04
Jun
personal_trollface_hd

Patent trolling is far from a divisive issue in the United States. Pretty much everyone but the trolls can agree that patent trolling is damaging to the economy, and generally kind of a dick move. Patent trolling, if you're not familiar with the practice, is quite simple in concept: buy patents, extort licensing fees from alleged infringers, and sue if they refuse to comply. President Obama proposed some "major" changes to US law that will supposedly reduce the effectiveness of such companies. Before we look at those, though, let's look briefly at what makes a troll tick.

(And no, Apple is not a 'patent troll.' This has basically nothing to do with Apple. If you're looking for a reason to make a bad Apple joke about innovation for the fiftieth time, please go elsewhere.)

Patent trolling has proven a highly successful business model for companies like Intellectual Ventures. While it sounds pretty simple on paper, patent trolling requires armies of lawyers, computer scientists, and various experts to effectively accomplish its goals. Identifying a patent's scope, its relative validity, its value, and its relevant legal history is hard enough when one patent is involved. Companies like IV own thousands of patents. Then, you have to determine who infringes (allegedly) that patent, another task that is far from easy. Finally, you have to work out a licensing fee that the infringer is likely to agree to in lieu of a lawsuit, because patent trolls actually hate lawsuits - they cost a lot of money and could expose them for what they are. IV is also the poster boy for a rather common practice of creating various shell companies to avoid directly identifying themselves in some lawsuits, basically in order to avoid bad PR or readily identify themselves as "trolls."

Trolling itself isn't strictly legal in the United States, either. Justice Kennedy of the US Supreme Court briefly commented on the issue of trolls, and how troll-like behavior may be construed against a plaintiff seeking injunctive relief (product bans). While this is not binding precedent, the Court's view - even as a mere concurrence - on the matter is without a doubt highly influential in lower federal courts. That, however, was 7 years ago, and patent trolls seem as healthy as ever.

President Obama's suggested changes to prevent trolling are as follows. First, more strict requirements in regard to current patent ownership information for registrants at the USPTO. Whenever a patent suit is filed, the current owner must update the involved patents' ownership information. This will effectively reduce some of the identity issues in patent troll suits.

The second change Obama proposed was that the loser of a patent lawsuit deemed "abusive" by the presiding judge must pay the defending party's legal fees. This, in theory, reduces the attractiveness of going to court even more for the trolls.

Finally, Obama issued an executive directive to better train USPTO examiners to identify frivolous or overbroad software patents, though that has a feel of generic pandering about it more than a serious promise.

Congress is already drafting bills that incorporate these proposals (note that Obama does need congress to pass laws to make this happen, apart from the executive order above), and a third change is apparently gaining steam as well, one that would make evidence discovery more expensive for plaintiffs in patent suits if they wish to go beyond "core documentary evidence" at the pre-trial stage. The new rule would require the plaintiff to front the cost of additional discovery. Evidence discovery can be an intense burden for small defendants to meet in a lawsuit, and can quickly ramp up the cost of legal defense.

This all sounds great, right? Well, not so fast. All of these changes are geared at making lawsuits more expensive - potentially - for patent trolls to engage in. This is great news for Google, Apple, Microsoft, etc., companies that are under siege from a handful of infringement allegations by trolls at any given time. The big boys' real concern with trolls is making lawsuits much riskier. A single victory in court by a troll would be disastrous, as jury-awarded damages could be sky-high compared to the original licensing demand. By making lawsuits more costly for the trolls if they lose, lawsuits are less likely to happen in the first place. In theory, of course.

But when we're talking about the Intellectual Ventures of the world - a company likely worth tens of billions - the potential cost of evidence discovery and legal fees are unlikely to do much in deterring lawsuits the troll finds worthwhile risks to take. When the potential payoff is, over the years, billions of dollars, a couple million put up as collateral isn't exactly the end of the world. Not to mention, one victory in court against a major defendant means all other accused infringers are pretty much guaranteed to fall in line and take a license. And most patent troll allegations are actually settled long before court, and happen behind closed doors.

These new laws, if implemented, will also do nothing to protect small businesses and individuals from the threat of patent trolls. And that threat is entirely real. No small developer or modest Kickstarter project is going to have an ice cube's chance in hell against a determined troll, because the chance of ever getting to the point of a lawsuit in such a case is not statistically significant. You either abandon or change the product, or you take the license. Almost everybody takes the license.

The real problem comes down to the way we currently manage the intellectual property rights of patents. The hinge upon which trolls rely is that patent ownership does not require you ever actually use a patent for anything once you've bought it - it's yours free and clear until it expires. Requiring a patent assignee to actually utilize a patent sounds like an attractive option, but is totally impractical - legitimate technology companies file patents for inventions that are never actually used quite regularly. Plans change, and it's entirely possible an invention may not be feasible as part of a product until a decade after it is first described. You can't fully account for those kinds of situations, and it's unfair to paint in broad strokes of "if you don't use it, you lose it."

So, what should we do? The answer is probably more complex than we'd all like to admit. Laws that outline and describe abusive patent behavior and restrict it may be necessary. Or, a more intricate set of rules that make purchasers of patents less able to sue on those patents for a time after purchasing them.

My idea, and I'm just spitballing here, would be to issue a 5-year general moratorium on patent infringement suits for any patent that has been transferred away from the initial assignee (from the date of the new assignment), unless the new assignee can show the court that it is either currently producing or developing a product which falls under the scope of that patent. This would protect patents transferred as part of major business mergers or buyouts where the company is still making or developing protected products, but make trolling much more difficult. If the new assignee believed there was an infringer out there, one of the USPTO's quasi-judiciary bodies could be given a right to exempt a patent from the moratorium in cases where infringement was obvious and causing the plaintiff clear economic harm. But that's just my idea.

Reuters

David Ruddock
David's phone is whatever is currently sitting on his desk. He is an avid writer, and enjoys playing devil's advocate in editorials, and reviewing the latest phones and gadgets. He also doesn't usually write such boring sentences.

  • Sqube

    One of the core facts of life for the USPTO is that there is NO SUCH THING as a final rejection. Even a final rejection, explicitly called a final rejection, is not a final rejection. You can keep resubmitting your patent for as long as you're willing to pay. Patent agents, on the other hand, have their efficiency measured by how many patents they grant. The problem is immediately apparent, and hard to solve. How are you supposed to tell how good/poor a job your patent agent is doing?

    Besides, even with these rules passed... they make a lot of their money from people who are never willing to go to court at all. Even if you make the trolls pay for a loss, they'll just go challenge a bunch of smaller/new companies that literally can't afford to even play the game... which is exactly what they do now.

    Something needs doing, and there are some fine points stated above... but this is a serious drain on the economy and will be for a while to come, IMO.

  • btod

    I wouldn't completely bash proposed laws. At least its an effort and a step in the right direction...

  • TechGuy22

    "And no, Apple is not a 'patent troll.' This has basically nothing to do with Apple. If you're looking for a reason to make a bad Apple joke about innovation for the fiftieth time, please go elsewhere"

    to you they not. to most of us yes they are patent troll. they just got awarded an NFC patent.

    • NeedName

      Apple most certainly does troll the patent systems all over the word by spamming them with tons of BS patents that they know full well are not valid and have significant prior art that they intentionally leave out of said patents. . . there's more than one way to troll the patent system!

      • http://www.androidpolice.com/ David Ruddock

        That doesn't make them a "patent troll." A patent troll is a specific thing described in this article, and Apple has nothing to do with them, other than having been sued by many of them.

        • NeedName

          reading comprehension fail!

          do you see the phrase "patent troll" in my comment? NO! What you see is "troll the patent system."

        • jason

          round corners pinch to zoom Nintendo ds rip off all they do is put tech in a pretty case and it's Samsung tech and foxconn

    • Sqube

      A true patent troll does not actually create any products. They do not release anything to the market, and they don't try. The entirety of their business hinges on (a) buying patents; and (b) using those patents to bully other people into paying them money.

      While I'm certainly not a fan of all the lawsuits that Apple is bringing, and feel that they should be competing in the marketplace instead of the courtroom, they're not a NPE no matter how much you stretch the definition of the term.

      That's why Apple isn't a patent troll. They're bringing too many lawsuits, sure. But they're not a NPE.

      • Thomas

        Apple have quite a few patents that they do create any products on.

        They might not be the worst, but they're definitely fitting of the title patent troll.

        • http://www.androidpolice.com/ David Ruddock

          There is a huge difference between having and not using and not using and suing. Every single Apple patent I've seen sued on in the last few years has been something they actually use in a product or did use at one point.

          • Samsung Fanboy

            you're on ANDROID police defending apple? are you for real?

          • Mike

            There's so much good stuff on AP that it helps stem the crap that Ruddock sprouts off about constantly

          • Thomas

            Well sure, if the only thing you would like to qualify a patent troll on is whether or not they sue with patents they don't use.

            Apple's primary business model may not be patents, and they may not sue for patents they don't use.

            They do however abuse the patent system in order to stop competition and sway the public opinion, not to protect their "intellectual property", by using injunctions.

            This is actually pretty similar to what Microsoft tried to pull back in the day with the whole Linux and SCO Group stuff, try to mark Linux as a stolen product liable for patent lawsuits if customers use it.

        • marcusmaximus04

          Apple tends not to seek licensing on their patents and have generally only sued over patents they're actively using.

        • Sqube

          Can you name me a tech company, in this day and age, that does not have a bewildering array of patents? Having them is basically a necessity at this point; even if you have no intention of using them offensively, you need to have them just to ward off other companies who would litigate you into nonexistence.

          The fact that they have a lot of patents, in and of itself, doesn't mean a lot. And while they're overly litigious, they are not a NPE. I think we're coming to something of a core issue where neither of us are willing to budge, though, so I think agreeing to disagree is the safest bet at this point.

    • Cerberus_tm

      Apple is not a patent troll the way the word is normally used, but it does troll people with patents. So it isn't mainly a troll, but the company still engages in trolling. That's the best way to describe it. Once a company is *mainly* about trolling, only then does it deserve the title of "patent troll".

    • jason

      round corners were used on tv for 50 years

  • nerdss

    We have Apple to thank for this

  • FrillArtist

    So what exactly do you propose?

    • Qliphah

      We could eliminate the USPTO completely.

      Patents, while good legally will always hinder advancement. Imagine anyone being able to modify or improve on anything. Ideas flowing freely from one technology to the next, the interconnectedness we could attain. Without them the company or individual that has the most popular (and hopefully best) product will always profit.

      • marcusmaximus04

        OK, but then why would a company bother bringing any kind of innovation? It takes serious money and time to come up with great new ideas and features. Why bother when anybody else can steal your idea and charge far less for it(since they don't have to pay themselves back for the research/time)?

        Moreover, the patent system, while obviously not perfect or even good, at least forces companies to make their ideas public. If we followed your idea, there'd be no incentive for any company to share such information or ideas.

        • blix247

          This strawman is always used, that companies will somehow stop inventing. Human greed won't stop just because we stop granting patents.

          If anything the pace of invention will speed up, because companies will have to innovate like crazy to maintain their edge. In addition, the billions in capital that are spent playing the patent game can be allocated towards research and development.

          Patents are just one of many government sanctioned monopolies. I believe a more vibrant marketplace would exist without them. Is it realistic? Probably not.

          However, in the meantime, we should drastically reduce the number of patents granted. We should make it near impossible to receive an import ban on the product. We should reduce how long a patent is valid for. We should also get rid of the idea of patents as a trade-able commodity. We should reduce the scope of what is patentable, and require MUCH greater detail for a patent to be granted.

          • http://www.androidpolice.com/ David Ruddock

            Strawman? No, it's not a strawman, it's an extremely reasonable economic point.

            If America were to kill the USPTO tomorrow, corporations would just start filing in the UK and EU exclusively. Eventually, that would result in a refocus of innovation centers and tech development generally to the regions in which IP is most protected.

            Europe would be where the patent lawyers are, where the courts of relevance are, and where the ideas being generated would have legal protection. If there were no such protection in America, originating those ideas in the US would be extremely risky from a corporate espionage standpoint. Doing business in America would become more expensive, and there'd be a "race to the bottom" effect on every single development, reducing profitability for the industry overall, and discouraging innovation.

            It would, without a doubt, cause substantial economic damage. And if your point is to say patents were ended worldwide, that's simply not going to happen. And as far as greatly reducing the strength of patents in the US, once again, you're just producing the problem described above on a smaller scale.

            Big IP businesses - entertainment, tech, pharma, biotech - are centered around the US because we offer the world's strong intellectual property protections. Patent, trademark, and copyright are fiercely protected in the US, and that makes us as a country attractive to businesses who rely on protection of those rights.

            It's very fun to say starting an anti-IP revolution would be much better for the world, but saying we owe the patent system nothing and that it should be demolished or severely neutered reeks of ignorance.

          • http://www.androidpolice.com/author/eric-ravenscraft/ Eric Ravenscraft

            This idea also ignores the fact that filing for a patent necessarily means you have to show, in public record, how you did something. Once a patent's term is up, anyone can come in and build on the existing work. Without patents, companies would just keep their innovations entirely secret and they may never leave the walls of research labs. This is another valuable service the patent office offers that gets completely overlooked. Ironically, the same crowd that believes open source software and equal access to innovation are the same ones who want to abolish the patent system entirely despite patents necessarily requiring open access to innovation blueprints.

            Some reforms may be necessary or beneficial, but I quite like the idea of giving an innovator a (relatively) brief exclusive right to its ideas in exchange for showing the public how they work.

          • FlexPlexico

            This is nonsense. While I believe we need patents, all the silly US system does is to feed a system where international companies are filing for loads of patents in the US and trading those patents between them. It makes companies spend large sums filing for generally useless patents, large sums trading patents, and large sums in patent litigation.

            Inventions made in the rest of the world are also patentable in the US. Thus it does nothing for US businesses in particular (with the exception of lawyers). Lastly, aside from entertainment, big IP businesses are not centered around the US.

          • http://www.androidpolice.com/ David Ruddock

            Really? We don't lead the world in biotechnology, aerospace, computing technology, agri-tech, and pharmaceutical development? News to me!

          • FlexPlexico

            I didn't want to research all of them, but worlds largest producer of airliners is Airbus, of the top 4 phama companies only one is american. US leads in lots of areas but definitely not everywhere. And any lead is not because of the crazy patent system as that applies to everyone - foreign or domestic.

          • Cerberus_tm

            There are two reasons we don't have patent trolls in Europe (yet):
            1. patenting software is much harder than in America;
            2. we don't have a special patent court (but it's coming).

            A special patent court tends to rule more and more in favour of patents with time, because that's what the entire court is about, its budget, and its jobs.

            Neither reason has anything to do with what's happening in America. Here you can read all about the history of the American patent court and why it is a major factor behind current trolling, on Ars Technica:

            http://arstechnica.com/tech-policy/2012/09/how-a-rogue-appeals-court-wrecked-the-patent-system/

          • Qliphah

            So your reaction to China's recent ignoring of all things patent would fit in where? If we don't do something about the patent system now they or other cheap knock off countries that don't give a crap about our laws will soon take over.

            I'll reiterate this again, in this day and age to bring a product to full retail it takes much much more than laws and patents. They in fact add a lot of time effort and money that doesn't even relate to the product itself. And do little to protect the consumer. And how people say without patents companies would sit on tech is beyond me... why? so they can stare at it and rub their greedy little nubs together laughing while they imagine how much the public would like to use their new fangled invention but can't? Not unlike patent trolls now..

            A mass database could still be in place, all ideas would have sources, everything would be in black and white. It's the patent office and their staff that create the main hiccups.

          • marcusmaximus04

            That's... not a strawman. If it's any form of fallacy, it's a slippery-slope.

            I'd argue it's not a fallacious slippery-slope argument because it follows directly from the stated logic. Companies wouldn't need to work harder to maintain their edge, if anything they'd need to work less hard.

            If a Joe company A spends the $millions required to come up with some new thing, they have to include that cost in the end-user price of their product. Joe company B can then come along, see what A did and produce a replica of that some new thing. They don't have anywhere near as much money spent in research, so they don't need to charge nearly as much. You now have two products that are functionally identical but one at a far lower price point. Which one wins?

            There is no way a patent-less system will favor the innovator in the long term. They'll always be beat out by the company that didn't have to spend money on research, choosing instead to steal the design.

        • Qliphah

          Because they want to make money. It takes more than a patent lawyer and some scientists to make a product come to light.

          At some point the idea would be to produce what people want. Not what a patent says they wanted 5, 10, 50 years ago. Without patents a product could change and evolve as fast as consumers wanted.

          Unfortunately with our stagnant patent system we are stuck with the same ideas, the same companies producing the same product, and no incentive to change as they own the only rights.

          • marcusmaximus04

            To quote my own argument:

            "If a Joe company A spends the $millions required to come up with some new thing, they have to include that cost in the end-user price of their product. Joe company B can then come along, see what A did and produce a replica of that some new thing. They don't have anywhere near as much money spent in research, so they don't need to charge nearly as much. You now have two products that are functionally identical but one at a far lower price point. Which one wins?"

            Note that this isn't just some hypothetical unrealistic situation, it's a huge part of the reason our patent system exists. And that doesn't even deal with the fact that without patents, you're no longer encouraging the spread of information. Right now companies have to make their ideas public in order to gain temporary guaranteed exclusive use of them. Without patents, the benefit to the company is gone and they have far more to gain doing anything necessary to keep their ideas secret.

  • Peter

    By "dick move", do you mean the Micro soft dick??? The daddy of all patent trolls...

  • FlexPlexico

    The big problem with patents is not really trolling. The problem is that way too many patents are granted for stuff that should not be patentable in the first place.

    It should only be possible to patent stuff that was either a genuine new invention or something that required significant resources to discover. It should not be possible to
    patent gestures, file formats, plugs, etc.

    Problem with the current system is that it creates a barrier of entry for smaller upstarts and
    it forces established companies to spend money on a patent portfolio that is
    simply used for defense. Not the best use of company resources.

    • Cerberus_tm

      I agree. When applying for a patent, the applicant should have to prove that it spent a lot of time and money on developing the technology.

    • Franky

      Exactly! Validity of patents is the main problem of the patent-system itself. If this were handled with a bit more common sense there wouldn't be a fullscale patent war in the first place.

      However, patent-trolling is a different matter. And I disagree that it would be impractical to forbid sueing for infringement of a patent that is not actually used. It would benefit the general economy if patents issued that are not actively used by the owner for actual developement and/or the production of goods would expire in a matter of one or two years. We're talking about a repidly changing market here - inventions from two years ago which are still not used in active developement can be considered obsolete anyway. And it would seriously cripple the trolling-business, which is basicly to exploit patents by passive use, as all patents acquired would be invalidated by having them lying around for more than two years.

      • FlexPlexico

        I really like the idea that someone could come up with a great idea at home … something revolutionary … something that he can patent. An individual or a small company will probably need quite a bit more time to assemble the funds to bring the invention to market and in some cases; it would make more sense for the individual to sell the patent to a company where the patent fits with their existing portfolio. Thus, I believe the current rules are okay.

        The problem with patents today is the sheer number of junk patents. I would like to reduce the number of granted patents to 1% of what it is today. But I would still like that IBM would be able to get a patent on hard drive technology that comes out of 30 years of research. I also believe that an algorithm like RSA should be patentable too, because of how it could revolutionized cryptography (at the time of invention).

  • http://www.facebook.com/people/Kellic-Youdontneedmylastame/100002201100154 Kellic Youdontneedmylastame
  • robert

    at least nuke isn't patented, so I can build one and nuke entire country without need to pay someone.. right ?

    eh, nuke is patented too ?? oh sh** ...

  • Alvin Brinson

    Actually, what it looks like to me:

    A) Intellectual Ventures and similar quasi-criminal patent trolls will just pony up the extra cash to keep the onslaught of lawsuits flowing.

    B) Legitimate patents held by genuine innovators will be weakened because the cost to defend your patent, even if legitimate, will increase greatly.

  • Could be Anyone

    A better way of to just van companies like Apple from being able to patent anything.

  • burtreynolds

    This is the first post on patent trolls that is pretty accurate. Most of it is sensationalistic BS by journalists trying to make the article exciting. This nails all the points.

    Great job.

    However, a tad inaccurate with the "shell companies". Intellectual Ventures (IV) doesn't create shell companies to hide. They don't care about hiding, they're IV for christake. They create shell companies to keep things very organized, and in line with the inventors.

    See it is a violation of ethics laws for a law firm to buy patents. So what do they do? They become and NPE. Not really a law firm...so they find good patents that are licenseable and will stand up in court, create an LLC around them (the inventors of the patent are frequently part owners of the LLC, other times they are not).

    Thus with an LLC around it..the patent now has a life as a company, solely for licensing.

    Anyways, great stuff, good post. You know your stuff.

  • Uthiel

    Evidently you have an ipod, ipad and mac... lol.
    You can't find impartial journalism anymore.
    Informate yourself, Apple is another patent troll, from the beggining.

  • jason

    I think the inventors of the tech should start renting the patents to companies instead of getting bought out keeping your own intellectual property." although all thoughts and inventions have already been thought or invented, just not made so the Patent system is a joke. Albert Einstein"