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The Other Side of the Debate over Patent Trolls


Written by Joel Benjamin
Posted: December 10, 2013 @ 7:55 am
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What is lacking from the debate over “patent trolls” is the “other side” of the story. In other words- who is benefiting from large multinational high tech companies being forced to deal with claims of infringement against them?

The major beneficiaries are not the patent trolls- but the thousands of single patent owners and small high tech start ups who for the first time ever-are able to monetize the enormous investments in time, money and ingenuity that they have made in their inventions.

The fact is- today, small patent owner and small tech start ups have real options to liquidate their intellectual property assets that they didn’t have before Intellectual Ventures and Acacia Research Group entered the market in the mid-2000s. If patent trolls sue big companies- then the owners of these patents were able to liquidate their investments. When the multinationals have to worry about these entities suing them it is good for the owners of the patents.

Patent trolls are not bad for them. That’s for sure.

For at least a century whenever a small-time investor approached a large company seeking to monetize/commercialize their invention- the end result was always that the large company would screw him. Patents or no patents.

The deeper issue of screwing people out of their patents is that if these huge companies can steal the IP rights behind these patents and infringe them with impunity- without the owners being able to do a thing about it (short of selling it to a patent troll) then of what credibility is a patent issued by the USPTO? When patent owners agree to sell their patents to trolls they see it as a huge upside benefit for them. What should they do- not sell out so large multinational high tech firms will not be harmed when the patent trolls tries to extort money from them with “frivolous law suits” and “jeopardize the future development of key technologies”?

The problem is large companies simply don’t worry about whether they are violating the rights of a patent owner as they know there is nothing they can do about it anyway- and- if they do- their hoards of lawyers will be thrust into action. It’s not personal- it is their corporate nature- and has been for the best part of the past century. When has the small guy not been screwed by the large corporates?

This is nothing new. Large companies rip off single patent owners all the time- in all circumstances- patents or no patents- and they have been doing it for decades. These aren’t “wild conspiracy theories” or “liberal/leftist anti-corporate rantings” but simply the way these large companies operate.

It’s no mystery as to why the corporates don’t like patent trolls

The reason why large high tech companies don’t like “patent trolls” and have convinced the public that “they are a problem” is because it is not good for them. For a change- they are getting screwed.
Forcing the multinationals to spend money to take “troublesome patents” off the market has create a new investment market for owners of intellectual property to actually be able to liquidate them and monetize all their hard work and investment.

When these patents are sold- they are taxed as new wealth is created and thus a capital gains tax is paid. Taxpayers can spend new public tax revenues that didn’t exist before. Society benefits when patents get sold to patent trolls.

How is that not a great thing for everyone except the large corporates? For the first time in history large multinational companies are getting hurt- indirectly via the people they have been stealing from all these years. It’s payback time. Real justice being pelted out right before our very eyes.

Patent trolls are not inherently bad nor a threat to anything

Patent trolls are not bad- and should definitely not be eliminated from the patent market just because the corporates don’t like the new reality that has been created.

Their lobbyists and hacks in the press claim that the trolls “stifles future development of technology.” This is bogus. Whether a court case exist against a large company in a court room or not has no bearing on whether more or less or what types of technology are or will be developed globally. These corporate entities are interested solely in their own profits- not “the future development of new technologies.” Patent trolls are a threat to nothing- on any level- certainly not to the future direction of the global development of new technologies.”

While the mainstream business and technology press will agree with anything the large high tech multinationals claim- it is about time someone stood up for all these single patent owners and what is in their interest. There is another side to this story but unfortunately this player isn’t able to hire lobbyists and PR agents to present their case to Congress.

Congress- particularly conservatives- need to understand how that there is no justified right for the government to intervene in the patent market and eliminate patent trolls. All that has happened is that the playing field in intellectual property has been leveled out- a bit- in favor of entities in the market that don’t have the luxury of spending hundreds of millions of dollars to propagate Congress by giving them only their side of the story.

Congress has no business intervening in the patent market.

To “troll for patents” is not illegal- yet the issue is being discussed in Congress. Why?

Courts should not care who owns a patent- if it is being infringed- that is the only issue that is relevant. It matters not the least who is the actual owner of the patent. If patent trolls aren’t a problem for the courts- why is the US Congress discussing the issue?

The reason is related to the huge economic resources the large companies have to hire lobbyists and PR firms to make it an issue that Congress believes they must discuss and debate. The public’s perception has been manipulated and needs to be set straight.

The other side of this story needs to be presented before any decisions are taken by Congress to eliminate the right to “troll for patents.”

About the Author

Joel Benjamin is a broker for Global Patent Sales (GPS).


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Posted in: Guest Contributors, IP News, IPWatchdog.com Articles, Patent Litigation, Patent Trolls, Patents

21 comments
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  1. While I agree with the basic views here, I would add the distinction that litigation abuse is what the focus could be about – without the pejoratives or attacks on the owners of patent rights.

    This is not my thought alone, and yet, Congress seems immune from understanding this.

  2. Their lobbyists and hacks in the press claim that the trolls “stifles future development of technology.” This is bogus.

    Agreed. What trolls stifle is future piracy of technology.

    We hear a lot these days about income disparities. Historically, one way for a have-not to become a have is by patenting his invention. Good Latte & Co.’s actions will make the income disparity problem worse.

  3. “For at least a century whenever a small-time investor approached a large company seeking to monetize/commercialize their invention- the end result was always that the large company would screw him. Patents or no patents.”

    Sounds a little conclusory. But presuming you’re correct, your beef sounds more like a beef with the patent system itself, and likely the costs associated with litigation, moreso than with the big company’s behavior or with any inherent need to have trollish behavior. Correct? Sounds like what you really want is an IP system that provides rock solid protection at very very low cost to any individual that comes up with a patentable invention. And I do not begrudge you that. Niether I doubt does the congress. So why not ask them for that instead of reiterating “the other side” of the troll debate?

  4. Being a startup I would wholeheartedly disagree. Large corporations now require full indemnification from their vendors from PAEs. These PAE’s are therefore putting young startup’s out of business. Hiring and innovation is crippled.

    And I would say that there is more investment WITHHELD due to patents and patent trolls than there is investment MADE in R&D to obtain patents..

    Trolls benefit the larger tech organizations (Oracle, IBM, Microsoft, NCR, etc) because they have the money to fight them and they also have the phoney patents to also be a troll and assert against their smaller competitors. Trolls disadvantage the smaller tech companies because we cannot fight them, or defend our customers against them.

  5. “Congress has no business intervening in the patent market”

    An interesting statement. Rather reminiscent of the “get your government hands out of my medicare” slogan several people had on boards during election time. Perhaps congress also has “no business” intervening in medicare?

    Just so that I’m clear, the patent market is congress intervening. Congress intervening in their own intervening seems, if not entirely appropriate, acceptable in a democracy.

    “To “troll for patents” is not illegal- yet the issue is being discussed in Congress. Why?”

    I think that’s because people know only congress can make such illegal.

    “Courts should not care who owns a patent- if it is being infringed- that is the only issue that is relevant. It matters not the least who is the actual owner of the patent. If patent trolls aren’t a problem for the courts- why is the US Congress discussing the issue?”

    I think it’s arguably because they’re supposedly a problem for other people in the country besides the courts.

    “The other side of this story needs to be presented before any decisions are taken by Congress to eliminate the right to “troll for patents.””

    I look forward to hearing about it.

  6. “For at least a century whenever a small-time investor approached a large company seeking to monetize/commercialize their invention- the end result was always that the large company would screw him. Patents or no patents.”

    John, I have been in the field for 35 years and that is what I have observed that whole time. Can’t testify as to the preceding 65 years, but I don’t think my becoming a patent lawyer caused a sea-change.

  7. “Congress has no business intervening in the patent market.”

    Patents aren’t healthcare. Patents come completely from government right and is mentioned in the constitution. Of course Congress has a right to regulate this. Without Congress, there’d be no patents. (Without Congress, there’d still be healthcare … well, at least, the potential for it. :) )

    The problem is “unfair” enforcement or infringement. It’s all about tweaking the system to get it right, but that’s not easy. A patent which lasts 20 years on something which becomes ubiquitous in three is a problem. There’s no way to have hindsight to know what will be, but address the problem. The author wants to address differences in money power, but that dances around the issue.

  8. Rich-

    There is more investment withheld because of the chipping away at patent rights that has occurred since at least 2006. The industry holds up patent trolls as the problem, but the reforms that they urge are never actually calculated at stopping the so-called patent troll problem. It really isn’t a patent problem at all. It is a litigation abuse problem that exists because many district court judges do not proactively manage their courtrooms to ensure that nefarious actors are not shaking down individuals, small businesses and start-ups.

    I’m not questioning that there are bad actors that are causing real damage, but the industry is pulling the wool over the eyes of Congress. That means weaker patents and still no end in sight to the abuses of the patent trolls because they are not related to a problem with the patent grant or the patent system as a whole.

    -Gene

  9. Michael-

    I understand exactly what you are saying. I saw that line when I was editing the article for posting. Congress does have a right to intervene, but do they have any business in doing so?

    I’d like to offer the following possible distinction. This seems to me to not be a question of whether they have the authority to act, but whether they ought to act. Congress has really never thoughtfully considered a patent issue over the last several generations at least. They continue to have the wool pulled over their eyes by the infringer lobby. They get Congress to fixate on the so-called patent troll problem and pretend, without any evidence, that it is a patent system problem. Of course, everyone knowledgeable knows that it is not a patent problem at all, but rather the same type of litigation abuse based on judicial inefficiencies that we have seen in various other substantive law areas. So the industry gets what they want, which is weaker patent rights, while never advocating anything likely to stop the problem they are complaining about. This allows them to continue to come back for more time after time and Congress, which never thoughtfully considers the problem or a potential solution, acts as they are instructed to act.

    I really don’t think Congress has any business intervening in the patent market. Not at least until they are going to open their eyes, define the problem and engage in meaningful discussion aimed at finding a solution to the articulated problem that does not destroy the patent system from within.

    Cheers.

    -Gene

  10. You covered a bunch of issues in that comment:

    - ‘Congress has really never thoughtfully considered a patent issue over the last several generations at least’

    How they did it in the 50s is beyond me, but looking at the current stock in Congress, most of them wouldn’t understand the patent issues anyway. It’s a technical subject and in the present case, with very difficult quesitons that even the best and the brightest of patent attorneys don’t have workable solutions for.

    - ‘the same type of litigation abuse based on judicial inefficiencies that we have seen in various other substantive law areas’

    I think judicial inefficiency is part of it … that’s a big problem in general, in my view, but with patents, it’s again, a technical subject area yet it goes to juries and district court judges. They’re supposed to litigate over modem encryption (Newegg case). It’s further made difficult by the fact that the ‘statute’ being executed is really a patent claim and how to read that, not an actual statute. That’s very difficult when each patent is drafted by a different writer.

    - ‘I really don’t think Congress has any business intervening in the patent market … engage in meaningful discussion aimed at finding a solution to the articulated problem that does not destroy the patent system from within.’

    It wont’t happen with either Obama or the present Republican Congress. Neither is capable of meaningful discussions on substantive issues. They can’t accomplish even more basic things. Under Clinton, maybe it could have happened but the current state of the federal government is more dysfunctional than usual. So I actually agree with you… they should stay away rather than starting messing with it ….

    … but what’s your solution to judicial inefficiency and so forth if not for Congresses intervention? I don’t have one.

  11. … but what’s your solution to judicial inefficiency and so forth if not for Congresses intervention? I don’t have one.

    As has been posted by several people (including Chief Judge Rader), the solution to judicial inefficiency is to have the judiciary BE more efficient.

    They already have the tools.

  12. That hasn’t happened yet. How do you incentiveness them in ways which don’t involve tautologies?

  13. Michael-

    The way they did it in the 1950s is largely due to the presence of Giles Sutherland Rich. Not even sure the great GSR could infuse sanity into these discussions though.

    You say: “It wont’t happen with either Obama or the present Republican Congress. Neither is capable of meaningful discussions on substantive issues.”

    Do you think it will ever be possible again? I realize I am cynical and very skeptical, but I am not encouraged by what I see in DC at all. Substance is less that irrelevant. If it were irrelevant at least it would be considered and dismissed. Substance never comes up in these “debates,” if you can call a bill submitted and passed within 7 weeks “debated.”

    With respect to my solution, take a look at this article:

    http://www.ipwatchdog.com/2013/06/24/defending-chief-judge-rader-judges-can-make-patent-trolls-pay/id=42348/

    District Courts have the tools they need, they just don’t use them.

    -Gene

  14. Anon-

    I also think district court judges need to realize that with some of the cases filed there is not just a possibility, but indeed a likelihood, that the judicial process is being used to extort a settlement. The judicial system is not set up to assume the presence of bad actors, but we know that many of the most egregious actors repeatedly file and settle for pennies without regard to the merits of the case. If I were a district court judge I would be much more proactive in managing cases that smell like they could be a shakedown.

    I completely agree that district courts have plenty of tools, but the other piece is that they need to care enough to look and then intercede with their considerable powers.

    I think I sense an article: “The Patent Troll Solution: If I were a District Court Judge.”

    -Gene

  15. Great read: http://www.circleid.com/posts/20131202_dont_let_patent_wars_widen_digital_divide/

  16. For your article, it might help to read this one about Judge Noach Dear in New York…
    http://www.villagevoice.com/2009-06-10/news/hounded-by-debt-sharks-brooklynites-turn-to-an-unlikely-rescuer/full/

    He handles debt collection cases and is known for dismissing cases where plaintiffs are being overly zealous or are unprepared and just trying to extort money out of people.

  17. Feigen makes the point that a patent that covers a product is ubiquitous three years later is a problem. I strongly disagree. A patent on a product like that is one of the world’s should be longing for and willing to pay for.

    Also this talk about extortion being a bad thing strikes me as a bit overblown. Any effort to cause for somebody to pay money they are not otherwise willing to pay can be characterized as extorsion. But, that is what the statute allows, and it does not help the discouse to use pejoratives.

  18. Litigation abuse is a game of Whac-A-Mole®.

    Medical malpractice insurance rates skyrocketed in Texas largely due to many weak cases resulting in settlements to avoid large jury awards. Doctors went on strike in 2002 and legislation was passed in 2003 to cap pain and suffering awards in medical malpractice cases to $250,000. As a result, medical malpractice filings dropped by 90%, but many Personal Injury (PI) attorneys found themselves without sufficient work and many moved to Intellectual Property (IP):

    http://www.kaiserhealthnews.org/Daily-Reports/2002/April/09/dr00010523.aspx
    http://mcsmith.blogs.com/eastern_district_of_texas/files/IP.pdf
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1878966

    Securities class action was another area of significant abuse and even with the legislative changes, it was until recently the #2 legal cost for large public companies, especially in tech, right after patent infringement litigation. The Private Securities Litigation Reform Act of 1995 (PSLRA) significantly cut down the abuse (remember William Lerach?), but it is still an active area about to be reviewed by the Supreme Court. Feels like deja vu, doesn’t it?

    http://www.law.cornell.edu/uscode/text/15/78u-4
    http://www.insurancejournal.com/news/national/2013/11/18/311504.htm

    Patent marking was another area of abuse where attorneys even needed to solicit plaintiffs to drum up business. After a while the courts started to increase pleading standards but the abuse didn’t get significantly cut back until AIA legislation in 2012:

    http://www.kirksanderslaw.com/blog/expired-patent-could-make-manufacturer-liable-big-fines-attorney
    http://www.hblaw.com/alerts/America-Invents-Act-Impacts-Patent-Marking-Requirement-08-29-2012

    A 2008 survey of trial lawyers:

    http://www.abajournal.com/files/Survey_Press_Release_Final.pdf

    was summarized by the task force Chairman who stated that “the costs and burdens of discovery are driving litigation away from the court system and forcing settlements based on the costs, as opposed to the merits.” I could go on with the civil litigation abuse especially in California with ADA, Proposition 65, and Section 17200, but you get the idea.

    It is truly a shame that the legislation in each situation is narrowly targeted rather than getting to the core issue which is attorney conduct and proper discipline under FRCP Rule 11(b) Representations to the Court and Professional Conduct Rule 3.1 Meritorious Claims and Contentions. Fee shifting will be pointless to “patent troll” subsidiaries with no assets (except the patent being asserted) and no revenue. The joinder of interested parties in the Innovation Act of 2013 will do little when plaintiffs create foreign subsidiaries owning the domestic shell companies thereby creating a jurisdictional corporate veil. The Courts have demonstrated that they are unwilling to impose sanctions, especially against attorneys, absent serious misconduct (e.g. destruction of documents), and the normally unspoken reasons were made clear a few months ago by a Judge in the CAFC:

    http://www.ipo.org/wp-content/uploads/2013/02/IPO-Annual-Meeting-Keynote-Speech-09-17-13.pdf

    “With respect to the Rule 11 proposals and the asserted desire for more sanctions, I believe what you really want is not more sanctions, but more fee shifting. Having been a district judge, I know that, while sometimes you must do it, it is difficult to sanction lawyers. Most of us that have been on the district bench were also practicing lawyers, and we know that people make mistakes, we know that lawyers can be pushed in certain directions by their clients, and we know that they do not usually intend to step over the line. And we know that a sanction can destroy a lawyer’s career.”

    Unfortunately, there is no doctrine of cumulative repetitive harm. If such a doctrine existed, then the Court would not view behavior as being isolated to a single case, but would consider the effect on the Courts and on society if EVERY case had similar conduct because if the behavior is not effectively punished, then it will become more prevalent.

  19. From reading the article I would have to conclude that patent trolls only chase the large corporations and leave the small-medium companies and startups alone.
    Not so.
    As a medium-sized company with a small patent portfolio, I am just as likely to be hit by a troll trying to extort a settlement for a patent I don’t actually infringe, as I am to profit by selling my IP rights to a troll.

  20. Not sure why you would conclude that at all Benny.

    In fact, that sounds suspiciously like anti-software patent mantra with no real foundational link to the actual issue (and currently available resolutions to that issue) of litigation abuse. And yes, my view is colored by your past stances on software patent eligibility.

    I find your attempt to refocus on the ‘who’ instead of the “what” to be a part of the problem.

  21. As a small business patent lawyer since 1985, I have issued over 1000 patents and sued Walmart, 3M, Lowes, Farberware, Panasonic,Amazon, on behalf of solo (ripped off) inventors.As a “mini-troll” I have worked on contingency or partial contingency lawsuits.The newest laws of AIA clearly add power to the Fortune 1000 (fascist) bandits with expensive post grant reviews and enhanced inter partes roadblocks.All this while they outsource their jobs and patents overseas thus robbing America of her Middle Class and cutting their tax contribution in half since Ronald Reagan. The current proposals to shift legal fees to the loser will certainly strip any incentive to patent down to nothing-except for these corporate fascists who can afford a million dollars in legal fees as a risk to assert their new patents.America has bartered her free government away to corporate super money.What Congress should be doing is forming regional patent courts and binding arbitration boards at the new patent facilities in Detroit,Denver and San Francisco.Write your Congressman or drive over him.

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