Rackspace sues “most notorious patent troll in America”

Rackspace says a holding company broke its own contract by suing first.

Joe Mullin – Apr 5, 2013 2:15 AM | 76

You don't have to pay the troll toll. Credit: jj_judes

The San Antonio hosting company Rackspace is one of a few companies that has taken a tough position on software patents, stating clearly that the world would be better off without them. Today, the company filed suit against IP Nav, a patent-assertion company that Rackspace is boldly calling "the most notorious patent troll in America."

IP Nav certainly has a reputation. It was founded by Erich Spangenberg, a pioneer in the patent-assertion space, who has run a network of patent-holding companies for about a decade. Today, Spangenberg reportedly has an interest in more than 200 patent-holding companies through IP Nav, which advertises itself as a kind of advisory firm for anyone looking to "monetize" their patents. Some of Spangenberg's other projects include TQP Development, a Texas patent-holding company that has sued hundreds for using basic Web encryption; and a partnership with Priceline founder Jay Walker, who has gone full-throttle-patent-troll, suing dozens of Internet companies in 2011.

"We aren’t going to take it," writes Rackspace GC Alan Schoenbaum in a blog post on his company's decision to file suit. "We have sued IP Nav and Parallel Iron in federal court in San Antonio, Texas, where our headquarters is located... Search online for 'IP Navigation Group.' You will find that this group’s only business is acquiring patents and suing companies."

Ars Video

Rackspace's dispute is with an IP Nav unit called Parallel Iron, which says it has three patents that cover the open source Hadoop Distributed File System (HDFS). But remarkably, Rackspace didn't even know that at first; IP Nav contacted Rackspace and told the company it infringed some patents while refusing to even reveal the numbers or the owners of the patents, unless Rackspace signed a "forbearance agreement" to not sue first. (Sometimes companies threatened by patent trolls can file a "declaratory judgment" lawsuit, which can help them win a more favorable venue.)

“This time, the patent troll should pay us”

In a letter sent to Rackspace in late 2010, IP Nav said only that it had "been engaged by [a] client who owns valuable patents and related intellectual property directed to the field of data storage." It would only reveal more information if Rackspace agreed to the forbearance agreement, which said that either side would have to give 30 days' notice before filing suit.

Rackspace signed the deal, but says that IP Nav actually broke it. "Parallel Iron willfully ignored its own agreement," state Rackspace lawyers in their complaint [PDF]. Parallel Iron went ahead and sued Rackspace in Delaware once negotiations weren't going its way. Now, Rackspace is suing to show it doesn't infringe any of the three patents at issue in the case, and for breach of contract. "This time, the patent troll should pay us," concludes Schoenbaum.

As Schoenbaum points out, IP Nav has used the "gag order" strategy before; it backfired when it was used against educational software company Renaissance Learning, which got a Wisconsin judge to issue a subpoena requiring IP Nav to reveal the patent and the identity of the patent holder.

In the meantime, Rackspace's newest volley against a well-known patent troll comes on the heels of a big win against another patent-holding company, Uniloc. Just last week, a judge found that one of Uniloc's patents essentially boiled down to unpatentable math.

Like other patent-assertion companies, IP Nav has argued that it is helping out the "little guy" by squeezing patent payouts from the "big guys." It actually filed comments with the FTC to that effect late last year—comments which Schoenbaum called "laughable."

He continued, "This is tragic comedy at best. There are few trolls more notorious than IP Nav, and there is no such thing as a patent troll that has the best interests of small businesses in mind. Instead, IP Nav and Parallel Iron are acting in their own selfish interests and suffocating innovation, while stripping capital away from businesses both large and small."