Problem Child: The Third-Grade Approach to Patent Owners

When you really look at the facts and underlying dynamics of patents and patent litigation, there really isn’t much of a problem at all. There is litigation mischief in some cases, but that goes both ways.

Overall what you see in the hard, factual data is not at all surprising. There really is no patent troll problem at all, and despite what many charge, the quality of the patents asserted by non-practicing entities is quite high, at least if you remove from consideration patents asserted by independent inventors. In fact, non-independent inventor non-practicing entities (NPEs) have an outcome profile that is significantly better than that of operating companies. See Myth #1 in Probing 10 Patent Troll Myths – A Fractured Fairytale Part 2.

But is there a problem? Yes. There are certainly a few bad actors out there that leverage judicial inefficiencies and abuse the litigation process, but is that a patent or patent system problem? No. We could abolish patents tomorrow and those that abuse the litigation system to extort money will move on to the next scheme to monetize the lethargic, protracted and tedious litigation process.

The litigation abuse that is witnessed in the patent arena probably does rise to the level of patent misuse, or at the very least vexatious litigation brought with careless disregard to the truth. But we have laws on the books to handle that kind of litigation misconduct, which is exactly what it is — litigation misconduct. To try and sweep an entire class of patent owners together in a pile in order to address the few, easily identifiable miscreants is just plain stupid. And we all know, or should know, it to be stupid.

We all knew that it was wrong when we were in third grade and the teacher punished everyone because one or two kids didn’t follow the rules. So why isn’t it equally self evident that it is just plain nuts to take an entire industry out behind the woodshed because of a handful of delinquents? What was so obvious to us back in third grade seems to be lost on at least some.

Punishing everyone for the actions of an easily identifiable few is an abuse of power. The difference is when Sister Mary did it we lost a few minutes of play or had to sit quietly and watch seconds tick off the clock. Today the overlords who want to stamp out abuse risk destroying the engine of the American economy. If you haven’t noticed manufacturing jobs have gone. All we have left, by and large, is innovation. Are we going to kill that too? We’ve shipped manufacturing to Asia and thanks to decade of poor patent law and policy decisions we are on the cusp of shipping intellectual property and innovation to Europe. It is time to wake up and realize that exaggerated discipline that castigates the overwhelming number of good actors is ill advised and unwise.

Perhaps those who want to punish all patent owners, weaken all patent rights and fundamentally alter the patent system as we know it didn’t learn the same lessons in grade school because they were the “problem child” (to quote AC/DC) that led to us all losing recess. Or maybe they were that clueless third-grade teacher who just didn’t have the sense or patience to figure out who the problem children really were. Let’s just punish everyone darn it!

Today we do have the ability to clearly identify the bad actors. District Courts have plenty of authority to stomp out those that abuse the system. This has always been true, but now in the wake of the Supreme Court giving trial Judges greater discretion to award attorneys fees there is little doubt that there are plenty of tools at the disposal of Judges who don’t want to allow their courtrooms to become center stage for a litigation shakedown.

The truth is that there is no problem with the patent system. The patents in the software space that are too broad issued more than 12 or 14 years ago. The Patent Office long ago clamped down on bad software patents, so the justifiable ire for these bad patents is a relic of what transpired at the Patent Office well over a decade ago. Thus, to claim that the Patent Office today is the problem because they issue bad patents is ridiculous. It shows a lack of understanding of the issues and ignores the reality that today the Patent Office has clamped down so tight in certain Art Units that they routinely reject patent claims that really should issue. The problem today with the Patent Office is likely more that they issue too few patents in the software space.

Litigation abuse is a problem, but that does not mean that there is a problem with the patent system or patents. Certain nefarious bad actors use a patent as part of a shakedown to force defendants to settle for pennies on the dollar or pay hundreds of thousands of dollars (at a minimum) to mount a defense. But is that a problem with the patent system? No, absolutely not! The problem is with using the sloth of the judicial system to force settlements.

You might say that if you were sued with a bogus lawsuit you would defend, but it only costs a few hundred dollars to institute a federal lawsuit, so the bad actors can ask for $10,000 or $20,000 and still make a great return. If you don’t pay and seek legal representation, you will almost certainly be required to provide a retainer deposit that is at least $50,000, likely much more. So what do you do? Many choose to settle, including the corporate elites that have the money to fight. But all settling does is paint a target on their back so others now know that they are easy prey. And the cycle repeats.

We don’t need sweeping new laws or speeches from the Rose Garden.  What we need to do is identify bad actors and punish them directly, specifically, and without negative consequences for those who do not abuse the system. Without a targeted approach we run the risk of making the cure worse than the disease, which happens all too frequently thanks to the law of unintended consequences.