Google-backed UK startup Yieldify is embroiled in a legal battle with US rival Bounce Exchange, which accuses it of stealing Bounce’s code and infringing its patents.
The increasingly vicious case has now taken an unusual new twist — with Yieldify going on the offensive and accusing Bounce Exchange of patent infringement, using a patent it recently purchased from a company once labelled “the most hated company of tech” and accused of being a notorious patent troll.
- Read the complete court filing below.
Founded in 2012, Yieldify builds e-commerce software that helps online retailers convince people to buy products online by tracking customer behaviour and providing prompts where necessary. In June 2015, it received $11.5 million (£8 million) in venture capital investment, with the round led by Google venture capital arm Google Ventures (now called GV) and Softbank.
Yieldify CEO Jay Radia said the company does not comment on ongoing legal cases, but slammed Bounce Exchange as a “tyrant” and asserted that Yieldify “will not get bullied by any organisation that brings forward frivolous and unfair claims and misuse legal systems for their advantage.”
Bounce Exchange CEO Ryan Urban attacked the new case as “a diversionary tactic [from Yieldify] when faced with a losing lawsuit.”
Yieldify is battling lawsuits in New York and Texas …
In 2015, New York-based competitor Bounce Exchange filed a suit against Yieldify in a New York federal court, accusing it of copying its code and infringing its patents, in a case that first came to light earlier this year in a report from The Financial Times.
Bounce then followed this up with a second case — this one filed in a Texas court in April 2016 — repeating these allegations, also accusing Yieldify of patent infringement, and adding some of Yieldify’s customers as defendants. The customers (alongside Yieldify) are accused of “actively inducing others to infringe and/or contributing to the infringement [of Bounce Exchange’s patents].”
Yieldify has denied all of these allegations. VP of marketing Shawn Cabral previously told Business Insider that the company “cannot comment on pending lawsuits, but [would] like to reiterate that our company has done nothing unlawful or in any way improper.”
… And has now launched one of its own.
The London startup is now taking the offensive to Bounce Exchange. It is suing its rival in a third lawsuit, this one also in a New York federal court, accusing it of infringing on one of its patents.
The patent wasn’t originally Yieldify’s, though. Yieldify has purchased the patent from Intellectual Ventures in order to open up a new front in its battle with Bounce Exchange. It was first submitted for approval to the US Patent and Trademark Office back in 2005 by Intellectual Ventures (IV), an organisation that CNET once described as “the most hated company in tech.”
IV holds tens of thousands of patents and has been accused of being a “patent troll” — a company that squats on patents and sues anyone who inadvertently infringes upon them. The company disputes this characterisation.
The patent, No. 8,806,327, is for “a system and method for generating popup content in response to user’s actions within an enabled web page” — similar to Yieldify and Bounce Exchange’s core products.
“Bounce has infringed and continues to infringe the ‘327 Patent by making, selling, offering for sale, importing and/or using software and services in an infringing manner,” Yieldify’s court filings allege. “Yieldify has suffered irreparable harm as a result of Bounce’s infringement of the ‘327 Patent and will continue to suffer irreparable harm unless Bounce is enjoined from infringing the ‘327 Patent.”
Yieldify declined to say how much it paid for the patent, or when exactly it acquired it.
Yieldify is seeking unspecified damages and legal fees, and for the New York court to rule that it is not infringing on Bounce Exchange’s patents.
The rhetoric is getting pretty heated
Both Yieldify and Bounce Exchange provided with strongly worded statements when approached for comment about the new case — with Yieldify accusing Bounce of being a “tyrant organisation.”
“Yieldify policy is not to comment on any current litigation matters,” CEO Jay Radia said. “However, it is important to say that Yieldify will not get bullied by any organisation that brings forward frivolous and unfair claims and misuse legal systems for their advantage. Bounce Exchange has a long history of suing start-up innovators and customers for their advantage, instead of competing on product, service and price.
He added: “We have a responsibility to the industry at large to stand up to such tyrant organisations who bully successful start-ups to gain unfair advantages. Yieldify believes in healthy competition and will take necessary steps to defend its honour against such organisations.”
Bounce Exchange CEO Ryan Urban declined to comment on the specifics of the case, but labelled it a “diversionary tactic [from Yieldify] when faced with a losing lawsuit.” He said:
Because the case is pending I can’t comment other than to say that at Bounce Exchange we respect intellectual property rights. We believe these rights are vital to the protection of software developers and all those who foster innovation in the hopes of furthering technology to the benefit of the marketplace. It is disappointing to see intellectual property rights being exploited as a diversionary tactic when faced with a losing lawsuit instead of being used to encourage innovation.
The story so far
The entire battle is fairly ugly — with accusations of theft of code and marketing materials, and with customers getting dragged into it.
The initial New York suit alleges that after Bounce Exchange provided Yieldify execs with a product demonstration in 2013, they “copied hundreds of lines of code and generally replicated the overall structure, sequence, and organisation of the Bounce Exchange Software.”
Yieldify denies this, countering that “in March 2013, Mr. Jay Radia, Defendant’s Chief Executive Officer, and Mr. Meelan Radia, Defendant’s Chief Technical Officer, met with representatives of Plaintiff. At that meeting, Plaintiff demonstrated certain public-facing aspects of its behavioural marketing automation software. Plaintiff did not reveal any confidential information to Defendant, and did not show Defendant any of its source code, either at this meeting or otherwise.”
Yieldify changed its code after Bounce’s initial complaint. But Yieldify says it made the change only “in the interest of resolving this matter quickly and without needless litigation.”
In the newer Texas suit, filed on April 14, 2016, Bounce Exchange alleges that Yieldify also infringed upon its patents, and duplicated its marketing material: “Not only did Yieldify copy from Bounce Exchange the functionality of the Bounce Exchange Software, Yieldify also copied the very marketing information that Bounce Exchange used to promote its software.” (Yieldify also denies these allegations.)
Bounce Exchange is also going after Yieldify’s customers. The Texas suit names three of the UK startups’ customers as defendants in the suit — hotel company Omni Hotels Management, beauty products company Laura Mercier, and keyboard manufacturer Das Keyboard.
Other Yieldify customers have apparently also been hit with legal threats: “Bounce sent letters to hundreds of Yieldify’s customers, globally, threatening to take legal action against those customers if they did not agree to stop doing business with Yieldify within two weeks,” Yieldify’s court filings in the latest case allege.
The cases are ongoing, with the latest New York case — and the escalating war of words — adding a third strand to this acrimonious dispute.
In March, Yieldify laid over just over 10% of its employees from across a range of departments. The company says that these layoffs are unconnected to the ongoing legal battles.