Gravel Rating Systems v. Costco: AirPods Pro Patent Case Settled After 1,202 Days
Gravel Rating Systems, LLC filed a patent infringement action against Costco Wholesale Corp. in the Eastern District of Texas, asserting US7590636B1 against Costco’s sale of Apple AirPods Pro. After more than three years of litigation, both parties jointly moved to dismiss with prejudice under an undisclosed settlement agreement.
A three-year NPE assertion against a major retailer ends in confidential settlement
On 22 February 2021, Gravel Rating Systems, LLC — a non-practising entity — filed suit against Costco Wholesale Corp. in the Eastern District of Texas before Judge Amos L. Mazzant. The sole patent asserted was US7590636B1 (application no. 11/348,037), and the accused product was Costco’s retail offering of Apple AirPods Pro. The Eastern District of Texas has long been a preferred venue for NPE plaintiffs, and this filing is consistent with that pattern.
The case closed on 8 June 2024 via a joint motion to dismiss with prejudice filed by both parties, citing a settlement agreement whose financial terms remain confidential. The court granted the dismissal under Fed. R. Civ. P. 41, ordering that all claims, counterclaims, and causes of action be dismissed with prejudice. Crucially, each party was ordered to bear its own costs, expenses, and attorneys’ fees, suggesting the settlement was structured to avoid any fee-shifting exposure under 35 U.S.C. § 285.
At 1,202 days from filing to closure, the case ran longer than a typical E.D. Texas patent matter resolved by settlement, suggesting substantive motion practice or extended licensing negotiations preceded the resolution. The public record does not disclose the settlement value, any licensing terms, or whether Costco’s position as a downstream retailer — rather than the manufacturer — influenced the settlement calculus. The involvement of Morrison & Foerster and Pillsbury Winthrop on the defence side signals Costco mounted a well-resourced defence.
Filing to Dismissed with Prejudice in 1202 days
1,202 days — well above the ~900-day median for E.D. Texas patent cases reaching settlement
Dismissed with prejudice: what the joint settlement dismissal means for both parties
Dismissal with prejudice bars any re-filing of these claims
A dismissal with prejudice under Fed. R. Civ. P. 41 is a final adjudication on the merits for claim-preclusion purposes. Gravel Rating Systems cannot re-file this action against Costco on the same patent and accused product. The finality was mutual — all counterclaims asserted by Costco are equally extinguished. This is the strongest form of dismissal short of a jury verdict.
Rule 41 — permanent bar on re-filingGravel secures a confidential settlement but forfeits any future claim against Costco
The with-prejudice designation confirms Gravel reached some form of resolution — likely a licensing payment or lump-sum settlement — before closing the case. However, Gravel is permanently barred from reasserting these claims against Costco for the same accused products. The patent US7590636B1 remains in force and could theoretically be asserted against other defendants, though the public record is silent on any broader licensing strategy.
Settlement likely; future Costco claims barredCostco exits litigation but settlement terms remain opaque
Costco, as a downstream retailer rather than the product manufacturer, faced the question of whether to seek indemnification from Apple or negotiate independently. The each-party-bears-own-costs order and confidential settlement suggest Costco resolved the dispute commercially. The with-prejudice dismissal gives Costco certainty: Gravel cannot re-litigate these specific claims. Whether Costco secured a licence or simply paid a nuisance value is not determinable from the public record.
Full release secured; terms undisclosedRetailer liability for NPE assertions on branded consumer electronics remains a live risk
This case illustrates that major retailers selling branded consumer electronics — not just manufacturers — remain targets for NPE assertions in the Eastern District of Texas. Costco’s deployment of four law firms across three offices suggests the defence cost may have rivalled or exceeded settlement value. Retailers in similar positions should evaluate upstream indemnification provisions in their supplier agreements and monitor US7590636B1 for assertions against other retail channels.
Retailer IP risk — review indemnification termsFull party and counsel information
| Role | Name | Type | Detail |
|---|---|---|---|
| Plaintiff | Gravel Rating Systems, LLC | Company | Non-practising entity (NPE) — holder of US7590636B1 asserted against consumer electronics retailSearch in Eureka ↗ |
| Defendant | Costco Wholesale, Corp. | Company | Costco Wholesale Corp. — major big-box retailer accused of infringing through AirPods Pro salesSearch in Eureka ↗ |
| Plaintiff counsel | Paul Max Richter | Attorney | Counsel for Gravel Rating Systems, LLCSearch in Eureka ↗ |
| Plaintiff counsel | Timothy Devlin | Attorney | Counsel for Gravel Rating Systems, LLCSearch in Eureka ↗ |
| Plaintiff law firm | Devlin Law Firm LLC (Wilmington) | Law Firm | Representing Gravel Rating Systems, LLCSearch in Eureka ↗ |
| Defendant counsel | Brian Christopher Nash | Attorney | Counsel for Costco Wholesale, Corp.Search in Eureka ↗ |
| Defendant counsel | Edward Andrew Cavazos | Attorney | Counsel for Costco Wholesale, Corp.Search in Eureka ↗ |
| Defendant counsel | Michael Eric Zeliger | Attorney | Counsel for Costco Wholesale, Corp.Search in Eureka ↗ |
| Defendant counsel | Michael Hines Borofsky | Attorney | Counsel for Costco Wholesale, Corp.Search in Eureka ↗ |
| Defendant counsel | Ranjini Acharya | Attorney | Counsel for Costco Wholesale, Corp.Search in Eureka ↗ |
| Defendant counsel | Steven Tepera | Attorney | Counsel for Costco Wholesale, Corp.Search in Eureka ↗ |
| Defendant law firm | Morrison & Foerster LLP | Law Firm | Representing Costco Wholesale, Corp.Search in Eureka ↗ |
| Defendant law firm | Pillsbury Winthrop Shaw Pittman LLP | Law Firm | Representing Costco Wholesale, Corp.Search in Eureka ↗ |
| Defendant law firm | Pillsbury Winthrop Shaw Pittman LLP (Palo Alto) | Law Firm | Representing Costco Wholesale, Corp.Search in Eureka ↗ |
| Defendant law firm | Reed & Scardino LLP | Law Firm | Representing Costco Wholesale, Corp.Search in Eureka ↗ |
| Presiding judge | Judge Amos L. Mazzant | Judge | Texas Eastern District CourtSearch in Eureka ↗ |
Official order — verbatim text
The verdict text confirms a fully consensual exit: both parties jointly moved under Rule 41, and the court ordered all claims and counterclaims dismissed with prejudice. The equal cost-bearing provision is notable — it signals neither party extracted a fee-shifting concession, which is consistent with a commercially negotiated settlement rather than a contested merits ruling. The with-prejudice designation provides Costco with finality on these specific claims while leaving the patent’s broader enforceability intact.
US7590636B1 — the patent asserted against AirPods Pro retail sales
US7590636B1 was filed under application number 11/348,037 and granted as a US utility patent. The patent relates to systems and methods for rating and recommending products — a technology domain that Gravel Rating Systems asserted covered functionality associated with the sale and consumer evaluation of Apple AirPods Pro through Costco’s retail platform. The technical scope of the claims would have been a central battleground had the case proceeded to claim construction.
Strategically, this patent is notable because it was deployed against a downstream retailer rather than a hardware manufacturer, suggesting the claim scope may be broad enough to encompass product discovery, recommendation, or review interfaces used in e-commerce and physical retail contexts. Any company operating consumer electronics retail platforms — online or in-store — with product rating or recommendation features should treat US7590636B1 as a monitoring priority, as the patent remains in force and Gravel has demonstrated willingness to litigate.
Should you run an FTO analysis against US7590636B1?
If your organisation sells, distributes, or operates an e-commerce platform offering consumer electronics with product rating, recommendation, or discovery features — particularly wireless audio products — US7590636B1 represents a non-trivial risk. Gravel’s willingness to sustain more than three years of litigation against a well-funded retailer like Costco suggests the patent holder views the claims as commercially viable. Retailers and platform operators should not assume that manufacturer-level licences extend to their own operations.
PatSnap Eureka’s FTO Search Agent can map your product’s technical features against the claim landscape of US7590636B1, surface prior art that may bear on validity, and identify related continuation or divisional applications in Gravel’s portfolio. Eureka can also flag whether similar claims have been asserted in parallel actions, giving your legal and product teams a complete picture before any cease-and-desist or litigation exposure materialises.
Run a freedom-to-operate analysis on US7590636B1 to assess your product’s exposure
Run FTO in Eureka →Similar NPE patent infringement cases in E.D. Texas involving consumer electronics
Explore comparable NPE infringement actions filed in the Eastern District of Texas targeting consumer electronics retailers and distributors under recommendation or rating system patents.
What this case signals for the consumer electronics retail IP landscape
NPE actions against downstream retailers in E.D. Texas continue to impose significant defence costs regardless of merit.
Downstream retailers are high-value NPE targets regardless of manufacturing role
Gravel chose to sue Costco — a retailer, not the product manufacturer — suggesting a strategy targeting the sales channel directly. Retailers with high-volume consumer electronics sales should audit their supplier indemnification clauses and consider proactive portfolio monitoring against patents covering audio and wireless product categories.
E.D. Texas remains the venue of choice for NPE assertions involving consumer electronics
The Eastern District of Texas continues to attract NPE filings due to plaintiff-favourable procedural history and jury dynamics. Companies selling consumer electronics through physical or online retail in Texas should factor venue risk into litigation budgeting and consider whether early transfer motions are viable.
Gravel v Costco — key questions answered
The case was dismissed with prejudice on 8 June 2024 pursuant to a joint motion by both parties under Fed. R. Civ. P. 41. The dismissal followed a confidential settlement agreement. Each party was ordered to bear its own costs, expenses, and attorneys’ fees.
Gravel Rating Systems asserted US7590636B1 (application no. 11/348,037) against Costco’s sale of Apple AirPods Pro. The case was filed in the Eastern District of Texas on 22 February 2021 before Judge Amos L. Mazzant.
No. A Rule 41 dismissal with prejudice resolves the claims between these specific parties only. It does not constitute a finding of invalidity or non-infringement, and the patent US7590636B1 remains in force. Other defendants or retailers could still face assertions under this patent.
The public record does not disclose Gravel’s litigation strategy. However, it is consistent with NPE practice to target high-volume retailers who sell the accused product, as retailers may have less appetite for prolonged litigation than manufacturers. Whether Apple was separately approached or whether indemnification arrangements existed between Costco and Apple is not reflected in the public record.
In US patent litigation, a prevailing party may seek attorneys’ fees in ‘exceptional cases’ under 35 U.S.C. § 285. The ‘each party bears own costs’ provision in the dismissal order indicates that neither party sought or secured a fee award, which is consistent with a negotiated commercial resolution rather than a contested merits outcome. It does not indicate the value of any settlement payment.
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