Via Randy Ray: Patent trolls

Patent Trolls Predatory Litigation and the Smothering of Innovation by William J. Watkins Jr.

Floyd Norris writes on patent trolls and the law link here. It is well-worth a read as it offers hope that the Supreme Court will reverse common practice in appeals where the winner doesn't get his legal fees paid by the loser. This practice has made it difficult for small defendants to cover their costs and makes them reluctant to fight the trolls even when they have a good case as their company may not survive.

The trolls have had an easy time of it so far. Is this the end for them?

First, techdirt and then the Electronic Frontier Foundation examine the draft bill on patent reform introduced by House Judiciary Chair Bob Goodlatte. Techdirt (http://www.techdirt.com/blog/innovation/articles/20130923/17400624628/posturing-over-patent-reform-shows-how-young-companies-innovate-while-old-companies-litigate.shtml) looks at the sources of support for the proposal, mostly from startups that are innovators and are frequent critics of existing patents. Older firms which have an established position and may fear innovation are opposed. EFF's piece (https://www.eff.org/deeplinks/2013/09/troll-killing-patent-reform-one-step-closer) looks at the details and specifies what it likes in the draft, most of the bill's proposals. Given the balance of forces in the Congress, passage seems questionable but one can always hope.

Bartees Cox Jr. contrasts the company image and the public image of the patent troll, Intellectual Ventures (http://www.publicknowledge.org/blog/two-sides-intellectual-ventures). He sums it up, "Intellectual Ventures is giving you the good side of the story. They say that they are champions of invention and they're quick to point out their health and medical research. Everyone else in the battle for patent reform sees the other side. The side that preys on businesses without penalty, that buys up patents to sue innovators building companies, and that ultimately keeps innovation at a standstill while raking in massive profits. Later, he writes, "Because when a company like Intellectual Ventures sits on technologies and patents, waiting for someone to independently make a product to become unintentional fodder for a lawsuit trap, there is no benefit to knowledge, consumers, or to society." Worth a read and thought about the purpose of patents and current experience and whether we wouldn't be better off without them.

The New York Times went after another big patent troll yesterday, the second in less than a week link here. This one is called Intellectual Ventures. It seems to be a spinoff from Microsoft, a major patent holder, as it is run by Microsoft's former chief technology officer, Nathan Myhrvold. Its origin may raise the question as to how much business it does with Microsoft and whether it profits in some way from the new enterprise.

Another reason for the article is the announcement that "This summer, the Federal Trade Commission is expected to begin a sweeping investigation of the patent system after the agency's chairwoman, Edith Ramirez, urged a crackdown link here. She has singled out a particular kind of miscreant, one that engages in 'a variety of aggressive litigation tactics,' including hiding behind shell companies when it sues." Although not part of the article, it is worth reading as a description of what the FTC is thinking.

Most of the article is a description of what Intellectual Ventures has been up to and what a toll it has levied on the cost of doing business in a world that fosters both patents and patent-trolls.

The New York Times goes after patent trolls in a long review in the Sunday paper link here. Its author, David Segal, thinks he has found the worst offender, Erich Spangenberg, whose company, IPNav, even has a classy website, link here on which it claims to have "Monetized to date: $610,549,103" and makes its sales pitch to existing and prospective clients.

It is at the top of the list of patent trolls, ranked according to the number of defendants added to their suits from 2008-2012. The total number of patent infringement suits (in litigation?) has jumped from 2304 in 2009 to 4731 in 2012. One estimate of the costs of these suits was 29 billion in 2011. Only $6 billion went to inventors, with the balance going to lawyers and the trolls themselves as expenses and profits.

The article has a lot of details on how IPNAV operates, some of which have gotten it in trouble with the law, but so far it has escaped using lots of money and legal talent. But the bottom line is that it is a huge tax on innovation and on consumers with no redeeming features. The question is how long the U.S. or the patent system survives.

Bilan takes them on...if you read French.

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.