The Problem with Patent Trolls
|Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: July 28, 2011 @ 7:24 am
Recently several of my articles have been critical against patent trolls. This is not something new for me, I have been critical of patent trolls for quite some time. Over the years I have also been very supportive of patent owners having the right to bring patent infringement lawsuits to enforce rights that have been granted in the patent; after all, if you cannot enforce a right is it really a right? I think not. This has lead me to at times champion the patent grant and oppose any watering down of the rights of patent owners, as was contemplated in years past with previous versions of patent reform.
For some my pro-patentee and anti-patent troll positions have been difficult to reconcile. I have been contacted privately by some who have urged me to tone down my use of the term patent troll, and that is a fair point. After initially resisting using the term for a great while I embraced its usage years ago, back when earlier versions of patent reform were seeking to curtail the right of a patent owner to obtain due compensation (in the form of damages) for infringement by a defendant. Periodically the Supreme Court has even raised the issue of patent trolls in a casual manner as justification for one bad ruling or another. Typically most use the term “patent troll” to refer to non-practicing entity, but doing that is simply absurd. So I turned to embracing the term. Does it feel right to call a university a patent troll? I think not, and I think most would agree. So not all non-practicing entities can be patent trolls, can they? See how the usage of the term starts to really crystallize the issues?
Lately Lodsys, LLC, has been in the news a lot because of their patent infringement lawsuits against Apple App Developers, Android App developers and others. See Angry Birds Developer Sued by Patent Troll. But is Lodsys a patent troll?
Another company in the news with some frequency, and with a far larger patent portfolio than Lodsys, is InterDigital. They recently filed a complaint against Nokia, Huawei and ZTE at the ITC, alleging patent infringement of seven different patents. That is more patents than are owned by Lodsys. In fact, according to the InterDigital Amended 10-K filed with the Securities and Exchange Commission, as of December 31, 2010, InterDigital owned a patent portfolio consisting of approximately 1,300 U.S. patents and approximately 7,500 non-U.S. patents. InterDigital also reported that as of December 31, 2010, the company had approximately 1,200 pending applications in the U.S. and approximately 8,500 pending non-U.S. patent applications. These InterDigital patents and pending patent applications relate to a variety of digital wireless radiotelephony technologies, including 2G, 3G and 4G technologies. Is InterDigital a patent troll?
It is certainly true that a patent gives you the right to stop others from engaging in activities that infringe, and it is legal to purchase a patent and seek to enforce the patent whether you are a practicing entity or not. For this reason I typically go one step further when defining a patent troll. To me a patent troll is not just someone who has acquired a patent for purpose of licensing or bringing a lawsuit, but rather one who is engaging in some kind of unfair business practice. The truly bad actors that are the ones who should rightly be called patent trolls are the patent owners that do no due diligence prior to filing a lawsuit to determine if there is, in fact, ongoing patent infringement. The bad actors are also increasingly looking to shake down small businesses by bringing specious patent infringement lawsuits knowing that it will be far cheaper for the defendants to settle with a licensing fee than it will be to litigate, even if there is clearly no infringement.
The telltale sign of a patent troll is one who is abusing the patent right in order to shake down a defendant for payment. This type of behavior is typically exhibited by non-practicing entities who are not innovators, but rather acquire patent rights. However, the act of bringing specious claims to provoke a settlement would, in my opinion, be just as bad if brought by an innovator.
Based on this understanding of the term “patent troll,” it seems to me that Lodsys is correctly characterized as a patent troll, or at least as one exhibiting signs and symptoms of being a patent troll. They acquired these patents from Intellectual Ventures, who had already licensed Apple, a license Apple claims covers their App Developers, which sounds correct on its face. This would mean Lodsys is suing at least some, namely the Apple App Developers, who have every right to be doing what they are doing.
On the other hand, InterDigital is not what I would call a patent troll, although some certainly would. Innovators who legitimately have a grievance and who seek redress in the federal courts simply cannot be characterized as patent trolls, even if they are non-practicing entities.
All non-practicing entities are NOT patent trolls. If all non-practicing entities were patent trolls that would mean that universities, federal laboratories and R&D companies (i.e., much of the biotechnology industry, for example) would all be patent trolls. With this in mind I would exclude InterDigital as a patent troll because they engage in research and development to create technologies. The traditional patent troll is one who simply acquires patents for the sake of enforcing them against others, never having contributed anything by way of innovation themselves.
I do think patent aggregators could play a positive role. For instance, they could provide a useful outlet for independent inventors who do not want to be part of a large organization (secondary market) or be forced into marketing and management activities… They also could perform the function of a private clearinghouse for patent rights (sort of like a standards committee does). This would reduce litigation, increase the dissemination of new technologies, and decrease the cost of licensing activities.
Dale is correct. There is nothing inherently wrong with patent aggregators, and the licensing and sale of patent rights does not make one a patent troll any more than does the purchase or acquisition of patent rights from an innovator. A patent is a right granted for the disclosure of a useful, new and nonobvious innovation. It is given by the federal government as a reward, and it ought not be up to anyone other than the owner what to do with that property right. So whenever we attempt to define a patent troll we must look past the acquisition of the right and whether the person owning the right is a non-practicing entity.
Certainly it is fair to observe that the bad actors, who I refer to as patent trolls, are almost always non-practicing entities. It is also fair to observe that the bad actors are almost never innovators. But it would be best to use the non-practicing entity and non-innovator factoids as important clues to whether or not the patentee plaintiff is a patent troll. But without more neither should rightfully lead to a conclusion that one is a bad actor, and therefore a patent troll.
In my e-mail exchange with Dale, which incidentally was in response to NPR citing an IPWatchdog article about Intellectual Ventures, he said: “ I do not think the answer is to weaken our patent system or call people trolls. In addition, I do not think the story of people walking all over other people’s patent rights is heard often enough.” This was in response to my saying that the potential for abuse of the IV patent portfolio is what scares me. I am also troubled by the fact that IV had always said they were building a defensive portfolio, but now are bring patent infringement lawsuits as a plaintiff. Further, I am troubled by the accusations that IV has outsourced troll-like litigation by dumping patents to entities that then themselves become patent trolls.
There is much still to know, but if IV ever does want to become a patent troll good luck to everyone! See Intellectual Ventures: Independence Day Take II. With 30,000+ patents such a decision could be nearly catastrophic for many,who would have no ability to fight back against an extraordinarily well funded non-practicing entity. Of course, for now, that is really just a fear, or to put it in scientific terms, a hypothesis. There is some evidence, perhaps not enough to call it a “theory,” but still enough such that the fear is not irrationally baseless.
In any event, returning to Dale’s point, he is 100% correct. All the focus in the media about patent trolls and how patents are being abused is popular but wholly misleading. Yes, there is a problem associated with bad actors in the patent space, but the story that doesn’t get told enough is the one relating to the small business that innovates only to have larger business rip them off. While it is easier now to get contingency representation for patent infringement litigation, that does not mean it is at all easy.
Easier to get needs to be understood in relative terms; namely easier now because it is possible in some cases when in the past it was virtually impossible to obtain contingency representation. So what that means is even now much ongoing infringement is not addressed because it costs too much to pursue an infringer, and that may well be where aggregators come in, buying good patents and then funding a fight that the innovator never could have undertaken. That only properly becomes characterized as a bad actor situation if the patent infringement litigation is specious or simply being used to shake-down the defendant.
Everyone would do well to remember that the system is set up to encourage disclosure so that future innovators can build upon the inventions of those who have come before. The patent is the reward for the benefit received. A patent, like any other right or asset, can be abused. A patent, like any other right or asset, can also be trampled. The trampling and ignoring of a valid patent is no less condemnable than the abuse of a patent. Both pervert the system. Both harm innovation. But despite what Google thinks, patents in and of themselves are not evil and they do not block innovation.
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Posted in: Gene Quinn, IP News, IPWatchdog.com Articles, Patent Fools™, Patent Litigation, Patent Trolls
About the Author
Gene Quinn is a US Patent Attorney, law professor and the founder of IPWatchdog.com. He is also a principal lecturer in the top patent bar review course in the nation, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam. Gene started the widely popular intellectual property website IPWatchdog.com in 1999, and since that time the site has had many millions of unique visitors. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, USA Today, CNN Money, NPR and various other newspapers and magazines worldwide. He represents individuals, small businesses and start-up corporations. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.