JCI Sues Wyze

By John Honovich, Published Aug 21, 2019, 08:51am EDT (Info+)

The mega manufacturer / integrator JCI has sued the fast-growing $20 camera Seattle startup Wyze.

JCI Sues Wyze_4

Inside this note:

  • Share the court complaint
  • Examine JCI's claims
  • Explain why JCI is suing a startup
  • Examine the risk for Wyze

For background on Wyze, see: Wyze Explosive Growth Consumer IP Camera Market, Surging Wyze Raises $20 Million and Wyze AI Analytics Tested.

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Comments (32)

John Tran

08/21/19 01:13pm

Doesn't this apply to every home monitoring camera?

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John Honovich

IPVM | In reply to John Tran | 08/21/19 01:21pm

Good question. Theoretically, it might. Will JCI sue more? I don’t know.

Of course, a core question is whether the Smartvue 2000s architecture patented is truly applicable to what current providers do.

There is also the risk that Wyze or others sued in the future try to invalidate the patent but that costs a fair amount of money to try.

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Undisclosed Integrator #1

08/21/19 01:52pm

Watch out Amazon Ring / Nest etc....

I was running cameras on wireless in 2008 with remote access and wireless sensors. So could the patent be thrown out? :s

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John Honovich

IPVM | In reply to Undisclosed Integrator #1 | 08/21/19 02:01pm

The patent cited above is from 2004.

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Undisclosed #5

In reply to Undisclosed Integrator #1 | 08/21/19 11:25pm

Will Ring work without AWS? Smartvue never had AWS dependencies, so is Amazon safe?

I could be wrong here but I thought the Ring opt out = no storage at all? Did JCI have opt out packages for cloud storage for SmartVue?

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Undisclosed Integrator #2

08/21/19 04:07pm

Its probably going to be thrown out. Wireless cameras are so common, it’s “public domain” now. They’d have to sue hik and dahua and more. Seems like a shake down similar to that stupid law firm in east Texas that sued anyone with security cameras.

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John Honovich

IPVM | In reply to Undisclosed Integrator #2 | 08/21/19 04:14pm

“Wireless cameras are so common, it’s “public domain” now.”

It’s not about how common it is now, it is about whether or not the patent filed in 2004 covers what is being done today.

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Undisclosed Integrator #2

08/21/19 04:18pm

Then they might as well shake down deep sentinel since bezos is tied to it 😂

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Undisclosed #3

In reply to Undisclosed Integrator #2 | 08/21/19 05:28pm

no way.

Bezos has the cash to attempt to get the patents invalidated.

It is unlikely that Wyze has any chance to do this - based on their thin margins mentioned by John above.

This is the primary reason (imo) that JCI chose to litigate their patent portfolio against Wyze - as they are potentially in the weakest financial position to defend - vs all the others who appear to be doing exactly the same technical thing.

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Undisclosed #3

In reply to Undisclosed #3 | 08/21/19 05:30pm

once JCI gets an infringement 'win' they can now point to that precedent in any future patent litigation.

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John Honovich

IPVM | In reply to Undisclosed #3 | 08/21/19 05:41pm

Typically a win in such matters is a settlement, as the sued would often prefer to avoid litigating to judgement. What happens here, of course, is to be seen.

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Undisclosed #3

In reply to John Honovich | 08/21/19 06:07pm

true... but as you mention, settlements are generally preferred by defendants, and not necessarily plaintiffs - unless it's just a squeeze play.

And Wyze is in the weakest financial position to be able to settle (based on product margins compared to other potential defendants - like RIng).

VC will have to pony up more $ (i.e. split 10s in blackjack) and I think JCI is surmising they won't.

this is just my opinion.

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John Honovich

IPVM | In reply to Undisclosed #3 | 08/21/19 05:39pm

Wyze’s most recent $20 million funding was lead by Norwest Venture Partners who has $7.5 billion in assets including a $1.5 billion fund from 2018 Norwest Venture Partners - Wikipedia

If Norwest is happy with Wyze’s growth / potential, they can easily deal with the money to contest JCI’s suit.

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Undisclosed #3

In reply to John Honovich | 08/21/19 05:58pm

they are $20M in now.... and I don't think their biz plan includes patent invalidation litigation seeing as how just to compete and grow Wyze product margins are razor-thin already.

how much you think VC is gonna throw at patent invalidation?

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John Honovich

IPVM | In reply to Undisclosed #3 | 08/21/19 06:03pm

Patent litigation is a cost of doing business.

If their investors see them becoming a unicorn (which given their growth rate is feasible), they will invest $100 million plus over the next few years, which makes even a JCI lawsuit relatively trivial.

Or Wyze can settle which will raise their price maybe a few dollars but Wyze price point is so low, their model is still sound.

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Undisclosed #3

In reply to John Honovich | 08/21/19 08:25pm

you've mentioned above that you do not know if JCI will sue any others in the industry for similar patent infringement - even though it would appear that most of the popular resi solutions are within scope.

why do you think JCI chose Wyze vs any others (and specifically Ring)?

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John Honovich

IPVM | In reply to Undisclosed #3 | 08/21/19 10:37pm

why do you think JCI chose Wyze vs any others (and specifically Ring)?

I don't know. Suing Wyze vs Ring is a good question.

What I was addressing in the post was why Wyze generally, from the perspective of many industry people who view Wyze as a tiny / irrelevant company, which is somewhat understandable given how recent their rise is and how concentrated it has been in the consumer space.

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Undisclosed #5

In reply to John Honovich | 08/21/19 11:30pm

Agree, also a mention for other expansion products Wyze is producing such as their Wyze Bulb

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Randy Lines

08/21/19 04:34pm

We could make a better product for "X" dollars or we can sue them out of existence for "Y" dollars.

rbl

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Undisclosed #5

In reply to Randy Lines | 08/21/19 11:44pm

Oh JCI....on the minority rule bandwagon are we? I do not feel a design suit here that is being infringed or I had the day off today and it is fresh IPA and shop drawings day.

JCI: Their product uses the same 120vac power source that our products use! (wait)

JCI: Their camera connectivity on a one line diagram is exactly the same as ours. The camera is transmitting video wirelessly...

JCI: We invented all wireless camera transmitting technology!

JCI: Their camera has a mobile app for the end user...JCI invented mobile apps for all phones to log into their cloud hosted smartvue accounts in 2013!

JCI: When I see a Wyze camera I think of Smartvue...

JCI [INTERNAL]: What is the cost of filing a lawsuit you cannot win? Wyze is using our Analytics platform, they are using all our code we acquired from Smartvue. Motion forwarded! Let's sue!

Wyze: Achtung! Wyze is now acquired by...

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Undisclosed Integrator #6

In reply to Randy Lines | 08/22/19 12:29am

Or they could increase the cost of said cameras just by suing them. They have to aggregate the cost of legal defense across that $20 sell price. Who knows what their margin actually is but they would either have to move a ton of product or raise prices to pay for even a few hours of legal defense. Unfortunately, the world favors the big guy squashing the small.

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John Honovich

IPVM | In reply to Undisclosed Integrator #6 | 08/22/19 12:33am

They have to aggregate the cost of legal defense across that $20 sell price

They don't. They are a VC funded startup. Such companies are not trying to make short-term profits. As long as they have the cash to burn and the confidence of their investors to keep funding it, the legal defense costs are not a problem.

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Undisclosed #4

IPVMU Certified | 08/21/19 06:54pm

well, this quite a change from the tiny troll going after the fat cats: Doomsday Prepper Sues Avigilon, Dahua, Hikvision.

this is more like “man sues dog”

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Undisclosed #3

In reply to Undisclosed #4 | 08/21/19 07:28pm

or, "man sues dog first"

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Undisclosed

08/23/19 08:21pm

I thought they finally killed Sensormatic and the furball of corporate entities when JCI acquired Tyco.

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John Honovich

IPVM | In reply to Undisclosed | 08/26/19 02:47pm

finally killed Sensormatic

Sensormatic still exists focused on retail, it now evidently includes ShopperTrak who they acquired a few years ago:

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Undisclosed Manufacturer #7

08/26/19 01:00pm

Wyze crossed JCI's line by competing with their DSC intrusion products. JCI simply cannot compete with $20 sensors and can't innovate video into their intrusion products fast or cheap enough. JCI is too big to care about modest licensing revenue; it's about protecting their DSC business.

JCI is bigger, but Wyze is fighting for survival. Wyze VC's can kick in a couple $M to mount a patent invalidation campaign and JCI execs will eventually push to settle it when they get tired of documenting/explaining it in every quarterly report.

JCI is playing whack-a-mole with the huge number of manufacturers who have "at least two wireless input control devices". They're fighting a fundamental problem that lawyers can't solve - as DIY product features and ease of install improve, more people don't need an expensive installer channel solution using JCI's product. Suing the little guys over a 2004 patent will force them to further innovate... and patent it to lock JCI out.

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John Honovich

IPVM | In reply to Undisclosed Manufacturer #7 | 08/26/19 01:15pm

JCI execs will eventually push to settle it when they get tired of documenting/explaining it in every quarterly report.

No. This lawsuit is immaterial to JCI as they did $8.4 billion revenue in 2018. Companies only report material things. Wyze will have to report this to their board given their small size but whether JCI wins or losses this, to the JCI corporation overall, it makes no difference.

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Undisclosed Manufacturer #8

08/26/19 05:44pm

This is an interesting case. Yes, I believe that JCI is trying to squash Wyze. It is what people do to gain or protect market share. I also believe that JCI is trying to set a precedence. Can they convert this patient from 2004 to a precedence 15 years later? Since precedence is what the courts use to determine the outcome for litigation this would protect them in the future. A lot has changed in the wireless marketplace since 2004 and much of what JCI is holding with its patient is mainstream technology today but was unique in 2004. I was part of a similar case in the late 90's and as the defendant the judge found that the patient held by the plaintiff did not hold up because the design was not determined to be unique. So it will be interesting to see if a patient from 15 years ago will stand up if that technology has become mainstream and an industry standard in its space. Since no precedence has been set it will be very interesting to see how this turns out. I like Wyze's chances.

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John Honovich

IPVM | In reply to Undisclosed Manufacturer #8 | 08/26/19 09:04pm

if a patient from 15 years ago will stand up if that technology has become mainstream and an industry standard in its space.

Whether a technology is mainstream now has no bearing on whether the patent from 15 years ago is valid. If Wyze can prove prior art of someone else 'inventing' this before the patent, they could seek to get it invalidated. But just because something is mainstream or obvious now has no bearing on patents.

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John Honovich

IPVM | 10/01/19 07:44pm

Wyze was granted an extension to respond until October 9th.

We will keep on tracking the progress of the case.

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John Honovich

IPVM | In reply to John Honovich | 10/09/19 10:59pm

Update: Wyze was granted an extension until November 9th.

We will keep on tracking the progress of the case.

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