DataCloud Tech LLC v. Etsy Inc

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: DataCloud Technologies, LLC (Georgia)
  • Defendant: Etsy, Inc. (Delaware)
  • Plaintiff’s Counsel: Stamoulis & Weinblatt, LLC; Rozier Hardt McDonough PLLC
• Case Identification: 1:25-cv-00120, D. Del., 01/28/2025
• Venue Allegations: Plaintiff alleges venue is proper in the District of Delaware because Etsy is a Delaware corporation and has conducted substantial business in the district, including committing the alleged acts of infringement.
• Core Dispute: Plaintiff alleges that Defendant’s e-commerce platform, including the Etsy Seller app and its website infrastructure, infringes patents related to methods for organizing digital information and for providing anonymity in network communications.
• Technical Context: The patents address foundational concepts in data management and network privacy, specifically the automated categorization of information sent to a user and the anonymization of a user's identity during network sessions.
• Key Procedural History: The complaint notes that on December 15, 2020, Defendant was informed of Plaintiff's patent portfolio, including the patents-in-suit. This notification may form the basis for allegations of willful infringement.

Case Timeline

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 6,651,063: Data Organization And Management System And Method (Issued Nov. 18, 2003)

The Invention Explained

• Problem Addressed: The patent describes a world where businesses and consumers are "constantly inundated with, and some even overwhelmed by, information taking various forms," such as product guides, mail, and solicitations. It notes that existing storage systems are often cumbersome, decentralized, and inefficient, making it difficult to organize and retrieve important information like warranties or manuals when needed. (Compl. ¶20; ’063 Patent, col. 1:19-44).
• The Patented Solution: The invention proposes a system where information "providers" (e.g., retailers) send digital "information packs" to a recipient's "User Data Repository." These packs are pre-tagged with a "category identifier," allowing them to be automatically filed into the correct category within the user's repository without user effort. The system also allows the user to create their own "custom categories" and provides a mechanism for this custom categorization to be communicated back, so that future information from the same provider is automatically placed in the user's preferred custom location. (Compl. ¶20; ’063 Patent, Abstract; col. 3:21-43, col. 9:21-51).
• Technical Importance: The technology aimed to shift the burden of initial data organization from the end-user to the information provider, streamlining the management of digital documents and communications. (’063 Patent, col. 2:5-10).

Key Claims at a Glance

• The complaint asserts infringement of at least Claim 4 (Compl. ¶25).
• Independent Claim 4 is a method claim comprising the essential elements of:
  • storing information in an information pack
  • associating the pack with a user destination address, a category identifier, and a provider identifier
  • communicating the pack over a network to the user's data repository
  • locating the pack in a pre-reserved location corresponding to the category identifier
  • creating a custom location in the user data repository and placing the pack there
  • associating a custom category identifier with the pack
  • sending a "custom category signal" to a "processing station"
  • the processing station storing the custom category and provider identifiers and using them to automatically place subsequent information packs from that provider into the custom location

U.S. Patent No. 7,209,959: Apparatus, System, And Method For Communicating To A Network Through A Virtual Domain Providing Anonymity To A Client Communicating On The Network (Issued Apr. 24, 2007)

The Invention Explained

• Problem Addressed: The patent identifies privacy risks associated with the HTTP protocol, which allows a client's e-mail address, web history, and other data to be "recorded and traced by the server." This exposes users to "unwanted e-mails, solicitations, and 'cookies'". (’959 Patent, col. 1:56-65).
• The Patented Solution: The invention describes a system architecture composed of three main components: a "deceiver," a "controller," and a "forwarder." A client's request to a website is first intercepted by the deceiver. The deceiver communicates with the controller, which resolves the destination website's true IP address and establishes a session with a forwarder. The system then returns the forwarder's IP address to the client, deceiving the client into communicating directly with the forwarder. The forwarder then relays communication between the client and the actual destination server, effectively masking the client's IP address from the server and vice-versa. (Compl. ¶30; ’959 Patent, Abstract; col. 2:33-47).
• Technical Importance: This architecture provides a method for anonymous network activity where neither the client nor the destination server is aware of the intermediary, enabling the creation of "virtual namespaces" for private, community-based browsing. (’959 Patent, col. 2:48-54).

Key Claims at a Glance

• The complaint asserts infringement of at least Claim 1 (Compl. ¶35).
• Independent Claim 1 is a method claim comprising the essential elements of:
  • in response to a client request, setting up a "forwarding session" between the client and a destination server
  • employing a "forwarder" between the client and destination server to forward packets
  • implementing the session such that "neither the client or the destination server is aware of the employment of the forwarder"
  • employing a "controller" to communicate with the forwarder and a domain name server (DNS) to resolve the destination website's name
  • employing a "deceiver" to receive the client's request and initiate the controller's query to the DNS

III. The Accused Instrumentality

Product Identification

• For the ’063 Patent: The "Etsy Seller app" (Compl. ¶16, ¶24).
• For the ’959 Patent: The "Etsy website infrastructure," described as "Etsy systems for supporting multiple domain names on the same website infrastructure" (Compl. ¶16, ¶34).

Functionality and Market Context

• The complaint alleges the Etsy Seller app is an application used by sellers to manage their online shops (Compl. ¶25). A screenshot from the Apple App Store shows the app is titled "Etsy Seller: Manage Your Shop" and includes features for managing orders and messaging with buyers (Compl. p. 6, Fig. 3).
• The complaint alleges the Etsy website infrastructure hosts multiple subdomains (e.g., adobe.etsy.com, blog.etsy.com) and uses components like front-end server switches, firewalls, and DNS to route traffic between internet users and its web servers (Compl. ¶35). These systems are central to the operation of Etsy's large-scale e-commerce marketplace.

IV. Analysis of Infringement Allegations

U.S. Patent No. 6,651,063 Infringement Allegations

Identified Points of Contention

• Architectural Questions: A central question will be whether the Etsy Seller app's functionality maps onto the specific architecture of claim 4. The complaint makes a conclusory allegation regarding a "processing station" that receives a "custom category signal" and performs automated routing. The court will need to determine what component of Etsy's system constitutes this "processing station" and whether it performs the specific comparison and placement logic recited in the claim.
• Technical Questions: What evidence supports the allegation that using the Etsy Seller app involves creating "custom locations" and "custom category identifiers" that are then used to automatically route subsequent, distinct "information packs" from the same provider? The functionality of a seller app for managing orders and messages may differ substantially from the claimed method of organizing diverse information for a consumer.

U.S. Patent No. 7,209,959 Infringement Allegations

Identified Points of Contention

• Scope Questions: Can the terms "deceiver," "controller," and "forwarder," which describe a specific tripartite architecture in the patent, be construed to read on standard modern web infrastructure components like a "router," "firewall," and "front-end server switch"?
• Technical Questions: The claim requires that "neither the client or the destination server is aware of the employment of the forwarder." What evidence supports this specific limitation? In many modern reverse proxy or load-balancing systems, the destination server is, by design, aware that it is communicating with a proxy/forwarder rather than the end-user client directly. This may represent a significant mismatch between the claimed invention and the accused system's operation.

V. Key Claim Terms for Construction

For the ’063 Patent:

• The Term: "processing station"
• Context and Importance: This term is critical because Claim 4 requires this "station" to perform the core automated logic of the invention: receiving a "custom category signal," storing identifiers, and automatically routing subsequent information from the same provider to the custom location. The infringement analysis will depend on whether any part of Etsy's system can be shown to meet this specific functional and structural definition. Practitioners may focus on this term because its definition will determine whether the accused system performs the automated, intelligent routing that appears central to the patent's novelty.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The patent states the processing station can be "remote from the Providers" and "remote from the Recipient's User Data Repository," suggesting it can be a logically separate, centralized entity. (col. 9:48-50; col. 8:28-31).
  • Evidence for a Narrower Interpretation: Figure 1 depicts the "Processing Station" (30) as a distinct component with its own data storage and processing means that receives specific inputs (e.g., a "rejection signal" or a "custom category signal") and performs analysis. This suggests a more structured component than a generic server. (col. 10:56-65; Fig. 1).

For the ’959 Patent:

• The Term: "deceiver"
• Context and Importance: The "deceiver" is the entry point into the claimed anonymous communication system. It is functionally distinct from the "controller" and "forwarder." The complaint maps this term to a "router." Whether a standard internet router performs the specific functions of a "deceiver" as claimed—receiving the client's request and initiating the controller to query a DNS—will be a dispositive issue. Practitioners may focus on this term because the patent appears to disclose a purpose-built, three-part architecture, which may not map cleanly onto general-purpose network hardware.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The patent's summary describes the deceiver's role as providing "name resolution for clients" and allowing "the controller to supply the information," which could be argued to encompass functions of a sophisticated router. (col. 2:37-41).
  • Evidence for a Narrower Interpretation: The detailed description and figures show the deceiver (104) as an intermediary that transparently intercepts a client packet (1) and then specifically queries the controller (106) in a separate step (2). This implies a more active, application-aware role than a standard network-layer router. (col. 7:46-65; Fig. 1).

VI. Other Allegations

Indirect Infringement

• The complaint does not contain separate counts for indirect infringement. The allegations focus on Etsy directly performing the claimed methods and making/using the claimed systems. (Compl. ¶25, ¶35). However, the general prayer for relief and allegations of Etsy distributing apps could potentially support an inducement theory if, for example, user manuals or on-screen instructions were shown to direct users to perform infringing acts.

Willful Infringement

• The complaint alleges that Etsy received a letter on December 15, 2020, informing it of DataCloud's patent portfolio, including the Asserted Patents (Compl. ¶17). This allegation provides a basis for post-suit willfulness and supports the request for a declaration that the case is exceptional under 35 U.S.C. § 285. (Compl. ¶39.D).

VII. Analyst’s Conclusion: Key Questions for the Case

• A core issue will be one of architectural mapping: do the accused Etsy systems, which are components of a modern, large-scale e-commerce platform, actually implement the specific, and arguably dated, data-flow architectures recited in the patents? For the '063 patent, this hinges on identifying a "processing station" that performs automated routing based on a "custom category signal." For the '059 patent, it requires mapping Etsy's infrastructure to the distinct "deceiver-controller-forwarder" model.
• A key evidentiary question will be one of functional specificity: can the plaintiff provide evidence beyond the conclusory allegations in the complaint to show that the accused products perform the exact functions required by the claims? For instance, does Etsy's infrastructure truly operate such that "neither the client or the destination server is aware of the employment of the forwarder" ('959 patent), a critical limitation that may not align with standard reverse proxy configurations.
• The case may also turn on a question of definitional scope: can claim terms rooted in the networking and software context of the year 2000, such as "information pack" and "deceiver," be construed to cover the features and components of a contemporary cloud-based application and web service infrastructure? The outcome of claim construction for these key terms will likely be dispositive.