[ANSOL-geral] "Patents: It's disheartening to see the moral decay of the patent system."

[André Isidoro Fernandes Esteves]

Why one software CEO agreed to meet a patent troll—and then fought it to 
the end
"He seemed sad... but for whatever reason, he decided to take this path."

by Joe Mullin - Oct 27, 2015 8:40pm GMT

Pegasystems founder Alan Trefler, speaking at PegaWORLD conference 
earlier this year.
Pegasystems

When the business software company Pegasystems got sued in 2013 by a 
mysterious shell company called "YYZ LLC," Pegasystems' head of IP 
licensing, Ayaz Hameed, got ready to tell his boss that they had been 
hit by a patent troll.

Hameed looked at the two patents in the complaint (PDF), numbered 
7,062,749 and 7,603,674, and read their examination histories. The 
patent focused on creating "monitoring messages" and storing them into a 
central database using what's called a "message broker."

"There was nothing earth shattering about what he [the inventor] said," 
concluded Hameed. It also didn't come close to describing how the 
accused software, Pegasystem's SmartBPM Suite, worked. Hammed began the 
unenviable job of telling Pegasystem's CEO and founder, Alan Trefler, 
that the company and his life's work had been hit with a low-value 
patent suit—from a "company" they'd never heard of seeking a quick payout.

It's an all-too-familiar story for software companies. The most 
surprising thing about the YYZ lawsuit was that it was Pegasystems' 
first. By 2013 when the suit was filed, Pegasystems was one of the 
biggest companies building business-process and customer relationship 
software.

But Trefler's response was unexpected. "Why don't we talk to the guy and 
explain to him that we don't infringe?" Hameed recalled.

"From everything I’ve heard about patent licensing entities and patent 
trolls, I thought, 'it's not going to work,'" Hameed said. "But why not 
give it a shot?"

The thinking was that perhaps in a one-on-one meeting, inventor to CEO, 
cooler heads would prevail. "I tend to be fairly optimistic in my views 
of humankind," said Trefler in an interview with Ars. "I always think 
there’s some chance."

Meeting in Cambridge

The lead inventor on the patents and apparent owner of YYZ is Vincent 
Cyr. He founded an IT services firm called Promenix in 1997, and it was 
sold a decade later. The patents were spun out into YYZ.

YYZ's lawyer had already reached out to tell Hameed that IBM and Oracle, 
two software giants who compete with Pegasystems, had already paid for 
licenses to the patents. "They told us, if we wait longer, it will go up 
in price," said Hameed, who wouldn't say what YYZ's cash demands were. 
"Typical troll tactics."

Cyr came to Pegasystems' headquarters in Cambridge, Massachusetts with 
his lawyer. They spoke with Trefler and Hameed for over two hours, with 
Trefler—whose knowledge of Pegasystems' products goes back 
decades—trying to explain how the concepts in the patent were far 
outdated by the time it was filed in 2000.

"Some of the principles they had patented were ones I had been involved 
in implementing," said Trefler. "Messages brokers," for instance, are 
middleware systems that have allowed computers to talk to each other and 
have been in operation for decades. In Trefler's view, the concepts in 
the patents date to at least the 1970s.

Cyr was respectful and not rude, but during the meeting it became clear 
that he and his lawyer, Julie Chovanes, weren't interested in the merits 
of the case, Hameed said.
Cheng: "Why those asshats trade at any value, I don't know."

"I asked [Chovanes], 'What do you mean by 'message broker?' and she 
said, 'We'll make it mean whatever it needs to mean for us to win this 
case,'" he said. "That's not something that someone who's interested in 
the technology would say."

Trefler also thought Cyr and his lawyer had earlier expressed a "bona 
fide interest" in hearing their position on how Pega's technology 
differed from what their patent described. The meeting left him 
disappointed and determined.

"The conversation kept coming back to 'if you pay us this much, we'll go 
away,'" Trefler said. "I concluded that was two hours of my life I'm not 
going to get back."

Perhaps early engagement from Trefler made Cyr, other YYZ investors, and 
his lawyers think they were likely to get such a payoff, but it had the 
opposite effect. Trefler became more energized to win a complete victory 
over the YYZ patents—even though millions in potential damages were at 
stake.

"He [Cyr] seemed sad to be doing what he was doing," Trefler said. "He 
would have been happier running a business instead of an NPE 
[non-practicing entity], but for whatever reason, he had decided to take 
this path. I encouraged him to recapture the work he had done earlier."

Cyr, who runs a real estate business in his home state of Pennsylvania, 
wouldn't discuss the meeting with Pegasystems or anything else about the 
YYZ litigation. "Whatever anybody wants to write, I can't stop you," he 
said when reached by telephone. "I have nothing to say at this point in 
time. I may be involved in an appeal."

Cyr also wouldn't say what the name of his company, YYZ, meant. "It's 
letters—we put the company together to hold the patent," he said.

Fighting a system in “moral decay”

Hameed arranged for two steps to keep costs low while the company 
litigated the case. First, Pegasystems would become part of a joint 
defense group that included other companies sued by YYZ: 
Hewlett-Packard, Adobe, Software AG, and BMC. Those five companies 
shared experts and prior art searches.

Some aspects of the litigation, including much of the electronic 
discovery, were handled in-house using Hameed's own IT team. He also 
hired the Pittsburgh-based Webb Law Firm on a recommendation from Newegg 
Chief Legal Officer Lee Cheng, who has used the firm for high-stakes 
cases against other patent trolls.

Ultimately, BMC and Software AG ended up settling out of the case, which 
was a surprise to Hameed and his team.

During the course of the case, the Supreme Court issued its opinion in 
last year's Alice Corp. v. CLS Bank decision, a landmark patent case 
that has made it much easier to knock out software patents that are 
abstract. As courts began interpreting Alice as a mandate to kill many 
types of "do it on a computer"-type patents, Hameed got more confident 
that his team was going to beat YYZ, perhaps even before a trial.

On October 8, the company won a total victory. In a 22-page opinion 
(PDF), US District Judge Sue Robinson found that YYZ's patents were 
abstract and unable to pass the first test of patentability. YYZ lawyers 
claimed that their patents "use a very specific set of technologies and 
invented a set of solutions to problems that existed in very specific 
technological environments," but Robinson saw it as routine 
functionality dressed up with computer language.

"To broadly claim a method of accomplishing routine functions requires 
more than just an 'apply it' directive, even in a specific technical 
environment," wrote Robinson. "A component that 'can be configured' to 
perform the claimed function is neither sufficiently described nor 
sufficiently innovative" to warrant getting a patent.

YYZ has until next month to decide whether it will appeal, and Hameed is 
expecting that the company will. Meanwhile, Pegasystems is going to 
request its legal fees get paid—something that has also gotten easier 
because of Supreme Court precedent.

Hameed and Trefler declined to say how much Pegasystems spent on 
defense, although they acknowledge that the legal bill was likely higher 
than what the company could have settled for. Like many other tech 
companies, Pegasystems has advocated for legislative change to the 
patent system as well.

For 59-year-old Trefler, a former chess champion and the son of a 
Holocaust survivor, taking on these cases is a simple matter of being a 
responsible member of the industry.

"Nothing can be worse than encouraging these sorts of suits," he said. 
"As someone who’s always prided himself as being an engineer and an 
inventor, I think it is disrespectful to both of those professions to 
engage in or support frivolous patents. It's disheartening to see the 
moral decay of the patent system."