Today's Date: November 28, 2014 Search | Home | Contact | Services | Patent Attorney | Patent Search | Provisional Patent Application | Patent Application | Software Patent | Confidentiality Agreements

A Patent Troll Conversation – One on One with Rachael Lamkin


Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog, Inc.
Principal Lecturer, PLI Patent Bar Review Course
Posted: June 21, 2013 @ 10:54 am

View Gene Quinn's profile on LinkedIn

Tell A Friend!



#The 1 Patent Bar Review Course
LIVE or HOME STUDY ~ CLICK HERE to REGISTER
Call 888.296.5973 and mention "IPWatchdog" to save 10%


Rachael Lamkin

Rachael Lamkin is a patent litigator who recently became Associate General Counsel at Blue Ocean Enterprises, Inc. I have known Rachael virtually for several years, communicating with her both via e-mail and via Twitter (she is @Rachael_IP on Twitter).

Occasionally I have tried to convince her to go on the record with me so we could have a more in depth conversation for publication. After an exchange about six weeks ago relating to patent trolls and the definition of a patent troll I proposed the idea of an on the record conversation about patent trolls, which Rachael accepted. On May 10, 2013, we had the following conversation.

During our conversation we discussed our various definitions for a patent troll, the difficulty of coordinating a joint defense in a patent infringement case, potential solutions and a program that she is involved with called Troll Bono, which is a pro-bono effort to assist companies and individuals who are facing troll lawsuits.

Without further ado, below is part 1 of my conversation with Rachael Lamkin.

Advertisement

QUINN: Thanks Rachael for taking the time to talk to me.  I really appreciate it.  I wanted to get together with you for some time to talk about the various things that you and I go back and forth with over Twitter. Recently one interesting thing we talked about there was this idea of what is a Patent Troll, and then we dove into a discussion about whether the patent system is broken.  Let’s start with the big question because I think that leads into the definition of Patent Troll. When you hear somebody say the patent system is broken what goes through your mind?

LAMKIN: Well, the first, you know, it’s really fun to get on the phone with you.  I’ve been a fan of yours, I’ve been a fan of yours for a long time, and even when we disagree on an issue, Ilearn something so thank you for that.

You know, whenever I hear someone say the patent system is broken I have a tendency — my knee jerk reaction is to think the person doesn’t understand the patent system..  First, I don’t think the statement is helpful; before you can solve problems you have to articulate the problem.  Saying “the patent system is broken”…  that statement is so vacuous as to be un-helpful if not detrimental to trying to solve the problem.   The “patent system” (i.e., processes in place for obtaining, asserting, and licensing patents) works well.  What is arguably “broken” is ability for certain entities to assert the innovations for others and to do so using the public’s judicial system, at great cost to actual innovation and, frankly, at great costs to the courts and public.

QUINN: Right, right.  Okay, now we’re getting the tiger by the Troll. So let’s move into that. I suspect we will weave in discussion of whether the patent system bad.  As you and I were going back and forth on Twitter recently about patent trolls and how you define a patent troll it struck me that your idea probably is a lot closer to how Chief Judge Rader would define a patent troll. I understand that and it makes a lot of sense, but I don’t totally agree. So let’s start there.  How do you define a patent troll?

LAMKIN: So keep in mind this is a running definition but currently my thinking is that a “troll” would be an  entity that asserts patents with the sole aim in asserting the patent is to extract rents and that has never attempted to manufacture any product in connection with the assertedpatent.    and at some point, you know, it’s almost like the definition of promiscuity you know it when you see it.

QUINN: Okay.  So let’s start with the end of what you just said — extracting the rent.  What you’re talking about is just charging some level of a super competitive price.  Now, I have two problems with that.  One is by their very nature patents are supposed to entitle the person who is the owner to extract rent because if they can’t get rent out of it then the entirety of the research and development and the cost of the patent was – was wasted. Patent owners have to at least be able to recoup what they’ve invested and still make a profit worthwhile to have done everything in the first place.  Then the second thing, and I think maybe is is where we more directly disagree, is with respect to the unrealistic goals of a client.

I would prefer to start with a very narrow definition of what a patent troll is so that we can whack all the bad moles and then see where we are.  It’s a very conservative approach. But I would resist your definition because I think it’s fair to say that you get clients who honestly think what they have is probably a lot more valuable than what an impartial observer might think is reasonable.  And I don’t want those folks who have unrealistic ideas to be considered patent trolls. If they’ve got a good, strong right and want more than is justified then they are unrealistically optimistic, but not necessarily a patent troll.  You see where I’m going with all that?

LAMKIN: Well, I do, but there’s a lot there.  Let me see if I can unpack the first point because I think it’s really important, andtell me if I got this wrong, but I think you’re saying that the owner of the IP has to be able to extract rent to reward said owner for the cost of innovating the idea behind that patent; is that close enough?

QUINN: Yeah. I think that’s a fair characterization what I said.

LAMKIN: Okay. I think that thought is problematic for at least two reasons.  The first is that the original innovator is long decoupled from that patent and when you look at  who actually makes the money on the Troll assertions it’s the contingency based lawyers.  Often, the original inventors never expected to make money via patent rents and thus were not incentivized to invent for rents because the inventor works for a company and has assigned all rights –as is the standard procedure—to the company that employs said inventor.   Second, the purpose of the patent system is to encourage the useful arts, right?  I argue we need to really take a look at what that means. does that mean encourage net innovation or encourage a single idea or a single inventor’s innovation.  If it means net innovation, I argue the Troll lawsuits result in a net loss of innovation by killing start ups and innovation capital.  So I think we really have to be careful about saying troll suits play some roll in encouraging innovation.  I haven’t seen any evidence that the original inventors are the ones being rewarded in a majority of these Troll suits, and I’m not sure that the Constitution intended that individual inventors would to be encouraged as much as society as  whole.

QUINN: Okay.  Well, Let’s throw a name out there so we’re not talking necessarily in the abstract. Acacia Research.

LAMKIN: Okay.

QUINN: Would you characterize them as a Troll?

LAMKIN: I don’t know, I mean, I’ve heard of them.  But I would have to really take a real close look at how their structure works, right?

QUINN: Yeah.

LAMKIN: If it’s a room – it’s a boiler room, right?  The boiler room was for inventors for getting a piece of the overall, you know, rent at the end then, you know, then that’s more support of your argument, but I don’t know the structure the internal structure of how it works.

QUINN: You know like most things in life it’s complicated.  I know a little bit about what they do, obviously, they’re a publically funded company so anybody can research them and find out an awful lot about their business model.  I’ve interviewed their CEO Paul Ryan and – and most of what they do is they partner with inventors in order to go after people who are infringing and then they share in the proceeds.  Now, they also do occasionally buy patents outright. As I understand it what they do is if you’re an inventor and you have a patent or patent portfolio they are interested in then they offer you a deal. Some inventors need money up front or to cash out or what have you and that’s one avenue that they pursue. But most of the deals that they do they have some kind of sharing in the proceeds with the inventor.  They’re one that a lot of people would point to as a patent troll, but that seems quite inaccurate based on what I know. At one point I would have agreed, but knowing about their business model really suggests they are not trolls or engaged in trolling.

I get solely what you’re saying, but the question seems like it should be whether the inventor, the creator, is the one who’s really getting the benefit because this is supposed to be incentivizing. I think a lot of the folks that are out there that are labeled patent trolls by the broader community are folks who are sharing with the inventor.  Either they pay the inventor an appropriate lump sum so that the inventor is okay with a buy-out or they’re collaborating. You know, Ray Niro represents inventors who are the owners of their technologies and I think almost everybody would say he’s a patent troll, or represents patent trolls. After all, he is the one the term patent troll was actually coined after, but it doesn’t seem to me that he is a patent troll by any fair definition.

Anyway, perhaps shifting gears a little. We spoke off line about a program you are starting called Troll Bono. Can you tell me a little bit about that Troll Bono?

LAMKIN: It’s on its very early stages; still in the formation stage and involving a dialogue between myself  and a few senior partners at law firms, who have greatly benefited from Troll litigation by representing defendants.We are all members of, primarily, the patent litigation defense bar..  We’ve built law firms and careers and profited from Troll litigation and it’s time we give back a little bit, right.  Currently the Troll Bono program is imagined to involve two primary prongs. First,education, education of entrepreneurs, VC’s, founders of companies who don’t know how to react to Troll letters and suits.  Second, the program will involve ways to restructure the delivery of legal services in patent litigation.  As to the latter, when you think about it,Troll versus startup patent litigation is small litigation.  It’s not SAP V. Oracle orApple V. Samsung.  These are two small players and at high level there are only three questions involved in that litigation: (1)  Is the patent being asserted any good, (2) does the accused product read on that patent and (3) if the answers to both questions are yes, how much shouldyou pay?

Regarding the second prong, restructuring the delivery of legal services, When you think about it, on the defense side, there are very few issues for each individual defendant.  For each defendant, infringement is the key issue and you can even group those by technology..  All of the other questions , such as invalidity and royalty, are universal defendant questions.  So why in those litigations is each defendant paying for their own law firm, their own discovery, their own damages expert, their own infringement expert?   That doesn’t make any sense.  That’s how the Troll wins.  They have one lawyer, the defense has 40.

QUINN:  And I know that feeling, too, because we are working — representing  a company that’s a defendant in a patent litigation. One of the partners who is a lot more involved in the case than I am was telling me the other day that everybody came out with an agreement about what was going to be done on the defendant side and then as soon as the  call was over one of the parties filed a request for reexamination that nobody knew was coming.

LAMKIN: Right.

QUINN: It’s tough when you think you’re all on the same page you’re not.

LAMKIN: And there’s ways to do that especially if you’re — the decision makers, the non-lawyer decision makers; the CEO’s, the venture capitalists, the founders, the COO’s area little more educated.  One thing that contemplate drafting is a sort of early response play book for non-attorneys who have to make these decisions..  The decision makers only have their attorneys as advisors.  Don’t misunderstand,  I am an attorney and I have great respect for attorneys.I have very trusted advisors that I rely on constantly, but in many of these litigations, the interest of the law firm and the interest of the defendant are not aligned.  For example, the longer th litigation goes on, the more money the law firm makes; the defendant’s interest in exactly the opposite  The fee structure for the law firm needs to be aligned.

QUINN: Yeah.

LAMKIN: I was on joint defense group, Gene, before I went in house for the Jellyfish Troll lawsuit and there was more than a 100 attorneys on the phone and I was estimating the call was probably about $65,000 an hour.

QUINN: My goodness.

LAMKIN: Right.  $65,000, I mean, that’s absurd and that’s how the Troll wins. It doesn’t have to be that way.

QUINN: Would you agree that the American Invents Act at least stopped that.  I mean, with the joinder previsions you’re not seeing that anymore, are you?

LAMKIN: Well, the problem is, and again, you know, I applaud Congress for continuing to try. I think we have to stop just wanting to be rescued and we have to save ourselves. With the AIA Joinder provisions, what we now have is 40 lawsuits each assigned to a different court or a different judge.  That doesn’t facilitate \ communication and \ discussion between the defendants as readily as it did when we were all in the same lawsuit so, yes, I think it did some good but it also created some problems.  What the Troll cares about is money.  You have to stick it to the Troll, right, so you have early infringement contentions and you make the Troll do complete infringement contentions for every single dependent.  You know how much money they’re going to spend on that, right?

QUINN: Yes.

LAMKIN: Congress currently is considering a fee shifting bill, but we can fee shift now in many ways.  For example, we can start collaborating and driving the Trolls’ costs up early in the litigation.  Force them to spend the money.

Continue Reading Interview —> It Takes a Village to Kill a Patent Troll.

- - - - - - - - - -

For information on this and related topics please see these archives:

Tags: , , , , , , , , ,
Posted in: Guest Contributors, Interviews & Conversations, IP News, IPWatchdog.com Articles, Patent Litigation, Patent Troll Basics, 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.

 

6 comments
Leave a comment »

  1. Hello to all my fellow parasitic, rent-seeking patent professionals!,

    What are the chances of legislation being proffered to mandate that companies asserting patents against competitors actually be manufacturing or using the product claimed by the asserted patent? Is anybody aware of any such laws being drafted or considered at this time?

  2. In response to the definition of a “troll,” she actually say that you know it when you see it? Isn’t that statement so vacuous as to be un-helpful if not detrimental to trying to solve the problem?

    Sure, there are bad actors out there, however most NPEs don’t fit into this category. Instead, they focus on legitimate patents with solid claims that are being infringed. Since when is a property right defined (changed) according to who owns it? Even Lamkin’s suggestion that innovation isn’t motivated in cases where salaried employees have assigned their inventions to the companies doesn’t make sense. Don’t these companies have to pay the salaries (consider it a rent paid to an employee to invent). And don’t the companies themselves deserve to seek a return on their investment in their employees, research and resulting inventions?

  3. I’m an independent inventor. I have several issued patents for my invention. A few years ago, following the first issuance, I brought together a small team and we developed a prototype. I then shopped it around and discovered that the sales cycle to large clients was going to be long and expensive. Over a period of months that followed, I also discovered that several Fortune 1000 companies were beginning to infringe my patents.

    So I did seek to manufacture my invention. Yet the risk of investing my life savings into the business made no sense given the high cost and the fact that big companies were starting to infringe anyway. At that point I turned to a firm to help me enforce my rights and collect the “rents” I believed I was entitled to. These are relatively modest fees in line with license fees for comparable technology, although they add up and I’ve been able to repay my patent costs and then some. I’m certainly not making millions from my invention.

    Although the firm I work with takes the majority of the revenue (shared with their law firm), I have no problem with this. I also don’t believe that anyone else should. It was my decision to enter into this kind of deal, and I don’t believe that I could have done it on my own. We all know that infringers won’t respond unless there is a credible threat of litigation. That costs money and I only had one way to play this game. Yes, lawyers and the legal system are expensive, however that’s quite possibly more of an issue than any illegitimate activity of certain NPEs. Would anyone care about NPEs if the legal system worked at a much lower cost? Even Lamkin says that this is “how the troll wins.” It shouldn’t be this way. Justice should prevail without being influenced either way by the cost of such justice. Unfortunately, that’s not today’s reality for anyone.

    The bottom line for me is that I did manufacture my invention. And then it was infringed. And I consider it my right (just like the right of any major corporation) to assert my rights. It’s really sad that people like Lamkin want solutions that don’t take small inventors into consideration. The legal system is expensive and not everyone has the money to engage with it in order to assert one’s rights. Please don’t wipe out the one recourse left for small inventors, or make it more expensive for us to get the legitimate rents that we’re entitled to.

  4. Two points:

    1) Patents are not meant to be an incentive to innovation. Inventors and creative people need no such incentive. Rather, patents are meant to “promote progress in the useful arts.” The way they do that is by rewarding investment in innovation. If a company hires employees (makes an investment) who assign their patent rights to the company, who in turn sells or licenses those rights to a third party for some consideration (makes a profit), the system has worked as intended. Investment has been rewarded and progress has been promoted.

    2) There is a natural tension between patent law and antitrust law. The solution to bad patent litigation is antitrust reform. If a patent assertion entity faces possible antitrust consequences to their action, that is what would keep them in check. But right now the bar for antitrust is much higher than for patent infringement, so the patent assertion entity faces little risk. These two opposing bodies of law need to be brought into balance. It is not just “trolls” that use patents to squash innovative startups. Any large, well-funded incumbent can do that. I know this from sad personal experience.

  5. In response to the definition of a “troll,” did she actually say that you know it when you see it? Isn’t that statement so vacuous as to be un-helpful if not detrimental to trying to solve the problem?

    Sure, there are bad actors out there, however most NPEs don’t fit into this category. Instead, they focus on legitimate patents with solid claims that are being infringed. Since when is a property right defined (changed) according to who owns it? Even Lamkin’s suggestion that innovation isn’t motivated in cases where salaried employees have assigned their inventions to the companies doesn’t make sense. Don’t these companies have to pay the salaries (consider it a rent paid to an employee to invent). And don’t the companies themselves deserve to seek a return on their investment in their employees, research and resulting inventions?

  6. @dtrellum

    You’re right that the cost of litigation is prohibitive for the little guy. In my case we ended up funding the litigation with our VC money, which also left me with a greatly reduced return in the end. I’m curious, did you try approaching the infringers (with or without a lawyer) first? Some companies are actually ethical and will negotiate a license agreement in good faith.