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Against Monopoly

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Patent Trolls

Monopoly corrupts. Absolute monopoly corrupts absolutely.





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Press coverage of patent trolls has been rare.

The New York Times went some way last week to remedy that link here.

First, it notes that the chairwoman of the FTC is expected to recommend an investigation of patent trolls (or "frivolous patent lawsuits" as specified in the headline). The promised further action has not been confirmed, so we will have to wait and see.

The Times then slid around the "patent troll" name and henceforth called them by the less pejorative "patent-assertion entity" or PAE. Still, adding some weight to the promise of action was the "several executive orders" from President Obama "directing executive agencies to take steps to take steps to 'protect innovators from frivolous litigation.'"

The article goes on to describe patent trolls as typically having no operations other than collecting royalties on patents and says that they accounted for more than 60 percent of the roughly 4,000 patent lawsuits filed last year, up from 29 percent two years earlier.

But then the article notes one company that calls itself a "patent-licensing company," raising the question of "what's in a name".

In any case, the Times expects the full commission (two Democrats and two Republicans, with one seat empty), to approve a study.

The article identifies two kinds of troll: Little (poor?) ones that sue for amounts smaller than the expected cost of litigation. "At the other end are large companies like Mosaid, which has its American headquarters in Plano, Tex., and Intellectual Ventures, a Bellevue, Wash., firm that was co-founded by Nathan Myhrvold, a former chief technology officer at Microsoft. Both may be little more than collection agents for big patent owners like Microsoft which thus preserve their public persona as innovators working in the public interest.

Those entities buy portfolios of intellectual property rights from technology innovators like Microsoft and Nokia and use them to generate millions of dollars in licensing payments. The big ones are able to finance suits for large amounts over extended periods with lots of potential licensees. Both would seem to raise questions about the anti-competitive nature of their activities and the cost to consumers.

According to the head of the FTC, the makers of smartphones are an example of the monster class as a single design "could be subject to tens of thousands of patents."

What to do? Push for the study and its likely negative conclusion, but don't expect any action soon. Patent owners and patent lawyers will be watching, ready to pay for inaction.


Comments

The New York Times has (surprise) another misleading article.

The supposed growth from 29% to 60% has been entirely due to the America Invents Act, which requires a new treatment of patent litigation. Under the old rules, NPE's could sue a boatload of defendants in one litigation. Under the AIA, NPE's had to file unrelated defendants separately. The net result is that NPE's have to file more suits for the same number of defendants.

Another point of interest not discussed in the NYT article is that lawsuits by others (non-NPEs) dropped in total numbers in 2012. Indeed, excluding NPE's, the number of patent lawsuits per year has remained fairly constant, which should be a surprise given that the total number of patents issued by the USPTO has continued to rise.


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