Uber’s Ride-Sharing Empire Built on Borrowed Blueprints? Decades-Old Patents Fuel High-Stakes Lawsuit
A seemingly under-the-radar patent infringement lawsuit is quietly threatening to shake the very foundations of Uber, the multi-billion dollar ride-sharing behemoth, and could send ripples across dozens of other companies in the mobility sector. Carma Technology, a firm established in 2007 by serial entrepreneur and SOSV Ventures founder Sean O’Sullivan, is alleging that Uber’s core business model directly infringes on five of its foundational patents related to the system of matching riders (or packages) with available vehicle capacity – the very essence of modern ride-sharing.
The lawsuit, filed earlier this year in the U.S. District Court for the Eastern District of Texas, is the culmination of a dispute nearly a decade in the making. Carma is seeking a jury trial, a permanent injunction against Uber, mandatory future royalties on infringing products, and damages. While the legal filings are recent, the core of the conflict dates back to 2016, a pivotal year for Uber.
At that time, Uber was a stratospheric success story, valued at $66 billion and aggressively expanding its disruptive model globally. Yet, according to the complaint, Carma’s lawyers first contacted Uber then regarding its existing patents. O’Sullivan contends that while Uber had the market momentum, Carma held the crucial intellectual property. This claim is bolstered by allegations that the U.S. Patent and Trademark Office (USPTO) rejected at least four of Uber’s own patent applications between 2016 and 2019, citing existing patents held by O’Sullivan and Carma. Uber reportedly abandoned some of these applications.
The Nine-Year Wait: Why Sue Now?
So, why the nine-year gap between Carma’s initial concerns and formal legal action? O’Sullivan explained to TechCrunch that the primary focus of any startup is market capture, not immediate patent litigation. “Patents are meant to protect against aggressors from stealing the idea, but it’s not the main focus of your business to get patent revenue,” he said.
Carma, he noted, was “very busy building a multi-million dollar business and getting to profitability” by pivoting its technology towards road-pricing services like GPS tolling and HOV verification after, as O’Sullivan puts it, Uber and Lyft “co-opted the term ride-sharing to mean taxi-hailing.”
The sheer cost of litigation was another factor. “It’s incredibly expensive to sue a large company over IP,” O’Sullivan stated, estimating the cost at “$10 million-plus.” He added that Carma had hoped Uber would “do the right thing and license our patents,” but “it really took us a while to come to terms with the idea that we actually had to sue Uber in order for them to respond.”
Uber has declined to comment on the lawsuit but has made procedural motions, including one to potentially move the case from Texas to California, its home turf.
The “Shared Transport” DNA: Carma’s Core Patents
The lawsuit hinges on five key patents, stemming from O’Sullivan’s initial frustration with traffic congestion in 2007. This led to the idea of an automated carpooling system using smartphones, which became the startup Avego (Carma’s original name) and the basis for its first patent (No. 7,840,427), granted in 2010. This patent described a system for matching empty vehicle space with riders or goods, establishing pick-up/drop-off points, and coordinating users and drivers along similar routes.
Avego even launched its “Shared Transport” app on the Apple App Store in 2008, demonstrating how drivers could accept ride requests and process electronic payments – a system strikingly similar to today’s ride-hailing experience.
Intellectual property attorney Larry Ashery (not involved in the case) told TechCrunch the case is complex. “Carma isn’t just asserting five patents,” he noted. “They have had a very sophisticated strategy of patent procurement… for the past 18 years.” These five patents are part of a larger 30-patent family, meaning Uber must defend against numerous individual claims within each patent.
A Test for the System?
O’Sullivan isn’t just fighting for Carma; he sees this as a broader test. “I think there’s a danger in society where we can’t rely on our patents to protect the rights of inventors,” he said, noting that around 60 other companies might also be infringing. “It’s a test of whether the rule of law still applies when a powerful tech giant is involved.”
While Carma is now a profitable company in the road-pricing sector, this lawsuit represents a significant financial undertaking. For Uber, the stakes are immense, potentially impacting its core operations and bottom line if Carma’s claims are upheld. The outcome of this legal battle could redefine the landscape for how innovation is protected and compensated in the fast-moving tech world.
