On-Demand Car Services and Patents: A Review

INTRODUCTION

        The growth of on-demand car sharing and ridesharing companies has become a phenomenon as a popular form of transportation in high-density urban areas.[^1] This is especially true in San Francisco. Each company offers slight variants of the car sharing or ridesharing concepts. In car sharing, a car owner makes is car available for use by others within a community.[^2] This is commonly understood as peer-to-peer sharing, and usually involves a fee.[^3] In ridesharing, a car owner drives his car, sharing space within the car to other passengers to a specified destination.[^4] This also involves some sort of fee arrangement.[^5] As such, it seemed appropriate to review a selection of these companies’ intellectual property, and specifically patent, portfolios as to how their IP support each company’s business model.

OVERVIEW OF COMPANIES

        The following are five car share or rideshare tech startups located in San Francisco. There are a number of other car share companies – for example, City CarShare, the local non-profit which was the first car share company in San Francisco when it was founded in 2001[^6]; and ZipCar, a for-profit car share company founded in 2000 and acquired by Avis Co. in 2013, headquartered in Boston, with a presence in San Francisco.[^7] These are not discussed at length in this article since these companies have a lengthier legacy in the on-demand car service ecosystem. This article will focus on the startups in the industry.

Uber Technologies Inc.

        Uber, the behemoth of all ride shares, was founded in 2009, is based in San Francisco.[^8] It recently raised $1.2 billion in funding,[^9] and has a valuation of $50 billion.[^10] The company’s business model uses a mobile-based app to link riders with driver-owned cars.[^11] All aspects handled through the app, including GPS location, payment, and feedback.[^12] It has recently been in the headlines with issues revolving around its drivers’ employment status,[^13] credibility and hiring practices,[^14] and controversial surge pricing.[^15] The company is financed by several venture capital firms.[^16]

Sidecar Technologies, Inc.

        Sidecar is a mobile-based app which connects riders with driver-owned cars (“peer-to-peer”), but unlike other car share or rideshare companies, allows the rider to enter price he is willing to pay.[^17] Sidecar is based in San Francisco and was founded by Sunil Paul and Jahan Khanna in 2012.[^18] It is available in 10 markets and financially backed by a number of well-known venture capital firms.[^19]

Lyft Technologies, Inc.

        Utilizing a mobile-based app, a user-passenger can rideshare with a driver-owned car.[^20] Lyft was founded in 2011 and headquarters in San Francisco, and is now one of the largest rideshare companies in the country.[^21] It has three services and runs in 65 markets.[^22] It has raised an astonishing $862.5 million in seven rounds of funding, as of May 2015.[^23]

Getaround, Inc.

        A car sharing startup founded in 2013 and based in San Francisco, Getaround, Inc.’s business model is based on privately-owned cars being rented by others through a mobile-based app.[^24] Getaround’s popularity resulted in the recent partnership with the SF Municipal Transportation Agency to allow 450 parking spaces around the city to be used for members at a discounted rate.[^25]

RelayRides, Inc.

A car sharing startup founded in 2009 and headquartered in San Francisco, RelayRides, Inc. is similar to the business model of Getaround.¹ RelayRides recently raised an astonishing $52.5 million in financing.² The company claims far less overhead than traditional car share companies like Zipcar because its capital expenditures are minimal, resulting in a “superior” product.³

ANALYSIS

On-Demand Car Service Patents

        Uber does not have any issued utility patents.[^29] However, Uber does have one design patent, D724,620, for an ornamental display screen GUI.[^30] Uber also has nine published patent applications.[^31] Sidecar has one issued patent, 6,356,838, for a “System and Method for Determining an Efficient Transportation Route,” issued to its co-founder, Sunil Paul, in 2002.[^32] Sidecar does not have any published patent applications.[^33] Furthermore, Lyft, Getaround, and RelayRides neither have any issued patents nor published patent applications.[^34] Since all five on-demand car service companies are private, two interesting investors were revealed: General Motors Ventures and Google Ventures. Google Ventures has invested in Uber and Sidecar.[^35] General Motor Ventures invested in RelayRides.[^36] Google owns 871 issued patents or published patent applications focused on passenger/driver matching, vehicle routing, navigation, and mobile notifications.[^37] General Motors owns 164 issued patents related to car services, including navigation, communications, mobile programming, and vehicle tracking.[^38]

Alice Test

        The Supreme Court placed limitations on what can be construed as patentable subject matter in *Alice Corp. v. CLS Bank Int’l*.[^39] Citing *Mayo*, the Court elucidated, as best as it could, a two-prong test to determine whether a claim is patent-eligible: first, if the claim at issue is directed to a patent-ineligible concept (e.g., process of nature, abstract idea, or law of nature), and second, if yes, determine if there is something significantly more to the claim than the patent-ineligible concept to make it patent-eligible subject matter.[^40]

The oldest relevant issued patent is Sidecar’s ‘838 patent originally issued to Sunil Paul.⁴ There are six independent claims. Five of these claims go to methods for finding an “efficient transportation route.”⁵ This concept of “efficient transportation route” goes back hundreds, even thousands, of years, like when Columbus tried to find an efficient route to India,⁶ or even when the ancient Greeks were discovering efficient trading routes throughout the Mediterranean.⁷ Paul’s patent is really just an abstract idea. For example, Claim 1 reads:

1. A computer-implemented method for determining an efficient transportation route comprising:

compiling travel data over one or more travel segments, said travel data transmitted from one or more transportation vehicles traveling over said travel segments;

receiving positional data associated with a transportation request, said positional data including an origin and a destination; and

providing a driver of a vehicle with a first efficient route from said origin to said destination using said travel data, said first efficient route including one or more of said travel segments,

wherein said destination is a pickup point of a passenger submitting a transportation request and said origin is a current position of said vehicle.⁸

This claim, when reduced to its basics, is just a method to find a more efficient transportation route, juxtaposed to modern times. Additionally, simply attaching it to a computer system is not enough to make it significantly more than just an abstract idea.⁹ As such, it would be unlikely that Paul’s patent would survive a §101 invalidity challenge.¹⁰ It was curious to note the lack of patents, or even pending patent applications, among the car service companies, and initially the thought was that Sidecar’s early patent would be enough to preempt others from entering that space. However, upon closer analysis of the ‘838 patent, it seems that Sidecar’s patent strategy could be undermined given the recent Alice decision.

Uber does not have the same issues as Sidecar in that it does not have any veritable patents or patent applications that could pass muster under the Alice regime. One recent patent application relates to its surge-pricing, “Enabling a User to Verify a Price Change for an On-Demand Service.¹¹ Claim 1 recites:

1. A method for enabling a user to verify a price change for an on-demand service on a computing device, the method being performed by one or more processors and comprising:

determining a real-time price for providing the on-demand service to the user;

determining when the real-time price is equal to or exceeds a threshold price; and

in response to a request from the user for the on-demand service when the real-time price is equal to or exceeds the threshold price, providing an intermediate interface that the user is to correctly respond to before a service request can be transmitted to a service system.¹²

This method is really just a process which goes to the abstract idea of supply and demand, a basic economic theory espoused by Adam Smith.¹³ While it could be argued that there is a computer system automating the process, it really does nothing to be “significantly more” than just an abstract idea. As such, Uber’s surge-pricing patent application would probably not be issued as a patent, especially in light of Alice.¹⁴ It should be noted with caution, however, that Federal Circuit post-Alice decisions are still unsettled on patent eligibility; many more decisions need to be handed down before a concrete landscape develops on what is patentable and what is not.¹⁵

CONCLUSION

        On-demand car services are currently extremely popular. Intellectual property has always been used as an effective asset by many tech startups. However, this particular space is devoid of major patent estates among these car service companies. The reason may partly lie in the relative newness of the companies (all surveyed in this article were only formed within the last five-to-six years), but also partly due to the post-*Alice* world of software patents. The challenge for these companies, in order to remain competitive not just with each other but with the bigger tech companies like Google and Amazon, is to enhance their patent portfolios, vis-a-vis *Alice*.

Footnotes

1. See About, RelayRides (viewed May 6, 2015). ↩

2. See Sean O’Neill, RelayRides Revs Up Car-Sharing, Fueled by $52M in Financing to Date, TNooz (January 12, 2015). ↩

3. Id. ↩

4. See supra note 32. ↩

5. See Sunil Paul, U.S. Patent No. 6,356,838 B1 (iss’d Mar. 12, 2002), at 11-14. ↩

6. See Dagmar Wernitznig, Europe’s Indians, Indians in Europe, University Press of America, Inc. (2007), p. v. ↩

7. See Heather Whipps, How Ancient Trade Changed the World, LiveScience (Feb. 17, 2008, 07:00 PM ET). ↩

8. See U.S. Pat. No. 6,356,838 B1 (Paul), at 11. ↩

9. See CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1368 (Fed. Cir. 2011) (simply reciting “an unpatentable mental process for collecting data…” did not “become patentable by tossing in references to [I]nternet commerce.”). See also Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 719 (Fed. Cir. 2014) (“…use of the Internet is not sufficient to save otherwise abstract claims from ineligibility under §101.” (citing CyberSource, 654 F.3d at 1370.)). ↩

10. See Jeff John Roberts, As Uber, Lyft, and Sidecar Count Patents, Warning Signs Ahead, GigaOm (Jan. 26, 2015, 6:00 AM PDT) (“Sidecar’s swagger with its 2002 patent could be a bluff, given that Uber or another defendant may have a good chance to invalidate it under patent law doctrines of obviousness or ineligible subject matter”). ↩

11. U.S. Pat. Appln. Pub. No. 2013/0268406 A1 (Oct. 10, 2013). ↩

12. See supra, at 10. ↩

13. See Henry Carter Adams, Outline of Lectures Upon Political Economy (1881), at 38 (“…the market price of very particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity….”); Thomas Power, Are Government Laws Consistent with the Laws of Supply and Demand, J. School R.E. & Constr. Econ. 1, 4 (2007) (“…prices guide… individual decision makers to reach outcomes that maximize the welfare of society as a whole….”). ↩

14. See Roberts, supra note 47 (“’This application is really seeking to claim the basic idea of pricing and service, which is a concept Adam Smith discussed 200 years ago’.”). ↩

15. See Dennis Crouch, Federal Circuit Falls in Line: Supporting Strong Limits on Patent Eligibility, Patently-O (Sept. 3, 2014) (noting that the Federal Circuit has avoided delineating a clear test for abstract ideas). ↩