Droplets awarded $15 million in damages
Robin Y. Richardson
Jan. 17, 2015 at 4 a.m.
Sears and Overstock will have to pay software development company Droplets Inc. $15 million for patent infringement, a Harrison County federal jury decided Friday.
The case began here Tuesday in the U.S. District Court for the Eastern District of Texas-Marshall Division with U.S. District Judge Rodney Gilstrap presiding.
After three hours of deliberations Friday, the jury of six men and two women rendered a verdict in favor of Droplets, ordering e-commerce site Overstock to pay Droplets $4 million and Sears to pay $11 million for directly and indirectly infringing on it's patents. Droplets was seeking a royalty of $32 million.
"We respectfully but strongly disagree with the jury's verdict and we intend to appeal," said Chris Brathwaite, spokesperson for Sears. "We believe we have strong grounds to overturn the verdict under well-established case law."
The three patents in the suit related to the deployment of rich Internet applicants and related technology. In the case, Droplets accused the e-commerce outlets for infringing its patents by providing certain embedded interactive functionality through their websites, specifically search suggest, add to cart, mouse hover over shopping cart and store pickup locator.
Sears and Overstock denied the infringement and contended that Droplets' patents are invalid, citing a couple of prior art references.
The jury determined Friday that the defendants did not prove their case. The jury also determined that the defendants did not prove that they had been granted a license to practice the patents.
In closing arguments, Theodore Stevenson III, an attorney with McKool Smith law firm representing Droplets, said Droplets was created in 2002 by its six inventors, who wanted to bring the desktop experience to users over the Internet.
"They had a great idea, worked hard, got investors, created an idea and they sold it," he said of Droplets.
He said to protect their invention, they filed for a patent.
"They did everything right, everything they should've done," Stevenson said.
"The defendants told you their invention wasn't revolutionary because people never heard of Droplets," Stevenson said. But, "we all benefit from the invention every day."
He said, as of today, a lot of Internet companies have licensed Droplets' patents.
"This is the background idea. This is the invention that enables the features (on a website)," Stevenson said of the patented technology.
Stevenson said plaintiff's attorneys disproved the defendants' claims that the interactive link on their sites is not stored on the user's computer.
"They say it's in a cache, (but) that's what cache is - storage," Stevenson said. "Cache means storage."
Stevenson noted that Droplets' patent was praised in the industry. He said proposed damages in the case - $32 million - were based on the value of what was taken due to the infringement.
"Droplets' invention put $68.3 million dollars in Sears' (pocket) and $34.9 million in Overstock's," Stevenson said.
"The royalty is the split," he said. "We propose a very fair split - $30 million dollars going to Droplets and allowing the defendants to retain $70 million, due to the trespass."
And although the defendants contend that they do not make money off of the accused website features, Stevenson argued that they do. He said a Sears document, comparing Sears' profits with search suggest versus no search suggest shows that the company brought in $890 million over the three years of damages period in which Sears has been using search suggest.
John Barr, an attorney with Houston-based Bracewell & Giuliani law firm, representing Sears and Overstock, argued that Droplets' invention was not novel.
"Mr. Stephenson claimed Droplets had a (revolutionary) idea, but no one ever heard of it; no one wanted to buy it and they're not the only ones to do it," Barr said.
"Droplets said they delivered 'a way' of delivering remotely executed applications," Barr said. "No one's testified in this trial that Droplets had the only way."
He said the problem Droplets had was no one liked Droplets' way.
"After they tried it, they didn't use it for very long," he said of those who tried Droplets' invention.
Barr said when Droplets failed in their software business, having to go through a layoff two years after launching, they decided to start suing people.
"It decided to stop making money in the software (development) business and decided to start making money in the courthouse," he said.
"There was no call… just a lawsuit," he said of how Sears and Overstock learned of Droplets.
Barr said the fact that other e-commerce sites have taken out licenses to use Droplets' technology is irrelevant.
"All this talk of other licensees is just an attempt to confuse you," he said.
"Sears and Overstock are fighting this case because they believe they do not infringe these patents and they believe these patents are not valid," Barr said.
"These were not patents that changed the Internet," Barr said. "These were specific patents that described the Droplet way."
Barr further argued that none of the website features, including search suggest, shopping cart, updating a website automatically, and auto complete, were invented by Droplets.
"Their invention is different," he contended. "They got this little interactive link that can be dragged on a computer and accessed."
Barr said there's nothing like that on any shopping sites.
Barr called Droplets claims of damages excessive and unsupported.
"They're relying on surveys that are completely flawed," Barr said.
Barr said, further, Sears and Overstock already have a license for the patented technology through Adobe.
"We are within the definition of the Adobe license product," Barr said. "When Adobe went in there and paid $10 million (to license Droplets' patents), they wanted to make sure its customers didn't get sued.
"All that matters is it was made by Adobe," he said of the software they use.
Attorney Sam Baxter, co-counsel for Droplets, said there's no dispute that Droplets didn't invent the accused website features.
"The case is, 'how do they get search suggest and all the other features to your computer?'" Baxter said. "The answer is they use our product. They have to use our product."
He asked the jury to make Overstock pay a reasonable award of $12.2 million and Sears pay $20.5 million.
"There's no question the patents are valuable," Baxter said.
He said it's even valuable to the defendants.
"The patents make a difference to them economically," Baxter said regarding the defendants.
"We put Droplets in your hands," he told the jury.