Posts Tagged: "patent troll"

Bad demand letters are a big problem for U.S. small businesses, costing them millions of dollars in settlement fees and legal costs annually. Patent trolls often operate through shell companies and these bad acting companies send form demand letters to hundreds or even thousands of small businesses at a time, claiming with little or no evidence that they are infringing on patents. These mass demand letters are often misleading and sometimes outright false. This type of activity has been characterized as “extortion-like” by the federal courts, and gives hard working innovators a bad name.

Jane Muir, AUTM President: “[U]niversities are not the next patent troll because at the end of the day, university tech transfer offices were put into place to ensure that the new discoveries that happen in the research laboratories ultimately get out into the marketplace by way of product and services that improve the human condition. The big difference is with patent trolls. They’re not interested in commercializing discoveries. They’re interested in using those patents to sue legitimate companies who do want to move those products into the market. From the commercialization standpoint that really is the fundamental difference. Patent trolls have no real interest in commercializing. Their interest is in litigating.”

The Federal Trade Commission testified on consumer protection issues involving patent demand letters, patent assertion entities (PAEs), and proposed legislation to prohibit deceptive patent demand letters. Delivering testimony before the House Subcommittee on Commerce, Manufacturing, and Trade of the Committee on Energy and Commerce, Lois Greisman, Associate Director of the FTC’s Division of Marketing Practices at the Federal Trade Commission, provided lawmakers with comments on a draft bill regarding deceptive patent demand letters, and recognized that demand letters raise broader issues about patents and the U.S. patent system.

FTC says that it considered and implemented many of these suggestions it did receive in order to sharpen the focus of the study and reduce its likely burden on study respondents. Frankly, I see little evidence that the burden on the responding PAEs has been reduced to anything that approximates a reasonable level. The information that the FTC will seek from 25 different PAEs is extraordinarily detailed and it will be onerous to produce, if it can even be produced… The questions seek detailed information about each patent owned by the PAE. In one case a seemingly simple question asks the PAE to for every patent they own identify the patent’s “priority date,” which is a term not defined in the Notice. Asking this question in and of itself presents an objectionable burden in my opinion.

Next, I tried to interest manufacturers in licenses. That went nowhere. One company officially told me no one would take me seriously until they were sued, so I set out to sue a few organizations that I felt were infringing. I could not find a law firm that would take the case. Firm after firm said they had a conflict of interest. This took years. As far as trying to manufacture, it seemed as though the train had left the station. What could I do? I could not get a major law firm to represent me in litigation because of client conflict, even when such firms were filing my patents. I could not go into manufacturing because I could not get funded. I could not sell licenses, even to infringers, because I had not sued them. This is when patent accumulators came into play. The opposition called them ‘trolls.’ To me, they were ‘saviors.’ They provide the experience and leverage individual inventors need to get the attention of those who take what they want without repercussion.

The above-enumerated problems of the current patent system are real and barriers to further innovation and job creation. But the solutions do not require a comprehensive definition of a troll to fix the patent system. Lady Justice is blindfolded for a purpose. Justice in the US should be meted out objectively regardless of identity. So too in the instant situation. It is not the identity of the actor that needs to be evaluated, but the character of the action. We need to assure that frivolous, predatory actions are penalized and prevent the abusive tactics used by many that harm our innovative culture.

In a magazine with the name Fortune—devoted to capitalism and free markets—it is surprising to see an article that would promote closed markets and limited ownership of property within its pages. I doubt Fortune would support laws restricting real estate ownership to those who build on the land and live on it. I doubt Fortune would consider supermarkets to be “grocery trolls” because they sell goods from others that the stores never actually produce. It is time to reconsider these foolish restrictions on intellectual property ownership and return to treating intellectual property as we do all other property.

Patent licensing, in fact, was the principal means by which new inventions were commercialized during the decades before in-house corporate R&D departments emerged in the early 20th century. Publications such as Scientific American were founded expressly to facilitate the trade in patents, and it regularly featured descriptions of new and interesting patents, which commercial enterprises then licensed or purchased to use in their product development efforts. American Bell Telephone’s new product pipeline, for example, operated like most others at the time. According to its 1894 annual report, the company’s R&D department licensed 73 patents from outside inventors, while developing only 12 from its own employees.

Congress is on the cusp of passing legislation that is said to be designed to control the so-called “patent troll.” Of course, as belatedly recognized by the person who came up with the moniker “troll” in 1993, Peter Detkin (former Assistant General Counsel at Intel at the time), the word “troll” is often in the eye of the beholder. Indeed nearly every litigator will tell you that term “troll” is commonly used against any opponent in a patent litigation suit, much as Arthur R. Miller asserted that “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).

”They just walked away,” said Patrick M. Byrne, Overstock.com chairman and CEO. ”Patent trolls find us unappetizing. While we have the highest respect for intellectual property rights, we don’t settle abusive patent suits—we fight.” Byrne added, ”You can’t fork over your lunch money today, and expect a bully to leave you alone tomorrow. Patent trolls understand a bloody nose and in the long run, it’s the asymmetrical response that pays off.” [ ] So the question remains, will other tech companies see the light, or will they keep settling frivolous patent lawsuits brought by patent trolls?

And the game goes on, with sophisticated tactics and subterfuges. Some patent holders obfuscate their patent ownerships behind shell companies, including some large technology companies who find it useful to play the part of the NPE to harass competitors. Others use negotiations as fishing expeditions with the intent to prepare stronger cases in the court room – making escalations go even faster. Complaints are prepared before a first contact is made. Even those who would prefer to negotiate rather than sue are forced to sue to capture the attention of the accused infringer, many of whom simply refuse to discuss licensing or settlement unless they are sued. The IP game becomes a race to the courtroom. There are no obvious winners (except for the attorneys representing the parties) as legal fees keep escalating. Litigation could be avoided in many circumstances, but the IP game fosters a power struggle in which each party assumes the worst from the other and defends itself, at high legal expenses, against imaginary threats. Both sides, the users and owners of patented technologies, are antagonized.

By keeping an eye on stealth and dangerous patents managing the future risk presented is much easier. By proactively monitoring the landscape of published applications and granted patents you may be able to engage in design work-arounds to avoid the most dangerous patents. You may also be able to actively identify patents and pending patent application that are ripe for licensing or acquisition at an early stage, perhaps before the patent even issues or before the patent works its way into the hands of a litigious patent owner. Even if you cannot acquire rights through licensing or acquire all dangerous patents, if you have a meaningful patent footprint that gives you the right to do a variety of things you may well be able to defend based upon having broad based rights to engage in what it is that you are accused of doing.

It is almost incomprehensible that the Patent Office would put together a litigation resource that ignores the reality that many companies, both large and small, trample on the rights of innovators who have spent large amounts of time, money and energy receive a patent and disclosing their innovation to the world. . . the Patent Office only offers a one-sided help section that gives advice to infringers and sets a tone that comes across as anti-patent and anti-patent owner. This strikes me as fundamentally misguided and clearly demonstrates the anti-patent bias of the Obama Administration. . . I would expect the federal government — the Patent Office that is charged with an important Constitutional duty — to be even handed and empathetic to innovators and patent owners as well.