Posts Tagged: "patent troll"

Earlier today the Senate Judiciary Committee held a hearing on patent reform. The hearing was titled The Impact of Abusive Patent Litigation Practices on the American Economy. There was a variety of diverse views presented by the witnesses, including one witness, Krish Gupta, who continued to cite the bogus and thoroughly debunked Bessen-Meurer “study” that erroneously claims that patent trolls…

The order bars the company, MPHJ Technology Investments, LLC, and its law firm from making deceptive representations when asserting patent rights. The settlement with MPHJ, announced in November 2014, is the first time the FTC has taken action using its consumer protection authority against a patent assertion entity.

The U.S. economy is full of intermediaries everywhere you look. But for some reason we have demonized the intermediaries in the market for innovation. Think of it this way. Most people buy their groceries at a grocery story. That grocery store does not grow any of the vegetables, raise the meat, nor catch the fish. It is simply an intermediary. Now I can see why from the point of view of a manufacturer the PAE may be a nuisance. But from the inventor’s point of view the PAE is a valuable intermediary.

Large companies can steal your patented technology, make a great deal of money, ignore you all together, and then have the resources, the vast resources in most cases, to delay your enforcement actions or actually destroy your patents by any means necessary. So the only recourse left for me and others like me is to bring suite to protect my invention – my intellectual property rights. However, the loser pay clause in HR 9 would be a showstopper for me. Bringing a suit against a patent infringer would be too much of a risk for me and my family now and I’ve already used my life savings and family inheritance and hard work for over 15 years plus the untold impact on my family just to develop and maintain my patents. I just do not believe the independent inventor is the problem.

There is no credible evidence behind proposals to make the drastic changes embodied in the Innovation Act, the removal of discretion from judges to judge each case on an individual basis with mandatory stays and fee shifting, and new rules for pleading and discovery that would undermine the ability of legitimate inventors and patent holders from enforcing their rights against infringers.

Earlier today 40 economists and law professors wrote to Senate and House Judiciary leaders explaining that the data it that keeps being cited to justify HR 9, otherwise known as the Innovation Act, is “flawed, unreliable and incomplete.” The professors caution Congress to proceed cautiously, particularly given the numerous misleading and flawed studies that “highly exaggerated claims regarding patent trolls.”

Carly Fiorina: ‘[W]atch carefully who is supporting that [the Innovation Act]. It’s not the small it’s the big. It’s the big companies whose ongoing economic benefit depends upon their ability to acquire innovations and patents at a lower cost.”

Senator Coons: ”[P]atents are not just foundational. Patents are really about the American Dream. They are about what it means to come to this country or be from this country and believe in the possibility that you and a team of folks that you work with can invent and develop and then protect a groundbreaking innovation. Patents are about constantly laying a stronger foundation upon which future generations can continue to innovate and about insuring we will find solutions to the challenges that face us, not just here but around the world… So here is the truth. We need to both strengthen patents and target real abuse. They are not mutually exclusive…”

An effort to address bad actors may unnecessarily create significant hurdles for innovators seeking to enforce or license the rights to their own innovations. The fear of unintended consequences requires targeted reform that will specifically address only the abusive behaviors relied upon by the bad actors, namely misleading and fraudulent demand letters. The trick will be to tackle these abusive behaviors that serve no legitimate purpose while not making legitimate business communications impossible. Luckily, it is not difficult to spot fraudulent demand letters and distinguish them from legitimate business inquiries. But will Congress be able to strike the appropriate legislative solution?

The company that just forcefully promised to fight the troll at all costs now can’t write the check fast enough. The case settles, the corporation feels vindicated because they didn’t have to pay their high priced attorneys for more than a couple hours, and they have mitigated the risk. This story is repeated constantly, but one thing never changes. Because the case was settled there is no prevailing party. Therefore, there will never be an award of attorneys fees against the nefarious actors that are rightly called patent trolls.

Notice letters play an important role in the patent system. Indeed, as the Supreme Court has explained, ”[p]atents would be of little value if infringers of them could not be notified of the consequences of infringement.” Virtue v. Creamery Package Mfg., Co., 227 U.S. 8, 37-38 (1913). Patent law encourages patent holders to take reasonable steps to notify others of existing or pending patent rights and their possible infringement. In some instances, federal patent law requires patent holders to send notice letters to accused infringers to preserve their patent enforcement rights and ability to collect damages. Notice letters and licensing communications can also serve the interests of accused infringers. Once a patent holder has made its rights known, the accused infringer can determine whether to cease the allegedly infringing activities, negotiate a license, or decide to continue its activities based on an assessment of non-infringement or invalidity.

The legal costs of the IP system should be measured against the value of intellectual capital in the U.S. economy, estimated in a study by Kevin Hassett and Robert Shapiro to equal between $8.1 trillion to $9.2 trillion… Weakening the US patent system harms economic prospects for middle income earners because it will stifle innovation, discourage patenting, reduce private investments in new technologies protected by patents, slow economic growth, increase unemployment, and harm consumers. The proposed reforms will reduce prospects for economic advancement for middle income earners because they damage entrepreneurship and small business and favor large incumbent firms over inventors and innovators.

They found that citations were elevated for licensed patents. Moreover, most citations occurred after the patent was licensed. That licensing of patented technology increases its diffusion and relevance more broadly is supported by Drivas et al. (2014), who found that citations by non–licensees to patents exclusively licensed (either by geographic area or field of use) by the University of California increased after the licenses were executed. These are objective empirical indicia – not subjective responses of accused infringers to selective surveys.

Once upon a time Comarco manufactured products, but the company was pushed from the industry by cheaper infringing products. That makes the Comarco story a prime example of the often overlooked reality facing small businesses in a global marketplace increasingly dominated by giant conglomerates. It would seem that the Comarco story is one about how large companies push original innovators out of the marketplace as the result of widespread infringement.

The recent public discourse is purposely blurring the line between NPEs and trolls. Research labs and universities are all NPEs. But it would be not only incorrect but also ultimately ethically wrong to classify these entities as trolls. In fact, by taking away their right to technology monetization, we might undercut their ability to further investments in innovation, yet creating a vicious cycle. Ultimately, all companies – practicing or non-practicing – do R&D in areas where they will never bring a product to the market, and act as NPEs in specific market segments. Innovation requires multiple actors, including individual inventors. In times when R&D dollars are scarce, aggregators and patent licensing firms generate more resources to fuel innovation.