Patent troll

Patent troll is a derogatory term used to describe a patent owner, frequently a small company, which enforces patent rights against accused infringers, but does not manufacture products or supply services based on the patents in question. A patent troll may represent an entity which performs research or manufactures products incorporating the patented technology, though the troll itself does not. Patent trolls focus their business on the enforcement of intellectual property rights.

The key point of contention against patent trolls is not their non-practising status, nor that their assertions are necessarily invalid, but rather that "they are in a position to negotiate licensing fees that are grossly out of alignment with their contribution to the alleged infringer’s product or service". Indeed, the core controversy is over equitable issues rather than legal issues. In particular, some believe that patent trolls have an unfair advantage over manufacturers since they are relatively immune to the burdensome litigation tactics which are a traditional front line of defense by large entities against small entities. Others warn that tying the nature of a property owner to the nature of property rights poses a fundamental threat to equal protection under the law, notably in the US, under Article 1, Section 8 of the Constitution.

Some allege that use of the expression "patent troll" is primarily a public relations tactic that large corporations use to intimidate individual inventors in an effort to tilt the playing field in their favor. In this context, it is sometimes noted that the same large corporations that critize patent trolls collect significant revenues enforcing their own patents against smaller or emerging competitors, including patents relating to technologies that they themselves do not implement in the marketplace.

Technology transfer offices and companies set up to administer patents of a group are usually not considered to be patent trolls (see patent holding company, technology transfer).

Definition and etymology

The expression "patent troll" is a pejorative and controversial phrase attributed to former Intel assistant general counsel Peter Detkin. It was originally meant to describe entities that purchase patents at low prices from inventors, and then broadly assert these patents across an industry for the purpose of generating nuisance value settlements. According to Detkin, instead of having invented, or actively developing, a technology, a patent troll would acquire ("troll for") a patent in order to enforce the patent against potential infringers, and pursue opportunities for license agreements. When the patent troll is unable to reach a licensing agreement with a company, it might threaten to sue for patent infringement. To avoid litigation, companies might choose to settle by purchasing a license.

Today, patent troll is used more generally to describe a variety of businesses. The one commonality appears to be that the patent troll company attempts to license and enforce patents, but does not itself perform research, produce products or provide a service. However, there is neither an official definition of patent troll nor any test to determine whether a company qualifies as a patent troll, making the neologism vague and its use subjective. The neologism is pejorative while the concerned strategy is lawful.

Ironically, Peter Detkin is now a partner in the patent licensing firm Intellectual Ventures, a firm often accused of being a patent troll under the general definition.

A broad barrier to rational discussion arises from criticism of patent trolls being often amalgamated with criticism of the patent office, or even of the concept of a patent itself. For instance, a common charge made by patent troll critics is that the patent office is "broken".

To simply define a troll as a patent holder who does not practice or promote the patented invention is also problematic. Under that definition, most US universities and many individual inventors who have undeniably contributed to society, such as Thomas Edison, would meet the definition of a patent troll. Also, a large company which practices an invention, but also has a licensing department, which does not, and which may enforce patents which the large company does not practice, would be both a patent troll and not a patent troll. Thus a reductio ad absurdum shows that this definition fails to pinpoint the behavior that is implicitly criticized when the expression is used.

Legality

The patent troll strategy is a lawful and expected result of present patent law. The licensing of patents is considered procompetitive since it encourages the investment required to bring new products to market.

Patent protection grants an inventor (or his or her assigns) a right to exclude others from making, using and selling the patented invention for the term of the patent. As far as the United States is concerned, the power of the federal government to grant patents is provided for in the United States Constitution (Article I, Section 8). The broad right to exclude others by enforcement is restrained by two factors: the limited patent term and the obligation to disclose.

The owner of a patent need not be the inventor. Patents are transferrable in the sense that they can be bought, sold and licensed in part to entities other than the inventor(s). Patent trolls are often charged with enforcing patents they purchased cheaply from entities not actively seeking to enforce them. For example, a patent troll may be able to purchase hundreds of patents when a high technology company enters bankruptcy and is forced to auction its patents.

In the United States, patent owners do not have to commercialize the invention disclosed in a patent to enforce it. They are legally entitled to charge any amount they wish as a royalty to anyone that wants to make, use or sell the patented invention. Patent owners are also free not to license or make use of the patent at all. UK patent law, in contrast, contains provisions which enable anyone to apply to the UK Patent Office for a compulsory license which will be awarded to them if they meet the requirements of Section 48 of the UK Patents Act 1977 (as amended). Although the relevant Sections of the Patents Act are quite involved, they suggest that if the proprietor of a patent that could be usefully exploited in the UK denies a person a license under that patent on reasonable terms, the Patent Office may require that proprietor to grant a license under such terms as the Patent Office see fit. Similar provisions operate in other European countries which could be used to limit the damage that Patent Trolls are seen to cause.

In a suit for infringement, a successful patentee is entitled to at least a reasonable royalty, where reasonableness depends upon the norms of the field of the patented invention. If a patent owner makes and sells the invention, they may also be entitled to sue for lost profits.

Patent trolls, being non-manufacturers, will typically find it difficult to sue for lost profits. On the other hand, and by the same considerations, one who would charge trolls with patent misuse involving antitrust violations would prevail with difficulty in the United States, since such misuse requires significant market power on the part of the alleged abuser.

Aspects of the patent system affecting patent infringement and enforcement

File:EPO pendancy.JPG

Delays between when a patent application is filed and when it issues in the EPO as of 2003. Figure 7, Page 17 of the 2004 EPO Annual Report Source: [3]

There is often a delay of many years between when a patent application is filed and when a patent issues. In Europe, for example, half of the patents issued have a pendency of four years or more. One out of twenty have a pendency of nine years or more. Similar delays are also experienced in the US. Thus any patent holder, troll or otherwise, must often wait long periods before they are granted and can enforce their rights.

Nonetheless, Patent trolls and other patent holders may assert patents at any stage of their life cycle, while they are pending, after they are granted, after they have been reexamined or reissued, or even after they have expired, to collect past damages. Thus, whether or not delays in the patent office are relevant to patent troll behavior can only be determined on a case by case basis, where the maturity of the patent rights asserted is assessed in relationship to the rights granted at that stage by the various national patent offices. In general, the greater the maturity of the patent, the greater the value of the patent rights granted. The mere fact that a patent is in litigation is strongly correlated with patent value.

Extended delays in the processing of patents in a given nation's or region's Patent and Trademark Office may result in significant uncertainty as to the scope of protection eventually provided by a patent to an inventor for their invention. . While patent applications are generally published 1 ½ years after patent applications are filed, and are therefore publicly available, the scope of protection is not known until a patent is granted. During the period that the patent is published but not yet granted, the inventor has performed their part of the bargain: teaching the public how to make and use their invention, but they have not yet received the promised consideration: the right to exclude others from making, using, or selling the invention. Thus delays do not benefit inventors, and also pose challenges to third parties.

The third parties face significant uncertainty in proceeding to commercialize their own products even if they diligently search the public records for patents and published applications in the same area. On the other hand, third parties benefit in that they may exploit the teachings of any invention disclosed by the patent office, and in some jurisdictions, without having to pay licensing fees. They may also be able to use the uncertainty to rebut charges of willfulness, avoiding enhanced damages. If these third parties are successful in commercializing their product, and a patent is later granted that the product infringes, only then may they be required to take a license to the patent (and pay royalties) or be subject to a patent infringement suit.

The risk to a third party can be managed by monitoring the prosecution of published applications that they have flagged as close to their product. If it appears that a patent will issue covering their product, they can a) proactively seek a license to the patent, b) attempt to buy the patent or patent application outright, or c) design around the patent. Many Patent Offices provide public portals on their websites to aid in patent application monitoring. Some patent offices also provide mechanisms for third parties to submit prior art to the attention of the examiner. Such submission may help the examiner to issue valid claims for the patent.

Patent examination is not perfect. A well-written patent contains hierarchies of claims, of varying scope and taking varying starting points in an effort to capture the essence of the invention. Successive dependent claims narrow in scope the broadest independent claims. Often a patent is issued with some claims that are too broad, though some narrowing claims are not. It is not uncommon, for example, for patents to issue on inventions whose broadest claims cover art which was already in the public domain or were obvious at the time the patent application was filed. In Europe, about 5% of all patents issued are opposed because a third party felt at least some of the claims were too broad to be valid. Of those that are opposed, about 1/3 are overturned, 1/3 are reduced in scope, and 1/3 are fully upheld. . A product may infringe a patent via its narrower claims even if some of the broadest claims are overturned.

Opposing a patent or patent application (via an opposition or re-examination procedure) is a strategy which must be used with caution, for if the patent emerges from the procedure intact, its claims are in general stronger than they were before the opposition or re-examination. These procedures give the patent holder the opportunity to correct some defects in their claims, add new claims, and to show how the invention is patentable over the submitted prior art.

Response to "patent trolls"

There are a number of actions that prudent manufacturing companies may take to manage their exposure to patent holders other than themselves, including patent trolls, independent inventors, startups, and well-established manufacturing competitors. These include:

• Patent watch. Patents and patent applications are public (with some exceptions). Many companies routinely search newly published patents and patent applications to determine if any are relevant to their business activities. This is called a patent watch. If relevant patent or patent application is found, then a number of activities may result. The company might oppose the patent, get an outside legal opinion as to whether or not the patent is valid, license the patent or modify their products so that they don't infringe the patent.

Patented Woodward light bulb that was never commercially successful.

• Clearance search. Edison bought the patent, US 181613, before he began his own development work to invent a practical light bulb. Many companies have a standard practice of performing a clearance search prior to the initial development or commercial introduction of a new product. The clearance search seeks patents or pending patent applications that cover one or more important features of the new product. Thomas Edison, for example, did a clearance search before he began developing his light bulb. He discovered a prior patent by two Canadian inventors, Henry Woodward and Mathew Evans, (U.S. patent 181,613) which covered the type of light bulb he wanted to develop (i.e. carbon filament in non-oxidizing environment). He bought the Woodward and Evans patent for US$5,000 ($100,000 in 2006 US currency) and thus eliminated the possibility of Woodward and Evans “trolling” him later on.

• Opposition proceeding. In Europe, third parties have the chance to oppose overly broad patents in what is called an opposition proceeding (see Opposition procedure before the European Patent Office). In the US, a similar but somewhat more limited process is available called a reexamination. Research in Motion for example, has filed reexaminations against the NTP, Inc. patents related to BlackBerry technology.

• Early settlement. Generally speaking, if the parties in a patent dispute can settle the case early in the proceedings, they can settle for much less than if the case goes on to a decision, appeal, etc. However, a strategic business decision must be made as to whether it is better to settle a large number of questionable cases each for a small amount of money or to fight all questionable cases, only to find that one had merit, thus having to pay a large settlement. Ebay for example, successfully fought several questionable cases, but ultimately lost to MercExchange when MercExchange's patents were found to be valid and enforceable (see EBay#Other_eBay_controversies). Damages to MercExchange for eBay's infringement were assessed at $US 35 million.

• Patent infringement insurance. Insurance is available to help protect companies from inadvertently infringing a third party's patents.

Benefits of patent trolls

• Increase the liquidity of intellectual property by providing a ready market for patents which the respective inventors cannot exploit or commercialize.

• Facilitate legal access to intellectual property via the organization of patents governing a given technology by aggregating and licensing patent portfolios as a whole.

• Promote innovation and progress by providing incentives for the making, and public disclosure of, new inventions.

Harm from patent trolls

• Increase costs for manufacturers due to increased potential of having to pay royalties for intellectual property which they do not own.

• Increase costs for product developers due to the increased need to monitor issued patents and pending patent applications.

Sample troll

The phenomenon of trolling has recently emerged in the copyright arena. Certain companies have been purchasing portfolios of old music copyrights for the express purpose of enforcing those rights when a musician samples said old music for a new composition. These companies have been referred to by the pejorative term "Sample Troll". [4]

Alleged patent trolls

Corporations

• Acacia Technologies for acquiring and enforcing broad patents in the fields of media and internet technologies. [5]
• ADC Tech K.K for attempting to assert a purchased Japanese patent against NTT. The patent was ultimately held invalid. [6]
• Anascape, represented by Dallas firm McKool Smith, P.C., for alleging patent infringement by Nintendo and Microsoft concerning video game controllers. The suit is currently pending in federal court. [7]
• Creative Labs for strong-arming id Software over the use of depth fail shadow volumes in Doom 3, which was permitted on the condition of EAX support being added. This cooperation came reluctantly, as John Carmack planned on developing an alternate algorithm and refusing to support Creative technologies in protest. The validity of the patent itself is even questioned as a presentation by Sim Dietrich of NVIDIA is often cited as potential prior art. [8]
• DataTreasury for suing over 50 banks and other institutions for infringing their patents on check imaging technology. [9]
• Fenner Investments for suing Microsoft, Sony, and Nintendo for infringing a patent on joystick ports. This comes after a failed attempt at suing Alcatel over a patent for "a method and apparatus for managing a communications network for mobile users." [10]
• IBM for focusing on enforcing their patent portfolios as opposed to manufacturing products. [11]
• MercExchange for seeking an injunction against EBay to shut down their "Buy it now" feature after a jury convicted EBay of willfully infringing MercExchange's two original patents on the invention. [12]
• NTP, Inc. for enforcing its patents against Research in Motion. The patents cover various aspects of BlackBerry technology.[13]
• University of California for forcing Microsoft to pay over $500 million for infringing one of its patents. [14]

Individuals

• Edison, Thomas for enforcing his patents on light bulb filament technology. [15]
• Katz, Ronald for collecting over a billion dollars in license income from his patents covering call center technology [16]
• Lemelson, Jerome for collecting over a billion dollars in license fees for his patents covering bar code readers. Some Lemelson patents took over 30 years to get through the USPTO [17]
• Myhrvold, Nathan, founder of Intellectual Ventures, for accumulating 3,000 – 5,000 software patents. [18]

Miscellaneous

• Some make the claim that the field of software patents lends itself more easily than many others to patent trolling due to the fact that it is particularly difficult for patent examiners to determine whether a software patent is truly innovative, (SPI).
• Peter Detkin, said to be the first to coin the expression "patent troll" , now works for Intellectual Ventures, which some perceive as a patent troll enterprise.
• In the U.S. Supreme Court case, eBay v. MercExchange, Yahoo! filed an amicus curiae brief defining "patent trolls" as "entities whose primary purpose is to prey on innovators who actually produce societally valuable products". Yahoo! further stated a patent troll's purpose is to "abuse the patent system by obtaining patents for the purpose of coercing settlements from such innovators."
• The U.S. Supreme Court Justice Kennedy recently (eBay v. MercExchange) made an inconclusive attempt to resolve the Etymology of the term when he asked: "Is the troll the scary thing under the bridge, or is it a fishing technique?"

References

• Brenda Sandburg, You may not have a choice. Trolling for Dollars, The Recorder, July 30, 2001 [19]
• Maggie Shiels, Technology industry hits out at "patent trolls", BBC News, June 2, 2004, [20]
• Lorraine Woellert, A Patent War Is Breaking Out On The Hill, Business Week, July, 2005, [21]
• Joe Beyers, Rise of the patent trolls, CNET News.com, October 12, 2005 [22]
• Raymond P. Niro, The Patent Troll Myth, Professional Inventors Alliance web site, August 4, 2005 [23]
• Simon Phipps, On Cane Toads, Fire Ants and Patents, SunMink, February 13, 2005, [24]
• Danielle Williams, Steven Gardner, Basic Framework for Effective Responses to Patent Trolls, in IP Links, North Carolina Bar Association's Intellectual Property Law Section, Volume 17, Number 3, April 2006 [25]
• Bakos, Tom, "Patent Trolls", Insurance IP Bulletin, Vol. 2005.3, June 2005 [26]
• Ferrill, Elizabeth, "Patent Investment Trusts: Let's Build a PIT to Catch the Patent Trolls", N.C. J. of Law & Tech., Vol 6, Iss. 2: Spring 2005.[27].
• Newman, Judy, "Innovators fear the patent trolls", Wis. St. J., May 9, 2006.[28]
• Jos้ Cortina, A, "Antitrust Considerations In Patent Enforcement: A Patent Doesn’t Mean Grant Of Monopoly Power" [29]
• Kurt Leyendecker, "PATENT TROLLS!", Control, Protect & Leverage, A Leyendecker & Lemire Blog, March 14, 2006. [30]

See also

• Acacia Technologies
• Eolas
• Forgent
• Jerome H. Lemelson
• Intellectual Ventures
• NTP, Inc.
• Open Invention Network
• Patent misuse
• Rates Technology
• Rent seeking
• Research In Motion [31]
• Submarine patent
• Troll

External links

• PatentFizz.com - Bringing the Community to the Patent Process
• WikiPatents.com - Community Patent Review