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January 18, 2013

Trolling for a Solution to Patent Lawsuits

 
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Continuing with reflections on the Consumer Electronic Show policy track, one of the several panels was titled "Fighting the Patent Trolls." The assumption leading to the panel's name is that there are such things as patent trolls and that they are the problem. Both assumptions should be challenged.

There is no definition of a "patent troll" that is globally accepted, although the notion that a "patent troll" is a "non-practicing entity" is fairly routine. A non-practicing entity is a patent owner who does not use or manufacture the patented item. The pejorative "troll" part, sounding like something from "Billy Goat's Gruff", generally refers to an individual who seeks to enforce the patents they own in such a way that some judge to be too aggressive or opportunistic even though they are not manufacturing the item themselves. The CES panel added that lawsuits where goal is to monetize patent without a technology transfer is a patent troll. Or that those who buy a patent and then look around the market seeking to monetize the patent by taking a broad view of what it covers is another indication of bad behavior. And that finally, a patent troll is an entity which owns a patent but that is not creating value in the broad marketplace. All of these definitions are troubling.

Why shouldn't a property owner be able to dispose of their property as they see fit? Sell it, trade it, do nothing. And why shouldn't the acquirer of sold property be able to do what they want with their new purchase? It is their property after all.

To make an analogy to the world of personal property, it would be as if you bought a classic car from someone who used it regularly but you decide to never take it out of your garage. Your neighbor, seeing an opportunity, decides to take your car and open "Classic Pizza Delivery," So you threaten a lawsuit to be compensated for the use of your car, and in response they argue that since you were not using it that they should be able to do so and keep the proceeds. Sort of sounds crazy.

On the other hand, the cost of fighting suits from these so-called trolls is actually hard to ignore for a large company, and for small companies they can be an existential threat. Of course, one must remember that these are the companies accused of misusing someone else's property, admittedly sometimes ignorant of that fact but of course sometimes not nearly so innocent. And the number of suits is increasing. In 2011 there were 5,800 "troll suits," which was four times the number of suits brought in 2005. Putting aside name calling, there is clearly a problem. All the resources that are poured into that litigation is economic activity that is not going towards further innovation to build a strong economic future. But is stripping property owners of their rights a good approach?

When we start dictating who is allowed to enforce the patent rights that they own, particularly when based on arbitrary standards of judgment, we begin the steady and sure destruction of the patent system. Some proposed solutions, such as the The Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act (introduced by Rep. Peter DeFazio (D-OR) and co-sponsored by Rep. Jason Chaffetz (R-UT)) do just that, “upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding, the court may award the recovery of full costs to the prevailing party, including reasonable attorney’s fees, other than the United States.” Focusing on "bad people" is just a way for Congress and the system to dodge taking responsibility to fix the system.

"Trolls" are merely a symptom of a disease, a symptom craftily named to be sure, but still only a symptom. Mr. Defazio's bill might help treat the symptom but the disease will rage on.

So what is the problem? There are likely many. Perhaps the problem is silly patents, patents that are too broad. Or our one size fits all patent law. Maybe it is a natural result of over-patenting, the strategy of seeking to patent multiples of similar innovations not just the core technology for defensive purposes, or perhaps even that is another symptom. Regardless that process results in numbers of substantially similar patents flooding the market when a business fails and the patents get sold. Maybe it is the creation of and increasing use of software patents (more on that in a future post).

And the solutions? We could rationalize the law of damages, thereby taking away the damages incentive. The PTO should continue to seek and implement better procedures for addressing vague, abstract or overly broad patents. Perhaps the imposition of a uniform patent review conducted by the companies to make sure that willful infringement is not taking place. Each of these ideas has some up side and some down side but at least they attempt to treat the disease. And companies, especially those who insist that Patent Trolls are real creatures, just might need to accept that keeping up with all the patents, handling hundreds of patents in one product, and understanding the breadth of some patents, is one more expense of doing business and should stop seeking to shift that expense to the public by trying to shut down property owners.

In the long run we need a patent system that creates an incentive for more innovation. Playing small ball, simply treating the symptoms, will never get us there. And in the end, it is hard to side with those who are wrongly making money off of other's property.

It is time to start doing the hard work and solve the problem.



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