Upstart smart thermostat maker Nest has received almost-universally glowing praise for its Learning Thermostat since it launched last year — and it also received a major patent complaint from Honeywell, which claims Nest is walking all over its intellectual property. Not so, says Nest: the company just filed its official answer to Honeywell's complaint today, and in addition to arguing that it isn't infringing Honeywell's patents, it also stridently argues that most of those patents are "hopelessly invalid." What's more, Nest also claims that Honeywell is misusing its patents to stifle innovation — a strategy Nest claims Honeywell has used to squeeze out new competitors for years. "Honeywell is worse than a patent troll," says Nest CEO Tony Fadell. "They're trying to strangle us, and we're not going to allow that to happen."
Fadell knows a thing or two about patent lawsuits — as the former head of Apple's iPod and iPhone programs, he says he faced "an infringement letter probably every week." So it's no surprise he and the Nest team have turned to former Apple chief patent counsel Richard "Chip" Lutton Jr., who is joining the company as VP and general counsel today after having served as an advisor to the company for the past several months. Lutton says he thinks Honeywell's patents are "not very impressive" and "not very relevant" to what Nest is doing. "We think there's an answer to why Honeywell would do this... they jump in and try to scare new entrants back out of the market." Indeed, Fadell says Honeywell never called Nest prior to filing the lawsuit, and thus far has "rebuffed all attempts" to discuss the pending litigation.
"They're trying to strangle us, and we're not going to allow that to happen."
"They are not trying to get money out of us," says Fadell. "They are trying to maintain the status quo." That status quo is pretty sad, according to Nest's filing: "In seven decades, there appears to be little more technological improvement to the flagship Honeywell thermostat than the replacement of a mechanical display with an LCD." And the programmable thermostats sold by Honeywell have failed to find favor with consumers, leading the company to enter what Nest calls "damage control mode" after reviewers heaped praise on the Nest thermostat.
Nest's full answer to Honeywell's lawsuit reveals the same arguments in greater detail. (It also contains amazing legal zingers like "Nest denies that Honeywell is an innovator in the area of thermostat technology.") According to the filing, "Honeywell has a track record of responding to innovation with lawsuits and overextended claims of intellectual property violations," and the patents in question should all be invalidated by prior art — even, in some cases, by previous Honeywell patents Nest claims the company hid from the Patent Office. What's more, Nest claims that some of Honeywell's patents require mechanical components like a potentiometer, which the computer-controlled Learning Thermostat doesn't have. According to Nest's filing, all of this leads to "the inescapable conclusion that Nest Labs does not infringe a single valid claim from any of the asserted patents." Here's the full list of Honeywell's patents Nest thinks are invalid or irrelevant, and why:
- #7,584,899, which covers a rotating ring around a central display. Nest says this was "implemented years earlier by engineers at Volkswagen," who filed for a European patent.
- #6,975,958, which covers controlling a thermostat through the internet. Nest says this was already covered by now-expired patent #4,657,179, which Honeywell first filed for in 1984 — a patent it did not disclose to the Patent Office.
- #7,476,988, which covers "power-stealing" to charge the thermostat's battery from the control wires. Nest says Honeywell already patented the idea ten years prior in patent #5,736,795 — and once again didn't tell the Patent Office.
- #7,159,790, which covers a rotating selector with an offset rotation axis. You guessed it: Nest says Honeywell filed for exactly the same thing nearly 20 years prior, resulting in patent #4,405,080, a patent Honeywell didn't disclose to the Patent Office.
- #7,634,504, which is Honeywell's wild patent for using natural language prompts to program a thermostat. Nest says this is a retread of patent #5,065,813, which was filed 15 years earlier and not shown to the PTO by Honeywell.
- #7,142,948, which covers displaying the time it'll take to reach a certain temperature. Nest says that was already covered by patent #6,286,764 and #5,767,488 — patents that were again not disclosed to the PTO.
- #7,159,789, which covers a thermostat with a rotatable selector dial partially hidden behind a non-moving cover. At this point you should be ready for this: Nest claims this was already covered by patent #5,224,649, which Honeywell did not disclose to the PTO.
Those are certainly compelling arguments, especially given Nest's claims that it doesn't even use the mechanical components required by some of these patents. But from a legal standpoint, the combination of noninfringement and invalidity defenses isn't generally as strong as countersuing using your own patents — think of how Apple and Samsung keep suing each other using different sets of patents to up the game. As a new startup, Nest doesn't have a patent portfolio to hit Honeywell back with — and given that Honeywell isn't even trying to negotiate, it appears the larger company is content to sit back and try to bleed Nest dry through months of litigation. Then again, Nest isn't exactly the usual small company, and Fadell says his investors — which includes players like Google Ventures and Kleiner Perkins — are "totally behind us, and actually helping us in many ways as well."
"We don't believe we should be changing the product whatsoever."
Although Nest is insistent that Honeywell is abusing bad patents to maintain its dominance in the thermostat market, Fadell is pragmatic about getting things resolved. "We'd be more than happy to have a professional discussion with Honeywell to understand what their issues really are" he says, adding that the company is open to all options "if there's something that makes business sense to our investors, our employees, and our consumers." But on one point Fadell draws the line: "We have multiple defenses against those seven patents, and we don't believe we should be changing the product whatsoever." Thousands of happy Nest owners undoubtedly agree.