“The reality is that the term patent troll seems to be more in the eye of the beholder than anything else.”
Over the last several weeks “patent trolls” have been back in the news. The mother of all patent trolls, NTP, which won over $600 million from Research in Motion as the result of a successful patent infringement litigation over the popular BlackBerry phone, is back at it again. NTP is now suing Apple, Google, Microsoft and others alleging that smart phone e-mail systems infringe its patents. See, for example Bad News for Tech Heavies? and NTP sues Apple, Google, Microsoft and others.
Not long ago Attorney John M. Desmarais, who was one of the attorneys who represented GlaxoSmithKline in their effort to stop the claims and continuations rules from becoming effective, left the practice of law. He acquired 4,500 patents and is going to throw his hat into the ring, presumably representing himself, going after those large companies that he believes are infringing his patents. See Billion Dollar Lawyer Desmarais Quits Firm to Troll for Patents.
Just this past week, Kelley Drye & Warren, the firm that represented Dr. Tafas in the claims and continuations challenge, filed an $11.4 billion lawsuit on behalf of XPRT Ventures, LLC. Many in the popular press and in the blogging community are, like lemmings heading off a cliff, referring to XPRT as a patent troll. But what evidence do that have of that? As far as I can tell little or none; mostly none. See eBay’s PayPal Sued for $11.4 Billion for Patent Infringement.
As you can see, the term “patent troll” is thrown about constantly as a quick way to refer to individuals and companies that have little or nothing in common. Many large corporations have started referring not to “patent trolls,” but rather to non-practicing entities, which allows them to group together Universities, federal research laboratories and start-up companies and research and development companies. As with individual inventors, none of these folks actually “practice” their inventions, and if you use a sterilized term such as “non-practicing entity” it isn’t as shocking as the term “patent troll,” and apparently seems useful to forward their anti-patent, anti-innovation agenda. I suspect this is the case because no one would ever consider a University or R&D company to be a patent troll, so you have to change the linguistics in order to wrap them all together in the same pot.
The reality is that the term patent troll seems to be more in the eye of the beholder than anything else. So a patent troll is whoever is suing you because you must be correct and some evil wrong-doer is holding you hostage. Never mind that you are actually infringing and you are the real wrong-doer (i.e., tortfeasor). So the term “patent troll” is much like the term “communist” during the McCarthy era. Once you are labeled a patent troll reality no longer matters, just as those who were labeled communists found out. Of course, some of those who were labeled communists by Senator McCarthy were, in fact, communists. But there were some who were labeled communists that were not, having only been caught up in the frenzy and ruined as a result thereof.
Patent trolls are not vilified in society quite the same way as alleged communists were, and the FBI and CIA are not, at least as far as we know, being deployed to investigate patent trolls. But it is also certainly true that some who are vilified as patent trolls are, in fact, the type of bad actors that should be appropriately vilified, but many, perhaps even most who are labeled patent trolls are not at all bad actors at all.
What is needed is a working definition for the term patent troll so that this nonsense can stop once and for all, and so the uninformed in the media can be spared the embarrassment of their own cluelessness. So lets take a look at some of the characteristics that will get you characterized as a patent troll and either confirm it as a useful indicator of a wrong-doer or as simply overblown and wholly inaccurate.
1. You a patent troll if you sue a big tech company
FALSE. While those giants of Silicon Valley will be upset to hear me say it, the reality is that just because you sue them does not mean you are a patent troll. As it turns out these tech giants actually infringe patents with at least some level of frequency. When they do infringe, have been found to infringe and lose the litigation it is intellectually dishonest to act as if the party enforcing a valid right, and which as proven infringement, is the bad actor. Infringers are the bad actor if there is one. The law properly calls infringers tortfeasors because they have trampled on the valid rights of another.
2. You are a patent troll when you sue for an enormous amount of money
FALSE. The law entitles patent owners to recoup either lost profits or a reasonable royalty if they can demonstrate patent infringement. It is exceptionally difficult to prove lost profits, and for those that are truly non-practicing entities it is impossible to obtain lost profits. This is because in order to obtain lost profits you must be able to demonstrate that you had the capacity to satisfy the demand diverted by the infringer. So if you do not sell anything you cannot prove capacity and you would be limited to a reasonable royalty. So the complaining of those who vilify patent trolls can already be seen to be largely disingenuous.
The fact is, with so many units for various products in the marketplace even a reasonably royalty can lead to an exceptionally large amount of damages, particularly when the invention relates to a computerized process that can be implemented many millions of times, each leading to the payment of its own reasonable royalty. Additionally, factor in that a reasonable royalty during litigation is always higher than it would have been if negotiated prior to infringement and you can see this amount adds up quickly. But why shouldn’t a litigation royalty be higher? If it were not then why would anyone ever do anything other than infringe? They would pay only if they get sued and lose, which is unfair and would reward breaking the law (i.e., infringing) which is not something that is or should be encouraged.
3. You are a patent troll if you are a non practicing entity
FALSE. Throughout history there have been many individuals and entities that have done nothing more than invent and then license out the inventions they make. Thomas Edison was a non-practicing entity. Was he a patent troll? Of course not. Neither are universities and neither are independent inventors who innovate. Research and development is something to be encouraged, not vilified. Once and for all we should realize that if you innovated you should not be able to be considered or called a patent troll. The vilification of those who engage in the hard work of inventing is anathema to what the United States has always done and celebrated. We ought not let tech giants who simply cannot innovate and are relegated to infringing to call these pioneers infringers.
4. You are a patent troll if you acquire a patent and you did not innovate
PERHAPS. To the extent that there is any across the board definition of the term “patent troll” this is the characteristic that seems to be shared with most who would be considered by the majority to be patent trolls. There is something that rubs people the wrong way when individuals or entities buy up patent rights from a desperate inventor or a bankrupt company, and then turns around and sues big tech giants.
I suspect we don’t like it when this happens because the innovator is not the one who is being rewarded, but rather the entity with the deep pockets who can wrestle the patent away and then back it with a large litigation war-chest reaps the rewards. Still, while this may not be the most appealing line of business to be in it is hard to justify the underlying infringement that needs to accompany a big award paid to an entity that scoops up an unwanted patent. So in this scenario neither party is snow white, or even snow off-white. The defendant who loses was infringing a valid patent right and the plaintiff who wins gets rich not as a result of their own innovation but as a result of having bought a patent that the inventor couldn’t actually monetize. In short, they didn’t have the money to put up a fight to win lottery like winnings.
Of course, many who do acquire patents do so in order to supplement their own patent portfolio, so the mere fact that you acquire a patent and then sue on an acquired patent cannot make you a patent troll. However, one thing that most who are called patent trolls have in common is that they are not innovators and they have acquired a patent for the sole purpose of licensing and enforcing the patent through litigation.
Luckily for independent inventors and small and mid-size businesses, it is getting easier and easier to obtain contingency representation when there is large scale ongoing infringement. One of the sponsors of IPWatchdog.com, Tara Williams, who is also known as the IP Contingency Lawyer, is an example of a patent litigator who takes patent infringement cases on a contingency basis, which means that you do not have to pay the hourly fee for legal services provided. This market reality can and should help some who have valid and infringed patents actually mount a litigation to be rewarded for the infringement of their own innovations, but there will always be reasons why some patents wind up in the hands of those who seek to only license or litigate in search of massive payouts.
I am not really sure what can be done to stop those who are the patent trolls that make so many uncomfortable. Anything done to make it harder for bad acting patent owners to sue would also apply to the rights of those who are not bad actors, which certainly would not be bad for the big tech companies, but would be objectively terrible for innovation at large. You simply cannot alter the rights granted in an issued patent without negatively impacting the inherent value of a patent. If the inherent value of a patent is impacted then investors will react accordingly and funding innovation will become more and more difficult, which would lead to less innovation, fewer jobs and a slowing down of an already sluggish economy.
So until there is an epiphany with respect to how to deal with those who are viewed as the bad actors, or until the large tech giants actually develop a strategy for combating patent trolls that would work (see Patent Trolls: A Conspiratorial Story of Symbiosis) the best we can do is to accurately characterize those who are suing for patent infringement. While NTP is considered by many to be the prototypical patent troll, the inventors who had a confidentiality agreement with eBay only to find eBay taking the innovation without paying for it and trying to patent it themselves are clearly not the bad actors. So that being the case, why don’t we reserve the term “patent troll” for the party who is the wrong doer and actually acknowledge what we all know is true. Those who infringe are tortfeasors and when they make a conscious or reckless decision to infringe are every part the patent troll they rail against with such vigor.