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Google: We Don’t Sell to 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: May 2, 2013 @ 7:45 am
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Late yesterday I was contacted via telephone by a representative of Google about my article titled Is Patent Litigation Really a Problem for Big Tech? I was told during that telephone conversation that I misunderstood what Suzanne Michel said during the symposium at American University. I was also told that Google does not sell patents to patent trolls, although other big tech companies do, which concerns Google.

There is a video tape of Michel’s presentation, which you can view online courtesy of American University. I have reviewed the pertinent part of the video tape multiple times, and I have asked for input from several trusted advisers. I have also received unsolicited input from others who have also seen the video tape and who were present at the event. What is most clear is that there is a reasonable difference of opinion about the meaning of what was said.

Google has asked for a retraction based on what was said at 58:45 into the video segment, but what I wrote relied upon what was said at 53:45 into the video segment. I am not entirely comfortable with a retraction because I think my interpretation of what Michel said was fair, although I’m willing to accept Google at face value when they tell me that they do not sell to patent trolls. So rather than retract and say I misinterpreted what was said I will leave it to the readers to determine the reasonable interpretation of what was said during the presentation.

Let’s begin starting at approximately 51:35 minutes into the segment. This is after her presentation and during the Q&A period. I asked a question, prefacing it by saying that I disagreed with almost everything she said, to which she responded: “I’m not surprised.” Our exchange then went as follows:

QUINN: What strikes me as odd is, and it’s not just Google, across the board in the industry, you bring this problem on yourself. You are settling crappy cases for nuisance value over and over again.

MICHEL: We don’t.

QUINN: Well to say it doesn’t go on in the industry is false, and you know it.

MICHEL: Absolutely, because that is the right business decision to make.

QUINN: No it is not. We can have this discussion. The insurance industry figured this problem out in the 80s. But the other thing is the industry continues to litigate and want serial challenges on patent after patent after patent where the technology is good and the patent is good and the patent is confirmed valid over and over again. So we have this system where the big tech companies are settling crappy cases and preventing those who really innovate from getting the fruits of their labor, and that is the problem. And I don’t see anybody trying to address the problem.

MICHEL: Two things. One is I want to back out to a higher level. I don’t blame trolls and mean to be demonizing trolls, so thank you for the question because I think it will help me make a connection here. That is a reaction to a the circumstances created by the system. It is just a market response to the system as it exists. What the tech companies do is also a market response to the system that exists. So when you see that kind of behavior, in both cases, you try and identify the root causes of what is causing the kind of behavior that is not good for innovation and address those root causes.

It would take me another hour to explain why what happens in the tech industry happens in the tech industry but I do believe that there is too low of an obviousness standard for this kind of patent. I’m not really meaning to impact other areas, but if everybody else is running after every trivial patent and building a big portfolio, you have to too. What that does is put lots and lots of trivial patents out into the world, which you can’t maintain, because the maintenance fees are too high, so you sell them off to trolls, who then go and litigate them forever, and that’s happening more and more and more, and that’s really frightening. It’s just a bad situation all around.

QUINN: You don’t have to have massive patent portfolios to go after trolls because you can’t sue them because they aren’t doing anything because they are trolls.

MICHEL: You have your massive patent portfolio for competitor reasons. And you absolutely have to have it. Absolutely.

QUINN: Are there a lot of competitor lawsuits in this area?

MICHEL: It’s called mutually assured destruction. That is the dynamic. It absolutely is the dynamic you have to have it. And Google tried not to and it didn’t work. You have to have it. You cannot opt out of the patent system and decide I’m an open source company and anyone can use my stuff. You have to have a massive portfolio of your own and that is really expensive and it is what it is.

(emphasis added).

Starting at approximately 58:45 minutes into the segment is where Google pointed me to demonstrate I misunderstood Michel. Starting at this point she explained:

What’s happening more and more now, compared to two years ago, is that operating companies are selling off these massive portfolios that they have built and have become too expensive. I’ve been on panels and in conferences with in house counsel saying I don’t like doing this, I have to do it, everybody else is doing it, I have to do it, and these patents are sold off. We just get more and more litigation. That is not a good situation. I don’t really see that litigation environment getting any better. I see it getting worse unless something is done.

Here Michel is unambiguously saying that she has been told that at least some big tech companies are making the decision to selling to patent trolls. Thus, the premise of my article about whether patent litigation is really a problem if big technology companies are selling to patent trolls holds. In fact, the problem as described to me by Google during our telephone call suggests that the sale of patent portfolios held by big tech companies to patent trolls is a problem that Google is very concerned about.

Now I have been told that the use of “you” is clearly and unambiguously Michel speaking in terms of a hypothetical industry. Perhaps Michel was using “you” in a royal, hypothetical sense that was intended to mean “everybody but Google.” But I don’t understand why she would be talking about how the tech industry operates, giving an example of how the tech industry operates, but then not explain that this isn’t how Google does business. She had no trouble telling me directly that Google does not settle for nuisance value, although that is in her opinion the right business judgment. I would think that if Google doesn’t sell to patent trolls at some point during her explanation of how the industry works she would have mentioned that she wasn’t referring to Google.

In any event, the short of it is that Google says they do not sell to patent trolls, but others big tech companies do sell to patent trolls.

I have reached out to Google to inquire whether they would like to make an official comment. If they respond I will add that comment here.

In conclusion I will just say that it makes no sense to me that any big tech company would sell to a patent troll, and it makes less sense that they would then complain about patent infringement lawsuits after having sold to trolls. For goodness sakes, if you don’t want to maintain the patents let them fall into the public domain. Wouldn’t that be better than getting held up by patent trolls later?

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Posted in: Gene Quinn, Google, IP News, IPWatchdog.com Articles, Patent Litigation, Patent Trolls, Patents

About the Author

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.

 

24 comments
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  1. I offer the following comments as the student organizer of the event:

    American University Washington College of Law is grateful for the time and energy Suzanne Michel donated to our academic debate and to help the students of AU.

    I personally organized the event. At the event, Mrs. Michel, speaking academically, was speaking of a broad problem in the technology industry—that bad patents can issue in bulk and then make their way into the hands of assertion entities. Additionally, comments made in the academy are just that—academic.

    We are grateful to Mrs. Michel for continuing the academic debate and contributing valuable time and energy to it, and regret if the debate has been read as anything other than academic.

    American University Washington College of Law, the Intellectual Property Brief, and the Administrative Law Review remain committed to a vibrant academy and a creative discussion of the patent law. I personally greatly appreciate Mrs. Michel’s support for our mission and her generous donation of time, as well as Gene Quinn’s donation of his time and comments over the years. Both have and will likely continue to participate in active intellectual discussion meant to spur further innovation and reform in the patent law.

    American University, the Intellectual Property Brief, and the Administrative Law Review remain committed to a vibrant academy and a creative discussion of the patent law. I personally greatly appreciate Mrs. Michel’s support for our mission, and thank her for her time.

    Jonathan R.K. Stroud, Student Organizer, Second Annual Patent Administrative Law Symposium
    jonrstroud@gmail.com

  2. [...] UPDATED: May 2, 2013 at 12:17am ET — An earlier version of this article explained that Google sells to patent trolls. Google has since informed me via telephone that they do not sell to patent trolls, but other big tech operating companies do sell to patent trolls, which concerns Google. See Google: We Don’t Sell to Patent Trolls. [...]

  3. I read her comments as “you” meaning the hypothetical you, though I can see why you might lump Google into that group until Google says it is not part of that group — which it is apparently now saying.

    That aside, thanks for putting this so clearly: “So we have this system where the big tech companies are settling crappy cases and preventing those who really innovate from getting the fruits of their labor, and that is the problem.”

  4. Thanks Michael. I plan to follow up on that thread. If you would like to offer any thoughts for publication you are always welcome to do so.

    I hope all is well.

    -Gene

  5. Well, my wired op-ed lays out my views pretty clearly – and Suzanne’s points just reinforce them. I suppose Google’s view is that they are above it all, but I think they would cross-license with IBM and cut out startup competitors in a heartbeat. As would any rational company, by the way.

  6. Isn’t the real impetus behind Google’s stance, their business model? Google makes money by offering services and products for free and making money off the advertising associated with such services and products. Naturally, Google doesn’t want any regime that will impede or “tax” (if you will) their ability to offer “free” products or services and that is precisely what the patent system was designed to do: grant a limited monopoly to the first inventor who then gets paid (hopefully) a royalty from anyone using that invention. In other words, Google’s business model is directly at odds with the exlusionary nature of patents. Of course, Google is going to be rabidly anti-patent because patents directly conflict with their core business model.

  7. I am less concerned with a naked assertion like “cut out startup competitors in a heartbeat. As would any rational company, by the way” and far more concerned with the real-world effects of what that statement entails – the length and depths of the attempts to cut out startup competitors.

    It is one thing to recognize that there are anti-patent forces in the world. It is quite another to ignore that reality and what the capture of patent law by those forces would mean in the long run.

    We are very much in that era of agency capture.

  8. Isn’t Google’s motto “Don’t be evil?”

  9. Google and its patent activiIties fascinate me. They just never seem to get it. Even as they learned some difficult lessons with the Smart Phone patent disputes (like the need for a good patent portfolio!) it seems like they still want the world to comform to their ideal patent worldview. Every time I hear a Google executive speak on patents, it’s as if they’re still trying to process why it’s not working for them.

    You either have to be pretty naive or pretty idealistic to think you’re going to play at the level they want to play at and be complacent about patents when you know the rest of the industry is serious about patents.

    Whatever they’re feelings toward patent trolls, it’s clear that they now begrudgingly view patents as a necessary evil to do business.

  10. What do you do with a patent portfolio that’s too expensive to maintain? The notion of letting it fall into the public domain, rather than into the hands of trolls, sounds good at first blush, but it doesn’t solve the problem: you’re still going to get hammered by all the patents your competitors did sell to the trolls. From a business point of view, then, you might as well get some cash out of them. If you’re careful not to sell patents that read on anything you’re doing, it’s your competitors who’ll suffer the consequences — again, a good business decision.

    Game theory teaches us that Indepenent actors, taking rational actions, often could do better if they were to act cooperatively. This is one of those situations.

    If the big players (Apple, Microsoft, Google, IBM) seriously want to knock down the cost of trolling, they’ll have to get together, throw their junk patents (junk = not worth the maintenance fees) into a pool, and cross-license the lot of them, rather than release them into the hands of trolls. Agree to let the maintenance fees go unpaid, and the things will cease to be a threat after a few years. (It’s rather like controlling nuclear proliferation with arms reduction treaties.) A bit of cooperation might also help in calling the bluffs of trolls, whose business model depands on minimizing actual litigation of their infringement suits. Cooperative action what finally slew the Lemelson patent monster, a lesson you’d think they’d have learned.

  11. 2 points:

    1) Suzanne Michel’s argument for building a patent portfolio is to fight patent trolls! Doesn’t add up – you can’t fight a troll with patents. #Asymmetric

    2) Suzanne Michel said “It would take me another hour to explain why what happens in the tech industry happens in the tech industry”

    Hey – maybe because other industries don’t inefficiently re-invent the wheel each time they put out a new product/service! First they check if someone else already found a solution to a problem. Simple prior art search is far more efficient than defining requirements + meetings + getting developer estimates + Requirements docs + implementation + testing + finding problems + back to drawing board + etc…

  12. but it doesn’t solve the problem: you’re still going to get hammered by all the patents your competitors did sell to the trolls

    Seriously?

    I think the problem is that you are using someone’s else’s property Mr. Demers.

  13. There are several areas in which Michel is way off base here:

    1 – The idea of a patent portfolio that is “too expensive to maintain” is a canard. The total cost of drafting, filing, prosecuting and maintaining a US patents is ~$50k for a large tech company, of which only ~25% is maintenance fees.If you can afford to draft, file and prosecute an application, you can afford the much lwoer cost of maintenance. It certainly makes sense to carefully review when 12-year maintenence is due, but only a fool would sell theri portfolio to save on maintenance fees.

    2 – It does not make business sense to settle nuisance suits if you look at the big picture. There are plenty of examples of companies who have a clear policy not to do so, and those companies see a lot less such litigation than those who pay up every time. In the words of one such CEO “I’d rather pay lawyers than trolls”. If that attitude were more prevelent, the whole nuisance patent suit problem would die off pretty quickly.

    3 – It is ironic that the outcome of Google’s own action against Microsoft proves her wrong on the “need” to buy up “trivial” patents – and under the circumstances utterly hypocritical of Michel to charcterize the situation in this way. Google asserted what might reasonably be described as “trivial” patents – and were awarded damages commensurate with the significance of the patents in suit.

    Frankly, it’s hard not to conclude that Michel’s position is purely self-serving. Google sprang into existence, and proceeded to ride on the back of decades of inventemnt in R&D totaling billions if not trillions of $, and seem to demand a free ride instead of paying the people who invented all the foundation technology on which is critical enabler of everything they do.

  14. Gene,
    The answer to the question need not be left to speculation or your readers’ interpretation of remarks that Suzanne Michel made. Publically available facts on USPTO assignment page http://assignments.uspto.gov/assignments/q?db=pat&asnr=GOOGLE%20INC.&page=1 unambiguously show that Google assigned only 38 patents or applications and that the assignments were made to HTC, GE, Trimble Navigation, and WideOrbit – all practicing entities – and in the context of strategic moves. For example, WideOrbit acquired for its own operating business several of Google’s patents when it acquired Google’s radio automation business.

  15. Ron,

    Good indicator, but hardly conclusive, as that is not a mandatory system.

    It seems a bit short to think that a company Google’s size has only ever sold 38 patents.

  16. Anon, you are technically correct – recording an assignment with the USPTO is not mandatory. However, given potential malpractice liability in case of erroneous subsequent assignments, I doubt that the attorneys handling the acquisition of patents from Google for an entity intending to enforce them would have neglected to record assignments at the USPTO: “An assignment, grant, or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage.” 35 U.S.C. 261.

    As to the small number of patents sold by Google, it appears entirely consistent with the generally known fact that Google has been an eager acquirer of patents – not a seller. Given this evidence, I would let this go – just acknowledge that Suzanne Michel did not refer to Google in her remarks but generally to other IT companies.

    That said, I disagree entirely with her characterization of the patent system being “just a bad situation all around” and that inventors “put lots and lots of trivial patents out into the world.” What are “trivial patents”? Are they the same as “bad patents,” the nonsensical folklore term used without any quantitative empirical evidence? For every patent that she can identify as “trivial” I will identify a similarly “trivial” Google patent.

  17. Ron – having conducted numerous patent sale transactions on behalf of an operating company in a similar technology area to Google’s I can tell you that it is far from unusual for assignements to go unrecorded.

  18. “I think the problem is that you are using someone’s else’s property ”

    In the case of trolling, it’s property that someone else unexpectedly shows up and claims to own.

    The better analogy is finding an unexpected toll both on the road, where the guy in the booth informs you that he owns this stretch of road — and introduces you to his lawyer. No matter how sketchy his property deed looks, it’ll cost you a million bucks to find out if it’s legit.

  19. Trivial patents ought to be easy to design around, if you are not too stupid, lazy or arrogant.

  20. In the case of trolling, it’s property that someone else unexpectedly shows up and claims to own.

    This stuff is in the public record.

    Sorry – I am not buying your view here.

  21. James-

    “it’ll cost you a million bucks to find out if it’s legit.”

    That is the widely held belief in the industry, but isn’t really correct. There are a variety of mechanisms and strategies that can be employed for far less than $1 million. The industry, however, doesn’t want to employ them for some reason. I have offered to represent anyone facing a patent troll, but no one ever takes me up on the offer. Interesting! They want the problem to persist so they can act like there are no options.

    I still wait for the call from one CEO or CFO that has interest in fighting.

    -Gene

  22. Her statement was ambiguous, but it was objectively unreasonable to take that ambiguous statement and automatically assume that she was saying Google sold to trolls given everything else they’ve said about the problem.

    The idea that some patents become too expensive to maintain is no canard. Anyone who thinks otherwise is either horribly naive or has never worked in-house for a company that is cost sensitive.

    There have been studies that indicate that people who publicly state that they don’t settle with trolls see no reduction in litigation filings by trolls against them than the corporate population at large. It’s nice to say that the tough guy image will pay off in the end, but I’m not aware of any studies that support such a position.

  23. Troy-

    You say: “Her statement was ambiguous, but it was objectively unreasonable to take that ambiguous statement and automatically assume that she was saying Google sold to trolls…”

    Seriously? How did you manage to write that without an alarm going off in your head to alert you to the internally inconsistent position put forth?

    You admit her statement was ambiguous in your view, but it is “objectively unreasonable” to assume that when she talks about the entire industry doing something that she was including Google? Even though she repeated said “you” in reference to what needs to be done? So in her opinion certain things are a necessity and Google doesn’t do that. So at best she is saying that Google doesn’t do what she believes is mandated by the industry norms.

    As far as my position being “objectively unreasonable” because of what Google has said elsewhere, are you that naive? Do you really think that everything everyone says is objectively accurate and they don’t mislead? What about the IRS lying to Congress about targeting conservative groups? What about Intellectual Ventures saying they would never sue to enforce their patent portfolio?

    I could go on and on and on with examples of individuals, corporations and government agencies that say one thing initially and then later it is learned they were wrong or outright lying. Under your naive view I guess if someone says something then you have to take their word for it forever and not question it.

    What is objectively unreasonable is YOUR comment.

    You also say: “The idea that some patents become too expensive to maintain is no canard. Anyone who thinks otherwise is either horribly naive or has never worked in-house for a company that is cost sensitive.”

    I never said otherwise. What I said is that being forced to sell to trolls is simply false. If you can’t afford to keep your patents and you are afraid to get sued on them and can’t figure out the business responsible way to take back a license before you sell then you shouldn’t sell only to get sued. That is idiotic. You should let the patent fall into the public domain.

    You see, you can’t have your cake and complain about it to.

    As far as the tough guy image and taking a hard line against trolls, that is the ONLY approach that will work. The fact that you question that reality and look for a study to support the obvious speaks volumes about your knowledge and familiarity with litigation strategy. Look to the insurance industry, as I explained. All the lessons you need are right there. No study necessary. All a matter of public record and objective history.

    -Gene

  24. Gene,

    You’re clearly incapable of rational disagreement on this subject. I suppose that fact should have been obvious based on your hyper-literal interpretation of Michel’s comments. It’s not worth my time to try to dissuade you from your strongly held beliefs on the subject. For the clarification to others who may read and be undecided, though…

    1) When a company decides to sell patents, they have a responsibility to their shareholders to obtain the highest price they can get. That includes selling to trolls if the troll is willing to pay the highest price. That said, some companies attempt to weight the negative publicity and potential backlash from selling to trolls (e.g., some companies claim they will pursue infringement against companies who sell to trolls), thereby rationalizing a lower price to someone else. Nice in theory, but difficult in practice.

    2) The “canard” part of my response was to Dave W who claimed that not being able to afford to maintain a patent was a “canard.” I thought that should have been obvious from the context, given that “canard” is a fairly rarely used word, and was used exactly once prior in the discussion. You obviously understand the concept of a license back, and it appears that you agree that not every company can afford to maintain every patent it ever creates. License-back is pretty much standard in ALL sales by practicing entities (to anyone, including trolls). That said we should all be aware of the fact that patent licenses can be broken by a bankruptcy filing (if they’re not careful to make the license non-executory). In which case, there IS the potential you can get sued on a patent you sold even if you have a license back.

    3) On the tough guy defense…ignore the studies if you wish. However, as patent attorneys, I think we should all be familiar with the idea of “unexpected results.” It was surely a surprising result to me (heck, I still lean towards fighting trolls).