Meta Facing The Patent Music?
Facebook has had lots of luck when it comes to patents, but its luck may have just run out.
(Photo by Sean Gallup/Getty Images)
It is hard to think of a Big Tech titan that has had as sustained a run of luck when it comes to patents as Facebook (now Meta). When it was under threat in 2012 from Yahoo!, Facebook was able to use strategic patent acquisitions from IBM and Microsoft to blunt any possible existential risk to its future. Sure, by today’s standards Facebook overpaid for the patents it acquired, but at the time, Facebook’s move was hailed as a savvy use of resources. The consensus was that buying patents that had originated at AOL, for example, was an opportunity to acquire valuable assets from a web-based industry innovation leader. Those acquisitions were in the pre-Alice days, of course, but there is no doubt that Facebook benefited from the timing of things in terms of surviving its first major patent threat through strategic patent acquisition.
After establishing its willingness to spend money to build a patent portfolio as quickly as a random Chinese megalopolis is able to throw up apartment buildings to house millions of people, Facebook struck gold again when it came to patents — this time with the dual whammy to software patent owners of Alice and IPRs. With respect to the latter, Facebook was an early adopter of an IPR-first defense strategy, a practice which it continues to employ until today. Considering its success with that approach, Meta can’t be blamed for being a frequent consumer of the PTAB’s services. And with respect to Alice, there is no doubt that the gutting of Internet- and software-directed patents engendered by that decision and its subsequent application by the courts has been a boon for Facebook on the patent infringement defense front. In fact, it is hard to think of a company that has benefited more from Alice, considering Facebook’s revenue growth over time and attractiveness as a target for patent owners. Maybe Google, but they also face a lot more cases than Facebook does on the patent side, so perhaps Alice has led to more of a deterrent effect in Facebook’s favor.
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Even though Facebook has been a prime beneficiary of the age of IPR and Alice, the company’s huge revenue base and efforts to expand into more than just a social network continue to attract enterprising patent owners hoping for a big score. For a long time, that result has evaded patent owners brave enough to challenge Facebook in court, such as when the company defeated Surfbook before a Virginia jury in 2014. Things changed though in 2022 for Facebook on the patent defense front, when an Austin jury awarded $175 million in damages to a Dallas-based company named Voxer, known for its app that turns a smartphone into a walkie-talkie device. In its verdict, the jury found that Facebook and Instagram Live functionality infringed on two Voxer patents, while awarding the $175 million as a running royalty. Facebook filed post-trial motions looking to set aside the verdict. That motion was decided in a written opinion released by Judge Yeakel of the Western District of Texas last week.
In his opinion, Yeakel made short work of Facebook’s attempt to disturb the jury’s infringement findings, particularly the jury’s decision to credit the testimony of Voxer’s technical expert. Likewise, Facebook’s attempt to overturn the finding that one of the asserted patents was valid over the prior art was also rejected based on the testimony of Voxer’s technical expert. (At a minimum, this case should be a reminder just how important expert testimony is in patent cases.) On damages, Facebook took issue with the jury’s finding that Voxer was entitled to a running royalty, as opposed to a lump sum, as well as the apportionment analysis conducted by Voxer’s damages expert. But those challenges were swatted away by the court, in addition to a challenge to the damages verdict based on the alleged use of a wrong date for the hypothetical negotiation — all because those issues were explored at trial via cross-examination and Facebook’s rebuttal case on damages. At bottom, Yeakel made plain that the findings of a WDTX jury after a full and fair trial are not taken lightly in his courtroom.
Facebook also tried to persuade Yeakel to at least order a new trial on damages, based in large part on a third-party valuation obtained by Voxer that put the value of Voxer’s patents to Facebook at a maximum of around $23 million. Here again, the court disagreed that this evidence was enough to disturb the jury’s damages findings, considering that the jury was free to weigh all the evidence presented to it. Facebook’s hopes for remittitur or a new damages trial were for naught.
Interestingly, Facebook also raised an Alice challenge to one of the patents under Rule 52(c), a procedural posture much less familiar than the typical 12(c) Alice motion filed early in a case. Alice’s face always has the ability to turn a patent owner’s face to stone, but — in a blow to Facebook’s hopes of styling itself a patent defense Medusa — Judge Yeakel determined that with respect to Voxer’s patent, there was no ineligibility as the claims were not directed to an abstract idea, but rather to “improvements to communications systems.”
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Ultimately, Facebook’s requests for a new trial or JNOV were not enough to get Yeakel to waver off his position, aptly summed up in his opening sentence of the conclusion paragraph in his opinion: “Facebook had a full and fair opportunity to defend itself.” Put differently, having gone through trial in a WDTX courtroom, Facebook now must hope the Federal Circuit will disagree with Yeakel and the jury on appeal. Or else it must be prepared to finally face the music, in Austin of all places.
Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.
Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.
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