Posts Tagged: "patent troll"

The Norwegian fairy tale “Three Billy Goats Gruff” was far ahead of its time and the moral of that story has a very relevant, modern application. In short, the story introduces three goats that want to cross a river to eat some luscious grass. To do so, however, the goats must first cross a bridge; under which lives a fearsome troll, who is so territorial that he eats anyone who dares to cross it. By working together, the goats are able to plot against the troll, and ultimately knock him off of the bridge. After knocking the troll off the bridge, the three goats lived happily ever after. So, if these goats can figure out how to get rid of trolls, why can’t sophisticated companies do the same?

The Federal Trade Commission’s (FTC) recently released report on patent assertion entities (PAEs) includes a number of key findings made by the agency on the business model of such companies. The FTC identified two different business models employed by PAEs which differ in terms of litigation and licensing activity. Most of the FTC’s recommendations are legislative in scope but the report does include some advice for the country’s judicial system. For example, the report also includes a number of recommendations to deter what the FTC calls “nuisance litigation.”

But now, after quickly dispatching with the patent troll meme as much ado about nothing, we can, should and must now unleash a more simplified counter attack by referencing a commonly deployed patent abuse known as “efficient infringement.” This deliberate disdain for patent property is the business model driving mega-tech IT incumbents to continually pressure Congress to enact measure such as HR 9 and S.1137. Efficient infringement is a cold-hearted business calculation whereby businesses decide it will be cheaper to steal patented technology than to license it and pay a fair royalty to the innovator. This cold-hearted business approach to stealing intellectual property resonates when it is conveyed properly. Here is a simple script for research universities to use when they communicate with candidates’ pre-election and Staffers and those who prevail after the election. These arguments are easily adaptable to all pro-patent advocates.

Why should the costs of the tortfeasing infringer be relevant in determining whether the extracted value from a settlement is fair? The fact that law firms charge a lot of money to defend patent infringement cases, and don’t particularly have any incentive to settle cases early, somehow translates into certain settlements being for nuisance value without any consideration of whether the settlement is a fair value for the rights trampled upon by the infringer? The FTC has quite a lot of explaining to do, because it seems they picked an arbitrary number that is a function of what attorneys ordinarily charge infringing defendants through discovery. I don’t see how that is a function of the value of the innovation, or how it says anything about the merits of the infringement case, the damages case, or the tactics of the patent owner. In fact, it seems as if the $300,000 figure is completely irrelevant.

Simply stated, Fortune is wrong. The FTC report did not have harsh words for patent trolls. In fact, the FTC had harsh words for those who use the term “patent troll” to vilify patent owners! At the risk of upsetting the predetermined narrative obviously favored by Fortune, allow us to interject some facts into this discussion… Perhaps Fortune confined their coverage of the FTC report to the press release accompanying the report, which conspicuously leaves out any mention of patent trolls, or that they view the term “patent troll” as being unhelpful and prejudicial. Seriously, if you are going to cover a report shouldn’t you at least read all of Chapter One?

To be fair, the coverage by Ars Technica doesn’t take the same vituperative tone as other voices who have concerns related to abuses of the U.S. patent system. However, it’s paramount for those who are covering the patent world to be judicious in their use of the “patent troll” designation, especially as the problem has been used to support legislation proposed in both houses of Congress… Ars could absolutely be accused of having a knowledge of the U.S. patent system that fails to account for some important nuances in patent licensing and enforcement. Indeed, they would do well to take into consideration the FTC’s recent admonition in the long awaited PAE report: “In the Commission’s view, a label like ‘patent troll’ is unhelpful because it invites pre-judgment about the societal impact of patent assertion activity without an understanding of the underlying business model that fuels such activity.”

Despite what many thought were the intentions of the FTC going into this project, the FTC did acknowledge the important role patent enforcement plays within the patent system, specifically and directly acknowledging in the press release issued today that “infringement litigation plays an important role in protecting patent rights.” It is also particularly noteworthy that the FTC recognized that the term patent troll is unhelpful because it inappropriately prejudices the patent owner from the start, without any consideration of business model or the legitimate and rightful attempts to enforce property rights. All-in-all, probably a much better report than most in the patent owner community had anticipated.

Yahoo’s proposed auction of the Excalibur portfolio is likely to be the largest sale of computer-related patents since the Alice Corp. v. CLS Bank Int’l ruling in June of 2014. Alice may reduce the number of overly-broad patents in existence in the long run, but (ironically) in the short term the decision may have skewed patent value calculations in a way that encourages the kinds of behaviors it was supposed to negate. A sale of the Excalibur patents will provide an important test of Alice’s effects in the short term.

Another incursion into research university governance and operations is now underway. And this time all research universities are affected. Led by the DC Based Electronic Frontier Foundation, a leftist anti-patent activist coalition that has initiated a 50-state legislative campaign to shrink research university patent licensing rights at the state level. (See) The measure’s purported objective is to prevent publicly funded university research patents from being licensed to so-called “Patent Assertion Entities” (PAEs, also known by the pejorative term “patent trolls”). The draft legislation is imprecise, making it even more dangerous than first appears.

The validity of secondary markets for a variety of goods and services is never questioned. Securities are sold and resold many times after their initial offering, homes and buildings and built and resold many times, as are automobiles. A quick review of the products listed an eBay leaves little doubt that a robust secondary market exists for many goods and services across the American economy. However, not everyone is in agreement that a secondary patent market is beneficial. For some reason, many people villainize companies that practice patent licensing. Even resorting to the use of pejorative terms such as “patent troll” to describe these businesses. These detractors fail to account for the fact that inventors may not be the most efficient licensors. In addition, they don’t take into account that, just as a builder generates revenue to build more buildings by selling their current ones, companies that sell or license patents help fund further R&D with the proceeds.

The information the FTC has been collecting regarding patent assertion entities is extensive. Along with standard corporate information, the FTC is making a survey of each patent in PAE portfolios going back to 2008 to investigate the date of patent acquisition, the patent’s maintenance fee status as well as the assertion history for all patents upon which the PAE has attempted to enforce its rights. Firms are also being asked to describe their business model, the methods used to organize their patent portfolios and the aggregate costs of patent acquisition and assertion. The FTC has sent information requests to 25 PAEs in order to build its evidence.

The NPR-style article tells the story of Tory Norred, a fellow in the cardiology program at the University of Missouri, who in 1998 came up with the idea for a collapsible prosthetic aortic valve that could be fished up through an artery with a catheter and implanted in the hearts of patients who suffered from failing aortic valves. Unlike previous valves, Norred’s stent disperses the force needed to hold it in place against the aorta’s walls, requiring no sutures. In November 2002 he received U.S. Patent No. 6,482,228, “Percutaneous Aortic Valve Replacement.” Norred knew that he was on to something important, but that was not the beginning of success, it was the start of a nightmare that led to repeated frustration.

How will our patent system treat this wonderful new discovery? How long will it take before its curative benefits can be deployed ? We can only hope that DC’s meddlers in our innovation ecosystem read the Ms. Sun’s article. Because however fervently the medical and scientific communities respond to this growing superbug crisis, IP’s DC government legal eagles are either unaware or unconcerned. The USPTO is regularly rejecting microbial patent applications in blind servitude to Alice-Mayo’s confusing eligibility formula. We can hope, but cannot be assured, the Federal Circuit will make sense some day of Alice-Mayo’s two-step test. But when? Worse, it appears that SCOTUS is infected by the anti-patent poison infesting our Capitol. How refreshing it would be to have our Congress and the nation’s highest Court be as concerned with superbugs as they seem to be with PR-created patent trolls.

The “troll” narrative of Nakajima and Snow will have us believe that any patent lawsuit to resolve a dispute constitutes abusive litigation. Economic folklore devoid of scale and proportion should not mislead this blog’s readers. First, even if one takes at face value Nakajima’s “six to seven figure” cost for settling per suit, those costs amounted to about $100 million in 2014. This is less than 0.01% of the $1.1 trillion in U.S. automobile sales in 2014, hardly a “serious drain on the automobile industry.” The growth in number of suits may simply be a result of the automotive industry shifting from traditional incremental improvement into adoption of new technologies developed outside that industry such as radar, sensors, navigation, video imaging, smart displays, batteries, electric propulsion, and computer-controlled systems. Second, we have shown that allegations that the Selden patent litigation “stifled the infant automobile industry” are false. We do so in-depth elsewhere by marshalling historical empirical evidence from primary sources in our article The “Overly-broad” Selden patent, Henry Ford and Development in the Early US Automobile Industry.

The chance of a court tripling damages for patent infringement has significantly increased. The Supreme Court, Halo Electronics, Inc. v. Pulse Electronics, Inc., et al. and Stryker Corporation, et al. v. Zimmer, Inc., et al., granted district courts more discretion to award enhanced damages for willful patent infringement. However, the Court’s recent decision could have unintended consequences. The Supreme Court’s relaxation of the requirements for willful infringement could be a game changer for patent trolls.