Editor’s Note: This is part 5 of a 5 part series written by Steven J. Moore and with the assistance of Marvin Wachs and Timothy Moore, also of the Kelley Drye & Warren Patent Department. To read the series from the beginning please see: A Fractured Fairy Tale: Separating Fact & Fiction on Patent Trolls. To read the debunking of patent troll myths see: Probing 10 Patent Troll Myths.
Fables are nice, but rarely reflect reality. We understand that this series of papers will not be accepted by some with open arms, as it does not correlate with their visualization of reality, a reality that has been in the making for a long time by very good story tellers. It is comfortable to have an enemy to blame, and it is nice to be the good guy as well as the victim. The reality of life, however, is much different than each of us just wearing a black or white hat.
Much of what is reported here makes perfect sense. Why should we not expect that a non-inventor-based NPE would be selective in their purchase of patents so as to result in a portfolio that is as good as, if not better than, those of producers themselves? (That is, why are we so sure that patent assertion entities do not have the intelligence to find the gems that others are leaving by the wayside?) How many of us would enter a monster-truck rally with a 1985 Yugo GV, considered by some to be one of the worst engineered cars of all time? Isn’t it logical that the patents asserted by independent inventors and their companies might not fare as well as those patents of producing companies and the other NPEs, particularly given that many belonging to this group are generally not able to afford the best legal work in the initial preparation and prosecution of their patents, and often are relegated to use any attorneys that will take their litigation on contingency? Why wouldn’t we expect that a company that is buying patents would likely try to monetize them, particularly when the company to which we sell a patent (or set up a royalty agreement) is not in the business of what the patent claims? Aren’t we being disingenuous when we decry a NPE patent owner for not practicing an invention in a patent, and yet allow Producers to obtain and enforce the same patents even if they do not practice the invention in the patent themselves?
One thing we wish to make clear is that we do not in this paper suggest in any way that there are not some entities that assert very bad patents and assert patents that are clearly not infringed by those who are sued. This is litigation misconduct, not patent misconduct. Unquestionably there are some entities that use litigation as a tool to extract money where no reasonable person would understand any was due. However, our data suggests that this problem is nowhere as widespread as is being made out by many yarn spinners. We simply did not find the patents being asserted by plaintiff producers, even the largest producers, to fare any better than those being asserted by non-producers in both patent litigation or USPTO reexamination proceedings.
It is time for us to look carefully at the facility with which we have come to reflexively label in a pejorative manner each and every entity that is adverse to us. Not every asserter of a patent is a “troll.” In some sense it does appear, as Arthur R. Miller once said, that according to most patent litigators “a frivolous lawsuit is any case brought against your client, and litigation abuse is anything the opposing lawyer is doing.” Miller, “Simplified Pleading, Meaningful Days in Court and Trial on the Merits: Reflections on the Deformation of Federal Practice,” 88 NYU Law Rev. 286, 302 (2013). Undoubtedly there are bad guys, but not every asserter of a patent is a bad guy.
A patent is a “right to exclude” (even if our present damages analyses seem to miss this point!). There has never been a suggestion in the law that a patent holder must produce the inention of a patent. At present the right to exclude can be transferred from one entity to another, and indeed that is what producers seem to be doing. It simply is time for the patent community to look at the reality of what is going on, before it instinctively fixes a “problem” which in large part it has broadly painted through its imagination without carefully checking carefully the roots of its genesis. It is time we acknowledge that the NPE “problem” is one in which many in corporate America and worldwide corporate are actively collaborating. We can’t keep calling every patent asserted by a NPE or small company as weak, particularly when many of these patents are coming from the very name-callers. Either we accept that right of all companies and independent inventors to monetize the worth of their patents, or we do not.
What is certain is that the story of the reprehensible troll has had a big impact on the many laws that have been enacted and proposed in regard to patent rights, starting with the AIA. As will be shown in our next paper, while the AIA was said to be designed to make life more difficult on the so-called “troll,” in fact the act has had significant negative impacts on small producing companies, with little effect noticeable on the NPE (which we assume includes some of the “bad guy” trolls).
How we deal with the problems uncovered herein is something for deliberate consideration, not the activity of an automaton. For example, this paper demonstrates that patents asserted by inventors and inventor based companies generally do not fare as well as patents of other entities. However, in the United States none of us would want to stop all such entities from trying to market and license their ideas. Most of us would agree that the independent inventor has been the heart of innovation in the United States for a very long time. We have too many memories of the stories of the Wright Brothers, Chester Carlton of Xerox fame, of Eli Whitney and the cotton gin, of Edison, and of Farnsworth — the farmer boy who invented the television.
In particular, we need to come to grips with the fact that the Hewlett Packard v. Acceleron case has played havoc with the patent system in that no longer do these independent inventors feel comfortable in proffering their patents to Producer companies, nor for that matter does any entity. The current status of sue first in a district where you may be able to maintain your case, and then negotiate makes little sense. As a former head of an intellectual property group of a large multinational joint venture during the pre-Hewlett Packard days, I may have been some annoyed by letters we received from independent inventors offering my company a license, but I would much more prefer this then having suit filed in a district court. I certainly would have looked very differently at licensing a patent for a nominal sum, then paying a nominal sum to “settle” a litigation (as would the higher up officers of my company).
Congress needs to weigh carefully any further changes in the law that would further disadvantage small companies. Not only are the number of patents that they are obtaining over the past decade rapidly decreasing, our review suggests to us that it is becoming extremely difficult for them to prevail in any action against the largest corporations as they can easily be worn down by monetary attrition given all the time and routes a defendant can use to keep away the ultimate resolution of the issue of patent infringement damages.
Our study suggests there is a critical need for a very through, unbiased, look at the so-called “troll problem” before new legislative and administrative fixes are enacted. In particular, a careful analysis of any “fix” must be made to determine the effect of any proposed change on the majority of companies in this country, that is the small company. Organizations that have a stake in the outcome of the study, or have consistently advocated a position in regard to this matter, should be excluded from conducting the study. We need to stop paying homage to the phantom tales of the past, and seek out only the honest facts.