Patent Trolls: Innovation Vampires Suck Life Out of Economy
|Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: December 14, 2010 @ 8:45 am
Let’s be perfectly honest, the US patent system has stopped rewarding innovation and has started rewarding those who have the finances and ability to game the system. That is a huge problem and one that needs to be addressed far more quickly than any other problem facing us. I have been saying for years that the manufacturing jobs are not coming back and that we need to focus on those areas where we can grow jobs and the economy, and that space is the innovation space. Innovation is at the core of growth because discoveries lead to inventions which lead to new technologies which lead to the creation of new industry which leads to the creation of high paying jobs. A rising tide lifts all boats and the tide that is going to lift the US economy is the innovation tide, so we need to start focusing on that and putting in place an environment that will allow innovation to thrive. This of course means a functioning patent system that recognizes worthwhile inventions, but it also requires that we put a stop to patent trolling.
I know that over the last several years I have not been one to want to jump up and down over the problems created by patent trolls, but I have to admit that things are not looking good for the patent industry these days thanks to the existence of patent trolls, and one particular super troll. What has transpired over the last few years is really quite sickening when you stop and think about it. The Patent Office during the second half of the Bush Administration became so dysfunctional that getting an examiner to look at your application in a timely manner was impossible, and now that things are changing at the Patent Office under the Kappos regime funding is being squeezed out of the Office and continually diverted, so far in fiscal year 2011 over $1 million per day is collected by the Patent Office that cannot be used. So in their infinite wisdom, or lack thereof, Congress is imposing a national innovation tax at a time when we should be doing everything in our power to encourage innovation and innovators.
In recent years the Supreme Court, with help from the Federal Circuit, has killed the doctrine of equivalents. The Supreme Court has also made it extremely difficult to get a district court to issue an order acknowledging that a patent is an exclusive right and has returned us to the days of “flash of creative genius” thanks to the KSR decision. The Federal Circuit seems poised in the TiVo case to undercut the value of a permanent injunction, even if you can get one. The Congress has been able to accomplish absolutely nothing time after time because rather than take on meaningful reform special interest proposals are pushed that while favored by many are not favored by most. Even if patent reform had been enacted it wouldn’t have hardly been a true reform; better to call it “patent change” rather than patent reform; and a change that would have created massive amounts of new work for the United States Patent and Trademark Office while not giving them any more money. All the while a guy by the name of Nathan Myhrvold, a man with a Microsoft pedigree, has been amassing tens of thousands of patents that he claimed he would never use offensively. Well, that changed just the other day. What is going on!
The trials and tribulations of the US patent system have been fairly well documented, but as it gets harder and harder to obtain meaningful patent protection there are those out there who are buying up already issued patents and preparing to enforce them against those who are actually forwarding our economy. Until recently I have been criticized in many corners for taking the side of so-called patent trolls. Yes, these folks buy up patents and then seek to enforce the rights against others who are allegedly infringing. That is the nature of the right though; namely that the holder has the rights and can seek to stop infringement or collect payments for previous infringement, which is really the name of the patent troll game. What is the harm really? A troll here, a troll there and big companies going down. Up until now I have not been willing to advocate for the overthrow of patent trolls because I have always felt that by going after the person who is holding the right you are ignoring that there is someone who is infringing the right.
Things are different for me now though and I have a lot of reasons to point for my change in attitude. While I do think our economy is fundamentally strong, despite what certain politicians say, there is no doubt that our economy has experienced blow after blow for years now and if something is not done to stop the damage and reverse the trend we are going to be in a whole lot of trouble and likely not that far in the future. So for me it is time to stop worrying about whether there is an infringer and start worrying about what it is that the patent system is supposed to foster; namely innovation. This is particularly true now with patent trolls increasingly instituting a strategy of sue everyone you can if they are engaged in an industry and plausibly reads on the TITLE of your patent. This just shifts the burden of due diligence onto the defendant, who many times is a small business without enough resources to fight. Oh yeah… these small businesses are typically not infringing either, so they are just being held up as if they are walking in a dark alley. What a drag on the innovators that we need to jump start our economy!
I hate the term patent troll because it has over time become synonymous with “non-practicing entity.” Not all non-practicing entities are bad though. For example, universities are non-practicing entities but the research they do if fundamentally important to our economy. The Bayh-Dole legislation is the most successful piece of legislation over the last 50+ years because it gives incentive to universities to protect their inventions and then license them to businesses, particularly small businesses, who in exchange pay the university, which funds additional research and development. So universities cannot be considered patent trolls, they are the image of what we want to foster. Universities to pure research for the sake of science and this is not something that would or could be done in a commercial setting, so whatever we do we need to realize that universities, federal laboratories and research and development companies are NOT patent trolls and should not be stopped.
What we need to focus on are those that are taking from the patent system without returning anything to the patent system. Rather than call these groups patent trolls, I would much rather call them what they really are — innovation vampires. These innovation vampires grab hold of as many patents as they sink their teeth into a company and begin to suck the life right out by holding the company, and often times the entire industry, hostage. No tax policy could ever do as much damage to an economy. This massive redistribution of wealth without an iota of benefit to society must stop! Having an enormous treasure chest that can fund litigation ought not entitle you to reap the rewards carved out of the public domain to incentivize the creation of new technologies. The shake down of companies that are actually engaged in doing something, like creating technology and employing hundreds of thousands, must come to an end. And while we are working on figuring out the solution we all better keep our eye on the 8,000 pound gorilla located just outside of Seattle — Intellectual Ventures.
On December 10, 2010, the United States District Court for the Western District of Washington dismissed a patent infringement complaint filed by Paul Allen, of Microsoft fame. The complaint was woefully inadequate. It provided no facts, no theory of the case and really premised liability on the fact that the defendants, a who’s who of the tech industry, are engaged in activities that seem to overlap with the titles of several patents he owns. It is this complaint by ambush, where no useful information is provided, that is causing the problems. If you have a patent right then enforce it, even if you are a non-practicing entity, but for goodness sake do at least a modicum of due diligence before you file a lawsuit. Shifting the burden onto defendants to prove they are not infringing an unspecified claim is something that cannot stand in our legal system.
Thankfully, over the past several years the Supreme Court has started to put their foot down on complaints that uselessly provide no information. Now it is time for patent infringement defendants to fight hard, and for district courts to cease to tolerate the ambush. While the ambush of technology giants may be seem to provide a cute strategic advantage, when it is limited to the big corporations it is really of little consequence, despite still being against the rules and laws. When employed against small and mid-size companies it is wholly unacceptable because it works to force a license payment where none should otherwise be owed, resulting in a tax akin to extortion.
Allowing for extortion on any level, against big or small companies, is not a strategy likely to get innovative companies hiring again. Without hiring our economy will continue to stagnate, which is a real concern for everyone. The time is now to stop this madness and strict adherence to rules of fairness as set forth in the Federal Rules of Civil Procedure must begin here and now.- - - - - - - - - -
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About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.