The end of a lawsuit by a company that charged Adam Carolla and other podcasters with infringement is being hailed as a victory in the battle against so-called patent trolls.
Carolla, a comedian who distributes his radio show via podcast, and Personal Audio, a Texas company that claims to hold patents for sending personalized media to listeners via the Internet, on Tuesday announced a settlement of a suit against Carolla that Personal Audio filed last year in the U.S. District Court in Marshall, Texas.
Personal Audio and other Patent Assertion Entities, as the trolls are more formally known, rely on vague patents to sue everyone from Fortune 500 companies to the smallest startups in the hope of a financial recovery. Apparently it’s a profitable scheme if enough people settle rather than incur the cost defending a lawsuit in court.
As part of the settlement, Personal Audio and Carolla agreed to withdraw their legal claims against each another and to refrain from commenting publicly on their dispute until September 30, according to court papers. The parties “do not anticipate further litigation,” the court papers said.
Personal Audio “has no intention of suing podcasters that are making modest amounts of money from podcasting,” the company said in a press release that accompanied the settlement. Besides dropping its claim against Carolla, Personal Audio agreed to refrain from suing popular podcasters the Nerdist, Ear Wolf, Podcast One, Joe Rogan, Marc Maron and Jay Mohr.
A growing tide of lawsuits in recent years by trolls has led public officials and businesses to call for changes to intellectual property laws. Between 2011 and 2013, the number of suits brought by trolls tripled, rising to 62% from 29% of all infringement suits, according to a report issued by the White House in June 2013.
“All told, the victims of patent trolls paid $29 billion in 2011, a 400% increase from 2005 — not to mention tens of billions dollars more in lost shareholder value,” Gene Sperling, then Director of the National Economic Council, wrote in a blog post that accompanied the report.
As part of an effort to cut down on such claims, the Obama administration last year directed the U.S. Patent and Trademark Office to scrutinize excessively broad patent claims and to require companies to state precisely what their patent covers and how it is being infringed.
The administration has garnered praise for its push. “The history eBooks will remember the 44th president for setting off a chain of reforms that made predatory patent lawsuits a virtual memory,” David Kravets of Wired wrote in March. “Obama is the patent troll slayer.”
According to The New York Times, intellectual property experts attribute the explosion in patent lawsuits to a 2011 law that requires the holder of a patent to sue each alleged infringer individually. Previously, a patent holder could sue could file a single lawsuit charging multiple defendants with infringement.
The settlement between Carolla and Personal Audio follows what appears to have been a business decision by Personal Audio that the cost of suing podcasters does not justify the financial return. As Joe Mullin of Ars Technica observed:
The press release really includes nothing new. Through discovery, Personal Audio simply found out podcasters—even famous ones like Carolla—just don’t make that much money, so it isn’t interested in suing them.
Speculation by the Electronic Frontier Foundation, a nonprofit that advocates for civil liberties online, and others holds that Carolla settled the suit without paying Personal Audio anything, based on the latter’s announcing in July that it would drop the lawsuit. However by settling, Carolla will likely forego a chance to challenge the patent or to recover attorney’s fees.
The EFF hailed Carolla for battling back against Personal Audio, including raising roughly $500,00 for his legal defense and waging a public campaign against patent trolls. According to a blog post on Monday by the EFF’s Daniel Nazer:
Carolla, his team, and everyone who donated in support deserves massive credit for putting up such a strong fight. The podcasting community showed that it would not be shaken down. Patent litigation is very expensive and most troll targets settle early just to avoid the cost of defense. By fighting back, Carolla forced Personal Audio to actually mount a case and establish that it deserved money. That turned out to be too hard for the troll.
Still, the EFF lamented that the settlement allows Personal Audio to retain its patent, which raises the prospect of continuing claims by the firm. Personal Audio has reportedly sued deeper-pocketed defendants, including NBC, CBS and Fox.
According to the EFF, the cost of defending against an intellectual property claims encourages firms like Personal Audio. “Trolls know this and use the cost of defense to extort settlements,” Nazer wrote. “In the rare case where someone shows a willingness to fight to the end, the troll will often save its patent at the last moment with a walk-away deal.”
Carolla’s settlement will not impact a challenge to Personal Audio’s patent that the EFF is mounting before the Patent Trial and Appeal Board, the Patent and Trademark Office’s administrative law arm, Nazer said.