By Eric Shumsky and Mel Bostwick
Chances are you’ve spent a lot of time in the cloud recently. If you’ve checked your Gmail account, saved a document to Dropbox, messaged your colleagues on Slack, streamed a Spotify playlist, or watched the latest Netflix show, you’re there. The data for those services—your emails, your playlists, your movie preferences—are being stored remotely in the cloud.
Cloud computing has become pervasive in just about every business sector. Many of today’s most successful “unicorns”—big names like Uber and Pinterest and Stripe—were born in the cloud. Companies rely on cloud computing for everything from coordinating their internal operations to managing complex inventory and supply-chain logistics. And companies are directing their resources accordingly, with cloud spending set to top $100 billion this year and keep growing from there.
But where innovation and investment lead, litigation follows. As counsel to companies that provide and consume cloud services, we’ve witnessed this phenomenon firsthand. We’re already defending against lawsuits targeting cloud-computing services. And the numbers bear out what we’re seeing.
An increase in “sue-happy” patent trolls
Patent litigation over cloud technology is increasing. A recent Patent Risk Digest study showed that patent trolls (or “non-practicing entities,” if you prefer the politer term) targeted cloud storage applications more heavily in 2016. It’s easy to see why.
For nearly two centuries, every new technology that involves multiple components has been a target for patent litigation. Many interlocking pieces means many potentially relevant patents and lots of people to sue. Thus the nineteenth-century “Sewing Machine War”—a battle between industry leaders who sued and countersued based on the thicket of patents covering needles, spools, and shuttles—presaged the modern “Smartphone Wars.”
And technologies involving a network (like the cloud) have been particularly attractive targets. It was true of the internet, the telegraph and the telephone, and railroads.
So predictably, patent trolls have been snapping up cloud-related patents, getting ready to go on the attack. And other companies that actually make something, but haven’t transitioned to the cloud and can’t compete effectively in the marketplace, seem poised to turn to litigation too.
What’s been interesting to observe, though, is the response from the cloud-computing industry. Typically, companies faced with patent litigation threats have looked to the law for solutions—and they’ve achieved some success.
RELATED: 10 Intellectual Property Strategies for Technology Startups
Cloud-computing industry responds
The Supreme Court has made it easier to kill patents as “obvious,” and limited what inventors can patent by expanding the definition of “abstract ideas” that can’t be patented. The Federal Circuit has tightened the standards for proving damages, and the Supreme Court made it harder for plaintiffs to get an injunction—an order prohibiting someone from infringing—which took away powerful leverage from plaintiffs. Patent-reform proposals also are kicking around again, as they always seem to be.
But cloud-computing companies are sending the message that these legal changes are lumberingly slow as a tool to protect fast-paced business innovation. And even more striking is who’s sending that signal: major industry players like Microsoft, Google, and Amazon, which are some of the same companies that have taken the lead in pushing for legal changes.