Running the Table

Note: This blog was originally posted on Mike’s Blog.

It’s that time of year. Time to look back over the past twelve months and consider things accomplished and areas for future improvement. Like everyone else, I’ve got a number that come to mind in both categories.

In terms of professional accomplishments, there are many of which I am proud; however, one stands out and that is Adobe’s success in fighting patent trolls.

While we had hoped that we would finally get Congressional action on patent litigation reform in 2014, we were once again disappointed. But, our strategy has never been to rely on Congress (please note my editorial restraint). Instead, over the last year, Adobe has been consciously investing in fighting these cases as aggressively as possible rather than considering them a “cost of doing business” and negotiating a quick settlement.

It’s a strategy not without its costs. We spend millions of dollars defending these lawsuits. So, why do we do it?

First, because it’s the right thing to do for our stockholders, employees and customers. Adobe is one of the most innovative companies on the planet. Diverting resources and dollars from innovation to paying to settle specious patent claims runs against who we are as a company.

Second, because we believe the odds are on our side. We spend significant time and effort investigating these patent claims. When we decide to fight them, we do so with the conviction that we will prevail at trial.

And, third, because this a long-term strategy. One which we believe over time is the only way patent trolls will have an incentive to think of ways to add value to society, rather than killing investment in job creation.

With this in mind, I thought I’d share how we did in 2014.

TQP Development. Between 2008 and 2012, a patent troll named TQP Development filed lawsuits against more than 200 companies, including Adobe, claiming infringement of TQP’s patent encryption technology. (By the way, I’ve always wondered about their name as we have yet to figure out what these folks “develop” other than lawsuits.)

In many of these lawsuits TQP was represented by a law firm that also represented Adobe during this same period. Under legal ethical rules this creates a conflict of interest. Consequently, we were successful in getting the firm disqualified from the case.

Result: Perhaps because they were not excited about finding another law firm, in March 2014, TQP settled the lawsuit without Adobe or its customers paying them a dime.

Ingeniador. On their website, Ingeniador claims to be “a worldwide team of scientists, engineers and entrepreneurs pioneering leading-edge research in mobile, e-commerce and healthcare technologies.” Sounds great, but if it “quacks like a duck”… it’s probably a patent troll. And, indeed, Ingeniador sued Adobe in the Eastern District of Texas, accusing our products of infringing a patent relating to, among other things, web-based editing and publishing of files using a network of client computers. Given that Ingeniador is headquartered in Puerto Rico, and Adobe in San Jose, we didn’t think it made much sense for the trial to be held in Texas. The court agreed with us and, in March 2014, moved the case to Northern California.

Result: Evidently, Ingeniador was not looking forward to a trial in Northern California because one month after the case was transferred, they settled the case without Adobe or its customers paying them a dime.

Select Retrieval. In 2011, another patent troll, Select Retrieval, filed lawsuits in numerous jurisdictions, including Delaware, Oregon, California, Florida, Illinois, Maine and Texas alleging infringement of their patent covering a way of retrieving and displaying information from a database. In these lawsuits, Select Retrieval sued dozens of companies, including eight Adobe customers based on their use of our products. Adobe stepped in and provided full indemnification of our customers and we successfully obtained stays in some jurisdictions while actively litigating on their behalf in others.

Result: Although some Adobe customers chose to settle before we joined their cases, in May 2014, Select Retrieval settled the remaining cases without Adobe or any of its other customers paying them a dime.

CSP. In April 2012, another patent troll, CSP, sued Adobe in the District of Delaware, accusing a number of our products of infringing a CSP patent relating to software that provides product activation. Unfortunately for CSP, Adobe had a license to the asserted patent, and had very strong non-infringement arguments. Undeterred, CSP refused to dismiss the case and Adobe aggressively pursued its defenses.

Result: In July 2014, on the eve of a key hearing in the case, CSP settled without Adobe or its customers paying them a dime.

Anyone see a pattern here?

Tejas. “Tejas” is another word for Texas. It is also the often overlooked fifth album by hirsute rockers, ZZ Top. Unfortunately, what I am referring to here is the name of a patent troll who on New Year’s Eve, 2013, began suing Adobe customers – ultimately five in total – in the Eastern District of “Tejas” alleging that that their use of an Adobe product infringed a Tejas owned patent. In response, Adobe went on offense filing a motion for declaratory judgment of non-infringement action in Northern California and aggressively pursuing discovery in the Texas case.

Result: With upcoming discovery deadlines approaching, in October 2014, Tejas settled the case without Adobe or its customers paying them a dime.

Seriously, do you see the pattern? Come on, concentrate.

Digital Reg. of Texas. In April, 2011, Digital Reg. sued Adobe in the Eastern District of Texas accusing a number of our products of infringing patents on software activation. Digital Reg. is a litigation-inspired entity with no connection to the State of Texas other than being formed as a Texas limited-liability company for purposes of acquiring patents used in lawsuits against eight out-of-state defendants. Because of Digital Reg.’s tenuous connection to Texas, and because of Adobe’s strong connection to California (where we are headquartered), the Eastern District of Texas transferred the case to the Northern District of California in March 2012.

Result: In September of this year, a nine-day jury trial was held in Oakland, California during which Digital Reg. claimed damages of in excess of $30m. The jury decided in favor of Adobe finding there was no infringement and that the plaintiff’s patents were invalid. What’s nice about this result is that if the decision is affirmed upon an expected appeal, Digital Reg. will be unable to use these patents against any other company in the future. And, again, we didn’t pay them a dime.

There is one more lawsuit I’d like to discuss, but for a variety of reasons, I’ll keep the names of the other parties confidential. In this case another patent troll sued one of our customers in 2013, asserting three patents. Our customer chose to fight the case and we supported their decision and accepted indemnification and took on the defense of the patent directed to our DRM encryption technology.

Result: This fall, after a 10-day trial, the jury returned a verdict finding that Adobe’s technology was not infringing.

With the help of our great Adobe legal team and business partners, and talented outside counsel, we ran the table with a positive outcome in every case. Not a bad year. And, we’re hoping that sharing these examples will encourage other companies to take the same approach.