Myths about patent trolls prevent honest discussion about U.S. patent system

By Gene Quinn
June 22, 2017

Recently I wrote about how the Supreme Court’s decision TC Heartland will, in my opinion, not be as disruptive as some are making it out to be. See Is the Supreme Court’s venue decision anti-patent? In that article I acknowledged, as I often do, that there are certainly some bad actors that abuse the patent litigation process and seek extortion-like settlements. There are bad actors out there on the patent troll side; there really cannot be any serious discussion to the contrary. Those bad actors, however, are few in number, which you wouldn’t know based on media coverage and the never ending call for patent reform by those who prefer to take technologies they did not innovate rather than pay a reasonable royalty to innovators.

The media, Congress and public have been misled with respect to the so-called patent troll problem. This has been accomplished by a masterful public relations campaign and a sadly disinterested and unengaged audience that buys sound bites that fuel their predetermined notions and agendas. The truth, however, is that the so-called patent troll problem has been created in significant part simply by gross over definition of what qualifies one to be called a patent troll. Indeed, there are entities that define all patent owners that seek to enforce their patents through litigation or licensing as patent trolls. Does that make sense to anyone? If that is the definition of a patent troll that means even those entities that are constantly lobbying for more patent reform and complaining about patent trolls are patent trolls themselves. Google and Uber are locked in a patent battle over self-driving automobiles, so does that make Google and Uber patent trolls? What about General Electric, Apple, Samsung, Microsoft, IBM, Cisco, Oracle, Whirlpool, Kraft Foods, Caterpillar, Seiko Epson, Amgen, Bayer, Genzyme, Sanofi-Aventis, and Honeywell, to name just a few?

If you stop and think about how some define patent trolls and other bad actors it becomes an absurdity of rather epic proportions. Obviously, seeking to enforce patents or licensing patents cannot make you a patent troll and does not mean you are a bad actor. And neither can the fact that you don’t make anything given that pretty much no American technology giant makes anything themselves, instead preferring to have products made in China and elsewhere around the globe by others and then imported.

The truth is America’s technology companies that make up the infringer lobby have masterfully created the narrative of the patent troll. Even worse, they not only created the narrative but they also created the so-called patent troll problem, with over 80% of patents asserted by patent assertion entities (PAEs) originating from America’s technology companies. See Clearing the Underbrush.

So not only is the infringer lobby responsible for the so-called patent troll problem, and not only have they slapped the patent troll label on the innovators of the products and services that they take (i.e., steal), but they’ve successfully managed to somehow avoid anyone noticing that based on their own definitions they are patent trolls themselves! While the message is horribly, and intentionally, misleading you do have to admire just how successfully they have managed to both insulate themselves while leading the media, judges and Members of Congress by the nose as if they were wearing an ox ring.

Why would the infringer lobby want to lose the patent troll narrative? It is enormously successful and allows them to parade dubious (to be generous) reports that don’t get any real scrutiny by the mainstream. Simply wave the patent troll flag and facts, truth and intellectual honesty no longer matter.

There is little better proof that the infringer lobby doesn’t want to do anything about the so-called patent troll problem than the failure of the TROL Act during the 114th Congress.

The TROL Act, which passed in House Committee, would have really put a substantial dent in the true bad actor problem, but in the end the infringers did not support the bill. Conventional thinking is that infringers didn’t support the TROL Act because if they did it would have passed and they were looking for more comprehensive patent reform. But why not take what you can get given that the TROL Act would have caused those bad actors to go away? We hear so often how evil those bad actors are, but the infringer lobby didn’t support the TROL Act? Obviously there was more to it than that.

The infringers didn’t support the TROL Act because it would have passed and it would have been successful to eradicate those bad actors they complain about so often. With the TROL Act passed and successful the infringer lobby wouldn’t be able to get any of the other items on their wish list without the boogey man of the patent troll being available as the straw man foil.

If something like the TROL Act did pass we could finally get past all this nonsense about the egregiously bad actors that engage in nothing more than extortion-like activities. Perhaps then we could have a real discussion about patent assertion entities that do own solid patents on meaningful technologies outside the shadow of a caricature of a boogey man made up strictly for PR purposes and to achieve the unilateral dismantling of the U.S. patent system. We are long overdue for a realistic, substantive discussion about the good done by a licensing industry that facilitates transactions, rewards inventors, and returns capital to the investors who supported the invention in the first place. See Academic Patent Licensing Helps Drive U.S. Economy.

The importance of licensing cannot be overstated. The founding fathers specifically intended to create a patent system that was affordable for individuals in contrast to the patent system in the UK. But that meant that the individuals getting the rights would not be in any kind of financial position to manufacture. The entire U.S. patent system was, therefore, set up in order to facilitate licensing. Approximiately 70% of inventors in the early days did not even graduate from high school. So the U.S. patent system from its earliest days was set up to encourage inventors to do what they did best — invent. They would be given rights that they could then license to manufacturers and others who controlled channels of distributions so they could do what they did best — make and sell. It was an intentionally symbiotic relationship.

If something like the TROL Act could pass and we can get past the truly bad actors that engaging in nothing more than courtroom extortion we could have a real discussion about how NPEs/PAEs that own solid patents and license industry so they can engage in business, we could have a meaningful discussion about the good that is being done in terms of facilitating transactions, rewarding inventors, returning capital to the investors who supported the invention in the first place and/or who purchased the patents thereby returning capital to inventors so the entire process could repeat.

As we consider all of this it is also important to keep in mind that the U.S. tech sector spending on patent trolls is less than 1% of all IT spending. Even if you use the egregiously inflated (and thoroughly debunked) $29 billion number patent critics erroneously claim as the “cost “of patents you get at best a rate that is 3.1% of all IT spending. See Doing the Math on Patent Trolls.

These numbers seem to on their face do nothing more than reflect a reasonable (if not lower) royalty one would expect in an arms length negotiation. So while the numbers can be made to look very large and certain verdicts capture great attention, the tech sector in the U.S. is close to $1 trillion (if not larger). The so-called patent problem is never put into that appropriate context, and all of this trashing of the patent system is because the tech sector does not want to pay even a modest royalty for what they are using.

A $1 trillion a year industry not wanting to pay innovators less than a 1% royalty on the innovations they appropriate (i.e., steal) for their own profits seems like a terrible price to pay given the national security and economic consequences of forfeiting our world leadership to the Europeans and Chinese.

 

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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. Join the discussion.

  1. Invention Rights June 22, 2017 4:30 pm

    You’re right Gene. Congress, especially the Judiciary Committees who have been bought off, refuse to fix anything. They think §103 is too low of a bar for patentability, but instead of debating and adjusting, they create the PTAB. They don’t like the §271 prohibitions on selling patented inventions, but instead of amending it, they are proposing retailer stay legislation. They don’t like §261 treatment of patents as property, so they “invented” a public rights theory rather than replacing the Patent Act. It is subterfuge. And the Supreme Court did their part on Article 1, Section 8 in Ebay. What happened to government by and for the people?

  2. Night Writer June 22, 2017 8:54 pm

    The OMB said there was no troll problem before the political storm that Google created obscured all facts.

  3. jbavis June 22, 2017 9:20 pm

    Less than 1% licensing fee is just the tip of the iceberg. What amazes me is that nobody talks about the relatively few jobs that large tech corporations provide:

    1990 Top 3 Automakers
    Revenue: $250 bn
    Employees: 1.2m

    2014 Top 3 Tech Companies
    Revenue: $247 bn
    Employees: 137k

  4. jbavis June 22, 2017 9:31 pm

    Regarding TROL Act. The efficient infringer crowd were absolutely let off the hook. Easy to explain that they lobbied to shutdown bad actors yet did not support the bill. Their excuse that it wasn’t enough only shows their true intentions.

    We are all to blame for not making this into a bigger thing.

  5. Night Writer June 22, 2017 11:21 pm

    @3 jbavis: The other thing that amazes me is that people don’t talk about Google’s business model. Their business model is a lot like Windows was in the 1990’s. Make everything you can available to people to get them to use the search engine (90% of revenue), which is just like Windows putting every program available to make you buy Windows.

    So, Google wants to make everything available to us and not pay for it just like Windows wanted to take everyone else’s program and not pay for it. A very similar situation, except Google is more sophisticated.

  6. jbavis June 23, 2017 12:07 am

    Night Writer:

    Google does this because YOU are the product. By “YOU”, I mean their users. By product, I mean data about you is the product they sellers to advertisers. Everything is tied together – what you look at in Maps, your search history, your emails in your inbox in gmail, who your contacts are, what patents you looked at in google.com/patents and for how long, your voiceprint to Android, the Chromebooks they subsidize to get into your childrens schools so your children can be tracked from their school to home to grandma’s house, your awake vs sleep patterns of accessing your various devices, etc etc etc. They know more about you then your wife/husband, parents, or kids – or yourself even! In fact, there are things they know more about you than the NSA does! Some form of Google (whether it’s Google itself, Analytics 3rd parties use, Doubleclick, or others) have access to about 70% of the web. Think about that – Google has their tentacles in 70% of the planets digital activities. All they have to do is form the proper database query to get what they want.

    Microsoft didn’t sell personal information about you – they just wanted you to buy more software. At the end of the day, you didn’t have to buy the software – but with Google, how do you opt-out?

  7. jbavis June 23, 2017 12:11 am

    But Night Writer, my point about the jobs of 1990 Top 3 Auto vs 2014 Top 3 Tech is the stark difference in jobs they provide. Is this point not worthy to bring into the mainstream? Is it not of substance or relevance that together with the above 1% licensing paints a larger picture of what’s going on?

    Same revenues but 1/10th the number of jobs. Are jobs not a part of what voters voted for last November?

  8. jbavis June 23, 2017 12:16 am

    Night Writer, further – I firmly believe that turning attention to jobs and how the large tech corporations provide relatively few actual jobs – would better get Trump’s ear than talking about Google’s business model. If anything, Google’s success would more than likely quickly push him away from looking at it – but jobs on the other hand would do the opposite and grab his attention.

  9. Night Writer June 23, 2017 7:25 am

    @6-8 jbavis. I agree with you. It is a very good point you make. I think our problem is that Trump is very unsophisticated when it comes to many economic issues. He knows how to borrow money and build resorts and golf courses which is no small matter. But, I don’t think he understands the bigger economy. And, he hasn’t put people around him who do. Currently his son-in-law (34 years old with no experience in innovation) is in charge of innovation for the country.

    But, what I think is driving this is K Street. I think Google is pouring money into public relations and that is why it is so hard to make your point about jobs, which is a point that should be part of the dialogue.

  10. Silicon Valley Inventor June 23, 2017 2:45 pm

    Night Writer @9, of course if journalists (or what passes as journalists these days) ever did some independent reporting on jobs and the tech industry, and the sellout of consumers’ privacy @6, Google would simply bury such reporting. Controlling information, innovation and consumer data is a nifty trifecta that is getting Google a hefty slap on the wrist in EU. But they have had free reign in the US, thanks to the revolving door Google policy that was the hallmark of the previous administration.

  11. Benny June 24, 2017 11:55 am

    Jbavis@7
    Higher paying (white collar) jobs, obviously. Jobs which indirecty support ancilliary service jobs (catering, transport etc).
    Could you plug in the litigation revenue/professional legal jobs for comparison ?

  12. Night Writer June 25, 2017 5:50 pm

    @11 Benny

    Google is enriching a few people. But the cost to the rest of us is unbearable. Moreover, Google’s strategy is to go to trade secrets, which will lower the pay for the technical people a lot. Probably about half their pay over 10 years. Google is like a lot of companies that are maximizing profits for the few at the top at the expense of the US economy and their workers.

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