Public-Transit Group Files Suit Against Patent Trolls
By TED MANN
Wall Street Journal
A public transportation advocacy group alleges in a federal lawsuit that so-called patent trolls are squeezing cash out of the nation's largest transit agencies by suing over schedule alerts, a common passenger convenience.
The American Public Transportation Association filed suit Tuesday in federal court in Manhattan against a pair of foreign-chartered firms that have threatened or filed patent infringement claims against public-transit systems.
The firms, Luxembourg-based ArrivalStar S.A., and Melvino Technologies Ltd. of the British Virgin Islands, control a family of patents that relate to messaging systems that provide status updates for vehicles and packages.
An attorney for ArrivalStar and Melvino said the company is protecting the rights of Martin Kelly Jones, who registered the patents. "This is an inventor," said lawyer Anthony Dowell, who also represents Mr. Jones. "What's a patent owner to do? If you can't work something out, you have to file a suit."
Mr. Dowell's argument echoes that of many patent-holding firms, which say they are using legally granted patents to protect small inventors. Critics say the companies amass portfolios of patents to churn lawsuits and generate settlements rather than manufacture products.
The Obama administration called for patent reform earlier this month, including instituting higher standards for establishing patent novelty and reducing the disparity between what it costs patent holders to sue and what it costs to mount a defense.
At least 20 transit agencies, including those in New York City, Boston and Chicago, have been targeted by the companies, the suit says.
The patent claims have followed a pattern, APTA says: Agencies send real-time status updates about buses and trains through websites and in texts, and ArrivalStar sues or threatens to sue for infringement. Agencies decide to settle because defending against patent lawsuits is complex and costly. The settlements are usually sealed.
"We're going after the entire operation," said APTA chief counsel James LaRusch. APTA is arguing the Constitution prevents a foreign entity from suing an arm of state government, such as a transit agency. The group is also challenging the enforceability of the underlying patents.
ArrivalStar says Mr. Jones conceived of a notification system in 1985 but struggled with funding to develop a salable product. He registered patents and launched the company to "commercialize" them in 2002. Since then, more than 300 companies and agencies have agreed to license ArrivalStar patents, Mr. Dowell said.
An Illinois congressman included examples of ArrivalStar letters in a report to the Federal Trade Commission on Tuesday asking for an investigation into infringement suits against government agencies. Mr. Dowell confirmed the accuracy of the letters.
In a letter sent last year to the Triangle Transit agency in Durham, N.C., Mr. Dowell said the agency's "Real Time Bus Route" system was in violation of at least one of its patents and suggested a pretrial settlement of $150,000, according to the report by Rep. Daniel Lipinski, an Illinois Democrat.
Metra, the Chicago-area commuter railroad, paid $50,000 in 2011 to settle ArrivalStar's patent claim, according to a document included in the report. Triangle and Metra didn't respond to requests for comment.
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