Posts Tagged: "patent troll"

The patent trolling by MPHJ and owner, Texas lawyer Jay Mac Rust, are well known. But now the SEC is going after Jay Mac Rust in federal court for fraud. The SEC’s complaint maintains that Atlantic had “no ability or intention to obtain these loans.” Rather, of the money the two collected, the SEC alleges that Rust took $662,000 from client funds for personal pay and risky securities investments; Brenner himself took $595,000, and both made investments claiming that the money was personally theirs and not from the client funds. Investigations at a brokerage firm where these trades were taking place led the SEC to discover the fraudulent activities.

Many defendants to patent troll suits have never heard of the patent owner or its patent(s), and will have never received notice of infringement until service of the lawsuit. Typically patent trolls have no product to mark, since they are non-manufacturing entities. In that situation, the patent troll must take reasonable steps to ensure that its licensees mark their licensed products – if it has licensees. If a patent troll plaintiff has not required its licensees to mark, the defendant may be able to defeat past damage claims without spending thousands in legal fees mounting a defense on the merits to an infringement claim. This, at the very least, minimizes potential exposure to a patent infringement defendant.

“Patent troll,” the term employed by leading newspapers, magazines and online publications to describe how some patents are owned and used, provides a prejudicial impression of patent licensing that unfairly influences attitudes towards disputes. This is among the findings of the research conducted by Illinois Institute of Technology – Chicago-Kent College of Law Professor, Edward Lee.

The set of questions asked will also naturally curb the conclusions that can be drawn from the study. This is true of any survey, but it is worth noting the particular constraints of the 6(b) PAE study. First, the questionnaires have been sent to licensors only; no licensees were surveyed. This is a significant limitation, as a study of patent litigation necessarily restricts the analysis to failed negotiations between two parties, potential licensors and potential licensees. The 6(b) study conducts a survey only of parties on one side of patent negotiations and therefore cannot generate a full dataset for understanding the conduct of the parties in patent license negotiation or the reasons for the failure of negotiations. Second, as the study is designed to elicit information from distinct types of patent-holders – PAEs and a limited set of practicing and non-practicing wireless chipset companies – it will by design not elicit information relevant to the full range of patent owners.

Pre-litigation review of cases to weed out instances of patent trolling sounds like a great idea, but what more weeding out do the authors want? Since the Supreme Court decided Alice v. CLS Bank nearly 70% of all software patents have been invalidated by district courts as being patent ineligible, which is almost always done at the motion to dismiss stage. Furthermore, the Patent Trial and Appeal Board (PTAB) institutes 80% of the challenges to patents they receive. Indeed, it seems that over the past 5 years with nearly every court decision and piece of legislation more rights are taken away from patent owners, patents are no longer presumed valid and district courts are disposing of an alarmingly high number of patent infringement cases on motions to dismiss. It is enormously ignorant to suggest changes to “U.S. IP policy” that would make it more difficult for patent owners. Only those unfamiliar with industry reality could make such a recklessly suggestion. Of course, familiarity with the industry is unfortunately not a prerequisite for academics hell-bent on reaching the wrong conclusion.

It’s very unlikely that obtaining data from just 25 PAEs will provide a representative sampling of PAEs given that the universe of PAEs is largely unknown and probably very diverse… The problem is that in my experience both lawmakers and regulators routinely ignore important statistical limitations of federal studies. I say this with the experience of having worked for over 20 years as a federal government statistician. All too often policymakers use federal studies in ways beyond their intended purposes, with the result that legislation or regulation may be based on a flimsy and potentially inaccurate understanding of the underlying problem or the costs or benefits of proposed government action.

First, the definition of PAE used by the FTC characterizes all PAEs as the same. But in treating patent licensing firms as a homogenous category, the FTC fails to recognize there is a wide spectrum of business models that exist under the licensing umbrella. Second, and related to the first, there are serious methodological questions that undermine any conclusions that could be drawn from the FTC’s data.

The Subcommittee is Chaired by Congressman Darrell Issa (R-CA), who has been an outspoken advocate for the need for more patent reform in order to provide relief from those he believes are abusing the patent litigation system — those sometimes called patent trolls. Indeed, from the start of the Thursday’s hearing, the debate regarding patent infringement at the ITC was couched in the language of the patent troll debate. For example, during his opening statement Congressman Issa rather imperiously stated: “for purposes of my opening statement ‘plaintiff’ and ‘troll’ will be interchangeable.” Issa, himself a patent owner, was forced to litigate against companies that pirated technology covered by his patents. As a patent owner forced to sue at numerous infringers, it would seem that Congressman Issa believes that patent owner and inventor Issa was a patent troll.

When patents were brought up in the hearing, however, it seemed to focus mainly on their effects in the pharmaceutical world. Ramirez’s prepared remarks for the hearing touched on pay for delay in pharmaceutical patent infringement settlements, and she noted that the U.S. Supreme Court’s June 2013 decision in Federal Trade Commission v. Actavis has given the FTC a greater capacity to challenge pay for delay schemes in court. Ramirez also stated that a report on the FTC investigation into patent assertion entities (PAEs) will be made available sometime this spring.

In 1903, Henry Ford was hit with a patent lawsuit while watching his first automobiles get loaded into boxcars. IP issues have plagued the auto industry every since. Today, over 110 years later, automakers still deal with IP threats on a regular basis. The number of lawsuits filed against automakers by patent trolls rose from 17 in 2009 to 107 in 2014. These lawsuits often result in six and seven-figure settlements, and represent a serious drain on the automotive industry. With this spectre hanging over their heads, automakers can’t fully innovate, grow and prosper. It is time for the industry to band together and fight back.

It is pure nonsense to say that opponents of patent reform never offer specifics, cite or discuss textual language of the bills. Utter fiction and complete fantasy. Frankly, Lee’s claims are as comical and insulting as they seem to be uninformed. Only the most disingenuous partisan could suggest that opponents of patent reform do not offer specific explanations citing to textual language of the bills. Indeed, quite the opposite is true. Opponents of patent reform make far more detailed and nuanced arguments. These intellectual, detailed, nuanced arguments have lead those fighting patent reform to lose the linguistic battle time and time again. So not only is what Lee saying false, but it is 180 degrees opposite from reality. So spurious are Lee’s claims that at first glance the article comes across as a piece of patent satire published by The Onion.

The first meeting this week was in Grundy Center, IA, during which a question about patent reform was asked. Grassley answered that he was trying to stop patent trolls, which he described as a person who buys up patents but never intends to build a product, and then sends threatening letters to small businesses demanding thousands of dollars or they will get sued. Notably, he said that it costs our economy $83B per year.

Patent risk solutions provider RPX yesterday released its 2015 NPE Activity: Highlights report, which offers a first look at trends in patent litigation activity for 2015. According to RPX, NPE litigation activity rebounded in 2015 following what now appears to have been a slowdown in the latter half of 2014. The Eastern District of Texas also continues to dominate as the venue of choice for NPEs, with NPEs suing more defendants there in 2015 than in any year since 2009.

Libertarians believe in property rights and government protection of those rights as one of the few necessary requirements of government. Ownership of property and free markets leads to competitive production and trade of goods, which in turn leads to prosperity for all of society. Intellectual property is property like other forms of property, and so government must protect IP as it protects other forms of property because it too leads to competition and trade and prosperity. Libertarians should encourage a strong patent system and object to any “reforms” that limit intellectual property ownership or introduce more government regulation than is required.

Jay Walker: “Any marketplace that cannot make a deal without filing a lawsuit in federal court is in deep trouble… The results of this mess are sad and unpredictable. There is less incentive to create long-term intellectual property. There is certainly more incentive to infringe if you can figure out what infringement is. There will be more secrecy and there will be less innovation or certainly a very different kind of innovation.”