Kove v. Amazon: Crafting an Intellectual Property Strategy for Cloud Computing Tech

Patent infringement lawsuits in the U.S. culminate in a jury trial. So the effectiveness of a U.S. patent, and ultimately its value, is determined by how well it holds up in front of a jury.

While the vast majority of patents never get litigated and therefore don’t go to a jury trial, the few that do provide instructive examples of what works.

At Henry Patent Law Firm, our job is to craft effective patents, and we pay close attention to patent trial outcomes. Although we never want to put too much weight on a single data point, patents that have been successful in court can certainly inform our practice.

That’s why we’re starting this new blog series. Over the next few months, we’ll be examining recent examples of U.S. patents that have gone through jury trials, and lessons that can be learned from them.

To start us off, we’ll look at Kove v. Amazon, which is a recent patent lawsuit related to cloud computing technology. In a jury trial in April 2024, Amazon was ordered to pay $525 million to Kove for patent infringement.

Among other things, this case offers useful insights into the value of patent vs. trade secret protection for cloud-based software technologies, in the current legal climate.

The relationship between patent drafting and jury trials

First, let’s address the obvious question: Why do jury trials matter for patent drafting? Well, simply put, a jury trial is the ultimate crucible for a patent.

Patents, of course, are drafted many years before the technology is ever in use — in fact, before anyone (besides the inventors) even know about the invention or its value. So patent drafting requires a great deal of foresight, as we are trying to predict what will have the best chance of prevailing in a jury trial.

For patent cases that go to jury trial, hundreds of millions of dollars are often at stake, and the pre-trial litigation process can take years. As such, both sides of the trial will commit significant time and resources — sometimes tens of millions of dollars — to advance their case:

• The patent owner must be able to fully explain their invention in terms of the legal claims in the patent, and then describe the meaning behind every technical detail of the alleged infringing product.
• The accused infringer will leave no stone unturned to challenge the validity and enforceability of the patent. For example, they may:
  • Find prior art to show the invention is not new or inventive;Invalidate the patent’s claims for being too broad, too narrow, too indefinite, or too abstract;
  • Render the patent unenforceable through the patent owner’s “unclean hands”: where the patent owner has behaved unethically by committing fraud, deceiving the patent office, withholding documents, etc.

All this must be communicated to a jury, which means it needs to be understood by a group of individuals who typically don’t have any relevant technical or legal expertise.

Moreover, for a patent owner to prevail, the jurors must unanimously agree, under strict procedures orchestrated by a federal judge, that the patent is valid, infringed, and supports a damages award.

If a patent can endure such a grueling litigation process, provide a foundation for such detailed technical proof, and survive scathing legal challenges and vile defense tactics, we can say that the patent did its job. In a nutshell then, this blog series is about patents that did their job.

A $525 million verdict: Kove IO, Inc. v. Amazon Web Services, Inc.

The jury verdict in Kove v. Amazon received a lot of press because it’s a case where a relatively unknown entity (Kove IO, Inc.) went up against one of the world’s biggest brands (Amazon) and won a whopping $525 million. Half a billion is a lot of money, even for Amazon!

Kove v. Amazon: The basics

• Patent owner (plaintiff): Kove IO Inc.
• Alleged infringer (defendant): Amazon Web Services Inc.
• Venue: Northern District of Illinois
• Patents in suit:
  • U.S. Patent No. 7,814,170
• • U.S. Patent No. 7,233,978
  • U.S. Patent No. 7,103,640
• Jury verdict:
  • Rendered on April 10, 2024 for the patent owner and plaintiff (Kove), finding $525 million in damages

Kove’s patents: What was the invention?

According to the complaint filed by Kove, their patents describe “breakthrough technology enabling high-performance, hyper-scalable distributed ‘cloud’ storage years before the advent of the cloud.”

In essence, the inventors had realized very early on that traditional servers for storing data files would someday become so large that it would become practically impossible to locate those data files.

To resolve this problem, they proposed using hash values to organize location information, which made the process of finding files much more efficient — even files that had been modified or moved — and therefore “improved upon the scalability limitations of conventional storage systems.”

Kove asserted that the inventors developed these concepts in the 1990s, long before they were allegedly deployed by Amazon Web Services (AWS). The patents asserted by Kove claim priority back to patent applications filed as early as 1998, 1999 and 2000.

For an example of a representative claim, check out claim 1 of the ’170 patent:

We claim:

1. A system for managing data stored in a distributed network, the system comprising:
   
   a data repository configured to store a data entity, wherein an identifier string identifies the data entity; and
   
   a data location server network comprising a plurality of data location servers, wherein data location information for a plurality of data entities is stored in the data location server network, at least one of the plurality of data location servers includes location information associated with the identifier string, each one of the plurality of data location servers comprises a processor and a portion of the data location information, the portion of the data location information included in a corresponding one of the data location servers is based on a hash function used to organize the data location information across the plurality of data location servers, and each one of the data location servers is configured to determine the at least one of the plurality of data location servers based on the hash function applied to the identifier string.

This is one of the claims that was asserted against Amazon, and Amazon was found to infringe.

Amazon’s technology: Where was the infringement?

Kove identified two products from Amazon Web Services (AWS) as allegedly infringing their patents. Both of these products manage data stored in a distributed network (in the “cloud”):

• Amazon Simple Storage Service (Amazon S3, aka “S3 buckets”)
  • What is it? Described by Amazon as “highly scalable, reliable, and low-latency data storage infrastructure.”
  • How does it work? Stores objects in a “File Repository,” where each object is assigned a unique identifier string.
• DynamoDB
  • What is it? Allows its users to “create database tables that can store and retrieve any amount of data, and serve any level of request traffic.”
  • How does it work? Its database tables are distributed across multiple servers and use a hash function to organize the location of data information.

As mentioned above, claim 1 of the ‘170 patent similarly describes “a system for managing data stored in a distributed network,” and uses hash functions to “organize the data location information across the plurality of data location servers.”

Amazon’s Motion to Dismiss for Invalidity under Alice

Predictably, Amazon filed a motion to dismiss Kove’s infringement suit, arguing that Kove’s patents are invalid under Section 101 and the Supreme Court’s Alice decision. In particular, Amazon alleged that Kove’s patent claims are directed to abstract ideas, without an inventive concept that transforms them into patent-eligible subject matter.

(We’ve discussed the ramifications of Section 101, particularly in the wake of the 2014 Supreme Court decision in a case now known as Alice, in greater detail elsewhere; for more, read Patenting Software and Beyond: A Guide to Understanding Alice and Its Impact.

The court denied Amazon’s motion to dismiss (under “Alice step 1”), ruling that Kove’s patent claims are not in fact directed to an abstract idea.

Key takeaways from Kove v. Amazon: Patents or trade secrets?

Kove v. Amazon is important because it provides an important data point that can inform how companies approach IP protection for software inventions.

Specifically, companies developing cloud-based software technologies are often weighing the value of patent versus trade secret protection:

• Patents give you the right to exclude others from making, selling, using or importing a particular product or service — in exchange for full public disclosure of your invention.
• Trade secrets derive their commercial value from being kept secret, and that a company is making reasonable effort to keep secret.

(For a more in-depth discussion about how the two differ, read What’s the Difference Between a Patent and a Trade Secret?

When deciding how to secure legal protection for cloud-based software technologies, two of the important factors at play include (1) the uncertainty around subject matter eligibility for these types of inventions, and (2) the difficulty of detecting patent infringement for this type of technology.

As outlined in more detail below, the Amazon case tips both factors toward patent protection over trade secrets.

Subject matter eligibility

Under current U.S. law, software patents are generally more difficult to enforce because they will be subject to so-called “abstract idea” (subject matter eligibility) challenges under Section 101, just like the one that Amazon asserted against Kove.

Basically, in the wake of Alice, the range of inventions that may be considered “abstract ideas” (and therefore patent ineligible) has significantly increased. And because Alice dealt with a software-implemented invention, the majority of patents invalidated from Alice have been software-related.

However, the concepts of “abstract ideas” and subject matter eligibility are not relevant to trade secret protection. In other words, “abstract ideas” can be protected as trade secrets even if they’re not patentable. For this reason, trade secret protection often looks like a better option for cloud-based software inventions.

Detecting infringement

While patents are a valuable tool for protecting your IP, they’re also only effective if you can detect and prove infringement by another party. As noted above, infringement must be proven to a jury in federal court. And you need hard evidence before you can file a lawsuit.

However, as the term suggests, cloud-based software technology is deployed in the cloud. In other words, cloud-based software lives on computers that are not directly accessible. Detecting whether your competitor’s cloud-based software system infringes your patent can be difficult when the competitor’s software operates in the cloud — which is, essentially, a black box.

According to the conventional wisdom, why invest several thousand dollars in patent protection when we might never be able to detect infringement? So this is another reason that trade secret protection often looks like a better option for cloud-based software inventions.

How Kove v. Amazon challenges the conventional wisdom

Simply, Kove v. Amazon shows that the analysis of patent versus trade secret protection shouldn’t put too much weight on the two factors outlined above.

For one thing, all three of Kove’s patents survived Amazon’s subject matter eligibility (“abstract idea”) challenges under Alice. The court ruled that, although categorical data storage is in and of itself an abstract idea, the patents’ specifications do explain how the technology is different from, and improves upon, prior systems; the claims also focus on specific improvements in computer capabilities and describe specific uses for the servers in the network architecture. So the court concluded that the asserted claims are not directed to abstract ideas.

For another, Amazon’s infringement was detected based on Amazon’s own public documentation and product announcements. In our earlier discussion about Amazon’s products that were found to infringe Kove’s patents, we referred to Amazon’s own descriptions of how its technology uses hash functions to organize data location information across multiple servers — which parallels what’s described in Kove’s patent claims.

In sum, this case suggests that the scales in the analysis surrounding how to protect software IP might tip more strongly toward patent protection than some would think.

Of course, Amazon plans to appeal the verdict, which means that the final outcome of the case is still up in the air. Nevertheless, the jury verdict illustrates just how powerful patent protection can be — and how well patents have served a smaller firm like Kove in asserting its rights against a large, well-resourced entity like Amazon.

The importance of partnering with a qualified patent attorney

As promising as the developments around Kove v. Amazon are, the debate around software patents is still far from resolved — and we’re certainly not at a place where there is a one-size-fits-all answer to that question.

If you’re trying to develop the right IP strategy to protect your cloud-based software technology, we highly recommend consulting a qualified attorney who can provide insights tailored to your specific situation. Please get in touch with us if you have any questions!