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In a Delaware court, Shopify takes on a patent holder with a ‘litigious history’

Shopify’s office in Toronto. Iain Sherriff-Scott for The Logic
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The online home of Larkspur, Calif.-based Express Mobile looks like a relic from an earlier era of the worldwide web. It offers “mobile app solutions for the enterprise,” but there is little indication the company’s website has been updated since 2015, when the last entry was posted to its sparsely populated corporate news section. Visitors are invited to contact the company, but the form is broken. The only substantial information on the site comes in the form of a list of patents it offers for license.

Over the last four years, Express Mobile has filed dozens of lawsuits in courts on both U.S. coasts demanding compensation, alleging that some of the internet’s most popular website-building platforms have infringed on those patents. Earlier this year, however, Express found itself on the other end of a lawsuit involving a major software firm.

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Talking Point

Shopify has asked a Delaware court to declare it isn’t infringing the patents of Express Mobile, a small California firm that has sued dozens of large software companies over its website-building and mobile inventions. The Ottawa-based e-commerce giant has become an increasing target for intellectual property litigation since going public in 2015.

The Ottawa-based e-commerce giant Shopify is suing the smaller firm, in an attempt to pre-empt a possible action from Express by having a jury declare Shopify is not infringing on patents held by the obscure company with what it calls a “litigious history.” 

Shopify filed its suit in March in a district court in Delaware, where both Express and Shopify’s U.S. subsidiary are incorporated. The Canadian firm wants a judgment that it has not and is not infringing on four Express patents. Two are for browser-based tools with a what-you-see-is-what-you-get (WYSIWYG) interface that allow users to create websites, while the others cover ways of displaying content on mobile devices.  

Shopify went to court after a December 2018 letter from Express’s lawyer accused it of infringing on the four patents “through its business of building web sites and web pages for customers.” Shopify’s complaint also claims that Express has “embarked on an industry-wide patent litigation campaign” over the last four years against competitors including BigCommerce.

“It is a wise strategy to get out ahead of an infringement suit and seek a declaratory judgment under [U.S.] law,” said Myra Tawfik, a professor of intellectual property (IP) commercialization at the University of Windsor’s law faculty. The action suggests Shopify “feels that it has a strong position on the merits (or at least a strong strategic position) and that it has the financial resources that it is willing to use to take an aggressive stand.” 

While filing first allowed Shopify to choose the jurisdiction in which it will fight Express, “it’s still a very reactive, entirely defensive play,” said Jim Hinton, a patent lawyer and founder of Own Innovation, a Kitchener, Ont. IP agency. “It’s not a purely nuisance litigation,” he said, noting that Express’s patents have been tested successfully in previous cases, and the company has shown it’s not afraid to go to court. 

Shopify has long anticipated that it might be the target of lawsuits. The prospectus for its 2015 initial public offering noted that there are many patents in the software business, and litigation is common. As the company gains “greater visibility and market exposure, we face a higher risk of being the subject of intellectual property infringement claims,” the prospectus reads. 

That prediction has come to pass. At least five companies have sued Shopify for patent infringement in U.S. district courts since 2016; one of them was dismissed at Shopify’s request, another at the plaintiff’s, but the other three are ongoing.

In its response to Shopify’s suit, Express claimed the e-commerce firm’s theme editor—which allows online merchants using its platform to modify the layout and sections of their storefronts—infringed on all four patents, while its widget and plug-in authoring tools violated two. In September, Express added a fifth patent to the suit. It’s asking for a judgment that Shopify infringed on all five, and financial damages to compensate it.  

Shopify denies violating Express’s patents. Neither company responded to multiple requests for comment.   

“Express Mobile [and similar firms] won’t be going after companies until they have a good amount of money to start paying up,” said Hinton, noting that litigation can cost hundreds of thousands or millions of dollars, depending on how long it takes. “You have to have that much money to lose.” 

Software developer Steven Rempell, who founded Express in 2006, is the sole or co-inventor of all five patents in the Shopify case, according to the World Intellectual Property Organization database. The patents were granted between 2003 and 2018. 

Since 2015, Express has launched more than 80 lawsuits in federal courts across four states. Its targets have included major website-building platforms like Weebly—since acquired by Square—and BigCommerce, as well as smaller app-development software firms like AppGyver and digital agencies like Domani Studios.

The cases rarely make it to trial. Nearly half were dismissed at Express’s request, with the company agreeing not to sue again. Hinton said that suggests the company either chose to abandon the case because it couldn’t prove infringement or decided going forward wasn’t worth it, or “it had its desired effect and came out with a settlement.” Such financial agreements are usually confidential. 

Shopify hasn’t generated any patents of its own, according to its 2018 annual report. But in September, it announced the US$450-million acquisition of robotics startup 6 River Systems, which has five patents for its warehouse-automation technology. 

Tawfik said Shopify’s case against Express acts as a statement of intent for would-be pursuers. “If it didn’t fight back in this way and just settled the claim, it risks becoming an easy target for future trolls,” she said. 

But Hinton said Shopify’s suit won’t “frighten anybody with a strong case of infringement.” Firms like Express “that are out to monetize patents are ready to enforce their rights and happy to go to court, because it’s painful for a company [like Shopify] to have to play that game.”  

Shopify is the second major e-commerce platform to take Express to court before it itself could be sued. In May 2017, Magento asked a California court to declare that it hadn’t infringed on the WYSIWYG patents, and that they were invalid. It said Express had also sued 13 companies that use Magento’s technology to create online shopping sites and strategies for businesses, as well as a “number of other providers of website building tools.”

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The software giant Adobe announced it was buying Magento for US$1.68 billion in May 2018. The case against Express is ongoing, but 12 of those against Magento’s agency partners have been dismissed.

Express, meanwhile, isn’t slowing down. It’s lodged 18 cases in 2019, including two October filings against publicly traded software companies Wix.com and GoDaddy.com. The Shopify-Express suit is also proceeding in Delaware. Shopify has asked the court to subpoena documents related to Express’s patents; the files were due this week.