When it's time to pay the troll toll, the bill arrives in the
form of a letter filled with polite but firm language and loaded
with references to patent numbers.
The invoice has been sent on hundreds of occasions by
ArrivalStar, a company once based in Delray Beach, Fla., but now
incorporated in the tax haven of Luxembourg. The letter describes
ArrivalStar head Martin Kelly Jones as an inventor who deserves his
due as owner of nearly three dozen patents related to technology for
tracking vehicles and packages.
"Mr. Jones conceived his inventions in 1985 when he observed a
young girl waiting at a school bus stop on a rainy, foggy Atlanta
morning," the letter says.
Versions of ArrivalStar's smooth-yet-threatening document have
arrived at hundreds of headquarters, including the offices of
American Airlines, The Gap, even the Port Authority of New York and
New Jersey, as well as Pittsburgh Logistics Services, a Beaver
County freight company.
Those who have received the letter -- and later been named as
defendants in patent-infringement suits -- scoff at the idea of Mr.
Jones as an innovator whose vision and acumen have greased the cogs
of global supply chains and online retailing. Instead, they paint
him with uncharitable terms -- "shakedown artist," "cockroach" and,
most commonly, "patent troll."
For Mr. Jones, the insults are part of doing business. His Boca
Raton attorney, Bill McMahon, said ArrivalStar has agreed to
licensing deals with more than 500 companies in recent years. The
average fee is "south of $40,000," Mr. McMahon said -- leading to
the obvious conclusion that ArrivalStar has brought in $20 million
in licensing fees on the three dozen patents it owns.
Not that ArrivalStar's revenue sources are happy to pay up. Mr.
McMahon said his licensing letters typically go ignored until he
files a suit in federal court.
"I can't tell you how many people call and say, 'F-you!' " Mr.
McMahon said. "I get that four or five times a week."
The arcane -- and emotionally charged -- world of intellectual
property disputes grabbed headlines in June, when President Barack
Obama lamented the rising number of suits filed by patent trolls,
companies that exist to collect licensing fees on inventions
registered with the U.S. Patent and Trademark Office.
President Obama announced several executive orders "to protect
innovators from frivolous litigation."
Unlike billion-dollar patent battles between Apple and Samsung,
or between the makers of brand-name drugs and generic versions,
these lower-stakes "troll tolls" are collected not on a piece of
crucial insider knowledge but on some easily overlooked invention.
In one example, a shell company threatened to sue 8,000 coffee
shops, hotels and retailers for patent infringement because they had
set up Wi-Fi networks for their customers.
ArrivalStar isn't the only patent troll, but it offers insight
into a shadowy industry.
First comes the demand letter. In it, ArrivalStar offers the
accused scofflaw an opportunity to "amicably resolve" the matter
"under highly favorable terms" -- by paying a licensing fee of
Companies that ignore the letter risk being named as a defendant
in a lawsuit.
In the past three years, ArrivalStar has filed 201 patent
infringement suits in federal court in South Florida, targeting such
household names as New Balance, Nike and Nordstrom.
In each of those three suits, ArrivalStar cited the consumer
brands' use of advance shipping notices and order confirmation
emails sent to customers. ArrivalStar says its patents give it the
right to a licensing fee.
The suits almost never make it to trial, Mr. McMahon said.
Instead, they're settled quickly, for an undisclosed sum.
That secrecy is an important part of ArrivalStar's strategy, said
Daniel Nazer, staff attorney at the Electronic Frontier Foundation
in San Francisco. The specter of a hefty settlement can pressure
companies to settle. …