Today's Date: September 17, 2014 Search | Home | Contact | Services | Patent Attorney | Patent Search | Provisional Patent Application | Patent Application | Software Patent | Confidentiality Agreements

Who is a Patent Troll?


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
Blog | Twitter | Facebook | LinkedIn
Posted: January 7, 2014 @ 4:42 pm
Tell A Friend!


With the enormous media focus on the so-called problem of patent trolls one might start to think that any patent owner can easily stand up to and take on industry giants to obtain lottery like winnings. Not so fast! The great irony is that if you want a larger entity to fold like a cheap suit and settle quickly you would be better off filing a frivolous patent infringement lawsuit using a dubious patent. You see, the great irony is this: Only when large entities get sued on completely frivolous patent claims do they settle right away. Now I’m not advocating that course of action, rather just observing the truth of the matter asserted.

On the other hand, if you have a strong patent that covers real technology, perhaps pioneering technology, and there are substantial damages, the tech giants you sue will vilify you as a patent troll in the media and do whatever they can to make sure that they never pay you a dime.  This is particularly true when the small company is building upon a base technology already owned by one of those technology giants.

Many large companies are happy to pay nuisance value on frivolous claims, but they are never going to pay meritorious claims if they can avoid it using any and all techniques and procedural machinations. The reality that frivolous claims get settled and meritorious claims get litigated has to make you wonder whether the so-called patent troll problem is really a problem or whether it is something that they actively perpetuate in order to achieve the “reforms” they continually ask Congress to adopt.

The “patent troll problem” dates back for over a decade, but it was NTP v. RIM, which in most circles is viewed as the “poster-child” case for patent reform, is constantly referred to as particularly illustrative of the patent troll problem, but that case was not nearly as straightforward as many press reports implied. In fact, it is unclear to  me that NTP is or was a patent troll in the first place.

One unique aspect was that NTP had rather fundamental patents on a technology that was employed by RIM. So the first question you might ask is whether it is even possible to be a patent troll if you are suing on foundational or pioneering patents? I say the answer to that question is absolutely not. The patent system is supposed to foster, indeed celebrate, pioneering innovations. The owner of a pioneering patent, or standard essential patent, or patent that is just really, really important can’t be a patent troll any more than Thomas Edison or a University.

Another unique feature of the case was that RIM initially seemed to have a strong infringement defense because the process covered by the NTP patents did not occur completely within the United States. RIM had argued both at trial and on appeal that because the BlackBerry Relay is located in Canada, as a matter of law RIM could not be held liable for infringement under 35 U.S.C. § 271. The trouble for RIM was that the main patent appeals court in the United States disagreed.

The United States Court of Appeals for the Federal Circuit explained that the plain language of section 271(a) does not preclude infringement where a system is used within the United States, even though a component of that system is physically located outside the United States. As a result of the Federal Circuit decision, when two domestic users communicated via their BlackBerry devices, their use of the BlackBerry system occurred “within the United States,” regardless of whether the messages exchanged between them may be transmitted outside of the United States at some point along their wireless journey.

Further complicating matters, RIM seemed to think it could win at least until the United States Supreme Court refused to hear its appeal. Because they thought they would ultimately prevail RIM continued to use technology protected by NTP patents, and never really seriously engaged in settlement discussions until the final hour. The end result was an extraordinarily large settlement in favor of David and against Goliath. Forgotten in most recent press reports and opinion pieces decrying this result, however, were the frequent situations in which a large company uses its patent power against a smaller upstart rival.

Query: Is is possible to be a patent troll where there are such complex legal issues involved in the case? Where the legal issues are so complex that the case could go either way? I say no. A loser in a patent infringement case is not a patent troll, they are merely the loser. Not all losers are created equally, and not all loses are achieved in the same way. For a frivolous case a loss is not just a run-of-the-mill loss.  Does a frivolous loss, or a loss by one who employs vexation litigation tactics, create a loser of the same magnitude as one who fights a good fight, has legitimate theories, but at the end of the day doesn’t prevail? The answer is obvious.

This is not to say that NTP was “Snow White” in the case; no litigant is ever Snow White pure. Nor am I suggested that the case couldn’t have been better streamlined. Of course the case could have been streamlined, but why haven’t we been talking about reforms that would lead to a final resolution in patent litigation matters through all the various forums in a quicker, more efficient manner? The reason is because those who vilify patent trolls don’t want to lose the ability to challenge issued patents and defend in multiple forums. The tragedy is that there are common sense reforms that Congress could concern themselves with, like streamlining patent litigation, but the “reforms” they pursue are the wish-list of those who have the most money to lobby on the issue. Sadly, they also want a weaker patent system that looks nothing like the strong patent system that was the envy of the world.

The sad reality is that “patent reform” is not making a better patent system, it is making a different patent system. Indeed, “patent reform” is creating a patent system that is inferior, which will only benefit infringers, particularly those from outside the United States where manufacturing still exists.

But is NTP a patent troll? By the definition of most people NTP is the quintessential patent troll because they acquired a patent and then had the audacity to enforce the rights acquired. Acquiring patents and enforcing them, for many, makes the entity a patent troll— that is unless the entity doing the acquiring and enforcing is Google. Google is actually the only adjudicated patent troll, at least according to Florian Mueller who writes FOSS Patents and follows the smartphone wars more closely than anyone.

Frankly, the term patent troll has evolved to mean nothing more than this: You are a patent owner who is suing me. Essentially, whether one is a patent troll is in the eye of the beholder. If I’m on the receiving end of a patent lawsuit then you are a patent troll, regardless of whether you are an innovator, regardless of whether you are an operating company, regardless of how you acquired the patents. But why then isn’t Google rightfully considered a patent troll? Google paid $12 billion to acquire Motorola’s patent portfolio and seeks to enforce those patents. So, if paying a lot of money for patents and then subsequently enforcing those patents makes you a patent troll, Google has to be a patent troll. The fact that they grossly overpaid for the patents they acquired for Motorola can’t be a defense to the claim of being patent troll. Furthermore, one of the alleged telltale signs of being a patent troll is that you didn’t innovate. Well, Google didn’t innovate either, which is why they needed to acquire the portfolio to help insulate them as they entered the smartphone marketplace.

Of course, the RIM case happened years ago. But not much has really changed if you look closely. But as was the case with the NTP v. RIM, there is nearly always more than meets the eye with most patent battles.

Take for example Soverain Software’s fight against Newegg, which now stands before the Supreme Court. It is anticipated that the Supreme Court will decide sometime later this week whether to take the case in what by all outward appearances is an obviousness dispute. If it were just an ordinary, garden variety obviousness dispute the Supreme Court would likely not get involved, but this case is not your ordinary obviousness dispute. The Supreme Court should take this case.

While Newegg and a host of ill-informed, know-knowing commentators and critics seek to vilify Soverain Software, the factual reality is that the patents at issue in this case relate to a filing that occurred back in 1994. The patents were granted, the patents have gone through reexamination twice and escaped without losing claims and instead adding many claims. In another case a jury determined that these patents were not invalid and the District Court in this particular dispute found that the evidence that the claims were obvious was so lacking that it wasn’t appropriate to even let a jury decide that issue. How can you blame the Judge? The Patent Office has reviewed these claims 3 separate times and another jury has found them to be appropriate as well. Yet, the Federal Circuit found the claims invalid on their own and for a reason not even argued by Newegg. Appeals courts are supposed to review the record, not find their own facts and ignore those in the file.

But this all begs one important question: Is Soverain Software a patent troll as they are being alleged to be? Of course they are not a patent troll! Only the most ideologically driven and intellectually dishonest critic would ever accuse Soverain Software of being a patent troll. After all, if you aren’t going to categorize Google as a patent troll how can you really call anyone a patent troll? Google did no research or development, instead electing to purchased Motorla’s patents so they could enter the marketplace armed with intellectual property in the form of patents.

I have no problem with Google paying, or even grossly overpaying as they did, for a patent portfolio. But Google really isn’t a patent troll because they acquired and enforce patents. They operate in the marketplace, they acquired patents to solidify their position, they did no research and development and instead acquired the patents and know-how to facilitate their entry into a market. This is no different than how start-up businesses have been acquired for generations. Start-up company comes along and are nimble, quick and responsive. They create great technology and then get acquired. This has happened in the high-tech sector, as well as in the biotechnology and pharmaceutical sectors. If this activity makes you a patent troll then every pharmaceutical company in the world is a patent troll, and virtually every technology company in Silicon Valley is likewise a patent troll.

Lets be clear, acquiring patents, in and of itself, cannot make you a patent troll, period! To the extent Google is properly characterized as an adjudicated patent troll it is because they engaged in abusive behavior. As Mueller explained: “found to have breached the duty of good faith and fair dealing flowing from Motorola’s FRAND licensing pledges to standard-setting organizations.” It is bad action that makes one a patent troll, nothing else.

So why then is Soverain Software accused of being a patent troll? Yes, they acquired the patents in question from the innovator, but Soverain Software actually services thousands of customers. They didn’t just buy the patents, they acquired patents to facilitate their business plans and continue to be an operating company that services the products covered by the software patents they now own and enforce.

It is as ridiculous to call Soverain Software a patent troll unless you are going to characterize an entity such as Cisco as a patent troll. You may recall that Cisco famously acquired one or two dozen start-up companies a year, every year, at least through the 1990s.

The reality is that at least since the NTP case with RIM there has been a belief that those that acquire and then enforce patents are patent trolls, of course save those large operating companies that do it. But this does nothing to forward the discussion or get at the root problem plaguing the patent system, which is that there are a number of bad actors who use patents as part of an abusive litigation strategy to attempt to shakedown defendants. Bad actions that warrant one being called a patent troll include shakedowns where the patents are laughably inadequate from an era of questionable patents being issued (over 12 years ago now), or where there is not a shred of evidence that supports infringement, or where one seeks to enforce patents that were subject to a duty of good faith and fair dealing flowing from pledges made to a standard-setting organization. But in and of itself acquiring patents, particularly when one is an operating company, cannot make one a patent troll.

There is no doubt that there are bad actors operating in the patent space, but what should we do to stop patent trolls? First, we should be asking the question, which sadly is not happening.

Second, if the Courts were interested they have all the power they need. See Judges Can Make Patent Trolls Pay. If the Federal Circuit wants to help solve the problem they should require more of a plaintiff prior to filing a patent infringement lawsuit, like an opinion from a competent patent attorney that there is objective reason to believe there is infringement and that at least some level of due diligence has been undertaken to ensure the patent claims are valid.

I do realize that patents are presumed valid, and I’m not suggesting that presumption be stripped. The presumption of validity is essential to the patent system. What I am suggesting, however, is that the abusive patent plaintiffs be required to engage in some level of due diligence just like responsible patentees already do prior to filing a lawsuit. Perhaps a sliding scale would be appropriate, since the Supreme Court seems to abhor bright line rules. The more diligence you engage in on the front end the less likely you are a patent troll. Of course, that would never fly, because those advocating that there is a patent troll problem know that the entities they point to most often, namely Acacia Research and patent litigator Ray Niro, engage in quite a lot of due diligence. But doesn’t that just make you wonder even further? If the reforms they advocate for won’t help the problem, which they won’t, what is it that they really want to accomplish?

Hopefully someone in the Senate wakes up and starts asking questions!

- - - - - - - - - -

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

Tags: , , , , , , , , ,
Posted in: Gene Quinn, IP News, IPWatchdog.com Articles, Patent Litigation, Patent Reform, 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.

 

18 comments
Leave a comment »

  1. As I have noted before regarding the following case:

    http://sites.google.com/site/271patentblog/Home/DiagnosticSystemsvSymantec.pdf

    Acacia Research does not always do proper due diligence. In the above case, after nearly a year, the plaintiff could not produce a Preliminary Infringement Chart that identified “how each accused product’s functionality contributes to infringement” and yet sanctions were denied though “it is a close call”. As noted in the case, “DSC is a wholly-owned subsidiary of Acacia Research Corporation (“Acacia”), and 20 both entities are in the business of acquiring, licensing, and enforcing patented technologies.”

    Furthermore, I have personal experience twice from Acacia Research subsidiaries where the lawsuits had no merit. In the first case, there was not only clear non-infringement, but two very clear prior art patents were found — so clear that these same patents were referenced in a rejection of the same patent by the European PCT yet there was no evidence that this information was given to the USPTO. In spite of all of this, the plaintiff refused to drop the case.

  2. Gene,
    Your description of NTP is incorrect: NTP was formed by the original inventor of patents Thomas Campana and his attotrney Donald Stout to enforce those patents, after unsuccessfull attempts of inventor-owned small tech company to commercialize patented technology
    (this was mainly due to the attitude of AT&T and other tech behemots towards small companies)
    In no event NTP can be called a “patent troll”

  3. Angry Dude-

    Nothing you wrote at all conflicts with anything I wrote. I am well aware who NTP is and how they were formed and what they did.

    They are widely viewed as a patent troll. That is also true, whether you choose to accept it or not.

    If you read the entire article, which it appears you did not, you would see that the vast majority of this article is devoted to explaining that simply acquiring a patent and enforcing it should not lead to one being called a patent troll. That, however, does not change the fact that NTP is widely viewed as a patent troll.

    In the future, if you are going to criticize what I write please have the decency to read the entire article. Please also don’t accuse me of being wrong when I am 100% correct.

    -Gene

  4. Gene,
    I am not accusing you of anything and I totally agree with the final conclusions of your article.
    It’s just I do not like when entities like NTP (and myself for that matter) are lumped together wth
    patent holding entities like Acacia or Rockstar (not that they do anything particularly wrong):
    the former developed their tech patents using their intelligence and sweat equity, while the latter just aquired their patents from outside sources using some form of financing.
    Lumping these two different kinds of patent-holding entities together is counter-productive in my view.
    (though it should not matter if patents are treated like real property)

  5. Angry dude-

    I understand what you are saying. However, I have always thought that there is great value in lumping everyone together. I’ve written a little about this, but need to write more.

    The term “patent troll” conjures up real evil in the minds of most. But the proposals and complaints run the spectrum. Is Thomas Edison a troll? How about a University? How about a Research & Development company? How about those who acquire from the innovator and pay the innovator good value? How about a company that just buys patents to enforce them? Personally, in my view, none are patent trolls and pointing out that whatever reforms Congress is considering would affect all those entities without distinction is useful. The proposals are not narrowly tailored and, in fact, won’t solve the problem.

    It is a great irony that the only entity that has been found to be a patent troll in litigation is Google. I have no problem with that because they engaged in abusive litigation tactics. There is where we need to focus the definition. If we do it is clear that we already have rules in place to handle this if District Courts would cooperate. If Congress wants to add more ability for District Courts to handle abusive and vexation litigation then go for it. I’m all for tools that would get at abusive litigation. But as President Obama has said in a different context, we need to cut with a scalpel, not a cleaver.

    -Gene

  6. Perhaps Gene, one aspect of the ‘lumping’ would be to divorce the holder of the patent rights completely from the equation.

    Afterall, patents were intended to be a fully alienable property right. Further, it is a right that does not require the holder to actually practice the invention, so that critical distinction should be maintained. In fact, I have a feeling that the vast majority of US patents are improvement patents, in which it may not even be possible for the follow-on inventors to be able to practice the invention (without first obtaining permission from the underlying item/method patent rights’ holders.

    If one removes the particular owner of a patent right from any policy discussion, what you are left with is to focus on the actions of those holding the patent rights (and the actions of those alleged to be violating those patent rights). One such action: enforcing patent rights through the only legal channel of court action simply should not be vilified as is currently being done.

    I fully believe that this is one area in which a Lady Justice wearing her blindfold would bring about the best results.

  7. Anon-

    I agree. How one acquired the patent right should be completely irrelevant. The questions should be limited to whether there is infringement and whether the patent claims are valid and enforceable. That definitely does focus the discussion because then whether one is a “patent troll” is about litigation strategies and techniques.

    -Gene

  8. I agree with anon & with Gene.

  9. If small and independent entities could successfully defend their patents/innovations then there would be little need to sell their patents to a 3rd party. However, they can’t – large companies can easily out-maneuver and out-resource them – and thereby infringe at will.

    Want to get rid of 3rd parties that specialize in litigation? Then STRENGTHEN the patent system. Make it so the little guy stands a chance. Afterall, wasn’t that the point of the patent system in the first place?

  10. jodi,

    I concur completely. Further, I would draw attention to what has been an unstated consequence of litigation reform (here, I focus not on trolls, but merely the cost of litigation that seems to feed the “Troll” myth). That unstated consequence would be an explosion of court cases. Removing cost as a constraint would merely shift to a new constraint: time and court resources. Remove the cost burden and then you could have independents attempt to enforce their patents. After all, the court system is the legal way set up for patent enforcement.

    Unfortunately solving the cost problem will not eliminate the so-called “Troll” problem, because people will switch the focus from “bad actors wanting money” to “worthless patents clogging the system,” and we will only see calls for super-heightening the barriers to obtaining patents in the first place. The Sport of Kings will be changed back to a Flash of Genius with the same end result: purposefully limiting the use of the patent system.

    What people need to realize is that a patent is a good thing. A valid patent is something that did not exist before the invention. The patent system is not only meant to provide a road ahead, but is meant to pave a parking lot, so that innovation in many different directions is enabled. Those that have studied history of science and technology will readily tell you (as I am telling you) that innovation is not linear. Tomorrow’s ideas stem from amalgamations of disparate ideas of today. Making a more stringent obviousness standard does not promote innovation – it retards innovation because it will drive advances underground. Remove the fuel, and you will either obtain less incremental advances or advances protected by other means (notably trade secrets). Either of these paths lead away from an optimal patent system and optimal innovation.

    You are fully correct. A stronger patent system is the best answer.

  11. Anon,
    “Flash of Genius” is a lot better than “Sport of Kings”
    At least it gives an ordinary genious a chance to win
    Right now the sutuation is grim: patent system is clogged with worthless junk patents which are mostly owned by (surprise surprise) the largest multinational corporations
    If you do objective analysis you will find that so-called “troll”-patents are of much better quality on average than the majority of patents owned by e.g. IBM or Apple (What do you think will happen to you if you, as an independent inventor, try to assert a patent on e.g. rectangular phone with smooth edges in court ? Right, you will be laughed out of court and probably sanctioned, not to mention that your “patent” will be invalidated)
    So no, we do not need more patents, we need high-quality patents on real inventions and an efficient system of patent enforcement.
    Without enforcement there can be no patents

  12. an efficient system of patent enforcement.

    But the Goodlatte bill will add to the inefficiencies by adding additional issues to argue about.

  13. Goodlatte bill makes any attempt of patent enforcement by an undercapitalized patent holder a losing proposition, possiby leading to bankrupcy, regardless of the merits of the case (it’s already very risky for an independent inventor to try to enforce his patent against large corporate infringer – I know it from personal experience)
    Only large corporations will be able to enforce their patents if Goodlatte bill becomes law.

  14. Be careful what you wish for, angry dude; as you might not be near the genius you think you are, and the big guys won’t even bother with patents at all, relying on their size and trade secrets to crush any competition.

  15. Anon,
    The irony of the current situation (as Gene already noted here) is that you have much better chance of achieving nuisance value settlements with some companies on useless crappy generic patents than collecting well-deserved licencing fees from industry on fundamental technological patents – those same companies will make every effort (concerted effort in some cases) to ensure that you don’t collect a dime…
    It’s a corporate policy I think, same type of stupid policy as officially prohibiting corporate R&D employees from reading any outside patents (as if the same info is not published elsewhere – conference proceedings, technical journals etc.)
    And this situation sucks, my friend…

  16. officially prohibiting corporate R&D employees from reading any outside patents

    That was reported to be the outcome of caselaw a decade ago that made finding of willful infringement very easy. Now that it is much harder, do the corporate types still feel that way?

  17. angry dude at 15 – that is not a patent problem.

  18. ‘if you have a strong patent that covers real technology, perhaps pioneering technology, and there are substantial damages, the tech giants you sue will vilify you as a patent troll in the media and do whatever they can to make sure that they never pay you a dime’

    You are correct.

    All this talk about trolls is just spin control by large infringers and their paid puppets to cover up their theft.

    The patent system now teeters on the brink of lawlessness. Call it what you will…patent hoarder, patent troll, non-practicing entity, shell company, etc. It all means one thing: “we’re using your invention and we’re not going to stop or pay”. It’s a pure red herring by large invention thieves and their paid puppets to kill any inventor support system. Their goal is to legalize theft. The fact is, many of the large multinationals and their puppets who defame inventors in this way themselves make no products in the US or create any American jobs and it is their continued blatant theft which makes it impossible for the true creators to do so. To infringers the only patents that are legitimate are their own -if they have any. Meanwhile, the huge multinationals ship more and more US jobs overseas.

    It’s about property rights. They should not only be for the rich and powerful -campaign contributors. Our founders: Jefferson, Franklin, Madison and others felt so strongly about the rights of inventors that they included inventors rights to their creations and discoveries in the Constitution. They understood the trade off. Inventors are given a limited monopoly and in turn society gets the benefits of their inventions (telephone, computer, airplane, automobile, lighting, etc) into perpetuity and the jobs the commercialization of those inventions bring. For 200 years the patent system has not only fueled the US economy, but the world’s. If we weaken the patent system, we force inventors underground like Stradivarius (anyone know how to make a Stradivarius violin?) and in turn weaken our economy and job creation. Worse yet, we destroy the American dream -the ability to prosper from our ingenuity for the benefit of our families and communities. To kill or weaken the patent system is to kill all our futures. Show me a country with weak or ineffective property rights and I’ll show you a weak economy with high unemployment. If we cannot own the product of our minds or labors, what can we be said to truly own. Life and liberty are fundamentally tied to and in fact based on property rights. Our very lives are inseparably tied to our property.

    Prior to the Supreme Court case eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the eBay decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Essentially, large infringers now have your gun and all the bullets. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you don’t like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back into the patent system with injunctions fully enforceable on all infringers by all patentees, large and small.

    Those wishing to help fight big business giveaways should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

    For the truth about trolls, please see
    http://piausa.wordpress.com/