On July 1, 2013, I spoke on the record with Ray Niro, who is one of the most well known patent litigators in the United States. Throughout his career he has been a champion for the inventor who was facing long odds due to widespread patent infringement. So loathed was Niro, he was the one who was originally referred to as the “patent troll” by the media due to his representing innovators against giant technology companies. Of course, if you are going to call Ray Niro a patent troll you might want to also point out that he is extraordinarily successful, which means he has been very good at proving that large corporations have infringed valid patents, sometimes on fundamentally important innovations.
What follows is the final segment of my interview with the man they call the patent troll, Ray Niro. To read part 1 see In Defense of Innovators: An Exclusive Interview with Ray Niro.
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QUINN: This goes back to a point you brought up at the beginning I wanted to get back to; they’re sending jobs overseas and people in China are making stuff and they’re importing it into the U.S. I mean, I’m not sure how that is any different than an inventor or a small research and development company that innovates and then licenses it so that others can make it. That seems to be their model.
NIRO: Well, Hewlett-Packard’s a good example. Hewlett-Packard created a company that would license and enforce its patents,many of which are in fields in which they are not practicing. And that entity is not called a troll, but it’s a non-manufacturing entity. And it’s collected sizable sums of money from licensing of the technology. But you don’t hear a word of criticism for that kind of thing. IBM, Texas Instruments, General Electric are all companies that make substantial sums of money from the licensing of patents in fields and with respect to technology for which they don’t manufacture a product. So what’s going on is you’ve got a double standard. If you’re a big company, it’s okay; but if you’re a small individual inventor, it’s not. That makes no sense.
QUINN: Right. It doesn’t make any sense to me either. And I would even go the next step and I’ve written a little bit about this is that companies like Apple are non-practicing entities as well. I know that Apple has a lot of stores and they sell their gadgets. But is their business model really that different a business model? Is it really different to innovate and then have folks in China make it for you to sell? Is the fact that you were the one that’s ultimately selling it, is that the hair that they’re trying split? Because in the independent inventors scenario they do their research and the development and they patent it. Then they license it to another company who then makes it and sells it. So the business models are different by a slight degree. I just don’t get the animosity towards people who we’ve always celebrated. Independent inventors, university researchers, research and development companies. I mean are we really at the point where Thomas Edison would be a patent troll? That question gets asked a lot and I think up until over the last, maybe over the last few months it had always been sort of a tongue-in-cheek question, like you can’t be serious. But now where this is headed is Thomas Edison would clearly, clearly be considered a nefarious actor if you listen to these West Coast elite companies.
NIRO: Absolutely. In fact, the Wright Brothers would be a classic example. The Wright Brothers invented the airplane. But, they didn’t have the resources and talent, maybe, to manufacture it. So a guy named Curtis came along and he started manufacturing the airplane using their ideas. Using their inventions and they brought patent suits for, I don’t know, eight or nine years before they ultimately prevailed. The Wright Brothers prevailed. They would be a classic troll today. Here they are preying on a manufacturing company for infringement of their patents while they manufacture nothing. Now, without the incentive of the patent system to create that invention in the first place, Curtis doesn’t have anything to copy. He doesn’t have the blueprint from the Wright Brothers. They would be a troll. Think of how ridiculous this whole thing is and put it in context — and I’ve heard this analogy frequently — suppose you were a composer that wrote a song but you couldn’t perform. Would you be deprived of the right to license your music because you couldn’t sing? You couldn’t perform? One of my favorite song writers is Burt Bacharach. He’s a terrible singer. But you know what? He writes great music. He should not be deprived of the opportunity to have his music performed and to have protection under the copyright laws because he’s incapable of performing himself. That same concept, it seems to me, applies to patents as well.
QUINN: Well, that’s interesting because I’ve long known this to be true in the music industry. The people who make the real money in the music industry are the writers and the people who own the copyrights. It’s not the people who are the performers. The performance rights makes people money, but it doesn’t make them long term money the same way that the people who own the copyrights and the rights to music and there’s all kinds of people that will write music for other people. And are they copyright trolls for doing that?
NIRO: Well, I guess they would be copyright trolls. But you know, take it a step further. There is so much noise being made about Ma and Pa shops and Wi-Fi patents and people being harassed for $5,000 or whatever. Just like the McDonald’s hot coffee case was used against personal injury lawyers. Look at ASCAP, what did they do as an organized group of composers? You know what they do? They go to the Ma and Pa shops, the bars, whatever, and they say, “If you don’t pay the royalty that’s necessary, we’re going to sue you for copyright infringement.” But that seems to be okay.
QUINN: Well, actually the only difference would be is that it affects far more people. I mean every restaurant, every barber shop, every establishment that has a radio on and is maybe not using just a small boombox but is using a sound system that’s larger than what you would normally see in your home can have somebody from these music licensing outfits show up and say hey you’ve gotta pay.
QUINN: So it’s a much larger problem.
NIRO: Right. In the trademark arena the same thing has taken place for years. Coca-Cola was well known for going into small establishments, sending shoppers into small Ma and Pa shops and saying, “I’d like a Coke” and, the minute the person gave them a product without saying, “We don’t have Coke; we sell Pepsi,” they’d get sued for trademark infringement. Anyhow, this is part of what intellectual property is about. You should have the right to license and enforce your rights against big or small.
QUINN: Yeah. And it should be across the board. The thing that bothers me about this whole debate is that it isolates and discriminates. But going back to one cynical view, going back to the copyright analogy, is another difference there is not only is it more prevalent but it would seem that those people probably many of them have a better relationship with the White House than probably independent inventors do. And that’s extremely cynical but the more I see about what goes on inside the beltway – if you’re not connected, if you don’t have the money to be connected or you just are not through political affiliation or philosophy connected you really get screwed.
NIRO: Well, one of the cases that’s received a lot of attention is this Innovatio which happens to be a case two of the lawyers in our office are handing. But amidst all the hoopla about how terrible it is that they’re out there enforcing patents in the Wi-Fi arena, what is lost in this discussion is that these patents come from Broadcom, a manufacturing company, just like Cisco. And those patents were licensed to the tune of nearly $1 billion, I think $900 million to QUALCOMM after a history of litigation. These aren’t so-called crummy, lousy, frivolous patents. These are serious patents. So again I think you have to go beneath the propaganda and look specifically at the instances where actions are being taken. I agree there are situations where there have been abuses, no question about it. And those can be addressed, and should be addressed. But let’s not, in this hysteria, wind up punishing people that have no reason to be punished. And let’s not create a disincentive for innovation in our country. The big debate during the election, again and I don’t want to politicize this either, was jobs. How do we create new jobs in America? Well, you don’t create new jobs in America by shipping 700,000 jobs to China, like Apple did. You create new jobs in America by creating opportunities for new businesses to be built on the basis of our ideas and our innovations. And when we create disincentives for that happening, we’re undermining the very thing that we want to be doing, which is creating jobs based on our ideas because we have long since stopped being an industrial society. We’re an idea-driven society, period. We don’t have the factories that we once had. We don’t have the businesses that we once had. What we have are ideas. And we better encourage innovation. We better encourage new ideas. And my big fear is that is what the West Coast boys — I wanna call them the West Coast boys– are doing. They are creating this hysteria. They’re creating this propaganda. They’re creating this aura of inventors and small entities being villains. And they’re selling that tune at the highest levels of our government, both to Congress and to the Administration and, unfortunately, to some judges. And that’s scary.
QUINN: Yeah. It also seems short sighted, too because they folks have spent a lot of money acquiring patent portfolios themselves that they say that they would rather not have to have acquired and they’re defensive in nature, et cetera, et cetera. But it’s extremely short sighted because if they’re going to succeed in this and weaken the patent system the way that the patent system has been weakened really ever since the eBay decision by the Supreme Court there’s going to come a day when they’re going to look around they’re not going to have the ability to prevent anybody from doing anything. I think when that happens they’re going to really regret some of these decisions, or at least their shareholders are going to regret them.
NIRO: Sure they will. Because if we don’t have a strong patent system, who’s going to stop the wave of foreign importers that are going to come in with their copycat products? And then all of a sudden you’re going to hear these same companies saying, well, we need a strong patent system to protect ourselves from these evil foreign companies that are bringing in products that copy our products. Debate’s a good thing, hysteria is a bad thing, propaganda’s a bad thing. I think what we’re seeing way too much of is hysteria and propaganda and way too little of genuine analysis and debate.
QUINN: I agree with that. Now getting back to the whole Wi-Fi issue again, I travel a lot on business, as I’m sure you do. And you go to these hotels and you get a varying degree of either okay, marginal, or bad Internet access at hotels. But, boy, they’re not afraid to charge you for an hour or for 24 hours. If you go to some classy hotel in a major city you’re lucky to get for $16 a day Internet access that’s barely good enough to check your email.
QUINN: So somebody is making a ton of money on Wi-Fi. Look at all the coffee shops, all these businesses that have sprouted up. You can’t hardly go about your day without seeing Wi-Fi promoted. People should pay attention how many signs they see in a day where a business establishment will say “Wi-Fi available here.” If they’re advertising that it’s because they think it’s important to attract people.
QUINN: And it is. It is. We go out to dinner and my wife will a lot of times complain, oh, well, there’s no Wi-Fi here. You can’t get on your cellphone and maybe check movie times or what have you. It’s an incredibly important innovation. Are we at the point where these incredibly important innovations are going to create animosity rather than celebration?
NIRO: I think that’s a good way to put it. I think we are at a point where, if you believe the propaganda, then the remedies that are being proposed are really going to be detrimental to innovation,to individual inventors, and to the opportunities to use invention to create new jobs. So I see lots of negatives. If people really believed there was support for this notion that development of new products has been slowed or the cost to consumers has been increased or that the judicial system is clogged or, incredibly, this nonsense that contingency lawyers select marginal cases to bring lawsuits, I would support what’s going on. The “select marginal cases” argument is the most absurd proposition I have heard. And it could only be proposed by people, frankly, that have never represented a client on a contingency, because the last thing in the world that a good contingency lawyer wants to do is to pick a lousy case and pursue that. Now, are there lawyers that might pick lousy cases because they don’t have the opportunity to pick good cases? Yeah, I think that’s possible. But I think that is the exception, rather than the rule.
QUINN: So what do you? What do you think the answers are? Do you have any call to action for people who are interested, for small businesses, startups, independent inventors? What can they do?
NIRO: Well, what we all can do is try to weather this storm. Try to petition government to make a stronger Patent Office, a more efficient Patent Office, a better Patent Office to improve the quality of patents. And it’s not as easy as the President makes out. Giving a directive to examiners not to issue overly broad patents. If that isn’t absurd, I mean, what are we talking about? Of course they already have that mandate. They know they’re not supposed to issue patents that are overly broad in the sense of not satisfying the statutory criteria of novelty and non-obviousness. Who is writing this script? Idiots. It’s crazy.
I see a view emerging that, if you’re an NPE, then it follows that your cases are frivolous. If your case is brought on a contingency basis, then your case is frivolous. That’s what these guys are really saying. I’m going to be an optimist here. I think that this storm will be weathered because I believe that, in the end, fair-thinking people are going to realize the harm that can be done if we go down this destructive path we are on. And, hopefully, we will tune out these special interest groups, like Cisco, et al., that are creating the hysteria. At least that’s my hope.
QUINN: Well there is some historical precedent for that. The pendulum seems to constantly be swinging in the area of patents and innovation throughout our history. Although when you’re in the middle of the hurricane and the winds are collecting, sometimes it doesn’t seem like you’re going to get to that other end.
NIRO: It sure doesn’t. And, you know, looking at the bright side of things, I believe that the pendulum will swing. I believe it will come back. I believe fair-minded, reasonable people are going to realize there is no data to support these anti-NPE, anti-inventor arguments and, maybe, the political process will wake up and do the right thing for a change. At least that’s my hope. Historically, it seems that’s what’s happened. But, as you correctly point out, when you’re in the eye of the storm, things don’t look so good. And right now, they don’t look so good.
QUINN: No, no. It reminds me what Winston Churchill has quoted as saying: eventually America will do the right thing after having exhausted every other possible option.
NIRO: [Laughter] Yeah, right.
QUINN: I guess maybe that’s the optimism that we have to hold onto because those of us who are in the industry – we know what it means to these independent inventors, to the research companies, the startup companies who need venture capital, and increasingly to universities, too. A lot of these researchers want to be able to license what they’ve come up with, to fund further research. And it really does matter to the economy and I certainly hope that message gets across.
NIRO: Well, I think blogs like yours certainly help. There’s a voice, and there is an opportunity hopefully to be heard. But can it defeat hundreds of millions of dollars paid to politicians? Probably not. As a friend of mine told me, “You’re on a row boat in the middle of the ocean.” True. But, as I reminded him, it only took one stone for David to defeat Goliath.
QUINN: Well, thanks again Ray, I really appreciate it.
NIRO: Well, thank you, Gene. Thanks for the opportunity. I appreciate it.