Shopify Tries to Expose Texas Patent Troll

Kate Nishimura
·3 min read

Shopify is hitting back at a patent troll suing the Canadian e-commerce platform for patent infringement.

Dallas-based Lower48, which provides data analysis firm and portfolio management to the oil and gas industry, in September filed a complaint against Shopify, claiming that about two dozen of the company’s features infringe upon its own patented technologies. Last week, Shopify asked a judge to compel Lower48 to disclose all third-party interests in the suit, “including the identity of any individuals or entities that have financial interests in the outcome of this litigation, such as investors or litigation funders.”

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Patent trolls try to exploit their intellectual property for financial gain. They usually don’t use their patents to make or market new innovations but rather sue rivals or threaten to.

Lower48 said it owns the patents to tech tools developed using the GraphQL query computer language, which solve various technological problems inherent within database systems, allowing them to function more efficiently and improve data processing speeds and ease of use. The company said that it has not granted Shopify license to employ these tools, which it claims are being leveraged across essential functions, from its Logo Maker to its Business Name Generator, Slogan Maker, Domain Name Generator, Wholesale Marketplace, QR Code Generator, Terms and Conditions Generator, Business Card Maker, Invoice Generator and Purchase Order Template.

The Ontario-based web services provider, which powers online stores and point-of-sale capabilities for brands and retailers, argued that it has a right to more information about the individuals and entities with vested interests in the outcome of the case. Shopify said that publicly available documents “indicate that Lower48 may be receiving funding from a third party for some or all of Lower48’s attorneys’ fees and/or expenses to litigate this action.” It claimed that the submitter of Lower48’s complaint is affiliated with IP Edge, a firm that specializes in patent monetization. Public documents also show the Texas firm’s ties to the U.S. Innovation Fund (USIF), which provides companies with access to investment capital.

In its Motion to Compel, Shopify wrote that it sent Lower48 a letter in early may requesting that it disclose the relevant third parties involved in order to determine whether conflicts of interest exist. The company said Lower48 didn’t respond to its requests, and when they met on May 30, Lower48 said it wasn’t going to give up that information.

The Lower48 lawsuit is not Shopify’s only legal problem. The company’s fourth-quarter net losses totaled $623.7 million. Earlier this year, Shopify sold its logistics business to Flexport and Ocado, laying off about 2,000 employees in the process. Last month, former Shopify engineer Iain Russell sued the company in a $130 million class-action lawsuit claiming it failed to deliver on promised severance package agreements.

“In my over two decades as an employment lawyer, I have never witnessed an employer renege on accepted severance agreements in this manner, particularly during times of economic uncertainty,” said Lior Samfiru, employment lawyer and national co-managing partner at Samfiru Tumarkin LLP, the firm that filed the lawsuit. “It appears that Shopify took deliberate action to minimize its financial liability, resulting in considerable losses for potentially thousands of people.”

While its first quarter earnings were overshadowed by the news of the layoffs and logistics sales, Shopify’s earnings and revenue surpassed Wall Street’s estimates. In early May, it announced a year-over-year revenue increase of 25 percent to $1.5 billion, and net income of $68 million on diluted earnings per share (EPS) of 5 cents, versus the $1.5 billion net loss it saw during the same 2022 period. The company said it expects to see similar year-over-year improvements in the second quarter.

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