A little-known patent infringement lawsuit could have big implications for Uber and its users. Carma Technology, founded in 2007, has filed a lawsuit against Uber, alleging infringement on five patents related to matching riders with available vehicles. This lawsuit, quietly progressing through the U.S. District Court for the Eastern District of Texas, has the potential to significantly impact Uber’s operations and financial future.
The core of the dispute revolves around Carma’s claim that Uber’s ridesharing system infringes on their patented technology developed for carpooling. Carma argues that Uber was aware of these patents as early as 2015. The outcome of this case could set a precedent for intellectual property rights in the ridesharing industry, potentially affecting numerous other companies. This article breaks down the key points of the lawsuit, exploring its potential consequences for Uber and its users.
Carma’s Lawsuit Against Uber: The Details
Carma, a company that once operated a ridesharing service, alleges that Uber has infringed on five of its patents related to the system of matching riders with vehicles. Filed earlier this year, the lawsuit seeks a jury trial, a permanent injunction against Uber, mandatory future royalties on infringing products, damages, and related costs.
Carma’s lawyers initially contacted Uber about these patent concerns in 2016. At that time, Uber was rapidly expanding and had a reputation for aggressive market entry. According to Carma founder Sean O’Sullivan, Uber was aware of Carma’s patents as early as 2015 when the U.S. Patent and Trademark Office rejected one of Uber’s applications due to existing Carma patents. Despite this, Uber continued to develop and expand its ridesharing technology, leading to the current legal battle.
Uber might have had the business model and the market share, but it didn’t have the specific ridesharing patents, O’Sullivan told TechCrunch in a recent interview. Carma does — plus a . Uber was allegedly aware of that fact as early as 2015 when the U.S. Patent and Trademark Office rejected one of its applications because it ran up against existing patents held by O’Sullivan and Carma, according to the lawsuit.
Patent Rejections and Uber’s Response
Between 2016 and 2019, at least four of Uber’s patent applications faced rejection, often with multiple revisions, due to conflicts with Carma’s existing patents. Uber eventually abandoned some of these applications. Despite these setbacks, Uber holds hundreds of other patents covering various aspects of its technology and business operations.
O’Sullivan argues that the core service described in Carma’s patents directly aligns with how modern ridesharing operates. He contends that Uber is infringing on these patents even if its business model resembles a taxi service more closely. This argument forms the crux of Carma’s case, highlighting the potential impact on Uber’s fundamental service.
Legal Expert Insights
Intellectual property attorney Larry Ashery, who is not involved in the case, describes it as complex. He notes that Carma’s legal strategy involves a sophisticated approach to patent procurement over the past 18 years. The five patents in question are part of a larger 30-patent family, all related and connected to the original filing date. Each patent contains multiple claims that define the legal boundaries of the invention.
Uber will need to address and defend against each asserted claim, making the litigation challenging. Ashery suggests that Uber’s strategy will likely involve attempting to invalidate these patents, which will be difficult given Carma’s extensive patent portfolio and strategic approach.
What’s important to understand here is Carma isn’t just asserting five patents,” said Ashery, whose practice is based in the Greater Philadelphia area. “They have had a very sophisticated strategy of patent procurement that they’ve been working on for the past 18 years.
The Nine-Year Gap
Despite possessing these patents, Carma waited nine years before suing Uber. O’Sullivan explains that initially, the focus was on capturing the market and building a viable business. Patents were seen as a protective measure rather than a primary revenue source. Carma was focused on building a profitable business.
The cost of suing a large company over intellectual property also played a significant role in the delay. O’Sullivan noted that it can cost over $10 million to pursue a significant patent lawsuit. Carma reached out to Uber as far back as 2016, hoping for a licensing agreement. However, the company eventually concluded that legal action was necessary to elicit a response from Uber.
Uber’s Response and Future Implications
Uber has declined to comment on the lawsuit. However, Uber’s attorneys have made procedural motions, including a sealed motion to dismiss the case for improper venue or to transfer the venue to the Northern District of California, where Uber is based. This indicates Uber’s preference to litigate the case in a more favorable jurisdiction.
The lawsuit specifically targets Uber, not other ridesharing companies like Lyft. O’Sullivan stated that Carma is pursuing the largest player first, noting that approximately 60 other companies are likely infringing on its patents. The outcome of this case could have far-reaching implications for the ridesharing industry, potentially affecting numerous companies.
The Five-Patent Argument
The core argument of the lawsuit centers on five patents granted to O’Sullivan and Carma, originally named Avego. These patents originated from O’Sullivan’s frustration with traffic congestion, leading to the development of an automated system using smartphones to coordinate rides. This concept evolved into Avego and formed the basis of the first patent, No. 7,840,427.
This patent, applied for in 2007 and granted in 2010, established a shared transport system that matches empty vehicle space with riders or goods. The system created pick-up and drop-off points and matched users traveling along similar routes. Avego’s ridesharing app debuted on Apple’s App Store in 2008, showcasing features like accepting or rejecting ride requests and electronic payments.
Avego, later renamed Carma, focused on promoting carpooling rather than traditional taxi services. The company operated the carpooling business until October 2016, when the app was withdrawn from the App store. However, Carma continued other forms of ridesharing, such as its partnership with Toyota, until phasing it out entirely in April 2018.
Carma’s Current Focus
Carma now focuses on helping transit authorities manage tolls and express lanes, a product line first introduced in 2013. The app is used by drivers on toll roads and tracks vehicle occupancy for HOV lanes. The goal is to increase ridership in cars and reward participants by reducing tolls or providing access to HOV lanes.
O’Sullivan explains that this approach offers toll authorities a way to reduce capital expenditure by up to 20 times by avoiding large gantry-based infrastructure systems. Carma is currently profitable, though the lawsuit will impact its financial performance. Nevertheless, O’Sullivan believes the cost is justified.
I think there’s a danger in society where we can’t rely on our patents to protect the rights of the inventors, and the patent system exists specifically to protect the rights of investors, not to reward copycats that just happen to have deeper pockets,” he said, pointing to Uber’s attempts at its own patents and the rejection of them by the USPTO.
Conclusion
The patent dispute between Carma and Uber highlights the critical importance of protecting intellectual property rights. Carma’s lawsuit tests whether the patent system can safeguard the rights of smaller inventors against powerful tech giants. The outcome will not only affect Carma and Uber but also set a precedent for the broader ridesharing industry.
This case underscores the challenges and costs associated with enforcing patents, particularly against well-resourced companies. The potential ramifications of this lawsuit could reshape the competitive landscape and influence how innovation is protected and valued in the tech sector. Ultimately, it serves as a reminder of the need to balance market dominance with the rights of inventors.
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