Clearing the Underbrush: How to Fight Low Quality Patents Related to Commoditized Technology that Threaten Innovation

By Karl Fazio
February 21, 2017

The most successful patent trolls tend to be those with the sharpest noses for weakness. They sniff out low quality patents and hit legitimate businesses where they’re vulnerable in order to make money without doing the actual work of innovation.

Unfortunately, this problem isn’t getting any better. More than six times as many patent lawsuits are filed today than in 1980 and Patent Assertion Entities (PAEs) currently drive over 84 percent of patent litigation in the U.S. There are a number of factors behind the rise in power and number of patent trolls. One of the most significant, if under-discussed, is the convergence of commoditized computing technology utilized by almost every software-dependent company.

“Full Stack” IP Threats

All software-dependent businesses are built on a technology platform or “stack” made up of multiple modules or layers, each providing different services. With apologies to the real platform architects in the room, a simplified example is illustrated above. At the bottom of the stack is the base computing layer, which provides the enterprise with basic computing functionality: processing, memory, storage, network connectivity, etc. On top of that is a service layer, which may provide enterprise-wide services, such as identity management and authentication, security, privacy, e-commerce functionalities, CRM, and more. Next up is what can be referred to as middleware or shareware. This layer of product-agnostic services may be called on to deliver functionality (e.g., personalization, analytics, content curation, etc.) to multiple different products. Finally we get to the application layer, which delivers the innovative and market differentiating products, services, features, and experiences that make a business unique.

From a patent strategy perspective, resources and budget should be spent at the top of the stack. As you move deeper, technology can become less relevant to user experience, competitive advantage, and therefore may be less likely to warrant patent protection. Many companies deploy 3rd party commercial or open source technologies in the base computing or service layers to free up resources to innovate and focus on the business-critical application layer. Patents should be used to protect key, user-facing innovations—the reasons customers buy your products. Legal departments are best served by spending their IP budget to protect innovations that provide market-differentiating, revenue-driving customer experiences.

Unfortunately, IP departments are often forced to spend their limited budget defending patent troll lawsuits targeted at the base computing and service layers instead of where it should be spent – protecting application layer innovation. There has been no shortage of such litigation due to the glut of vague and ambiguous software patents directed to basic computing technologies. These broad, vague patents have become glaring targets for trolls, who are eagerly buying them up and asserting them wherever they can. As a result, companies are being sued for patent infringement for things that aren’t directly related to their end products and services.

Rather than wasting time, energy, and money litigating such cases, many companies simply settle their troll cases, further depleting their IP budget. The problem with this strategy, however, is that it’s precisely what the trolls want. Their business model is based on companies choosing to settle, rather than fight. Many companies simply consider it a “patent tax” for using basic computing technology. Analysis from LOT Network and Hamilton IPV showed that 75 percent of the patents used to sue JP Morgan Chase in PAE lawsuits came from outside financial services and were related to such technology.

Clearing The Underbrush

The trend toward technology convergence (i.e., commoditization at the bottom of the stack) is not going anywhere. Nor are the many patent trolls armed with ambiguous software patents targeting the lower rungs of the tech stack. The struggle is real. Legislative patent reform has stalled while judicial efforts (Alice anyone?) meander through the court system and USPTO with wildly varying results. And from early reports, it’s possible the Trump administration will take a “pro-patent” stance, which could lead to an emboldened patent troll community. Clearly, businesses cannot wait around for the government to solve this problem. They need to take matters into their own hands to protect themselves.

Fortunately, a number of private organizations are pioneering market-driven solutions, such as the Open Invention Network (OIN) and the LOT Network. OIN is a defensive patent pool and community of “patent non-aggression” dedicated to protecting the Linux system, a foundational component of many tech companies’ base computing layer. LOT Network is another non-profit community that dries up the patent pipeline for trolls. More than 80 percent of patents litigated by PAEs are acquired from operating companies. By joining LOT, members agree that if one of their patents falls into the hands of a PAE, all other LOT members have their conditional license to that patent activated, granting them immunity.

These organizations effectively “clear the underbrush” from the tech stack, freeing up companies to innovate and spend IP budget at top of stack. They minimize the volume of patents that trolls can get their hands on, and lock them down so these patents can’t be used against legitimate businesses that generate products and services. Clearing out this underbrush provides freedom for members to spend R&D and IP budget on their product layer and different themselves in the marketplace, which is how it should be. Technology convergence has led to a glut of patent assertion lawsuits because trolls love patents that can apply to almost anyone in the software space. Removing these patents from circulation is an important step towards ensuring businesses can focus on what that matter most, delighting their customers, growing, and protecting market share.

The Author

Karl Fazio

Karl Fazio is Chief Patent Counsel for Pearson, and is responsible for advising Pearson’s global business, technology, and product leadership regarding strategy, policy, protection, enforcement, and process relating to patents, trade secrets, open source compliance, and standards-setting activity. He manages Pearson’s international patent portfolio to ensure effective protection and alignment with business strategy, develops and implements effective open source and trade secret practices, and provides guidance regarding defensive litigation, enforcement, M&A, and licensing matters

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 36 Comments comments. Join the discussion.

  1. angry dude February 21, 2017 8:20 am

    wrong question to ask, dude

    the correct question:
    how is that the very same large corps whining about evil patent trolls and their bad patents file themselves many thousands of even worse patents year after year thus polluting and undermining US patent system ?
    In fact, watering down and polluting US patent system was on (big tech) corporate agenda for several decades, with predictable results..
    Now it’s too late – too many junk patents in the system
    “The doc said ‘to the morgue’, to the morgue it is!

  2. Anon February 21, 2017 8:42 am

    My first impression of the headline was borne out upon reading the article.

    This is just the “Oh Noes, the Tr011s” meme.

    One give away was the lack of accounting for the AIA’s non-joinder multiplier effect and attempting othe compare lawsuit numbers as if that multiplier did not even exist.

    A second key point that is obfuscated here is that “the work of innovation” is deliberately separated from the patent right – by original design of the US patent system.

    Our system was built to have the property that is the patent right to be fully alienable.

    It is a critical component for the fluidity and full value of innovation that becomes merely a “punchline” for the author here – and one that seeks to denigrate a perfectly valid part of the open market that appreciates innovation.

  3. angry dude February 21, 2017 9:19 am

    Do I get it right that the author supports business-method software patents of the Bilski kind and opposes foundational technology patents driving computing machinery and intercommunications – e.g of the RSA kind, at the bottom layer of all ecommerce apps or telecom patents on e.g. high-speed inter-networking ?
    What a screwed perspective…
    And he uses terms like “vague” and “ambiguous” which are not legal terms
    the only relevant legal terms as applied to patents are “valid” or “invalid”

  4. You Know Who I Am February 21, 2017 10:05 am

    I’m a bit surprised this piece could run here. The usual sophists and their usual arguments appear, of course, but unless the big dog just wanted a punching-bag, kudos for some diversity of thought on the site.

  5. Paul Morinville February 21, 2017 10:28 am

    Please come up with some new creative argument. This one is very old and tired. It is constantly regurgitated by the anti-patent lobby onto the floor of congress and into the ink of lobbyist op-eds.

    The premise is that the patent being defended is a “bad patent” and should not have been issued. It therefore deserves no respect. All other threads of argument come from this place.

    Try to make the same argument with the premise that a patent is a valid property right and it is the duty of large companies to respect the property rights of others just as you demand others respect yours especially by purchasing the fruits of your labors, your products.

  6. Anon February 21, 2017 10:53 am

    The usual sophists appear…

    Be careful Mr. Snyder, you have been banned once already.

    Maybe you should try to understand why.

  7. Paul Morinville February 21, 2017 10:58 am

    Karl, This is a serious question. You say “[patent trolls] sniff out low quality patents and hit legitimate businesses where they’re vulnerable in order to make money without doing the actual work of innovation.”

    What is the actual work of innovation? How do you describe it?

    The answer to this question destroys your argument.

  8. Ternary February 21, 2017 11:54 am

    Interesting approach in using an OSI model in software patent quality. However, a layer in the OSI model does not say anything about its importance or quality, only its role. In fact, each layer has to be implemented adhering to standards to make the entire model work.

    “As you move deeper, technology can become less relevant to user experience, competitive advantage, and therefore may be less likely to warrant patent protection.”

    I would say that the lower layers become less visible to top level developers and thus have to be relied on heavily and have to be of excellent quality and warrants solid patent protection. The fact that someone is not aware of underlying technology says nothing about the quality of patents that protect that technology. In fact, when everything works as expected it is reasonable to assume that you are working with high quality technology, probably worthy of good patent protection.

  9. You Know Who I Am February 21, 2017 12:03 pm

    anon you just wish you had an ounce of power, over anything. You should start a blog, then you could ban your reader.

    as for me, I try to respect the big dog’s rules since this is his place. if that won’t be possible, so be it. But it won’t be you deciding.

  10. Anon February 21, 2017 2:08 pm

    Mr. Snyder,

    You are projecting.

    Never have I indicated that I desire such power. Instead, unlike you who only mouths “respect,” while being banned for a lack of that respect, I adhere to the basic principles here of accurately portraying law, history and facts.

    Maybe you should look into that.

    Perhaps understanding that first so that an apology for violating that which you claim to respect would be earnest, and perhaps your posting privileges would be restored so that you would not get around the rules (that you respect?) with a false email address.

    Think about it.

  11. Gene Quinn February 21, 2017 3:12 pm

    All-

    Karl Fazio has published other works here before, and he is a Chief Patent Counsel with a point of view that is certainly inside the envelope. He articulates it well. I disagree with the opening several paragraphs where he uses patent trolls, non-practicing entities and PAEs interchangeably. Still, the article is an important one for several key reasons.

    First, Karl is exactly right to point out that the patent troll problem (to whatever extent it actually exists) is a creation of large operating companies. That is where many of the low quality, overbroad patents come from that are then used to sue other operating companies. AT&T, Cisco and others were notorious for selling patents to those who would harass the competition. So the patent troll problem is a creation of those who complain about it.

    Second, if large companies want to do something about the patent troll problem they can. Joining LOT would seem to me to make all the sense in the world. Like so many other times throughout the history of law, private actions are far better at solving a problem (or insulating from a problem) than crammed down legislation.

    Finally, and most importantly, this article proves that the PTAB does not work. Post grant challenges were created to get rid of low quality patents. As we all know, large entities that are sued on low quality patents choose to settle those cases. Instead, they fight to the death high quality patents where there is ubiquitous infringement.

    -Gene

  12. I'm worth a million comprises February 22, 2017 2:39 am

    That illustration is just silly. The real innovation is happening at what you call the “commodity” layer (i.e. security, virtualization, exploitation of new hardware capabilities etc.). The application layer is where companies try to patent the idea of ordering sushi from your smartphone.

  13. Benny February 22, 2017 5:38 am

    Paul at 7,
    Here lies the problem. There is often a yawning gap between the actual work of innovation, which is usually spelled out in the specification of a patent document, and the independent claims granted. If the examiner isn’t on top of the job, claims go through with basically repeat known or obvious ideas, and the innovative tricks are buried in the combination of dependent claims 35 and 36 or whatever. The examiner get to knock off from work on time and every one else in the industry just has to deal with it.

  14. Night Writer February 22, 2017 8:40 am

    The thing about this is that as a patent attorney and former software engineer, I know a bit about this stuff. First, did they try to design around the patents? Second, is it the case that they are using technology that they didn’t invent? (I see this all the time where engineers just take stuff). Third, how do we know they are low quality? If they are low quality, then an IPR would easily take it out with 103. The patent judges love to invalidate patents and get their counts with easy cases.

    Moreover, many judges are very hostile to patents.

    Moreover, it is not hard to shield engineers from this type of stuff. You just need the right in-house attorney and they can run interference.

    Moreover, what are the damages? I note that you compare the costs to the budget that was given the “IP” department as if that was the correct amount. Maybe the problem is that the corporation is taking a lot of IP and needs to up the budget.

    Etc…just more propaganda.

  15. Night Writer February 22, 2017 8:44 am

    @12: Benny, the claims are supposed to be from a POSITA.

    Benny, your crxp is pushed all the time. But, if the claims granted, then the question is is there a 103 argument? If so, IPR or PGR.

    If not, then there is nothing wrong with the claims. You can innovate inside the claims scope and get them invalidated that way, otherwise suck it up and realize that someone invented something and got broad coverage of the invention.

    But, please, the underlying assumption that the claims are not valid or deserved is wrong. If it was not wrong, then there would be 103 arguments.

    It never ends with the misrepresentations. Claims scope: scope of enablement. 101 not really needed.

  16. Night Writer February 22, 2017 8:50 am

    The other giant lie about this blog post is that these “low quality” patents do not promote innovation. The fact is if there is this fruit to be gained from inventing and claiming these inventions, then it provides an enormous incentive for corporations to always stay one step ahead of the low quality.

    Just ask yourself: if the corporations have such great R&D departments and hot attorneys, then how did this happen? The corporations are flat-footed and got beat to the punch. I see lots of corporations vastly increasing their R&D and patent output to try to head this problem off. They want their inventors to get to all these inventions first and get them public.

    So, please…………stop the propaganda machine.

    I guess the thing that bothers me so much about blog posts like this one is the how naive and ridiculous they are. They do not adequately represent the ecosystem of innovation and patents. Grade: F.

  17. Benny February 22, 2017 8:53 am

    Night,
    you lightly drop from your lips the line ” is there a 103 argument? If so, IPR or PGR.” That’s at least $300,000 each side, over half a million dollars all told, or in terms we all understand, slightly more than my boys weekly allowance. Not all of us take such figures lightly. If there is a 103 argument, I expect it to come from the examiner, not have the examiner drop a hot potato on my lap.
    Of course, if you get a claim covering no more than your innovation, that’s fair play, but it doesn’t always work out that way.

  18. Night Writer February 22, 2017 10:14 am

    @16 Benny: Is there a 103 argument? I note that the blog post doesn’t say there is. Just that they are “junk” in his opinion. That is what we see all the time, isn’t it?

    So, is the claim that there is a good 103 argument?

    (Also, note that one reason we don’t see an improvement in prosecution is the bozo they appointed as director.)

  19. Benny February 22, 2017 10:24 am

    Night,
    I’ve seen some examples in my industry, where you could come up with a mighty convincing 103 argument in less than half a day’s work, but it didn’t happen at the USPTO.

  20. Edward Heller February 22, 2017 2:13 pm

    Gene@11, I had no idea that 80% of the patents asserted by so-called trolls are purchased from operating companies. But this makes sense. I was inside patent counsel at a large company and I too tried to convince my management to sell patents to others that they be enforced. The patents “up for sale,” of course, were not necessary to defend our core business.

    This all started when a book was published called “Rembrandts in the Attic.” Perhaps the alleged troll problem began shortly after that book was published.

  21. Paul Morinville February 22, 2017 2:22 pm

    Edward Heller @20. The troll problem has been around since the founding. Eli Whitney did not have a product, but sued dozens of companies. It is nothing new. Companies have been separating patents to assert in third party entities since at least the sewing machine wars in the 1850’s when they put patents into a combine. This is nothing new. Rembrandts in the Attic was not something earth-shattering or new. It is the way productive patent systems work and this effect gives value to patents, which in turn helps attract capital to startups, which of course once kept America at the front of the worlds technological development. That prize has now transferred to China.

  22. Paul Morinville February 22, 2017 2:28 pm

    Edward Heller @20. the text of the troll problem was supposed to be written encased in quotations as “the troll problem” @21. Your way of referring it to it as “the troll problem” reminds me of other phrases used to denigrate an entire class of people in the run up to wiping them out.

  23. Night Writer February 22, 2017 5:14 pm

    @22 Paul “to denigrate an entire class of people in the run up to wiping them out.”

    Very well put.

  24. Anon February 22, 2017 7:37 pm

    The “Tr011” problem began when the propaganda of using that term found resonance with other anti-patent ideologues.

    People very much like Mr. Heller, who is only too happy to be against software and business method patents.

  25. Molly (JD Candidate) February 22, 2017 11:01 pm

    Mr. Morinville,

    Your insinuation that Mr. Heller is akin to a genocide perpetrator is not very nice : (

  26. jbavis February 23, 2017 12:47 am

    Benny @ 17:

    “That’s at least $300,000 each side, over half a million dollars all told,”

    Then buy the patents for less than that and use it to keep competitors from copying the innovation. Your corp wins, the inventor wins, and your competitor loses for not being faster to buying the patent.

    This idea that every patent is invalid is not helping your business.

  27. Benny February 23, 2017 2:13 am

    jbavis,
    Your advice doesn’t address the problem, it merely juggles the figures. If a patent claim was, but should not have been, granted since it was either known or obvious, then the shoddy work of the examiner has still caused significant financial damage to the industry. Furthermore, if someone is granted a claim that has previously been disclosed elsewhere, or is obvious, that someone hasn’t really earned the title “inventor”.
    As for the last sentence of your comment – it is beyond me how a literate person can equate the notion that “some patents have been granted erroneously” with “this idea that every patent is invalid”

  28. jbavis February 23, 2017 11:07 am

    Benny,

    Patent quality has increased dramatically yet you are suggesting that you are being plagued by low quality patents is an incredibly ridiculous thing to say.

    As another article recently succinctly pointed out, large corporations lobbied for IPR’s in AIA and got them yet now are using the mechanism to invalidate small patent holders with high quality patents. See: http://www.ipwatchdog.com/2017/02/22/ptab-patent-troll-operating-companies/id=78616/


    “Post grant challenges were created in the AIA for the express purpose of getting rid of these low quality patents. The large operating companies that so desperately lobbied for new procedures to challenge these low quality patents instead continue to pay extortion-like settlements to patent trolls who apparently continue to sue alleging infringement of low quality patents. Of course, these low quality patents were supposed to be challenged at the PTAB, invalidated and the patent troll problem was supposed to eventually go away because trolls would learn there was no money to make. Instead, as Fazio explains, large operating companies sued on low quality patents choose to settle those cases. In a mind-boggling twist, however, these same large operating companies fight to the death against high quality patents where there is ubiquitous infringement of highly valuable commercial technologies.”

    So Benny, it is beyond anyone here how you can suggest that you are being plagued by “shoddy” patents. It is very obvious what the problem is – large corporations bullying small innovators and stealing their IP.

  29. Benny February 23, 2017 1:05 pm

    Jbavis,
    You have no idea which industry I work in, or what the claims look like in the patents that trouble me, or who is asserting them (hint — not NPEs or PAEs), so I don’t see how you are in a position to criticize. Your comments may be relevant to other corporations and patents, but not universally so.

  30. jbavis February 23, 2017 1:30 pm

    Benny,

    Your hand waving is telling. Enlighten us with your “industry” that is issuing these shoddy patents – or give us a patent #number to look at.

    Sorry but I ABSOLUTELY do not believe anything you say. Your posts over the years have shown NO credibility in caring about inventors, small innovative entities, or helping the American economy. I see right through you – you work for an ‘efficient infringer’ and are looking how you can further erode property rights to carry out your job better. The problem is, all the reform has only made it worse for both sides thereby legitimizing AIA and PTAB and IPR’s.

  31. Benny February 23, 2017 1:41 pm

    Jbavis,
    T is obvious from your comment that you have no clue who I work for. Now, here is a patent number for you — 8297768. In 2009, it seems, a bunch of bright engineers figured out a way of .making the light come on in your appliance when you open the door. Not something a second year student could put together over the weekend, obviously. How long would it take you to come up wth a 103 argument against that?

  32. jbavis February 23, 2017 2:16 pm

    Benny,

    are you claiming you or your company, for a light in a dishwasher, used Bowden cables configured to compensate for the weight of the door before ~2009?

    Your statement “making the light come on in your appliance when you open the door” is either deliberately misleading or you cannot read patents.

  33. Benny February 23, 2017 2:38 pm

    Jbavis,
    Where would you rate the claim on the scale of “cutting edge engineering innovation” to “shoddy, obvious patent”? By the way, this has nothing to do with our company, but it has a lot to do with “obvious”

  34. jbavis February 23, 2017 3:28 pm

    Benny,

    Ok so now you picked a patent that has nothing to do with your company but yet you claim that your industry is plagued by shoddy patents. Sorry, but you don’t get to jump all over the place in your comments and make such ridiculous claims by switching your story every time it falls apart.

    1) Stick to the point and provide us with your 103 rejection you “came up with in half days work”.

    2) Then, furthermore, tie this all back to the original post and what we’re learning that PTAB (or AIA) isn’t working for anyone in promoting innovation. We clearly see it’s working for Google in stealing IP but how about others – in particular the small entities that create the majority of new jobs. How is this all related to your ridiculous claims.

  35. staff February 23, 2017 6:19 pm

    “The most successful patent trolls tend to be those with the sharpest noses for weakness. They sniff out low quality patents and hit legitimate businesses where they’re vulnerable in order to make money without doing the actual work of innovation.”

    We have heard the same propaganda so long from large infingers that it has become amusing.

    First, what is a patent troll and why wont they define it? As often as they use it and as often as we’ve asked, why haven’t they defined it? We believe the answer is simple -if they don’t define it, they wont have to defend it.

    We believe what they really mean is ‘small competitors’. Large infringers would rather not have to deal with us in an honest way nor have to respect our property rights so they create a pure fictional account intended to mislead Congress and the courts with the intent of making it easier for them to rob and crush us in peace. But our inventions are a threat to their market share, especially if we are able to obtain injunctions against them to force them to stop using our inventions and have to compete legitimately and honestly with us. But then, thieves are never legitimate or honest. The bigger the thief, the bigger the theft.We do the work, they steal the byproduct. For them, that’s business as usual and they are just fine with it.

    For our position and the changes we advocate (the rest of the truth) to truly reform the patent system, or to join our effort, please visit us at https://aminventorsforjustice.wordpress.com
    or, contact us at aifj@mail.com

  36. jbavis February 23, 2017 9:19 pm

    staff,

    I like many of your Proposed Measures (https://aminventorsforjustice.wordpress.com/about-2/) but given the opponents, worry how this fight can be carried out.

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