Software co’s $525 million verdict against Amazon Web Services is one of the decade’s largest awards

Nisha Shetty

18 April 2024

Amazon Web Services Inc was recently hit with a $525 million patent jury verdict, the top award of the year so far and among the top 10 largest damages awards in the decade. Kove IO, a software firm, won the jury trial in the US District Court for the Northern District of Illinois for AWS’s infringement of three patents related to cloud storage technology found in the Amazon S3, the DynamoDB database service, and other products and services.

“Literally, they used the technology trillions of times so our goal in the case was to reduce damages,” said Kove’s attorney, Courtland Reichman, managing partner at Reichman Jorgensen Lehman & Feldberg. “If we did a conventional damages calculation, the damages would have been in the billions and it was too much money for a case like this. In the end, the jury gave us more money than we asked for.”

What the jury did concede was that the infringement was not wilful. A spokesperson for AWS said the company acknowledged that, but it would take the case to the US Court of Appeals for the Federal Circuit: “We disagree with the ruling and intend to appeal.”

How the verdict stacks up

While AWS hoped the damage could be limited to $5.25 million, Kove asked for $517 million. It got $8 million more than it requested. Another way of looking at it was that the jury multiplied Amazon’s ask by 100, said Reichman. 

It was the largest patent jury verdict handed out against AWS. Docket Navigator research shows the previous highest was last year’s jury verdict of $46.7 million in favour of VB Assets, in a case that remains active.

Kove’s jury verdict against AWS was also the ninth-largest jury verdict handed out in district court in the past decade.

Table 1: Largest patent jury verdicts since 2014

Damages	Plaintiff	Defendant	Status	Date of jury verdict
$2.5 billion	Idenix Pharmaceuticals	Gilead Sciences Inc	Reversed; terminated	2016
$2.2 billion	VLSI Technology	Intel Corp	Vacated; active	2021
$1.2 billion	Juno Therapeutics Inc	Kite Pharma Inc	Reversed, terminated	2019
$1.1 billion	California Institute of Technology	Broadcom, Apple Inc	Vacated; settled/voluntarily dismissed	2020
$948.8 million	VLSI Technology	Intel	Active	2021
$625.6 million	VirnetX	Apple Inc	Voided by judge, retrial ordered	2016
$538.6 million	Apple	Samsung Electronics Co	Settled/voluntarily dismissed	2018
$532.9 million	Smartflash	Apple	Voided by judge, retrial ordered	2015
$525 million	Kove IO	Amazon	Active	2024
$506.2 million	Optis Wireless Technology	Apple	Voided by judge, new damages trial ordered	2020

Source: Docket Navigator

Notably, seven of the 10 damages awards were overturned. Four were reversed or vacated at the Federal Circuit while three were thrown out by the judge who then ordered a retrial or a new damages trial.

This trend wasn’t lost on Reichman. “The track record is on Amazon’s side, in terms of the Federal Circuit – they don't usually affirm any verdicts,” he said. 

Financially, Amazon is also well-placed. The company reported an overall revenue of $170 billion for the fourth quarter of its financial year 2023, of which $24.2 billion was contributed by AWS. An appeal, therefore, was expected. “When there’s millions of dollars at stake and you can afford to pay it, why wouldn’t a company appeal?” said Reichman. 

Still, he struck an optimistic note. “We expected to have to go the distance, but I think this one has a good chance,” he said.

The breakthrough technology

Kove filed the lawsuit in 2018, claiming that CEO John Overton and fellow inventor Stephen Bailey had invented technology that was essential to AWS and paved the way for it to become the first large-scale vendor of economical cloud infrastructure and services.

In the 1990s, Overton and Bailey were studying at the University of Chicago when they “foresaw the advent of the cloud – distributed, large-scale storage networks – and they identified a key roadblock that would need to be overcome in order to sustain viability”, said the complaint.

Location information of data files was traditionally stored and retrieved from a single centralised server. If it was stored across multiple servers, it would reduce the processing time to find a file, but it would require a method for identifying which of the servers stored the location information for a particular data file. 

To achieve this, Overton and Bailey invented the patents in-suit: distributed hash tables, a decentralised system which allowed for the efficient organisation of location information.

Table 2: Kove’s cloud storage-related patents

Patents	Description	Date issued	Date of earliest application
7,103,640	Network Distributed Tracking Wire Transfer Protocol	2006	1998
7,233,978	Method and Apparatus for Managing Location Information in a Network Separate From the Data to Which the Location Information Pertains	2007	1998
7,814,170	Network Distributed Tracking Wire Transfer Protocol	2010	1998

Source: Docket Navigator

“There was no market for this technology back then because nobody was trying to do databases of that size,” said Reichman. “It became necessary when this hyper-scalable world was created.”

The trial

Kove’s success at the trial can be attributed to “six years of hard-fought, pre-trial work that led to Amazon going to trial with very little to argue”, said Reichman. 

AWS filed four ex parte re-examinations of the '978, '170, and '640 patents at the US Patent and Trademark Office and all were upheld.

In its response to the complaint, AWS argued that Kove didn’t file suit until nearly seven years after the release of DynamoDB, and over 12 and a half years after the release S3. It said AWS “could have chosen to cease providing its services, to obtain licenses for the patents-in-suit, or to file a declaratory judgment action” had it known of the infringement earlier. That was stricken by the judge before trial.

Also, a few days ahead of the trial, AWS dismissed and withdrew with prejudice its claims of invalidity, unenforceability, and unpatentability of the asserted patents. 

Reichman said that AWS tried to argue noninfringement positions at trial but because it had not been previously disclosed, the judge struck them and ordered the jury to disregard it. 

Then, when it came to damages, he said that AWS’ main line of defence was to argue that it had only paid a few million for licences in the past so the damages against Kove should be capped at $5.25 million.

In the closing arguments, Reichman said that he presented what was discussed as a tale of two cases – one based on facts and the other based on fiction. “I listed all the fictions and told the jury that they should demand an answer from Amazon about why they don’t have a position,” he said. “Amazon ignored it. I think the arrogance of them coming into court with no position and thinking that they could just fool the jury made them mad. Amazon thought they could just come in and just be Amazon and that would be enough.”

Nisha Shetty

Reporter

IAM

nisha.shetty@lbresearch.com