Shopify Inc. says it wants to push back against the trend of companies filing hundreds of patent infringement lawsuits against businesses every year, and is waging a court battle to make its point.
So-called patent trolls are often shell companies who own vast portfolios of patents, which they profit from by demanding license payments from businesses within the scope of the patents or pursuing court cases against firms they allege are patent infringers.
Ottawa-based e-commerce software company Shopify said Wednesday that patent trolls often target small businesses and startups that can’t afford to fight or lose a legal battle, thus stifling innovation.
"Shopify and our entrepreneurs are builders and innovators. They spend years, sometimes their entire lives, creating products designed to improve the world," said Shopify general counsel Jess Hertz in a LinkedIn post.
"Patent trolls? They lazily sit back, burying hard-working entrepreneurs in piles of legal paperwork ...They want to destroy and stifle. And Shopify? Well, we’re done with this game."
She added people funding lawsuits pursued by patent trolls often "hide cowardly in the shadows," but in the majority of cases exact a quick payout.
Research Shopify pointed to showed companies settling or losing patent troll cases reduce investment in research and development by an average of more than $160 million over the two years following the case.
It also said 90 per cent 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."
As a result, Hertz said Shopify is pursuing litigation that will identify who is funding patent trolls in cases lodged against the company.
Hertz used the LinkedIn post to announced Shopify filed a motion Wednesday in a Texas court demanding Lower48 IP LLC, which has connections to a data analysis and portfolio management services provider in the oil and gas industry, reveal any third-party interests it has.
In court documents, Shopify indicates publicly available documents indicate Lower48 may be receiving funding from a third-party for some or all of Lower48's legal fees.
Shopify alleges sent Lower48 a letter on May 5 requesting it reveal information about third-party interests so a court can determine conflicts of interests, but Shopify said the company didn't respond.
Shopify said it followed up on May 24 and both parties met and conferred on May 30 only for Lower48 to share with Shopify that it would not be providing the requested info.
Lawyers representing Lower48 in the lawsuit did not immediately respond to a request for comment.
This report by The Canadian Press was first published June 7, 2023.
Companies in this story: (TSX:SHOP)
Tara Deschamps, The Canadian Press