Is being called a ‘patent troll’ defamatory? NH inventor files suit against banking industry to find out

By Steve Brachmann
August 15, 2017

For the better part of the nearly 250 years of the existence of the United States of America, the U.S. patent system has been one in which inventors could be reasonably sure that their private property rights covering technological innovation would be respected and enforced. Giants of American innovation such as Thomas Alva Edison, Alexander Graham Bell and others not only successfully commercialized their patented inventions, they also protected their competitive advantage by taking patent infringing parties to court. What happened to that illustrious history?

Constitutionally-protected private property rights have been under assault for more than a decade. Over these past 10 years, an insidious narrative regarding “patent trolls” has been allowed to infiltrate the U.S. patent system, a system which currently ranks 10th, tied with Hungary. America is rapidly losing its edge in free enterprise – seemingly willing to surrender all innovation to China instead.

Funded by a collection of powerful interests such as The Federal Reserve System, the financial sector has become the largest collective source of reelection dollars than any other industry. There’s a reason why criticisms like those found in The Creature from Jekyll Island resonate so strongly among those who are suspicious of nationalized financial systems. Bankers use various special interest groups, such as The American Bankers Association (ABA), to try and convince lawmakers, regulators and the judiciary that they’re genuinely interested in “Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse”. OpenSecrets.org calls the ABA “one of the most powerful lobbying groups on Capitol Hill,” and the organization has spent more than $8 million per year for lobbying in all but one year since 2008 ($7.76 million spent in 2010).

In recent years, hundreds of financial institutions have paid thousands of lobbyists, paying for an average of more than five lobbyists per member of Congress in 2010, to push for favorable legislation. All the while, patent owners have had to stomach the deleterious effects of Congressional acts like the America Invents Act (AIA) of 2011, U.S. Supreme Court decisions like Alice Corporation v. CLS Bank International and questionable Executive Branch actions like former President Obama’s decision to appoint the former head of patents and patent policy at Google to direct a federal-level agency which Google has been trying to damage in its lobbying efforts.

In a multi-part series to be published on this site, readers will follow a self-made inventor who combined several unique technologies into a manufacturable product when, all of a sudden, the devastating events of 9/11 destroyed his business plan to deploy his device into New York City. Shortly thereafter, a similar product was rolled out by competitors, but there was nothing he could do about it. His patent application, one with nearly 600 prior art citations, was stuck at the USPTO as it was still being examined. It would remain there for a decade. The very same decade patents came under attack.

The story of David Barcelou and his company, Automated Transactions LLC, should be a very cautionary tale for anyone who still believes that owning a patented invention leads to financial success, even when the technology is widely adopted by a vast array of very large businesses. The minute Barcelou was able to enforce his patented technologies in court, winning a sizable settlement from the biggest bank in his hometown of Buffalo, NY, a veritable “Who’s Who” of the financial services leaders joined forces to destroy both Barcelou and his company economically. Besides encouraging one another to ignore Automated Transaction’s demand letters, false and misleading statements started to appear in prominent business publications, which went so far as to say the company had purchased its patents, or alternatively, that the patents were invalid. Over time a unified battle cry arose from the ‘poor little community banks’ he allegedly targeted; “He’s nothing but a patent troll.”

David and Goliath, by James Tissot. Copyrighted 1904.

In a New Hampshire State Superior Court, this so-called ‘patent troll’ has decided to fight back. Automated Transactions and Dave Barcelou have filed a defamation complaint against the crème de la crème of those deemed “too big to fail” and who many might consider to be too big to defeat. The metaphor of David and Goliath from the Old Testament’s First Book of Samuel may be overused, and in many cases it is, but there are some unique parallels which we’ll note as the series draws on. Dave Barcelou is walking into a battle over property, just as the Israelite David did in the Biblical battle. The Federal Reserve is a much more powerful opponent than Goliath could ever be. In fact, it is an entity whose armor so blinds them they can’t fight properly; they can only hurl insults like ‘patent troll’ in the face of Dave’s legitimate Constitutional property rights. Whether or not his case is able to destroy the empty, insulting ‘patent troll’ narrative with the slinging of a single stone (or, in this case, defamation lawsuit), the battle lines have been drawn in a way which should give many patent owners reason to pay very close attention to this New England case. His situation, which spans more than two decades, is one they might very well find themselves in (if they haven’t already). Dave Barcelou’s story is a classic example of the horrors that await the small individual inventor and patent owner in the face of powerful business interests. Despite owning valid, enforceable patents and track record of having invented one of the most successful arcade games in history, any entrepreneur might find themselves smack in the middle of a cautionary tale like this one.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

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 23 Comments comments. Join the discussion.

  1. Tesia Thomas August 15, 2017 1:34 pm

    Awesome!

  2. CW5 August 15, 2017 1:45 pm

    Looking forward to hearing more about this!

  3. Ternary August 15, 2017 3:05 pm

    Wow. Great lawyering (read the complaint). It is said that revenge is best served cold. But in this case it is clear that it is best served well argued, documented and with supporting evidence. It is a stunning story. Please keep us updated.

  4. Anon August 15, 2017 4:37 pm

    The banking cartel certainly is not the only established entity that would rather compete on non-innovation factors.

    Broadly labeled the Efficient Infringers, this group often includes trans-nationals who owe no allegiance to ANY single sovereign (lest anyone forget, patent laws are and remain sovereign-centric laws). The pernicious aspect of the trans-nationals is the dilution of what having a patent is meant to represent in the first place, and the “sounds” of international “ease” or comity or harmonization (aka HARM-ionization) are offered as somehow worthy goals of patent “reform.”

    I add this not to dilute the import of this particular article, but to simply provide notice that enemies of a strong patent system (and the healthy innovation culture that accompanies strong patent systems) are numerous, and do not belong to one overarching group or single philosophical mindset.

  5. angry dude August 15, 2017 9:54 pm

    Yeah, yeah,yeah..

    Just like I told you years ago and you would not believe me…

    It is no different from a drug cartel in Mexico or elsewhere where they fight and kill each other all the time but when a small newcomer shows up they all gang up on him until he’s dead
    Welcome to USA, year 2017

  6. Benny August 16, 2017 5:48 am

    Just for the record, according to the Biblical story Goliath didn’t actually fight the Israelites, he only taunted them, so the comparison in regards to defamation is apt, but regarding property, less so.

  7. John Fetter August 16, 2017 6:00 am

    It is important for an inventor to balance risk-reward. The inventor can have a winning streak but, sooner or later, when this happens, his legal advisor is likely to begin having ideas of his own about who should be the main beneficiary.

    Robert William Kearns, the man who had his invention of the intermittent windshield wiper infringed by all the motor manufacturers, won against Ford, but then had a problem with his legal representative and represented himself when he took on Chrysler. He won again but his costs skyrocketed.

    He took on more motor manufacturers but his problems multiplied. He should have quit while he was ahead, but he did not. By all means have a go. But in the end it will not be about who is right or wrong but about who has the longest endurance.

  8. xtian August 16, 2017 9:17 am

    Well drafted complaint indeed.

    Go UNH School of Law (Formerly Franklin Pierce Law Center) Alums!

  9. Matt Flinders August 16, 2017 10:29 am

    I looked briefly at some of the publications and congressional testimony alleged to be defamatory. Some of the defendants claim that the plaintiff sent small banks letters with a list of patents without providing a reasonably detailed explanation of alleged infringement. This sort of conduct, if true, bothers me a lot more than being a so-called “non-practicing entity” and is actually what many these state “anti-troll” statutes are targeting. Also, reputation has no basis on whether a patent is enforceable or not and the plaintiff is as free as ever to exercise his patent rights. Looks like he lost and is now trying to make money another way.

  10. Chuck Lantz August 16, 2017 10:58 am

    When I clicked on the David Barcelou link in the sixth paragraph of this article I was taken to a page with a photo of a lawn troll statue. Nothing else.

  11. Steve Brachmann August 16, 2017 12:29 pm

    @Chuck – I could have been more clear about this in the write-up but that link was chosen because it’s the top image that pops up on Google Image search when you search for David Barcelou. It’s not a picture of him, but a picture of a troll. That seemed relevant in light of the fact that this is a case about labeling someone as something that they’re not. Again, that could have been made more clear but thank you for pointing it out.

  12. Paul F. Morgan August 16, 2017 12:56 pm

    Interesting. But for Dave Barcelou to succeed in proving defamation of himself, presumably it would require proving that the defendant companies [not just someone in the media] called him a troll by his name, not just the suing company’s name.

  13. Tesia Thomas August 16, 2017 2:37 pm

    Um. No.

    Pretty sure he just has to prove harm as a direct result of being wrongly accused of being a patent troll.
    I actually think thd biggest hurdle this case faces is defining patent troll in such a way that it constitutes a false statement. Lol. Anyone’s a patent troll if you want them to be! They define it so that patent right defending inventors fall under it.

    He also filed a joint suit with his business. So it’s him and his business as plaintiff.
    They were definitely calling something patent troll whether him or his company.

  14. Bemused August 16, 2017 5:59 pm

    I skimmed the complaint which noted that he generated $3 million in licensing revenue from 200 licenses. That comes out to an average of $15,000/license.

    I’m not denigrating the average licensing amount but Mr. Barcelou better be able to show that his patent is extremely widely infringed (so the $15,000 average licensing amount makes good business sense in light of the number of infringers) or he’ll face an accusation that these licensing numbers reflect a litigation extortion strategy (i.e. patent troll).

  15. Gene Quinn August 16, 2017 6:07 pm

    Bemused-

    That is very likely true, but this whole episode may give us an opportunity to address the question about whether it is even possible for the innovator to be a patent troll. The FTC has said that term is unhelpful, which is an understatement. But whatever anyone thinks a patent troll may be, how is it possible that the person who innovated and was granted the exclusive rights by the Federal government could ever be considered to be a patent troll?

    I realize this is a slippery slope to some extent. I don’t think how you acquire rights should matter — it doesn’t seem to matter when big tech acquires patent rights to inventions they did not innovate — but how can the inventor be a patent troll?

    -Gene

  16. angry dude August 16, 2017 7:22 pm

    Bemused @14

    I could charge 1 cent per licensing each sold device (e.g. a smartphone) and still would do much much better than Mr. Barcelou

    Don’t you get it that average licensing amount does not matter at all and should not be a part of this discussion ?

    License amount is a product of negotiation IF injunction remedy is available to patent holder
    Otherwise it’s purely artificial figure

  17. Bemused August 17, 2017 7:59 am

    AD@16: I don’t disagree with you.

    But as we all know too well, perception is often-times stronger than reality in the patent world. The modest consideration received by Mr. Barcelou on a per-license basis will be (mis)used by infringers as evidence that this is nothing more than a shakedown (with the oft-mindless press going along with this silly narrative).

    Stated another way, Mr. Barcelou will not be lauded for seeking a reasonable and fair (either because of a large number of infringers or because the damages are modest) licensing amount. Instead, infringers will use those licensing amounts to claim that this is yet another example of an invalid patent being used to extract nuisance types settlements.

  18. Bemused August 17, 2017 8:36 am

    Gene,

    Can an inventor ever be considered a patent troll? Guess it depends on your definition of patent troll (with said definition being stretched to the point that I once read an article labeling Apple a patent troll in its patent infringement suit against Samsung).

    My personal definition of a “patent troll” isn’t based on who the plaintiff is. Rather its based on their behavior. Specifically, is the patent holder filing lawsuits with the intent of collecting whatever settlement amounts they can extract without ever putting the validity/infringement of their patent at issue?

    The e-Dekka case where Judge Gilstrap sua sponte urged defendants to file motions for attorneys’ fees comes to mind. The press on that case noted that e-Dekka was asking for license amounts in the $3,000 to $5,000 range and even going so far as to solicit defense counsel for settlements on the eve of the 101 hearing. As an aside, a friend of mine who was on the defense side in that case told me their client paid much less than even those amounts . Was e-Dekka a shakedown (i.e. patent troll) case? In my mind – based on what I heard from a few people involved in that case and the fact that the patent at issue clearly had 101 issues – it certainly looks/sounds that way.

    Would I still feel the same way if e-Dekka was inventor owned? And even further, would I still feel the same way even if the patent at issue in that case was objectively valid (and even cutting-edge innovative) at the time it was filed? Absolutely. Again, not because of the status of the patent holder but because the patent holder arguably based their licensing strategy on the inefficiencies (or cost) of defending against these types of lawsuits.

    B

  19. Gene Quinn August 17, 2017 1:32 pm

    Bemused-

    Not surprisingly, I agree. The best and really only way to define a patent troll is by focusing on behavior. Anything else just doesn’t make any sense.

    Of course, I’d be perfectly alright adopting the FTC approach and the industry moving beyond the term, which in the FTC’s own words is not a helpful characterization.

    -Gene

  20. Paul F. Morgan August 17, 2017 6:41 pm

    Gene and Bemused, I agree with you as to those suing with no intention of seeking anything more than settlements for less than it would cost a defendant to defend [and so that infringement or validity does not get challenged]. But there is an even worse kind of patent troll – the kind the FTC went after. Namely, sending thousands of letters to very small business that cannot afford attorney help threatening a patent suit unless a license fee is paid. With no intention of ever suing such small businesses.

  21. angry dude August 17, 2017 9:57 pm

    Paul F. Morgan@20

    Dude,have you ever sued a company for infringing your patent ?
    me thinks not
    pls stick to what you know

  22. staff August 18, 2017 11:46 am

    As Mark Twain said, ‘truth is not hard to kill, and (that) a lie well told is immortal’. Those who use the amorphous phrase ‘patent troll’ expose themselves as thieves, duped, or doped and perpetuate the lie.

    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.

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

  23. Chris Andreadis September 4, 2017 8:43 am

    No one is to ever know that I was one of the original contributors to the brainstorming process that Dave and I facilitated over many weekends in Pennsylvania in1992. Be that as it may, I would argue that private inventors do not stand a chance of an ice cube in hell to claim intellectual rights to their inventions. Let’s just give it all away to big corporate interests, and let everyone else wear lead boots and cement overcoats as is the mantra of the masses in the wake of how money drives the legal framework of society.

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