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.
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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.
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?
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.
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.
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?
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.