Last summer, a small company called Space Data sued Alphabet’s ‘moonshot’ X division. At issue was its effort to deliver internet access to remote areas by balloon, known as Project Loon.
At first, not much happened. Space Data alleged patent infringement, misappropriation of trade secrets, and breach of contract related to a failed acquisition bid in 2008. But last month, Space Data pulled off something big: It convinced the US Patent and Trademark Office to cancel most of one of Project Loon’s foundational patents, and say that Space Data came up with the idea first. Loon’s patent for changing a balloon’s direction by adjusting its altitude—a core feature of both systems—is now legally back in Space Data’s hands.
For Alphabet, the outcome is an unfortunate first. It has never before had any of its 36,000 patents change hands because of “interference,” the term for when a patent describes the same invention as an earlier filing from another company. Worse still for Alphabet, Space Data will now go to trial against it armed with a patent the multinational was relying on.
“This changes the dynamic of the case,” says Brian Love, co-director of the High Tech Law Institute at the Santa Clara University School of Law. With the loss of this key patent, Alphabet now finds itself knee-deep in a court case in which it can no longer argue that the central invention was its own.
While the world focuses on the epic legal struggle between Uber and Alphabet over self-driving car technology, this parallel battle flips the roles, putting Alphabet on the defensive against claims that it stole trade secrets—and then tried to patent them as its own. Project Loon, a program that was meant to highlight Google’s generosity in bringing internet access to the world, could end up looking like just another example of Silicon Valley trampling over existing industries for personal gain.
When Project Loon launched publicly in 2013, with a video showing a sheep farmer in New Zealand going online via wifi beamed from balloons 20 kilometers overhead, Google heralded its technology “a breakthrough.” Astro Teller, the X division’s Captain of Moonshots, wrote: “Back in 2011, we had a hunch that balloons flying freely on the winds could be controlled just enough to act like floating cell phones towers in the sky. We’d pump air out of or into the balloon to make it lighter or heavier, and then move up or down to catch winds traveling in the direction we wanted to travel.”
At a TED talk in 2014, Google’s then-CEO Larry Page said: “We did some weather simulations which probably hadn't really been done before, and if you control the altitude of the balloons, which you can do by pumping air into them and other ways, you can actually control roughly where they go.”
Both men were describing the engineering feat that Space Data had sought to patent more than a decade earlier. Filings with the Federal Communications Commission (FCC) show that in 2000, Space Data began experimenting with a nationwide paging service from high-altitude balloons. Space Data filed its key patent application in 2001, and quickly went on to test text messages in 2002, phones calls in 2006, and 4G LTE data by 2012—a year before Google’s splashy launch.
Space Data has been providing commercial wireless services from balloon constellations since 2004, and it operates a radio repeater platform used by the US Army and Marine Corps, utilizing cheap weather balloons. Larry Page likely knew all this. After all, he very nearly bought Space Data in 2008.
Back in 2007, Google was in a pickle. It had participated in an FCC auction of radio spectrum solely to force another bidder, Verizon, to hit a minimum bid that would open up the frequencies to all users—including Google. But if Google accidentally won the auction, it would have had to build out coverage for 40 percent of Americans within four years. That promised to be an expensive proposition using existing technology.
Space Data saw an opportunity. If Google invested in its balloons, it could provide service at a fraction of the cost of constructing a nationwide network of cell towers. Space Data approached Google in September 2007, and was met with enthusiasm. A Google court filing agrees that the companies had “multiple technical and business meetings…in 2007.” By December, talk had turned to acquisition. Google and Space Data duly signed a non-disclosure agreement (NDA) that would allow Google to perform due diligence on the startup’s technical, commercial, and financial secrets.
On February 15, 2008, twelve Googlers, including both cofounders, arrived at Space Data’s headquarters on the outskirts of Phoenix, Arizona. Over the next four hours, Space Data alleges that the team toured the balloon manufacturing facility, visited Space Data’s Network Operations Control Center (NOC), saw confidential wind data, and examined inner workings of the stratospheric transmitters. At one point, Sergey Brin even allegedly launched a Space Data balloon and tracked its progress at the NOC.
But less than 10 days after the demo, Google admits in filings that it abruptly broke off acquisition talks. At the time, an executive told Space Data that Google was annoyed by a Wall Street Journal story that had mentioned its interest in buying the company. However, a court filing by Alphabet now admits: “Google’s principal reason for engaging with Space Data… no longer existed, as it was apparent that Verizon had outbid Google.” Put simply, Space Data was an insurance policy that Google no longer needed.
Despite this, Space Data had made an impression with the Google leadership. Astro Teller told WIRED in 2013 that Page often spoke about the possibilities of delivering internet access by balloon. And with the passing of years, that idea evolved from an end-run around FCC red tape into a grand vision of connecting the half of the world’s population that still lacks internet access.
Starting in 2012, engineers at Google filed the first of nearly 100 patents related to wireless communications from a constellation of balloons. There were LTE tests in Brazil in 2014, balloon flights lasting many months, and pilot programs in Sri Lanka, Indonesia, and Puerto Rico. Earlier this year, Project Loon delivered basic internet connectivity to tens of thousands of people in flood-affected zones in Peru.
Loon’s technology has moved on from Space Data’s 2008 designs, with new, larger balloons that incorporate solar panels for long-duration missions. Meanwhile, Space Data still uses fleets of modified weather balloons and seems to have wound down its development program. Space Data’s last experimental permit from the FCC was in 2012; Loon’s most recent application was in May.
“Loon started to get huge traction in 2015,” says Spencer Hosie, a lawyer for Space Data. “It [became] clear it was going to run our company right out of business unless we did something about it. At some point, [we] had absolutely no choice. It was either fold and go away and donate 10 years of intellectual property to Google, or fight to protect [our] far earlier inventions.”
Space Data chose to fight in court rather than in the stratosphere. It recently won a motion forcing Google to share technical data on Loon to see where it might be infringing on its patents, and it will likely file a preliminary injunction shortly. An injunction might call for Google to stop using any of its infringing technology until the case is decided. A trial is currently scheduled for the summer of 2019.
Space Data’s accusations of patent infringement and trade secret misappropriation make a dangerously powerful combination, says Santa Clara’s Love: “In the vast majority of patent cases, there’s no allegation of bad behavior. But when Space Data threw a trade secret claim in the mix, it’s arguing that Alphabet copied it.” If a judge decides that Google did act maliciously, the chances of an injunction or punitive damages could go up.
Hosie has no illusions about the difficulties ahead. “A small company understands that litigation is horrifically expensive and never more so than when one is suing Google,” he says. “Google has essentially unlimited resources [and] is going to make this case as painful for us as possible.” A spokesperson for Alphabet’s X Division said that it does not comment on active litigation, noting only that: “We don’t believe their claims have merit and are vigorously defending ourselves.”
The company is more outspoken when its own trade secrets are at stake, however. In Alphabet’s other active patent and trade secrets case, it has accused Uber and subsidiary Otto of stealing confidential data from its self-driving car program.
One of Alphabet’s filings in that case reads: “There is a strong public interest in vindicating both trade secret and patent rights—a public interest that far outweighs any public interest in allowing products that infringe on trade secret or patent rights… Like Defendants’ continued trade secret misappropriation, Defendants’ continued patent infringement would give Defendants an unfair advantage in the high-stakes race to offer [new] services. Were [the Plaintiff] to lose the race to successfully commercialize this nascent field, the harm would be irreparable.”
Space Data could not have put it better itself.
