Uber Faces Patent Infringement Lawsuit That Could Upend Its Business Model

Uber is facing a significant legal challenge that could potentially disrupt its business model. Carma Technology, a company specializing in ridesharing technology since 2007, has filed a patent infringement lawsuit against Uber, alleging that the ridesharing giant has infringed on five of its patents.

The lawsuit, filed in the U.S. District Court for the Eastern District of Texas, claims that Uber’s system of matching riders with available vehicles infringes on Carma’s patented technology. Carma is seeking a jury trial, a permanent injunction against Uber, mandatory future royalties, and damages.

The Allegations

According to the complaint, Carma’s lawyers first contacted Uber about its ridesharing patents in 2016. At the time, Uber was rapidly expanding and valued at $66 billion. 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 similarity to Carma’s existing patents. At least four of Uber’s patent applications were rejected between 2016 and 2019 for the same reason.

Carma’s Patents

Carma holds a number of patents related to ridesharing technology. Sean O’Sullivan, founder of Carma, argues that Uber’s core service infringes on Carma’s patents, even if Uber operates more like a taxi service.

One key patent, No. 7,840,427, granted in 2010, covers a shared transport system that matches empty space in a vehicle with riders or goods, establishing pick-up and drop-off points and matching users and drivers traveling along a similar route. Carma launched its ridesharing app, Avego, in 2008, demonstrating the technology’s capabilities.

A Nine-Year Gap

Despite initially contacting Uber in 2016, Carma waited nine years to file the lawsuit. O’Sullivan explained that the delay was due to the high cost of patent litigation against a large company. He also stated that Carma hoped Uber would license its patents without legal action.

Legal Perspectives

According to intellectual property attorney Larry Ashery, Carma’s case is strengthened by its comprehensive patent portfolio. The five patents in question are part of a 30-patent family, making it more challenging for Uber to invalidate them.

Uber’s Response

Uber has declined to comment on the lawsuit. However, the company’s attorneys have filed procedural motions, indicating a preference for the case to be litigated in the Northern District of California, where Uber is based.

Implications

Carma’s lawsuit is not limited to Uber. O’Sullivan stated that approximately 60 other companies are likely infringing on its patents. Carma is focusing on Uber first as the largest player in the ridesharing market.

The outcome of this case could have significant implications for the ridesharing industry and the enforcement of patent rights against large technology companies.

Carma is now focused on reducing traffic congestion by using its app to help transit authorities manage tolls and express lanes. The app can track vehicle occupancy for HOV lanes, giving drivers access to the HOV lane.

“I think there’s a danger in society where we can’t rely on our patents to protect the rights of the inventors, and the patent system exists specifically to protect the rights of investors, not to reward copycats that just happen to have deeper pockets,” O’Sullivan said.