I have absolutely no problem with enforcing patent rights, and frankly I don’t think it should matter how the patents were acquired, but there is something exceptionally seedy about the use of shell companies and taking a back-end on revenues like Intellectual Ventures is routinely accused of doing. But if there is infringement of solid patents then there should be recourse. Having said that, it would be naive to pretend that there is not real evil lurking in the patent infringement realm. Stories of $500 to $1,000 offers to settle and avoid patent infringement litigation that would cost millions of dollars to defend abound. Some courts have openly acknowledged what feels like “extortion-like” activity. See Indicia of Extortion and Troll Turning Point?
That there are bad actors is hardly surprising, particularly given the lucrative nature of the business model and the fact that many district courts feel as if they do not have the tools to do anything other than allow their courtrooms to be used as the main prop in the extortion-like shakedown. Of course, despite what some district court judge say, there are considerable powers that can be exercised if judges really do want to stop the bad behavior. See Judges Can Make Patent Trolls Pay. But the shell game played with the ownership of patents does add a layer of complexity to figuring out what is really going on and who is calling the shots. Why is it so necessary to have such secrecy? As Justice Brandeis once said “sunlight is the best disinfectant.” The troll industry could use some disinfecting. It is a sin that these nefarious actors tar those innovators with real, strong patents that are infringed.
EDITORIAL NOTE: The black colored text below is taken from an FTC Press Release. I also provide my thoughts and comments in the format of comments from the peanut gallery, or perhaps as a patent law equivalent to Mystery Science Theater 3000. In order to differentiate my thoughts/comments from the FTC statement, my comments are italicized, colored, indented and tagged with the IPWatchdog logo.
FTC Headquarters, Washington, DC.
The Federal Trade Commission voted to seek public comments on a proposal to gather information from approximately 25 companies that are in the business of buying and asserting patents, known as Patent Assertion Entities (“PAEs”). The FTC intends to use this information to examine how PAEs do business and develop a better understanding of how they impact innovation and competition.
After considering the public comments, the FTC will submit a request to the Office of Management and Budget (OMB) in compliance with Paperwork Reduction Act, seeking clearance of the FTC’s proposal to issue compulsory process orders seeking information from the PAEs.
MY TAKE: What if the public comments received suggest that there is no reason to for the FTC to move forward? Will the FTC still subpoena records from PAEs? There is something fundamentally wrong about the FTC saying that they will consider the public comments and then they will go ahead regardless and subpoena records. This conjures up images of the wild west. Crowd yells: “Hang him!” Sheriff responds: “First we will give him a fair trial and then we will hang him!”
Many of you are privy to the problem of excessive patents. You have all seen the articles about yet another cellphone company infringing on yet another patent, but what you’re left with are questions of what all this activity means and how to use that information to act in your best interest– whether you are the CEO of a company or the general counsel for one. At the 2013 ABA Annual Meeting held in San Francisco, legal experts tackled this problem, discussing the trends in patent litigation and some potential strategies for companies preparing to introduce products into heavily-patented market segments.
Generally speaking the use of patents can vary with some people using them for insurance and others using them strategically. From a business standpoint how a company uses a patent depends on the industry that company is in. For example, in the medical technologies space, all the companies will have patents on their core technologies and be highly cognizant of the patents they have to deal with. With the record number of high patent filings, the continued state of high damages, and the fact that even smaller companies are beginning to see patent infringement lawsuits, it’s clear that patent strategy is a complex matter– further complicated by the presence of patent thickets.
A patent thicket is a bunch of overlapping patent rights you have to have in order to safely launch new technology. (Many of us are privy to this problem in the smartphone space. Basically, in order to invent and patent anything you have to go get licenses from several different sources before making it any sort of commercial success.)
Every month there are a number of items that catch my attention. Many of these “quick news” items are worth knowing or interesting in one way or another, but won’t support a longer article, which we typically prefer to publish on IPWatchdog.com. Others are certainly interesting and deserving of attention, but there are only so many hours in the day to write.
Without further ado, here is News & Notes for September 2013.
USPTO Extends After Final Pilot
CAFC Discusses Obviousness Type Double Patenting
GW Master of Patent Practice
White Paper Calls for Update to Patent Examination System
Goodlatte’s Second “Discussion Draft” of Patent Reform
Patent Litigator Becomes Managing Partner at Kilpatrick
Clouding IP Faces Inter Partes Review at the USPTO
New Superconducting Wire Invented
Daniel Winslow Hired as Rimini Street General Counsel
Patent filed on securing player identity on Internet gaming platforms
Recently we published a five-part series that debunked many prevalent myths about patent trolls. See A Fractured Fairy Tale: Separating Fact and Fiction on Patent Trolls, written by Steve Moore of Kelley Drye. While a bit long, it should be considered mandatory reading if you want to understand the underlying facts instead of just buying into the hype and hyperbole associated with the so-called “patent troll problem.” Similarly, if you want to get a good, non-biased view of patent litigation in the United States you absolutely have to read the recent report of the Government Accountability Office, which is an independent, nonpartisan agency that works for Congress.
Moore, with co-authors Marvin Wachs and Timothy Moore, concludes that when you really look at the facts and underlying dynamics of patents and patent litigation, there really isn’t a problem at all. The GAO report released on August 22, 2013 confirms the extensive research by Moore. The GAO report explains that the number of patent litigations only slightly fluctuated between 200o and 2010, with a one-third increase in 2011, which the report attributed to changes to patent laws ushered in by the America Invents Act and not as the result of any problematic increase in litigations initiated by patent trolls. This increase in patent litigation was by design. While Congress may not have been aware that an increase in litigation would occur, the truth is that the design of the AIA was guaranteed to lead to one of two things. First, the joinder and consolidation provisions of the AIA would either substantially curb patent trolling because it is now much more difficult, if not impossible, to bring a single lawsuit with many dozens (or hundreds) of defendants. Second, increase in the number of patent infringement lawsuits because patent owners must sue infringing defendants one at a time, or at least in much smaller groups. It would seem that the AIA did not stop patent litigation, so the result is a greater number of lawsuits. See alsoThe America Invents Act at Work.
Still further, the GAO found that “companies that make products brought most of the lawsuits and that nonpracticing entities (NPE) brought about a fifth of all lawsuits.” So there isn’t a patent troll problem at all despite the protestations of the Silicon Valley elite who think every patent they get sued on is invalid and every patentee plaintiff is a patent troll.
Just when Congress is gearing up to consider a package of patent reform initiatives aimed at dealing with abusive patent litigation, the U.S. General Accountability Office has released a much anticipated study of the “consequences of litigation” by non-practicing entities as mandated by Section 34 of The America Invents Act (AIA). Given that Section 34’s language and directives could best be described as unenthusiastic towards licensing and the enforcement of patents, an objective reader of the GAO study cannot help but conclude that the GAO did not conduct or produce the sort of scornful report on the state of our patent system that large IT companies and patent-skeptics had hoped for. While the report is not a vindication for NPEs (far from it), it did not give patent critics what they hoped to get (i.e. an independent agency’s finding that patent litigation is exploding and that this increase in litigation is having a negative impact on innovation). Quite the contrary.
The GAO interviewed officials from the PTO, FTC, ITC, and 44 stakeholders including judges, academics, venture capitalists, technology companies, and inventors, surveying existing economic and IP academic research; examined data from the AIPLA and RPX; and purchased litigation-related data from third party sources like Lex Machina; and conducted a year-long PTO performance audit. In the end, the GAO produced a measured report which summarizes the views of the various stakeholders and suggests that — to the extent there is a problem in the patent system, it is not a patent litigation problem but rather a legacy patent quality problem.
According to mythological accounts, ancient Mediterranean voyagers confronted a subtle danger embodied in alluring form: the Sirens. The Sirens compelled all who heard their sound to draw near their reef-surrounded isle. “Their song though irresistibly sweet was no less sad than sweet and lapped both body and soul in a fatal lethargy the forerunner of death and corruption.”  Those succumbing to the Sirens’ song perished as their boats were wrecked on the submerged reefs surrounding the island. Others escaped this fate, however, by blocking off the sound itself.
The Sirens are now singing a seductive song about how to stop patent “trolls” and their “abusive litigation.” It appears that several large corporations who cultivated the patent “troll” narrative trill forth their song, promising efficiency and fairness with concomitant benefits for all. Those giving heed to this modern Siren song are lulled into abandoning or subordinating to concerns of “litigation abuse” other fundamental long-held values and principles of equity, separation of powers, judicial independence and prudent judgment.
The America Invents Act (AIA) is one of the most sweeping patent legislation in over a century, the effects of which are yet to be fully understood. Even before the full implementation of the AIA, legislators in both chambers of Congress have heard the Siren muses and called for yet additional changes in our patent law, ostensibly to curb purported “abusive patent litigation.” The majority of the proposed provisions in these bills appear to focus on the patent litigation process, ironically by stripping the Federal Judiciary of their procedural and discretionary case-management tools.
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