Shopify alleging that several features of the company infringe upon its patented technologies. Lower48 offers portfolio management to the oil and gas industry. Hence, in an attempt to crack down on ‘patent trolls’, Shopify in the suit requested the judge to compel Lower48 to disclose “the identity of any individuals or entities that have financial interests in the outcome of this litigation, such as investors or litigation funders.”
Shopify entrepreneurs are builders and innovators. Patent trolls stifle that innovation, burying hard-working entrepreneurs in piles of legal paperwork. They quietly orchestrate hundreds of patent litigation cases every year, with no accountability.
Jess Hertz, General Counsel, Shopify
Who Are Patent Trolls
Patent trolls are generally shell companies that exploit their intellectual property for monetary gain. Usually, they make patents only to sue rivals and get hefty license payments. Their patented technology never come to market or become part of the innovation. Patent trolls target small businesses that cannot meet the expenses of a legal battle.
Dear Patent Trolls,
— Kaz Nejatian (@CanadaKaz) June 7, 2023
You facetious pettifoggers, kick rocks.
Sincerely,
Entrepreneurshttps://t.co/RivgRQn53B
In an article published on Linkedin, Hertz wrote, “Patent trolls stealthily orchestrate hundreds of patent litigation cases yearly, with no accountability. They often target small businesses and start-ups and stifle innovation and entrepreneurship – especially in emergent technologies. What’s worse, these patent trolls can actually deter small businesses and entrepreneurs, who can’t afford to fight or lose a legal battle. According to Harvard Business Review, companies settling or losing patent troll cases reduce investment in R&D by an average of more than $160 million over the next two years.”
In its lawsuit, Lower48 claimed it owns tech tools that have been developed using GraphQL query computer language. They solve technical problems that are built within database systems, thus helping them to perform efficiently, increase data processing speeds and boost ease of use.
The company further said that it has not provided license to Shopify to use any of these tools. As per its claims, its tools are being used across important functions starting from its Logo Maker, QR Code Generator, Business Name Generator, Domain Name Generator, Terms and Conditions Generator, Slogan Maker, Wholesale Marketplace, Purchase Order Template, Business Card Maker to Invoice Generator.
Shopify Claims Right to More Information
Shopify argued that it has the right to more information regarding entities and individuals with vested interests in the case. “Shopify entrepreneurs are builders and innovators. Patent trolls stifle that innovation, burying hard-working entrepreneurs in piles of legal paperwork. They quietly orchestrate hundreds of patent litigation cases every year, with no accountability. In many cases, we don’t know who’s funding these lawsuits. We are no longer willing to accept this as the status quo. Litigants and judges need – and deserve – to know who they’re litigating against,” wrote Shopify’s General Counsel.
According to Shopify, documents available in public “indicate that Lower48 may be receiving funding from a third party for some or all of Lower48’s attorneys’ fees and/or expenses to litigate this action.” According to a report published on sourcingjournal.com, Shopify claimed that the submitter of the complaint is connected with IP Edge, a firm with specialisation in patent monetization. Documents available also show Lower48’s affiliation with the U.S. Innovation Fund (USIF).
In Motion to Compel, Shopify also mentioned that in early May, the company sent a letter to Lower48 requesting it to disclose the third parties involved so that it can decide whether conflicts of interest exist. However, Lower48 didn’t respond and during a meeting on May 30, Lower48 denied providing the requested information.
Shopify’s Mission to Expose Patent Trolls
The Linkedin post by Jess Hertz further read, “We often know who is behind patent trolls – US Innovation Fund, IP Edge, and Acacia Research. But these groups’ funders, interests, and decision-makers hide cowardly in the shadows. In a majority of cases, they achieve their ultimate goal: a quick payout. In fact, 90% of patent litigation cases filed each year are abandoned or settled, making “winners” out of the patent trolls, and victims of the forward-thinking businesses who put in the work to create and innovate”.
“We’ll continue to support legislation to expose patent trolls as well as the numerous organizations shedding light on this issue: LOT Network, Unified Patents, Open Invention Network, Computer and Communications Industry Association and BSA | The Software Alliance. And, we’ll keep amplifying the voices of our millions of merchants so more elected officials take action to protect the businesses driving our economy forward,” she wrote.
Ex-Employee Files $130 Million Lawsuit Against Shopify
Shopify is also facing another lawsuit regarding non-compliance with its severance pay. In May, Shopify sold its logistics business to to San Francisco-based supply chain management company Flexport laying off 20 percent of its workforce. The laid-off Shopify engineer Iain Russell slapped $130 million class-action lawsuit alleging that the company slashed severance pay.
The suit alleges that even after employees accepted the severance offers by Shopify, several were told that they actually owed much less severance package. Breaching the terms of the contract, Shopify denied abiding by the original severance package.
“In my over two decades as an employment lawyer, I have never witnessed an employer renege on accepted severance agreements in this manner, particularly during times of economic uncertainty. It appears that Shopify took deliberate action to minimize its financial liability, resulting in considerable losses for potentially thousands of people,” said Lior Samfiru, an employment lawyer and national co-managing partner at Samfiru Tumarkin LLP, the firm that filed the lawsuit.
Russel, the lead plaintiff, worked at Shopify for seven years before being impacted by the mass layoff. He was offered over $88,000 in the first severance package which he accepted. Allegedly, Shopify later offered a $44,000 deal, which if he doesn’t accept, he was told he would get around $36,000. Samfiru alleged workers were sent a “vague statement about miscalculating” while being offered the revised severance pay. “For many people…the difference is significant,” he said.
As per financialpost.com, the lawsuit is seeking $80 million in damages and $50 million in punitive, aggravated and exemplary damages. The amount might change based on how many employees were offered deduction in severance pay, Samfiru said. Any terminated Shopify employee whose severance pay was slashed would “automatically qualify as part of the class action lawsuit,” stated the official website of Samfiru Tumarkin LLP.
