Small Business Fights for its Life, Wins with Alice

Michael Skelps was celebrating on New Year’s Eve with family and friends when he got a strange email from a lawyer. It said that Michael’s company, Capstone Photography, had just been sued for patent infringement. Michael went from celebrating to worrying about whether his small company would survive.

Capstone is a photography business based in Connecticut. With a network of contractors, it serves athletic events around the country. When Capstone was sued on New Years Eve in 2013, it had only three part-time employees other than the owners. It was sued by Peter Wolf, the owner of a company called Photocrazy, for infringement of three patents: U.S. Patent Nos. 6,985,875; 7,047,214; and 7,870,035.

Michael felt that he could win the case if he had the resources, but litigating it might bankrupt his company.

Wolf’s first two patents claimed common sense processes for using computers to help sort event photographs. A typical claim covers taking photos of a race, tagging and sorting by bib number and date, and searching for photos based on that tag via the Internet. In other words, the patents apply generic computer features to help with tasks that event photographers had been doing for decades. Wolf’s third patent was perhaps even more abstract. It claimed the idea of adding advertising to photographs taken at sporting events.

Patent litigation quickly began to drain Capstone’s resources. Michael felt that he could win the case if he had the resources, but litigating it might bankrupt his company. And he faced even greater stress: since Wolf had sued him as a defendant personally he could even lose his house. The stress and distraction of the case completely took Michael away from growing his business. As long as the case continued, the main question was whether his company would survive at all.

Fortunately, the Supreme Court decided Alice v. CLS Bank before Capstone went under. About six months after Capstone’s ordeal began, the Supreme Court held that an abstract idea (like sorting photos or placing ads on photos) does not become patent eligible simply by being implemented on generic computers. The holding offered a lifeline as it likely applied to Wolf’s patents.

Capstone’s lawyer filed a motion for judgment on the pleadings arguing that Wolf’s claims should be dismissed under the new standard. The distict court ruled for Capstone on every claim, giving it total victory in the case. Although Capstone prevailed, its win had come at significant cost. Months of litigation expenses meant that Michael had to let some of his employees go.

Alice likely saved Capstone Photography from bankruptcy. But if Congress overturns Alice, we should expect more cases like this one. We should expect more abstract software patents to issue and more wasteful litigation to be filed. Alice is good for innovation and we hope Congress leaves the Supreme Court’s decision alone.