Editor’s Note: This is part 5 of a 5 part series written by Steven J. Moore and with the assistance of Marvin Wachs and Timothy Moore, also of the Kelley Drye & Warren Patent Department. To read the series from the beginning please see: A Fractured Fairy Tale: Separating Fact & Fiction on Patent Trolls. To read the debunking of patent troll myths see: Probing 10 Patent Troll Myths.
Fables are nice, but rarely reflect reality. We understand that this series of papers will not be accepted by some with open arms, as it does not correlate with their visualization of reality, a reality that has been in the making for a long time by very good story tellers. It is comfortable to have an enemy to blame, and it is nice to be the good guy as well as the victim. The reality of life, however, is much different than each of us just wearing a black or white hat.
Much of what is reported here makes perfect sense. Why should we not expect that a non-inventor-based NPE would be selective in their purchase of patents so as to result in a portfolio that is as good as, if not better than, those of producers themselves? (That is, why are we so sure that patent assertion entities do not have the intelligence to find the gems that others are leaving by the wayside?) How many of us would enter a monster-truck rally with a 1985 Yugo GV, considered by some to be one of the worst engineered cars of all time? Isn’t it logical that the patents asserted by independent inventors and their companies might not fare as well as those patents of producing companies and the other NPEs, particularly given that many belonging to this group are generally not able to afford the best legal work in the initial preparation and prosecution of their patents, and often are relegated to use any attorneys that will take their litigation on contingency? Why wouldn’t we expect that a company that is buying patents would likely try to monetize them, particularly when the company to which we sell a patent (or set up a royalty agreement) is not in the business of what the patent claims? Aren’t we being disingenuous when we decry a NPE patent owner for not practicing an invention in a patent, and yet allow Producers to obtain and enforce the same patents even if they do not practice the invention in the patent themselves?
One thing we wish to make clear is that we do not in this paper suggest in any way that there are not some entities that assert very bad patents and assert patents that are clearly not infringed by those who are sued. This is litigation misconduct, not patent misconduct. Unquestionably there are some entities that use litigation as a tool to extract money where no reasonable person would understand any was due. However, our data suggests that this problem is nowhere as widespread as is being made out by many yarn spinners. We simply did not find the patents being asserted by plaintiff producers, even the largest producers, to fare any better than those being asserted by non-producers in both patent litigation or USPTO reexamination proceedings.
It is time for us to look carefully at the facility with which we have come to reflexively label in a pejorative manner each and every entity that is adverse to us. Not every asserter of a patent is a “troll.” In some sense it does appear, as Arthur R. Miller once said, that according to most patent litigators “a frivolous lawsuit is any case brought against your client, and litigation abuse is anything the opposing lawyer is doing.” Miller, “Simplified Pleading, Meaningful Days in Court and Trial on the Merits: Reflections on the Deformation of Federal Practice,” 88 NYU Law Rev. 286, 302 (2013). Undoubtedly there are bad guys, but not every asserter of a patent is a bad guy.
A patent is a “right to exclude” (even if our present damages analyses seem to miss this point!). There has never been a suggestion in the law that a patent holder must produce the inention of a patent. At present the right to exclude can be transferred from one entity to another, and indeed that is what producers seem to be doing. It simply is time for the patent community to look at the reality of what is going on, before it instinctively fixes a “problem” which in large part it has broadly painted through its imagination without carefully checking carefully the roots of its genesis. It is time we acknowledge that the NPE “problem” is one in which many in corporate America and worldwide corporate are actively collaborating. We can’t keep calling every patent asserted by a NPE or small company as weak, particularly when many of these patents are coming from the very name-callers. Either we accept that right of all companies and independent inventors to monetize the worth of their patents, or we do not.
What is certain is that the story of the reprehensible troll has had a big impact on the many laws that have been enacted and proposed in regard to patent rights, starting with the AIA. As will be shown in our next paper, while the AIA was said to be designed to make life more difficult on the so-called “troll,” in fact the act has had significant negative impacts on small producing companies, with little effect noticeable on the NPE (which we assume includes some of the “bad guy” trolls).
How we deal with the problems uncovered herein is something for deliberate consideration, not the activity of an automaton. For example, this paper demonstrates that patents asserted by inventors and inventor based companies generally do not fare as well as patents of other entities. However, in the United States none of us would want to stop all such entities from trying to market and license their ideas. Most of us would agree that the independent inventor has been the heart of innovation in the United States for a very long time. We have too many memories of the stories of the Wright Brothers, Chester Carlton of Xerox fame, of Eli Whitney and the cotton gin, of Edison, and of Farnsworth — the farmer boy who invented the television.
In particular, we need to come to grips with the fact that the Hewlett Packard v. Acceleron case has played havoc with the patent system in that no longer do these independent inventors feel comfortable in proffering their patents to Producer companies, nor for that matter does any entity. The current status of sue first in a district where you may be able to maintain your case, and then negotiate makes little sense. As a former head of an intellectual property group of a large multinational joint venture during the pre-Hewlett Packard days, I may have been some annoyed by letters we received from independent inventors offering my company a license, but I would much more prefer this then having suit filed in a district court. I certainly would have looked very differently at licensing a patent for a nominal sum, then paying a nominal sum to “settle” a litigation (as would the higher up officers of my company).
Congress needs to weigh carefully any further changes in the law that would further disadvantage small companies. Not only are the number of patents that they are obtaining over the past decade rapidly decreasing, our review suggests to us that it is becoming extremely difficult for them to prevail in any action against the largest corporations as they can easily be worn down by monetary attrition given all the time and routes a defendant can use to keep away the ultimate resolution of the issue of patent infringement damages.
Our study suggests there is a critical need for a very through, unbiased, look at the so-called “troll problem” before new legislative and administrative fixes are enacted. In particular, a careful analysis of any “fix” must be made to determine the effect of any proposed change on the majority of companies in this country, that is the small company. Organizations that have a stake in the outcome of the study, or have consistently advocated a position in regard to this matter, should be excluded from conducting the study. We need to stop paying homage to the phantom tales of the past, and seek out only the honest facts.
Join the Discussion
13 comments so far.
Randy LandreneauAugust 9, 2013 10:40 am
Anon – So true. Vested interests have, throughout history, used whatever “media” was available to maintain their positions. I read that, around the time of Columbus, those with power controlled the higher land at the ports. Because of the curvature of the earth, they could use telescopes and know what ships were coming in before anyone else, and use that information to corner the market. They certainly benefited from the general belief that the earth was flat.
Our only hope for maintaining any remaining inventor rights, as envisioned by our Founders, is to continue the dialogue and get more people aware of the real issues.
AnonAugust 9, 2013 08:24 am
I agree with your post, and find the ‘been-played’ thought pattern applies to many, including the anti-software patent crowd.
I find that when I have private conversations with individual technical person holding anti-patent views and that person begins to understand the larger context of just whom benefits most from a lack of patents and IP protection, the dawning of that realization causes a thoughtful pause and one can see that look of “I’ve been played” on the person’s face.
Outside of private conversations, in which those holding such views can simply disregard the context and understanding, I find that fruits of dialogue remain elusive. In such cases where facts and logic can simply be avoided, those ardently wed to an outcome and who refuse to contemplate that bigger picture will cling to their mantra and their unthinking ways. Visit some of the semi-recent multi-hundred post threads on this blog to see examples of this.
Randy LandreneauAugust 8, 2013 03:33 pm
I want you to consider that very few politicians are former engineers. What happens in politics is very rarely similar in any way to what happens in engineering. Consider the America Invents Act. After the public relations campaign that made everyone aware of how the huge patent application backlog is hurting our economy, what was passed? Fee diversion, a no-brainer if you want to improve the Patent Office operations, was not ended. It wasn’t even in the original bill, but was added as an amendment, and later watered down. But, changing to First-to-File, something that multinationals corporations have been trying to accomplish for at least 20 years, was achieved. Six places where the former law required that a patent applicant tell the truth were eliminated. Trade Secrets were enhanced (promoting more secrecy rather than promoting innovation). The requirement to show “best mode” was stripped of any teeth. New methods were created to keep a new patent application from either being allowed, or once allowed, to bring it into question. And don’t forget that a big law firm got rid of a 200 million dollar lawsuit by getting a change in how patent application deadlines are determined. I could go on. As an engineer, look at this. What was passed was a wish-list of multinational corporate patent attorneys that had nothing to do with the purported reason for having new legislation.
The same thing is happening regarding “patent trolls.” Regarding your “second hand car salesman,” according to Mr. Moore, the patents of the alleged “troll” NPEs are as good or better than the patents of those decrying them. So, an inventor has a valuable property (patent), and he sells it to an entity that has the wherewithal to profit from it. What is the problem? The real agenda behind the public relations campaign is to make it harder for those who steal others’ intellectual property to be successfully sued. The public relations campaign is intelligently designed to make you think that we need new laws right away. You are being played.
AnonAugust 7, 2013 07:10 am
I think Benny’s last statement has some merit.
I think that you should proceed to the engineering press and seek to have your wonderful series of articles posted in the engineering trade media.
Obviously, that media has been skewing the story and producing an audience of bias and misunderstanding.
And Benny, let me remind you that patent attorneys operate in both realms of law and technology. In fact many of us practitioners have solid engineering experience.
Benny AttarAugust 7, 2013 02:04 am
My source of information on patent trolling is the engineering trade media. None of those accused of trolling are independent innovators, or any kind of innovators or technology companies. Nowhere in the engineering community will you see accusations against those who file patent applications and subsequently take steps to protect or enforce their IP. The ire goes out against those operators who invest in a patent portfolio with intent to profit from it via lawsuits or settlements. These people produce nothing, invent nothing, and contribute nothing to the advance of technology. No one accuses an attorney who act of behalf of a patent holder of trolling. It is the lawyers who buy patents who are portrayed, in the engineering press, as second hand car salesmen. Of course, the popular press are generally clueless. If your views differ, you should be publishing articles in “Electronic design news” or other trade periodicals, not just in law forums.
John SmithAugust 6, 2013 03:14 pm
“Aren’t we being disingenuous when we decry a NPE patent owner for not practicing an invention in a patent, and yet allow Producers to obtain and enforce the same patents even if they do not practice the invention in the patent themselves?”
I quite agree with you on that one. But, others will note that they have to take out the “worst of the lot” before they take head-on the challenge of trying to get either continued ownership or enforceability of a patent by a “producer” to rest on its continuing to practice the invention themselves.
As to your assertion regarding intelligence, I find that quite laughable. There is no reason to believe that the patent departments of NPEs are more intelligent or more lucky in finding the gems than the guys working for the producers.
“However, our data suggests that this problem is nowhere as widespread as is being made out by many yarn spinners. ”
I think most of the yarn spinners are more concerned with rate of growth of this behavior, not necessarily the current absolute amount. Though I’m sure they consider that of concern also.
At the end of the day though I agree with you that there should be more studies by folks who have no stake in the game. I’m quite surprised that people on either side of the debate don’t pool their resources to do studies and hire outside people who do not have any stake in the outcome. I see so very few of those kinds of studies.
Randy LandreneauAugust 5, 2013 03:32 pm
Steve – Thank you for debunking the myths about “patent trolls.” Whenever the reality is much different than the propaganda, something very dishonest is happening. Here, large corporations are pumping up a non-issue, but to what end? To further erode the ability of the independent inventor and small entity to sue for infringement.
The vested interest has always been at odds with the independent innovator. The biggest threat to the vested interest is a new and better technology that can be patented and protected. However, the biggest threat to America is the elimination of the ability of the independent inventor to protect his intellectual property. Our history is full of examples of technological advances by individuals who depended on our unique Patent System. Innovation is one of the few things that America does extremely well. We cannot afford to let vested interests with infinite political power cut our American innovators off at the knees.
The multinationals are pushing our patent law, step by step, toward the point where it will be impossible for an independent inventor with a significant invention to protect his property. Every step in this direction moves America closer to a future that is very dark.
I strongly encourage all who are aware of this issue to become active in fighting for the side of maintaining and restoring inventor rights. Our future depends on it.
AnonAugust 5, 2013 06:47 am
In a narrow aspect yes – but that does not reach your statement of “long way” from each other. There is more in common (promote and make money) that there is difference (let people use or exclude). You cannot have the exclusionary power of patents work without the ability to actually exclude.
Sorry, but your view does not accord with reality.
Benny AttarAugust 5, 2013 02:01 am
“How so” ? A non-practicing IP owner attempts to sell his hard-earned knowledge to as wide an audience as possible, to maximize his return on investment. A typical manufacturer, however, attempts to restrict his IP to no-one but himself, so as to remain ahead of his competitors. As a manufacturer, our company takes the second approach. Companies such as ARM holdings, for example, develop IP and freely offer it for sale. You could argue that both methods encourage innovation (we “innovate” around our competitors patents). “Allow all who will pay the license to practice the invention” and “Don’t let anyone but myself practice the invention” are opposing policies.
AnonAugust 4, 2013 11:46 am
Again, Benny, how so?
You are assuming that because the methods of making money are different, that they are “a long way” away from each other.
This is simply not so.
Have you ever had experience running a business, for optimizing returns for shareholders?
Your views here simply do not accord with reality. Sorry.
Benny AttarAugust 4, 2013 08:41 am
Sorry, I thought I made it clear. A manufacturers goal is to obtain the maximum market share, and a good way of doing this is to hold on to an exclusive right to a desirable product or feature. It is therefore not in the manufacturers interest to sell this right, or to license the IP. This is based on the reasonable assumption that the competitors will not wilfully infringe the patent. (manufacturers earn their daily bread by producing products, not lawsuits). Staking out territory in this way is a long way from purchasing IP with the view of selling it later in the day.
AnonAugust 4, 2013 08:28 am
“taking a different approach altogether.”
Benny AttarAugust 4, 2013 03:05 am
I’d like to point out a fact that I don’t think came across in the article. Many manufacturers file patent applications in order to “scare” their competitors from entering the market with similar products. They do not attempt to licence their IP or sue infringers. Simply maintaining market lead is profit enough from the investment. (I’ve seen some ridiculous applications filed simply to create a “patent pending” scare). An “operator” who attempts to “monetize” a patent is taking a different approach altogether.