By Cromwell Schubarth. This article originally appeared on Silicon Valley Business Journal, August 17, 2015.
Josh Becker worked both sides of Silicon Valley’s startup and tech world before joining legal analytics business Lex Machina as CEO.
The former VC and entrepreneur said what he has learned at Palo Alto-based Lex Machina should concern anybody whose livelihood is built on patents, trademarks and copyrights, as well as some who may not be aware that they could become entangled in intellectual property litigation.
A new report from Lex Machina this month said that thousands of individuals are being successfully sued after downloading copyright-protected materials, particularly by one erotic website operator.
The following Q&A was done after that report was issued. It has been edited for length and clarity.
Some have blamed the free-for-all in patent suits on the multiple breakthroughs we are seeing in mobile, Big Data analytics, genomics and other technologies. Do you believe this increase in lawsuits is going to be a lasting phenomenon or is it just a phase we go through until this wave of innovation gets sorted out?
There is lots of debate on that. But I think it is here to stay because we are in an age of convergence. Take a smartphone, for instance. Is it a computer or is it a phone? There was significant litigation around that right up through about 2013.
Now we are seeing some of the same in other new technology that crosses domains, like wearables and automobiles that are becoming more and more like computers.
There was also the rise of patent monetization entities, which amassed patents and contributed to an increase in litigation.
We saw a big increase in litigation through 2013, but it went down again in 2014 after a couple of important Supreme Court decisions. But in 2015 it’s back up again, which I think surprised everybody. Q2 was the highest quarter on record for patent lawsuits.
I think some of that is because of the new convergence of technologies we are seeing and some of it is the patent-monetization entities.
Lex Machina published a report this month about copyright litigation. Most of the focus I saw from you until now has been on patents. Why copyrights now?
Well, just as we brought an increased level of the transparency to patent litigation, we believe there are other areas that have similar problems. Trademark litigation and copyright litigation are really more important for some companies than patents. We first did a report on trademark litigation about four or five months ago that got good reception. Copyright was the next logical area for us.
Tom Rubin, who was at Microsoft for a long time and is now teaching at Stanford Law School on copyright, has been one of our advisers on the report.
What was the biggest surprise for you out of this report?
The biggest surprise had to be the volume of the file-sharing cases brought by entities who are suing thousands of individuals and extracting lots of quick settlements. One erotic website called Malibu Media brought 15 times more lawsuits than the next most active litigator. They brought more copyright litigation than traditional sources of such activity, like music, movies and software.
Is there anything that you think people should be concerned about in the report?
Most certainly. People who are using peer-to-peer peer file-sharing systems should be aware that this litigation is happening in quite large numbers. I think, just as happened with the rise of patent lawsuits, we have to look at whether we have the right balance in the copyright litigation system and see how we can continue to improve it.
One of the things that I began to hear frequently right after Periscope and Meerkat came out was a warning against that type of individual broadcasting of a performance or event on the Internet. That’s a whole other layer of copyright and intellectual property litigation we are likely to begin to see, isn’t it?
Yeah, I’ve noticed that as well. I’m certainly not an expert on that, though. So I’m curious to see how that’s all going to play out. One of the things we covered in the copyright report is the notion of fair use, which is something that comes up frequently in the media. Where are the boundaries of fair use when you’re using Periscope or Meerkat to broadcast a snippet of a performance? It’s the kind of new issues being driven by the emergence of these new technologies.
What is the next area that you see Lex Machina getting into?
We are hearing from both our corporate customers and law-firm customers asking us when we will apply our analytics to commercial litigation and employment litigation and security, which is a big issue, obviously, for a lot of tech companies. So we’re looking at some of those new areas.
Would any of what Lex Machina does have been possible before Big Data analytics came along?
No. Previously, if you wanted to see which summary judgment motion to dismiss hadn’t worked in front of a particular judge, you would literally have to find 1,000 cases and download them — which cost a lot of money — then read them all and figure out what happened.
And there is a lot riding on these cases. The HBO show “Silicon Valley” has made the general public aware, in a satirical way, of how patent litigation can be used to quash innovation.
You mean the lawsuit by Hooli — the fictional company some say is patterned after Google — against the startup at the center of the show, Pied Piper?
Yeah, that kind of thing really happens. Take Nest, for example, the smart-thermostat company. It was sued by Honeywell, and that could easily have put Nest out of business. But because they had Chip Lutton as their general counsel, who was a chief patent counsel at Apple, he was able to amass his own portfolio and fight off Honeywell.
I think now that a lot of companies are getting ready to go public that have patents they need to protect, they are better prepared to fight and have more hope to win those suits. We think more open transparency of the sort that we can provide will increase the chances for more justice and better justice at the end of the day.
What are the pain points that you saw as a venture capitalist and as an entrepreneur that Lex Machina addresses?
That’s an interesting question because, back when I was at Redpoint in 1999 and 2000, VCs were not as conscious about the importance of intellectual property at that time, and I don’t think it was a high a priority with startups, either. But subsequently, especially starting around 2007 to 2009, it started to become more and more important.
Why?
First of all, I don’t think people were as concerned because the information just was not there. There wasn’t a lot of transparency in the system. It was hard to figure out who the entities were that were serving all these new lawsuits and why so many were suing in the Eastern District of Texas.
All of a sudden, startups and big companies were really struggling with those kinds of questions. And I saw in Lex Machina an opportunity to help answer those questions by mining the data in all the lawsuits themselves.
Who are the biggest users of Lex Machina?
Companies like Google, eBay, Yahoo, Microsoft and Cisco. Not surprisingly, Silicon Valley law firms working with startups and investors like Wilson Sonsini and Fenwick & West have been early adopters. Cooley signed on this year. But we do have good customers across the country, and we’ve just signed our first Korean law firm, which is interesting.
How are they using it? What benefit do they get?
It’s twofold. For the company, it’s really about winning cases. It’s kind of like “Moneyball” was for baseball. Teams started using data analytics to win more games by analyzing the players in a baseball game in a different way.
Legal analytics is the same for law. It’s about getting data about the judges and getting data about attorneys. Which attorneys have the most experience, and which have the best track record in front of a certain judge? What’s the right strategy? Which motions have worked in the past? Like if there have been 1,000 summary judgment motions in front of a particular judge, give me the five that succeeded for a patent-claim defendant and let me know what I can learn from those.
For the law firms, we give them information that they can use to win business from companies and then actually win cases for them. They are able to say to companies, “Hey, let me help you set a strategy. Not only have I got experience and a track record, but I also have access to all the data about this judge and every case that has been in front of this judge. So I’m going to use that as well as my experience as an attorney to help you set the best strategy.”