The most successful patent trolls tend to be those with the sharpest noses for weakness. They sniff out low quality patents and hit legitimate businesses where they’re vulnerable in order to make money without doing the actual work of innovation.
Unfortunately, this problem isn’t getting any better. More than six times as many patent lawsuits are filed today than in 1980 and Patent Assertion Entities (PAEs) currently drive over 84 percent of patent litigation in the U.S. There are a number of factors behind the rise in power and number of patent trolls. One of the most significant, if under-discussed, is the convergence of commoditized computing technology utilized by almost every software-dependent company.
“Full Stack” IP Threats
All software-dependent businesses are built on a technology platform or “stack” made up of multiple modules or layers, each providing different services. With apologies to the real platform architects in the room, a simplified example is illustrated above. At the bottom of the stack is the base computing layer, which provides the enterprise with basic computing functionality: processing, memory, storage, network connectivity, etc. On top of that is a service layer, which may provide enterprise-wide services, such as identity management and authentication, security, privacy, e-commerce functionalities, CRM, and more. Next up is what can be referred to as middleware or shareware. This layer of product-agnostic services may be called on to deliver functionality (e.g., personalization, analytics, content curation, etc.) to multiple different products. Finally we get to the application layer, which delivers the innovative and market differentiating products, services, features, and experiences that make a business unique.
From a patent strategy perspective, resources and budget should be spent at the top of the stack. As you move deeper, technology can become less relevant to user experience, competitive advantage, and therefore may be less likely to warrant patent protection. Many companies deploy 3rd party commercial or open source technologies in the base computing or service layers to free up resources to innovate and focus on the business-critical application layer. Patents should be used to protect key, user-facing innovations—the reasons customers buy your products. Legal departments are best served by spending their IP budget to protect innovations that provide market-differentiating, revenue-driving customer experiences.
Unfortunately, IP departments are often forced to spend their limited budget defending patent troll lawsuits targeted at the base computing and service layers instead of where it should be spent – protecting application layer innovation. There has been no shortage of such litigation due to the glut of vague and ambiguous software patents directed to basic computing technologies. These broad, vague patents have become glaring targets for trolls, who are eagerly buying them up and asserting them wherever they can. As a result, companies are being sued for patent infringement for things that aren’t directly related to their end products and services.
Rather than wasting time, energy, and money litigating such cases, many companies simply settle their troll cases, further depleting their IP budget. The problem with this strategy, however, is that it’s precisely what the trolls want. Their business model is based on companies choosing to settle, rather than fight. Many companies simply consider it a “patent tax” for using basic computing technology. Analysis from LOT Network and Hamilton IPV showed that 75 percent of the patents used to sue JP Morgan Chase in PAE lawsuits came from outside financial services and were related to such technology.
Clearing The Underbrush
The trend toward technology convergence (i.e., commoditization at the bottom of the stack) is not going anywhere. Nor are the many patent trolls armed with ambiguous software patents targeting the lower rungs of the tech stack. The struggle is real. Legislative patent reform has stalled while judicial efforts (Alice anyone?) meander through the court system and USPTO with wildly varying results. And from early reports, it’s possible the Trump administration will take a “pro-patent” stance, which could lead to an emboldened patent troll community. Clearly, businesses cannot wait around for the government to solve this problem. They need to take matters into their own hands to protect themselves.
Fortunately, a number of private organizations are pioneering market-driven solutions, such as the Open Invention Network (OIN) and the LOT Network. OIN is a defensive patent pool and community of “patent non-aggression” dedicated to protecting the Linux system, a foundational component of many tech companies’ base computing layer. LOT Network is another non-profit community that dries up the patent pipeline for trolls. More than 80 percent of patents litigated by PAEs are acquired from operating companies. By joining LOT, members agree that if one of their patents falls into the hands of a PAE, all other LOT members have their conditional license to that patent activated, granting them immunity.
These organizations effectively “clear the underbrush” from the tech stack, freeing up companies to innovate and spend IP budget at top of stack. They minimize the volume of patents that trolls can get their hands on, and lock them down so these patents can’t be used against legitimate businesses that generate products and services. Clearing out this underbrush provides freedom for members to spend R&D and IP budget on their product layer and different themselves in the marketplace, which is how it should be. Technology convergence has led to a glut of patent assertion lawsuits because trolls love patents that can apply to almost anyone in the software space. Removing these patents from circulation is an important step towards ensuring businesses can focus on what that matter most, delighting their customers, growing, and protecting market share.