When It Comes To Patents, John Oliver Takes The Easy Way Out

By Michael Gulliford
April 24, 2015

easy-way-outThis past Sunday, John Oliver — host of HBO’s “Tonight With John Oliver” — took up the issue of patent trolls. Bravo to Mr. Oliver for bringing the subject of patents — which should be getting a lot more attention than it does — to his vast audience. But unfortunately, instead of using his platform to inform an important demographic about the complexities of intellectual property, Mr. Oliver took the easy way out, telling an outdated story in an attempt to influence public opinion.

If you are an innovator, entrepreneur, or consider yourself well-informed on today’s issues, you owe it to yourself to look past the easy laughs and understand the real state of today’s patent system. Because then, no matter your ultimate position on patents or the need for patent reform, at least you will know the whole story.

 

Yes, There Was a Big Problem In The Patent World

You don’t need a Wharton degree to see why patents are important. You need only do as Mr. Oliver suggests and watch the popular ABC series “Shark Tank.” Because as anyone who regularly watches the show knows, whenever a company that manufactures or sells a product asks for an investment, the first question they are always asked by the Sharks is the same — “Do you have a patent for that?” And inevitably, not having patent protection means no investment. Why? Because the investors need to know that the company has the ability to protect its products, as well as their investment. Patents provide those assurances.

But here’s the rub: patents give their owners the right to exclude others from doing things. And for many years — given the boom in internet-based businesses, the patent office improperly granting many broad software patents and the astronomical cost of defending a patent suit — much damage was indeed been done by patent trolls that took advantage of the situation by suing as many entities as they could, to extract settlements lower than the cost of defense.

As a former partner at a major international law firm practicing patent litigation, I have seen the damage that unscrupulous patent trolls can cause, and how easy it was to demand high settlement payments from defendants whose only option for defense was a $3-5 million litigation. And this is what happened, again and again.

But that is not the world we live in today. It’s just unfortunate that Mr. Oliver, who is clearly seeking to influence public opinion on the issue, left so much out.

 

Things Have Changed Pretty Drastically

As we all know, businesses that get sued a lot are not going to sit there quietly and take it. They are going to pick up the phone and tell Congress that things need to change. And when it comes to patents, oh have things changed. To begin, Congress passed the America Invents Act (“AIA”), a patent reform bill designed to curb patent troll litigation abuse that has made it significant easier and much, much cheaper for defendants sued in district court to invalidate a patent. Again, very important but omitted from Mr. Oliver’s story. Mr. Oliver tells us that companies faced with a patent troll letter generally settle because the only other option is patent litigation that will cost upwards of $5 million. Perhaps that was true two years ago, but not anymore. Not only has one of the AIA’s coveted new proceedings allowed defendants to invalidate patents in record numbers, it only costs a small fraction of district court litigation.

Mr. Oliver also rails against the damage being caused by patent trolls aggressively asserting overly broad software patents that shouldn’t have been granted in the first place. But again, very true two years ago, not so much today. Although omitted from his story, the Supreme Court issued a much-anticipated decision regarding software patents in the summer of 2014, known as Alice v. CLS Bank Int’l. While the Supreme Court didn’t put an outright ban on software patents, it’s ruling decimated a large swath of software patents in the U.S., particularly the overly broad business method patents that used to be a favorite of patent trolls. Add to that additional Supreme Court decisions making it significantly easier to invalidate vague patents, and for defendants to recover attorneys’ fees from losing patent trolls, and you start to see a different picture than the one Mr. Oliver paints.

Large verdicts for patent trolls are also a thing of the past. While juries do still occasionally award such verdicts, the reality is that the Court of Appeals in charge of patent cases throws these verdicts out time and time again. Just ask Vringo.

And let’s not forget about state attorney generals or the FTC, which are generally against bad actor patent trolls. The NPE that extorted small businesses into paying licensing fees for using scanners, which John Oliver highlights in his story, heard pretty loudly from the FTC and the NY Attorney General. But Mr. Oliver left that out as well.

 

The Story Mr. Oliver Should Have Told

Indeed, if Mr. Oliver wanted to tell the real story of today’s patent world, he would have had plenty of good material. Instead of relying on litigation statistics from 2012, for instance, he could have explained how current patent reform, in making it so much easier and significantly cheaper for defendants to win patent cases, has already caused litigation filings to drop markedly in 2014. After all, no one likes losing money, least of all NPEs.

Mr. Oliver could have also told the wonderfully ironic story of the new creature in today’s patent world: the patent ogre! That story goes as follows. Recognizing that recent reforms gave them the strong strategic and financial upper hand in litigation, many very large companies privately tell would-be licensees that they must bring a lawsuit to have any potential for a license. At the same time, these very same entities publicly decry how often they are sued because they know public sympathy can only lead to more advantageous reform.

And perhaps the greatest irony of all, which would have made great material for Mr. Oliver, is that the current reform has made it so financially and legally difficult for all but the best-financed companies to protect patent rights, that patent trolls are now more necessary than ever. Because in a world where patent deals are only done in the courtroom, and not the boardroom, patent trolls, with their deep pockets and litigation focused business models, are now often the only way companies or inventors can protect their patent rights. Again, the ironies are apparent.

 

Mr. Oliver’s Real Motivation

At the end of Mr. Oliver’s admittedly humorous diatribe, we learn his real motivation: passage of the Innovation Act (HR 9) — the patent reform bill currently pending in the House that would no doubt benefit Mr. Oliver’s employers.

But even here, Mr. Oliver strongly misses the mark. It is not trial lawyers who are blocking the Innovation Act, as Mr. Oliver claims. Rather, it is a large swath of the technology community — from universities, to technology companies, to small businesses, to professors, and even venture capitalists — who understand that many innovators are now at a breaking point when it comes to patent rights and that the potential for further unintended consequences via additional reform is just too great.

So, in the end, no matter what side of the patent debate you are on, let’s remember that our patent system is a vastly complex, finely tuned equilibrium. While market realities require adjustments from time to time, going too far in either direction will cause devastating consequences for large swaths of businesses. Right now, the market remains anti-patent in many respects, to the disadvantage of those companies dependent on strong intellectual rights to bring in investment for a new technology or protect that technology from being copied by those with the easy means to do so. While it makes sense to continue weeding out bad actors and deceptive demand letters, reforms must be carefully tailored. Because going much further in the anti-patent direction will be no laughing matter.

The Author

Michael Gulliford

Michael Gulliford is the Founder and a Managing Principal of Soryn IP Group, a patent advisory and litigation finance firm headquartered in
New York City that closed $140 million in patent deals in 2017. In
addition to its robust advisory practice, Soryn manages one of the
largest funds in the U.S. dedicated to patent litigation finance via
its Soryn Capital affiliate. Michael has repeatedly been named to the
list of the Leading IP Strategists in the World, and is regularly
asked to speak and publish on the latest patent developments. Prior to
founding Soryn, Michael was a partner in the patent litigation group
at Kirkland & Ellis LLP. Michael graduated magna cum laude from the
Seton Hall University School of Law and received his B.A. in
Neuroscience from Columbia University.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 12 Comments comments.

  1. angry dude April 24, 2015 10:02 am

    John Oliver better watch HBO’s own “Silicon Valley” show

    It’s all about IP theft by large corporation (Hooli aka Google) from small startup

  2. Night Writer April 24, 2015 11:51 am

    Great article! I wish that these issues could be debated in some type of fair forum. It seems there is no such thing as reasoned debate anymore. It would be very interesting for JO to try and respond to the points raised.

    I also wonder whether the SCOTUS could get away with their nonsense such as Alice if there were reasoned debate about their behavior. My guess is they would be publicly shamed for Alice and other cases. But, without a forum for reasoned debate it is easy to just sloff off criticism. No doubt JO would merely say something like, oh year as if the former trial attorney doesn’t need to keep pushing patents to make his money. No response to the substance of the criticism would be forthcoming.

  3. Jim Slaughter April 27, 2015 7:40 pm

    The patent system was developed for the physical and material world, not for the instantaneous world of electrons and computer logic.
    The need is not to reform the patent laws. The need is to separate the logic and electron based ideas of the computer age from our patent system and protect them with other measures.

    Because of the immense inertia at rest that must be overcome to get physical products designed & prototyped, tested and manufactured prior to entering the marketplace, this mandates protection for these job producing innovators. Innovators that are willing to invest their own blood sweat and tears (rarely funded by VC’s who look for 10 X return in 5 years), sometimes working unfunded for years, to solve pains and problems in the real and physical world. Their only hope of compensation for their efforts is to expose their innovations to the public in the marketplace, thus providing benefit to community members who might want this innovative solution to eliminate their own pain or problem. These innovators know that their work is now exposed and vulnerable to unimaginative knock offs & copycats & patent encroachment.

    George Washington’s signature authenticated the very first patent in the United States. Thomas Jefferson’s signature as the Patent Examiner also demonstrated the immense importance that the founding fathers placed in motivating and defending physical product developers efforts for the betterment of society and the growth of the economy.

    To think that programmers in a room of laptops with a goal of programming a logic path should be protected by the same patent system as people who develop solutions for society in the physical world where human beings and the laws of physics and inertia exist is ludicrous.
    A separation needs to take place.

    Respect the geniuses of our time and give them a system of protection appropriate for their craft and for their brilliant applications of logic.
    Those of us who invest our lives in the other realm, the slow world, the heavy world, the physical world, we need strong intellectual property protection, different than those who invest their lives in the ethers of the computer programming, Internet world.

  4. angry dude April 27, 2015 7:59 pm

    “world of electrons”

    hilarious, dude
    I suggest buying “Make: Electronics” book for beginners, then you can proceed to intro to Arduino books, then come back and tell us about the “world of electrons”
    Or just unscrew the light bulb and put our fingers inside the housing…
    this will teach you bout electrons

  5. angry dude April 27, 2015 8:14 pm

    2Jim Slaughter:

    “On July 31, 1790 Samuel Hopkins was issued the first patent for a PROCESS of making potash, an ingredient used in fertilizer. The patent was signed by President George Washington”

    Think Diamond v. Diehr

    Think “electrons”

  6. Jim S April 28, 2015 2:23 am

    2 night writer,
    I appreciate your interest in getting to the “substance of the criticism”. It does seem that the reasoned debate is lacking a fair forum these days. It’s so common to defer to polls and slough off true debate on core issues.

    2 angry dude
    I hope you live in Southern California so you can visit us at OC worx.com where we arrange our meetings and meet in person to share technologies, build teams and develop products. Tonight I presented and IoT device for remote control of a robotic system which can be controlled from your smartphone. I was one of 7 presenters tonight. You would be welcome to stop by our next meeting. We had some amazing new products being demonstrated by local Orange County startups. I showed a few pages of my provisional patent to encourage other members to protect their ideas. Photos will likely be posted within a few days. Peace, out.

  7. angry dude April 28, 2015 12:09 pm

    2Jim S:

    Robotic system ? Apart from some cheap china-made commodity hardware like ir sensors and servos, there is only one valuable thing to protect: robot’s brain – software code running on microcontroller like Arduino, or ARM processor, or ARM/DSP

    There is currently no way to protect your robot’s brain, unless you use specialized encrypted microcontrollers or processors (like Omap L138 in secure boot variant) or keep your robot’s brain in (private) cloud (that robot would suck as it won’t be responsive at all)

    Arduino is open architecture and it’s out of picture – not protectable.
    “Provisional patent” (application) protecting ideas ? ur kidding ?

    Better ask Benny – he knows

  8. Night Writer April 28, 2015 3:18 pm

    Jim wrote: To think that programmers in a room of laptops with a goal of programming a logic path should be protected by the same patent system as people who develop solutions for society in the physical world where human beings and the laws of physics and inertia exist is ludicrous.

    Jim, what do you do for a living? Probably information processing. Information processing is predicted to replace 10’s of millions of jobs –and even 100’s of millions of jobs–in the next 10 to 50 years. Information processing is incredibly tough. The only people that think it is easy are the ignorant.

    Moreover, there is no principled way to separate electrical engineering from information processing. Every top program has merged the departments for this reason.

    Please go educate yourself before posting again. Your posts remind me of the first artificial intelligence programmers that thought it would be just a few years before computers outperformed people–until they actually tried to get a real system working.

    Why are these conversations so often dominated by the ignorant bullying types like Jim? Jim–if you want to go toe to toe with me on this I would be happy to humiliate you. Please go educate yourself and look in the mirror and ask what am I paid for? I am typing that what I do for a living is meaningless? Are you the same as a squirrel Jim? No? Why. What do you value the most about yourself Jim? I’ll bet it is your ability to process information.

    Why is it that every thread—no matter the blog–on information processing has a Jim? At patentlyo it is clear that MM is paid to blog against patents. Are you paid Jim?

  9. Blindcat April 29, 2015 2:07 pm

    Much of what John Oliver said is spot on.
    1. Too suggest that trolls are not a continuing problem seeking shakedown fees is simply not accurate. They are. Too suggest that those suits aren’t costly is not accurate. Too suggest that AIA has fixed the problem is not the case. We have a system where in many courts you don’t even know what the patent owner is accusing until close or at trial.
    2. there is a reason that trolls like E.D. of Texas. Defendant’s don’t believe they get a fair shake in Texas and plaintiff’s think the judges are unlikely to rule against them.
    3. He is right. the Innovation Act wasn’t perfect but there were many improvements. Shouldn’t a plaintiff provide more notice in a suit that will cost millions to defend than simply saying I have a patent and you are infringing? It is currently close to being that bad.

  10. Gene Quinn April 30, 2015 12:54 am

    Blindcat-

    You lost me when you said that defendants don’t know what patent owners are alleging until close to trial. That is simply false. There is absolutely no truth to that assertion. Either you don’t know what you are talking about or you are intentionally misleading. Either are unbecoming.

    Also, the Innovation Act makes no improvements to the system. It is just a different set of rules that imposes unnecessary burdens on real innovators.

    -Gene

  11. Kathy May 11, 2015 1:12 am

    Tge scanner patent troll faced NO FINES fir its behavior. The NYAG did force the company to refund any money received but that’s hardly a “loud” message. And the FCC? That consent decree prohibits the company from doing what it should never have done in the first place. Again no fines.

  12. Kathy May 11, 2015 1:13 am

    Argh. Sorry for ipad typos!

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