A cure for the common troll | Opensource.com

A cure for the common troll

Posted 20 Feb 2012 by 

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A cure for the common troll
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Our bridge into the 21st Century presently houses a nasty creature who demands a toll from the best and brightest in our community. The dreaded troll is a regular denizen of our current system of patent enforcement and he poses serious problems for technology companies. Despite the great expense of patent litigation, trolls are filing increasing numbers of patent suits aimed at technology companies, and particularly aimed at software and related areas of commerce. Their club of choice is the broad, complex, and vague patent claim. There are several means at our disposal, most of which are based on known mechanisms from other areas of the law, for dealing with these trolls, or more diplomatically, these "non-practicing entities."

There have been some efforts to address the troll issue over the last decade or so. The America Invents Act together with the yeoman work of Director David Kappos, brought the U.S. Patent and Trade Office into the 21st century. But those improvements only address half the equation – the prosecution and grant of patent rights. The AIPA minimally addressed enforcement and troll issues, only precluding joinder of defendants unrelated but for a common troll affliction.

Tech companies in certain sectors, particularly those who develop or support Internet-related software, enter a market sector mined with hundreds of thousands of patents. It simply is not feasible for a company to review and clear the field of potentially relevant patents when launching a new technology venture in these sectors.

For example, our patent enforcement system is retarding progression of the Internet and corresponding business growth. The Internet created an entire new and worldwide industry and revitalized old industries. It was largely the brainchild of and continues to flourish in the United States, yet we have also given birth to these trolls who harass and obstruct companies that continue to push innovation on the net.

With the current state of data analytics, parallel processing capabilities, the increasing connectivity of users to the web via mobile devices, and the forthcoming rollout of countless new Internet start-ups, we should be rapidly entering into a new paradigm of a smart Internet, where the most relevant information at any given time finds you.

Unfortunately, much of the relevant Internet foundation technology is infested with patent trolls. Patent trolls are a problem in many technology sectors, not just the Internet, and trolls are multiplying by the dozens.

Some trolls are simply patent-holding litigation entities controlled by trial attorneys that know a good "business" opportunity. Others are owned by business venture capitalists. It is a simple model – an arguably infringed patent can often be purchased for thousands or tens of thousands of dollars.

Since it typically costs hundreds of thousands to millions of dollars to defend against claims of patent infringement, with potential tremendous downsides, it is rational to pursue a settlement that costs less than the cost of defense, even if there is little merit to the patent itself or to the claim of infringement. Every day, patent trolls obtain large six and seven figure costs of defense settlements from technology companies.

Other of these patent trolls are set up and/or facilitated, at arm's length, by well-established technology companies. They serve to harass and extort their competitors and to serve as a rear guard against savvy start-ups.

Patent trolls are an impediment to innovation. It costs too much to try and avoid them and it costs equally much, if not more, to fail to avoid them. Venture capitalists who have done any amount of due diligence have been known to avoid cutting-edge technology ventures due to the costs associated with a troll attack. Established technology companies spend tens of millions of dollars each year dealing with trolls.

These trolls have a negative effect on our economy. According to a recently published study by researchers at the Boston University School of Law, trolls are associated with a half trillion dollars of lost wealth over the past twenty years. Lost company wealth associated with patent troll litigation now averages $80 billion per year according to these researchers. Trolls create minimal jobs and very little of the wealth transferred to them makes it to inventorsThis exploitation of our patent system harms society, punishes innovative companies, and has created a perverse incentive to acquire vague, over-reaching patents. Patent trolls may succeed at creating windfall profits for their stakeholders, but they retard the growth of technology companies in the most promising technology areas.

I suggest five solutions to cure the common troll:

First, create a compulsory licensing mechanism for patents whose owners are not making competitive use of the technology in those patents. Patent owners should be required to declare the areas or products that incorporate the patented technology. All other non-practiced areas should be subject to a compulsory license fee. (A non-practiced “area” would be a market or technology sector or activity in which the patent owner is not using or licensing the invention rights, though the owner may be using the patent in other "areas.") Licensing rates for patents could be set by patent classification or sub-classification based on industry average licensing rates for each such technology. Again, this would only apply to applications where the patent is not being practiced or voluntarily licensed by the patent owner.

Given the vast number of patents issued, an accused party should have a reasonable, set time after receiving notice of a patent within which to pay for the license going forward. Compulsory licenses are authorized by the treaties we have entered into, and we have significant experience with compulsory licensing of copyrighted works from which to develop an analogous patent mechanism. Uniform rates could be set.

Second, cap past damages for trolls at $1 million per patent and eliminate the possibility of obtaining injunctive relief for infringement of patents that are not in use, or are not used commercially, by the patent owner.

Third, a mandatory fee shifting provision should be put in place where the plaintiff is required to pay the defendant's reasonable defense fees if the plaintiff does not obtain a better recovery than what was offered by the defendant. (Presently, there is such a cost shifting mechanism in place; however, the relevant costs typically are a tiny fraction of the legal fees in a case.)

Fourth, for U.S. domestic defendants, require that suits be brought in the venue where the defendant's primary place of business is located.

Fifth, if a party wants more than limited discovery from the opposing side, particularly for electronically stored information (ESI), the requesting party should pay the cost of production. For large technology companies, ESI production alone can cost into the seven figures.

These measures would provide fair compensation mechanisms for inventors and patent owners who have not commercially exploited their patents, would de-incentivize the current parasitic non-practicing entity business model, and would lower the risks and burdens that technology companies presently face, freeing capital for research, hiring and other beneficial expenditures.

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25 Comments

shawnhcorey
Open Minded

No patents.

They cause nothing but abuse. Society is better off without them.

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Anthony Biller
Open Enthusiast

While I think the system needs further reform, elimination goes too far. It's not coincidence that the markets responsible for introducing new technologies - paradigm changing technologies - over the past 100 years resided in countries that predominantly have strong IPR regimes to include meaningful patent rights. True innovation warrants protecting the ability to leverage a return on the investment. Don't advocate throwing out the baby with the bathwater!

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stites
Open Source Champion

"While I think the system needs further reform, elimination goes too far."

No it doesn't. I worked in the software industry for 25 years before the American Supreme Court invented software patents. The software patent system does not give the software industry a single advantage over the pre software patent years. Describing the disadvantages that software patents bring to the software industry would fill a book. Everything is to be gained by abolishing software patents and absolutely nothing is to be lost.

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Steve Stites

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jasonbrooks
Open Minded

Do strong IPR regimes lead to new technologies, or do new technologies lead to strong IPR regimes?

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jean luc baidu

Why do american lawyers turn around the pot of software patents?

The state should not intervene in the software market, furthermore not telling programmers what they are allowed to type on their keyboard.

I type and I execute what I want on programmable machines.

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Anthony Biller
Open Enthusiast

Two problems with that -- first, the EPO unquestionably issues many "software" patents - methods that are entirely digital - software drivien, eg digital demodulator, which leads to the second problem - "software" means different things to different people!

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shawnhcorey
Open Minded

No, all software are algorithms. This is the works of Alan Turing and John von Neumann. They are no exceptions. Since patent law states that algorithms cannot be patented, all software patents are illegal.

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simonphipps
Open Source Evangelist

I wrote about this a while back (I'd be interested in your views) and I'd generally agree with your points (especially about removing access to injunctive relief). I do think there's another problem to be tackled, though. Trolls use income from early shake-downs to fund larger attacks. Steps to erode that war-chest are important.

So for example I'd want to make it easier for those who settle out of court to recover the money they paid when the patents involved are later invalidated. I think that simple move would itself make trolls rarer.

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Anthony Biller
Open Enthusiast

Right now, licencess can negotiate for such warranties. More typical is a provision that a term license automatically expires upon a final determination of patent invalidity.

Are you aware of any mechanisms presently used that compel warranties, in an IPR context or otherwise?

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simonphipps
Open Source Evangelist

Right now, licencess can negotiate for such warranties.

I think you mean "they can try". But in most cases the troll has them over a barrel with the threat of injunctive relief, and I'm not aware of any actually doing so.

Are you aware of any mechanisms presently used that compel warranties, in an IPR context or otherwise?

No, I'm not. This is the reason for my proposal; create an automatic right to such a warranty.

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stites
Open Source Champion

All of Anthony Biller's points condemning patent trolls can also be applied to any company which holds software patents and is not classified as a patent troll. The only difference between the two classes of software patent holders is that patent trolls are invulnerable to counter attack from their victims' own software patent portfolio.

One of the reasons that companies amass software patent portfolios is to provide a counter weapon against software patent aggressors. Software patent troll invulnerability to this type of defence is annoying to companies which have spent a lot of money amassing software patents partially as a defence in the software patent wars. Thus they are prone to taking the position which Anthony Biller advocates that software patent trolls are evil and all other software patent holders are good guys.

Whether the intentions of the individual software patent holders are good or evil is overshadowed by the fact that collectively they are a tremendous drag on the software industry. Each software patent holder would be well off if they were the only one holding software patents, thus the campaign to eliminate at least some of the competition. But when everyone has software patents then each individual software patent holder is worse off than if nobody had software patents.

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Steve Stites

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Anthony Biller
Open Enthusiast

Those general complaints can be made against any area of technology, not just software. It would be far less burdensome to start a telecommunications or a pharmaceutical company but for all those pesky and cumbersome patents. For the reductio ad absurdum, it would be far easier to advance nearly any venture but for the pesky and burdensome formality of other's property rights.

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stites
Open Source Champion

There are two major ways to protect intellectual property, patents and copyright. Software has always been protected by copyright and it has always worked well. When the American Supreme Court invented software patents then software became the only intellectual property field to include both patents and copyright.

Abolishing software patents will not leave software denuded of any intellectual property protection. Software will still be protected by copyright which is already well established and works well.

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Steve Stites

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CustomDesigned
Open Minded

"It simply is not feasible for a company to review and clear the field of potentially relevant patents when launching a new technology venture in these sectors."

Hence, software patents are not only harmful but useless. In other fields, a company willingly searches relevant patents because licensing is generally cheaper than reinventing.

Explicitly prohibited (software is math) by law, software patents exist only due to tortured case law built on pre-Gödelian mathematical ignorance.

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Anthony Biller
Open Enthusiast

While software is a good exemplar of the effective inability to conduct meaningful patent pre-clearances, it is by no means the only technology sector.

I'll defer until later your second point. The anti-software patent sentiment has dominated these comments, though that's wasn't the topic of the post. Given the passion in this forum regarding patents on software, I plan on writing a post attempting to make the point that being an advocate for open source does not mandate universal hostility to software patents and pointing out some of the inherent problems with such hostility, to include the "pure" algorithm arguments.

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stites
Open Source Champion

"I plan on writing a post attempting to make the point that being an advocate for open source does not mandate universal hostility to software patents "

I was hostile to software patents for ten years before I ever heard of open source.

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Steve Stites

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Unidentified

Patents, software or otherwise are killing this world, along with the stock market.

If I should patent the human biology make-up, and sue you all for copying me!

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Brian Cady

Perhaps complementary to patent law for rewarding intellectual work are outright awards, as in the Nobel prize. These can reward accomplishment, instead of promise. A more extensive system of awards could inspire good work without slowing or stopping progress.

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Jerry Horel

While it's not just software patents that are the issue, they certainly seem to be the most abused by trolls. The remedies are useful but don't address the fundamental issue of the patent office issuing patents that are overly broad and vague. A well functioning patent environment is essential to the protection of intellectual property, however it must be limited to true original non-obvious works.

in addition upon granting a patent the grantee should have a very limited time to put the patent to use or loose the protection of the patent.

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anonym_x

Saying patents are good because countries with strong patent laws have shown most progress in research/inventions in the last 100 years, is about the same like saying Switzerland (and its banks) did everything right during WW2, because they did not loose soldiers or civilian lives, and they got much richer.

if there are countries with strong, and countries with weak patent laws, then everyone who is big enough to be able to choose, will of course invent his stuff in countries with strong patent laws. that does not mean that they are good for inventions/research, as there will not be more or better inventions because of that, but that these countries are "stealing" profits/workload from others by using nasty... or at least morally highly questionable tricks, for nothing else but personal material benefits.

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CustomDesigned
Open Minded

I disagree about patents always being bad. When functioning properly, patents move inventions from trade secrets to patented public knowledge to public domain. The objective test of whether patents are working properly is whether companies search patents to avoid reinventing the wheel, or avoid searching patents to avoid triple damages (because the patent disclosures are useless junk, like with software patents).

Software patents do not belong in general discussion of patents, because they are specifically prohibited but then allowed again through mathematically ignorant case law. And software is already appropriately protected under copyright. Software patents are an abuse of the legal system.

The next thing you know, someone will patent a business method that discloses a marketing strategy for stories about boy wizards, it will be challenged because you can't (yet) patent story genres, the patent will be upheld because the story genre isn't the sole basis of the patent, and this will then be used to make story genres patentable through case law.

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CustomDesigned
Open Minded

My hair brained solution to patent abuse, is to grant patents *only* at the request of a 3rd party, rather than the inventor. Until then, the invention must remain a trade secret to be protected. So Stradovarious invents his trade secret violin construction method. When competitors see how effective it is, they (not the Stradovarious company) file a patent request on the method. Stradovarious must then disclose the method, but gets 17 years patent protection, and can charge licensing fees to competitors using it.

This would completely eliminate the patent troll, as only actually useful methods would ever get patented, but would of course have many other side effects compared to the current system. One variation is to give Stradovarious the choice of patenting, or continuing to keep it as a trade secret (and competitors would sweeten the pot with ever higher licensing fees offered). This would eliminate the troubling aspect of making them disclose their secret. What do you think?

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Anthony Biller
Open Enthusiast

Clever idea and certainly thinking outside the box! What you suggest would be a complete paradigm shift on centuries of patent practice and policy.

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CustomDesigned
Open Minded

A little thinking like a troll, and I see a flaw. A troll company could secretly collude with another shell company to have them request a stupid patent - and then start demanding license fees.

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Colin Hope-Murray
Open Minded

Much as I believe that innovation is accelerated and improved without the impediment of patents, it is the system we currently have.... for better but mostly for worse. And the worse includes the subject of this post, namely the patent trolls.

Changing the laws around intellectual property will take time, and it will take patience and forbearance as we as community members and individuals build confidence and trust in each other through collaboration and sharing.

In the meantime we should look to the tactical battles that need to be won and the damage wreaked by Patent Trolls is one that should and can be fought today. Anthony Biller's suggestions are a very good start, augmented by Simon and others in the comments section. Maybe it wont win the bigger argument but we must stop the hemorrhaging of our nation's wealth and energy and these simple steps might just stem the flow. These steps may also initiate alternative or augmented approaches that eradicate trolls completely, but that is for steps 2 and beyond.

You have my support now what else can I or anyone else do to translate these thoughts into action?

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A full time intellectual property litigator, Anthony J. Biller represents clients in patent, trademark, copyright, and trade secret litigation in trial and appellate courts throughout the country. Mr. Biller also advises and assists clients with managing their intellectual property assets. He advises clients on brand and content management, licensing and other IPR contracts, and trade secret issues. He is an adjunct professor of law at Campbell Law School where he teaches intellectual