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Patent plaintiff fails to spend $35 to investigate defendant's saddled with paying the defendant's attorneys fees.

Smart Options owns U.S. Patent No. 7313539 in which consumers may purchase an “option” to buy a good, service, or ticket to an event at a certain “reservation price” within a certain period of time. If the purchaser opts not to buy during that period, Smart Options does not refund the “option fee” which the purchaser paid to obtain the right to purchase the product at the reservation price.

Jump Rope operates an application for smartphone devices that lets users pay to “jump” the line at events (like a VIP celebrity).   After being sued by Smart Options, Jump Rope filed a Rule 11 motion (frivolous law suit) asserting the law suit was meritless.  Jump Rope stated in part:

Plaintiff alleges violation of a patent that covers providing options on the right to purchase goods or services at a future time. Defendant’s software application, however, does not provide options or charge option fees. Rather, it allows someone to buy the service  provided – a right to “jump the line” at an event or facility. Plaintiff and its counsel could have and easily should have discovered this, as the iPhone/Android application they accuse is free to download.

Despite receiving Jump Rope’s letter and motion, Smart Options did not withdraw or amend its complaint.  The Court then granted summary judgment of non-infringement finding:

[u]nlike Smart Options which sells a purchaser a right to buy a product at a specific price at some point in the future, Jump Rope sells the actual product or service–immediate access to the front of the line plus the entrance fee to the event or facility. A Jump Rope customer owns the Jump as soon as it completes the transaction, whereas a Smart Options customer must make an additional purchase at some point in the future, at the reservation price, to obtain the good or service. Because Jump Rope sells a good or service, not a “right” to obtain a good or service, Jump Rope does not sell “options” under the ‘539 patent.

In most patent infringement cases, each side bears it own costs.  But in this case, the Court ordered the plaintiff (Smart Options) to pay the attorney fees incurred by defendant (Jump Rope).  The Court found simply reviewing the Terms of Use from Jump Rope’s website was not enough when purchasing a “Jump” would have only cost the plaintiff between $35 and $40 to fully investigate the theory of infringement before filing suit.

The Court found even “more troubling” that Smart Options, after being served the Rule 11 motion, still failed to fully investigate the operation of the Jump Rope product.  The Court stated:

Smart Options, therefore, did not conduct a reasonable pre-filing investigation and had no reasonable factual basis to file its complaint, or to refuse to withdraw the complaint during the safe harbor period after Jump Rope served its original Rule 11 motion and letter.


Practice Suggestion:

Our firm is frequently retained by patent litigators to conduct pre-filing investigations.  In every case we attempt to obtain and examine the infringing article fully.  There are instances when a process or product cannot be fully examined due to limited access (e.g., no access to software source code).  However, every effort should be made to gain access and analyze the accused product.  In this case, an investment of $35-40 would have reasonably determined the product did not infringe.  Thus, it serves as a somewhat extreme cautionary tale to plaintiffs in patent litigations to use caution before they “pull the trigger.”

Smart-Options-LLC-v.-Jump-Rope-Inc.pdf (43.15 kb)

smartJumpPatentUS7313539.pdf (133.02 kb)

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