Raymond P. Niro is a nationally recognized trial attorney specializing in the enforcement of patent, trade secret and related intellectual property rights. The name Niro, however, is not like any other in the patent industry. It was as a consequence of a lawsuit one of his clients brought against Intel in 2001 that the term “patent troll” was coined. It seems to me, however, that the fact that Niro is viewed by some as a bad guy is owed to the fact that he has been extremely successful, which means infringers have paid his clients an awful lot of money over the years.
On March 12, 2012, Niro went on the record with me in an exclusive interview. This interview came about because Niro and I will be speaking at the Managing Intellectual Property program titled US Patent Reform Forum 2012 on March 27, 2012 in Washington, DC. In a preview of what Niro will discuss on the 27th, we discussed many things, including the nearly constant attempts to erode patent rights, efforts to make it more difficult for patent owners to seek redress for infringement and what the America Invents Act will mean for patent litigation moving forward. We also discussed the undeniable reality that there are bad actors in the industry.
What follows is Part 2 of our conversation. To read part 1 see: An Exclusive Interview with Ray Niro, Mr. Patent Litigation.
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QUINN: Now, are you familiar with what’s going on with the ITC working group at all?
NIRO: The ITC?
QUINN: Yeah. It’s called an ITC Working Group, which seems like it’s a large number of the tech elites that are trying to make it more difficult to bring a case at the ITC. And I guess their position is that since the American Invents Act more of the NPEs are going over to the ITC to try and get exclusion orders and cease and desist orders. So they’re trying to weaken the jurisdiction of the ITC. What seems to me to be just another in a long line of attempts to weaken patent rights.
NIRO: No question. I’m not familiar with that, but it sounds like now that the ITC has emerged as a potentially favorable forum because of its speed and the recognition that you don’t have to be a manufacturing entity to still be engaged in competition. You know, if you’re a licensing company then you can get jurisdiction there. It’s not surprising to me that there might be a move to stop that.
NIRO: In that regard one of the things that’s sort of a sleeping giant of the AIA is Section 34, are you familiar with that?
QUINN: Probably. Can you refresh my memory?
NIRO: Well, Section 34 is sort of hidden somewhere in the back of the statute. And it says, GAO Study. The Comptroller General of the United States shall conduct a study of the consequence of litigation by Non Practicing Entities or by patent assertion entities related to patent claims made under Title 35, United States Code and regulations authorized by the title. Contents of the study. The study conducted under this section shall include annual volume of litigation, the volume of cases comprising such litigations. Impacts of such litigation. Estimated costs, economic impact—I’m chopping it—the benefit to commerce. And then the Comptroller General is to report back in one year after the date of enactment of the act, so we’re getting close. Submit to the Committee of the Judiciary of the House of Representative and the Committee of Judiciary of the Senate a report on the results of the study required under this section. Including recommendations for any changes to laws and regulations that will minimize any negative impact of patent litigation that was the subject of such study.
Think through that for a minute. Here you have empowered by Congress the Comptroller General to determine the economic impact of NPEs. Remember the scene from the Johnny Carson Show, the comedy skit where he played the Great Karnack?
NIRO: Karnack the Magnificent, he’d hold up the answer and then he’d ask the question? So what’s the answer? And the answer is what are the evil bad people that are undermining the patent system and have to be eradicated? Question? What’s going to be the result of this study? (Laughs) you know?
NIRO: Patent trolls are evil. I mean, it’s preordained, I think, that you’re going to have a study done that is going to have a negative reaction to NPEs, and there’ll be some modification of the law to try to eradicate them. So I’m not surprised that they’re trying to shut down the ITC, I’m not surprised that you have this attack on NPEs. I think it’s a organized group that are determined to wipe them out. But you have to be careful if you get what you wish for it might not be for the best.
QUINN: Well, at some point in time these folks that have spent all these many millions, tens or hundreds of millions of dollars to create their own patent portfolio, if they get their way it’s going to be worthless. Which is another interesting irony I think. But that’s—
NIRO: Well, you’re going to have the patent system become a game that can be played only by the rich. Now, think through the consequences of that. We live in a country that’s suffering from a huge economic crisis. Because it’s lost its manufacturing base. And it relies principally on technology or the evolution and the creation of technology to create jobs. But history shows us that jobs aren’t created by the big companies, not jobs in the U.S. The little companies, the start up companies, the companies that are created by entrepreneurs that have new ideas generate about 85% of the new jobs in America. We’re killing those people. We’re destroying them. And case in point here you have Apple. And I don’t want to pick on Apple. I respect Apple as a very creative, good company. But they create an idea, the iPhone, and where is it manufactured? China. 700,000 new jobs created last year in China. By an American company who can save money to build up its billions in dollars that it has stored away by going to China. Is that helping America? Well, I guess it helps us if we have new products and we see them. But it certainly doesn’t help our unemployment. I’m not saying Apple has to make products in the U.S. But the reality is if the creator of that invention was a small entrepreneur, they might not be going to China, they might be trying to get a manufacturing facility and create that product in the United States. That has been historically what happens. But we’ve lost sight of that. I mean, where are the jobs—where are the big companies taking their jobs? To India, China, they’re outsourcing, you know, everything. So we’re really going as a country, we’re really going to suffer as a consequence of this almost fanatical propaganda that’s become popular now that NPEs have no place in the litigation and enforcement arena for patents. It will swing back eventually, but the question is what’s going to be left of our country by the time it does.
QUINN: You know, and it seems like NPEs now are universities and federal labs and independent inventors, and R&D companies. And if Congress is just going to line them up and shoot them one after another I don’t know what is going to be left of our economy because, I mean, I understand—I have a lot of respect for Apple as well because I think on the patent side, on the patent procurement side they do a lot of things really, really well.
QUINN: And I understand why they manufacture overseas because it costs less and we need to have better tax structure for manufacturers in the U.S. and less regulation. It shouldn’t be so ridiculously difficult to set up a manufacturing facility in the U.S. It just—I sometimes hardly recognize the country that we have right now.
NIRO: Well, look at Germany. Germany manufacturers, they make products. Japan makes products. Why are they able to have manufacturing facilities and be competitive and we can’t? Well, you know why Germany can do it? Because they have a highly skilled, highly efficient work force that maintain high levels of productivity. They train people. Let’s say you’re a machine tool operator. They train you to understand how a machine tool works, how to make molds, how to take the molds apart. So that the level of skill of the average worker is way higher than the level of skill of our workers. Now that’s an educational thing. I mean, there’s nothing inherently greater about the German intellect than the American intellect. So why can’t we train our people in the work force to do the same thing? And therein lies the ability it seems to me to start manufacturing. Now what does Apple do? They’re getting a huge black eye using these companies that fire pregnant women, of course they’re cheaper. They have a culture that’s totally opposite of what our culture is. You can’t run a company in the United States and fire women because they become pregnant. Or have a work force with injury levels that exceed acceptable levels. And this is all coming out now that the manufacturing source for the iPhone is potentially a bad place to work. They would never be able to have that tolerated in the United States. So, you know, you wonder why don’t we get it? And the reason we don’t get it is our country is simply run by political forces that respond to big money. And the big money happens to be concentrated in big corporations and they have PACs and super PACs and that’s what Congressmen and Senators respond to.
QUINN: Yeah. Well—
NIRO: The problem, the patent problem is, you know, a bit of the microcosm of what’s going on generally in the country. But it’s a shame. I’ve been doing this for 40 years. It’s an absolute shame that we’ve come down so hard on inventors. And I see so many people that are worthy inventors, especially now where you can invent at home on your computer — you don’t need a $100 million research lab to create something that has value on the Internet. I mean, look at the creators of Google. What did they have? They didn’t have a big research facility at the time. They had an idea. And they created that idea, and they created a company from it. That’s what we ought to see promoted by inventors. That’s the way our country has prospered by having individual inventors come up with ideas that can get commercialized. And oftentimes they can’t commercialize them themselves so they’ve got to go out and try to get somebody to take a license. Or they have to address the theft of their invention in some way. I don’t think that that’s bad. I think that that’s good for the country.
QUINN: I do, too. But I wonder— I’d like to get your opinion on this because if you’re going to go down this path where you’re going to be an inventor and a licensing company, somebody that would get characterized as an NPE, do you think we’re now at the point where those folks really ought to think about having at least some kind of modest manufacturing going on, and maybe even have manufacturing here in the U.S.? Because it seems that the narrative is being written by people who want to paint this entire research, development, innovation industry as bad actors, and that’s not the case. So I’m trying to think, well, maybe the way to turn it around is you get some modest manufacturing capabilities so you’re not an NPE, and oh, by the way, you’re actually employing people in the U.S. to do it.
NIRO: Well, the answer is, yes, if you can find people like that. If you can get people that are attempting at least to manufacture, that’s good. I think the second thing that you’ve got to do strategically is you can no longer try to have the person that’s enforcing the patent be an investor in the technology. You need to have the inventor front and center. And you can explain, I think, that the inventor needs help. It’s like the inventor goes to a bank and borrows money, the inventor needs some help to license and enforce. But the inventor is the plaintiff. The inventor is the licensee. I don’t think Congress or judges, for that matter, are going to come down hard on inventors. I think that there is a tendency to come down hard on people that invest, venture capital people that are investing in the technologies.
One, I think you really—if you’re a manufacturer you’re in a lot better shape than if you’re not. I don’t think universities are under attack, I don’t see that. I think they’re think tanks and they’re going to be spared. But I do think that the guy that’s just investing in technology that’s a quote “NPE” is going to have a rough road. I don’t think that an individual inventor is necessarily going to have that rough road if he can show, or she can show, hey, look, I sat at home, I created an idea, it’s an Internet marketing scheme, online retailing, or whatever. And it’s really good and I’m going to pursue claims against people that are using my invention. I think that’s a much easier sell than saying I’m an acquirer of patents that managed to sign this guy up and take the majority of his royalties so that I can become an enforcer of patents. Much tougher sell, I think.
QUINN: Yes, I think you’re right. And I don’t know that I would say universities are under attack at the moment, but boy, I’m starting to see the groundwork being laid where the industry, the tech industry, has been funding some research and saying that this model is a highly inefficient model that they use in order to derive revenues, and so on and so forth. I’ve also seen challenges to the Bayh Dole Act, which is at the heart of university research. So I think that this is an inch, an inch, an inch, and at the end of the day I don’t like where we’re headed. Because along the way if you’re going to follow this trajectory and try and reign in the bad actors by treating us like we’re in third grade, you all get punished.
QUINN: Rather than try to figure out who was at fault. Then we’re going to wind up with a patent system that isn’t really worth having.
NIRO: Well, I happen to agree with you, and that’s the—that’s the challenge. The key is to have voices heard that reflect that view. I mean, I think it’s an important part of the dialog that there is some voice that’s heard besides the big corporate voice. I think when you look at the history of this legislation, although there was some lip service paid to the plight of the individual inventor, he really didn’t have a voice. And there were some, I think Chief Judge Michel, made a point that where is the voice of the individual inventor in this whole program? That Congress is listening to a select few and ignoring the vast majority. Now, maybe that’s the way it is structured to operate. He who has money gets heard and he who doesn’t doesn’t get heard. But by shutting out the individual inventor, I think you’re missing the boat as to a real source of creativity and contribution to the economy.
QUINN: I agree. I agree. And I think that we could probably end on that. I told you this would only take about 30 minutes. I really appreciate you taking the time to share your thoughts with us.
NIRO: Well, I appreciate the opportunity to be heard. I’ve kind of made it part of my responsibility as somebody that’s been in this business for a long time. You know, and I wasn’t always representing plaintiffs, I was representing defendants. I’ve been on both sides of the fence, and I still represent defendants in cases. So it’s not like I’m speaking from a lack of experience in this area. I just have seen an alarming trend that is negative and I feel an obligation to speak out. I’m fortunate that some people will invite me to speak out and Dan McCurdy and I, for example, have been supposedly opposite each other in expressing points of view on patent matters. And it was really refreshing, I said to Dan at the end of a conference we spoke at together, I said, you know, it’s amazing to me we actually agree more than we disagree. And we’ve become good friends, and I really enjoy Dan because he’s an articulate, smart, good guy who’s views aren’t that different than my views, or yours. There are a lot of us that feel this way and hopefully we get a chance to say it to people that count.
QUINN: Well, I will say it often as I possibly can. And I really look forward to hearing you and Dan speak at the Managing IP Patent Forum.
NIRO: Well, thanks a lot. I appreciate the opportunity.