Uber Faces Patent Infringement Lawsuit Over Ridesharing Tech

Uber is facing a significant legal challenge that could disrupt its core business model. Carma Technology, a company founded in 2007, has filed a patent infringement lawsuit against Uber, alleging that the ridesharing giant has infringed on five of its patents related to matching riders with available vehicles.

The lawsuit, filed in the U.S. District Court for the Eastern District of Texas, claims that Uber’s ridesharing system infringes on Carma’s patented technology. Carma is seeking a permanent injunction against Uber, mandatory future royalties on infringing products, damages, and coverage of legal costs.

According to the complaint, Carma first contacted Uber about its ridesharing and ground transportation patents in 2016. At the time, Uber was rapidly expanding and valued at approximately $66 billion. However, Carma alleges that Uber was aware of Carma’s patents as early as 2015, when the U.S. Patent and Trademark Office (USPTO) rejected one of Uber’s patent applications due to its overlap with existing patents held by Carma and its founder, Sean O’Sullivan.

O’Sullivan stated in a recent interview that Uber had the business model and market share, but lacked the specific ridesharing patents held by Carma. The lawsuit further claims that at least four of Uber’s patent applications were rejected between 2016 and 2019 for similar reasons, leading Uber to abandon some of those applications.

Intellectual property attorney Larry Ashery, who is not involved in the case, noted that Carma’s strategy involves a sophisticated portfolio of 30 related patents, with the five asserted patents containing multiple claims. This complexity could make it challenging for Uber to defend against the lawsuit, as it must address each asserted claim individually. Ashery suggests that Uber’s likely strategy will be to attempt to invalidate Carma’s patents, a difficult task given the breadth and depth of Carma’s patent portfolio.

While Carma contacted Uber nine years before filing the suit, O’Sullivan explained that the company was focused on building its business and achieving profitability. The high cost of litigating against a large company like Uber was also a factor. Carma hoped Uber would license its patents, but ultimately decided to sue when a resolution could not be reached.

Uber has declined to comment on the lawsuit. However, the company’s attorneys have filed motions, including a motion to dismiss or transfer the venue to the Northern District of California, where Uber is based.

Carma’s lawsuit is currently focused on Uber, but O’Sullivan indicated that approximately 60 other companies are likely infringing on its patents. The company chose to pursue the largest player first.

The five patents at the center of the lawsuit stem from O’Sullivan’s early work on addressing traffic congestion through carpooling and automated ride coordination systems. This led to the development of Avego, later renamed Carma, and its shared transport system that matches empty vehicle space with riders or goods.

The first patent, No. 7,840,427, granted in 2010, covers a system that establishes pick-up and drop-off points and matches users and drivers traveling along similar routes. Avego debuted its ridesharing app in 2008, showcasing features such as electronic payments and driver-rider matching via smartphones.

O’Sullivan argues that Uber and Lyft’s interpretation of ridesharing as taxi-hailing services has caused market confusion, prompting Carma to shift its business model. Today, Carma focuses on providing technology to help transit authorities manage tolls and express lanes, with the aim of reducing traffic congestion.

O’Sullivan emphasizes the importance of protecting inventors’ rights through the patent system, stating, “We think it’s something that’s important to recognize that the rights of a relatively small inventor are being trampled upon. But it’s not just for Carma, really. We think of this as a problem for the entire system. It’s a test of whether the rule of law still applies when a powerful tech giant is involved.”