The Real Toll of Patent Trolls(inc.com)
inc.com
The Real Toll of Patent Trolls
http://www.inc.com/magazine/201202/kris-frieswick/patent-troll-toll-on-businesses.html
9 comments
Reading stories like this literally makes my blood boil. I know it's been discussed at length, but still. This is pure economic leakage -- it's an unintended consequence of well-intentioned legislation and it's absolute BS that companies have to put up with the trolls.
Good on the guys for putting up a fight, as expensive as it is.
I feel particularly frustrated about this whole mess because I don't see an end in sight. I'm not convinced the new patent reform legislation is going to help (Or is it?) and it feels like an uphill battle for small businesses.
What to do?
Good on the guys for putting up a fight, as expensive as it is.
I feel particularly frustrated about this whole mess because I don't see an end in sight. I'm not convinced the new patent reform legislation is going to help (Or is it?) and it feels like an uphill battle for small businesses.
What to do?
One avenue would be a non-profit organization that takes membership fees from software firms and uses the pooled money to fight these legal battles, or make collective licensing agreements.
The shakedown side of the troll business model relies on their being able to absorb more in legal fees than their targets. If their targets could actually force them to follow-through on their legal threats, the profitability of this method might drop to a level where they don't bother.
It would, unfortunately, do nothing about the cases where trolls are confident enough to take their shots at Google, Apple, Microsoft, et al.
The shakedown side of the troll business model relies on their being able to absorb more in legal fees than their targets. If their targets could actually force them to follow-through on their legal threats, the profitability of this method might drop to a level where they don't bother.
It would, unfortunately, do nothing about the cases where trolls are confident enough to take their shots at Google, Apple, Microsoft, et al.
How about an IP lawfirm offering insurance against patent trolls? Your company pays an annual fee. Once you get a shakedown notice, the law firm responds, letting the patent troll know that you have $0 marginal cost to making a stand. If the law firm had enough clients, their incentive would be to go to court to invalidate bad patents so they don't have to keep responding to the same shakedown notices.
Ugh, that's still protection money. It just went to a different lawyer.
True, but money you can plan for as a cost of doing business. Unlike shakedowns, which hit at unpredictable times for unpredictable amounts.
It wouldn't be the solution, but it could be an improvement for small and medium-sized software vendors.
It wouldn't be the solution, but it could be an improvement for small and medium-sized software vendors.
> unintended consequence of well-intentioned legislation
I'd question both of your adjectives there. This seems like an intended consequence of heavily lobbied legislation, as evidenced by the reactions to any attempts to change this system.
I'd question both of your adjectives there. This seems like an intended consequence of heavily lobbied legislation, as evidenced by the reactions to any attempts to change this system.
I think parent was referring to the inception of the patent system, which was well-intentioned. This is different from the trolls lobbying to keep the status quo, which is definitely not well-intentioned.
I still disagree. Since inception patent law is heavily lobbied (except that in some cases lobby didn't have a name yet), and legislators refuse to fix its very visible flaws.
About the same patter repeated on every country.
About the same patter repeated on every country.
The current structure of patent law isn't the result of heavy lobbying, or at least as we understand it in the modern form. See: http://www.ladas.com/Patents/USPatentHistory.html
The basic structure of the current law dates to 1952, and indeed even that update wasn't a big change from the 1836 Act. Maybe the 1995 amendment regarding biotechnology inventions is a lobbying-influenced giveaway, but most of the changes have narrowed the patent law, not expanded it.
The basic structure of the current law dates to 1952, and indeed even that update wasn't a big change from the 1836 Act. Maybe the 1995 amendment regarding biotechnology inventions is a lobbying-influenced giveaway, but most of the changes have narrowed the patent law, not expanded it.
> this literally makes my blood boil
Unlikely unless you're the Human Torch.
Unlikely unless you're the Human Torch.
https://www.google.com/search?q=define+literally
"2. Used to acknowledge that something is not literally true but is used for emphasis or to express strong feeling."
"2. Used to acknowledge that something is not literally true but is used for emphasis or to express strong feeling."
I think we should stand our ground on this one. We've let every word that can convey the correct definition of "literally" slide down the hyperbole treadmill. I realize that languages live and evolve, but the loss of all unambiguous indicators of actual literalness has made our language objectively worse.
You might argue that we can always tell the intent from context, but the whole point of "literally" is for when the context suggests that the expression in question may be figurative. If I say "I literally ate all of the soup in my house last night", you don't know if I'm actually out of soup now, or if I just ate a bunch of soup.
You might argue that we can always tell the intent from context, but the whole point of "literally" is for when the context suggests that the expression in question may be figurative. If I say "I literally ate all of the soup in my house last night", you don't know if I'm actually out of soup now, or if I just ate a bunch of soup.
I like it because "literally" is being used hyperbolically, therefore in those cases it is describing the opposite of itself.
People use literally to emphasize things all the time. I was surprised to find this definition in a dictionary though. I just find it hilarious that literally can literally mean not literally.
> If I say "I literally ate all of the soup in my house last night", you don't know if I'm actually out of soup now, or if I just ate a bunch of soup.
The majority of communication between people is non-verbal. Learning to read body language, voice tonality and keeping the context in mind resolves the vast majority of the inaccuracy given that one takes all the information in instead of obsessing over form.
The majority of communication between people is non-verbal. Learning to read body language, voice tonality and keeping the context in mind resolves the vast majority of the inaccuracy given that one takes all the information in instead of obsessing over form.
Bah. I refuse to allow language to advance beyond that which I learned in the sixth grade!
One of the interesting themes in the article is "we can't afford to go to court". Not to detract from the main issue of patent reform but perhaps America should look into making it's legal system a bit more user friendly.
It should be completely viable for a smaller entity to take on one of these "bogus" claims in court and not go bankrupt doing it. Smacking these claims down in court might go a long way towards preventing future shakedowns.
It should be completely viable for a smaller entity to take on one of these "bogus" claims in court and not go bankrupt doing it. Smacking these claims down in court might go a long way towards preventing future shakedowns.
It's not just the cost of going to court you have to think about, it's the cost of having your lawyers investigate a claim too.
There was a company going around asking $25k from e-tailors for a seemingly bogus search patent. The lawyers we worked with recommended that the client just settle as they'd blow through that way before it ever got to trial.
The legality of using pre-settlement letters to extort money from smaller companies needs to be looked at.
There was a company going around asking $25k from e-tailors for a seemingly bogus search patent. The lawyers we worked with recommended that the client just settle as they'd blow through that way before it ever got to trial.
The legality of using pre-settlement letters to extort money from smaller companies needs to be looked at.
Nothing prevents you from representing yourself. Maybe this is an easy way to disrupt patent trolling: a "how to" guide for taking an obviously stupid claim out in summary judgment.
> Nothing prevents you from representing yourself.
...other than good sense.
...other than good sense.
That's the part that needs fixing. A greedy amoral entity can threaten your entire livelihood for no cost to them and you are powerless to defend yourself or even understand the process by which to do so.
That sounds like institutionalized injustice to me.
That sounds like institutionalized injustice to me.
How are you "powerless to defend yourself or even understand the process?" There is nothing magic about the legal system. You can pick up the crucial aspects of the patent law probably in less time than it'd take you to pick up a new scripting language. And since it's federal law, the rules of civil procedure and evidence are written in very easy to understand English.
You WON'T “pick up crucial aspects” because there all aspects are crucial. Law practice costs so much money mainly because it's totally entangled and messed up, and ordinary person just physically can't follow all these legal procedures correctly.
This is not true at all. There is nothing complex about basic legal practice. Legal services get expensive because companies hire expensive people to work on very complicated problems (e.g. multi billion business deal gone wrong). The process itself, for simple problems, is not complex or "messed up."
We're not talking about small-claims court here. Your profile says that you're an attorney; I would be absolutely stunned if any trial attorney would suggest that a pro se defendant could prevail in a patent lawsuit against a much more resourceful organization without any more experience than reading a book or two (let alone a "how to").
You would know as well as anyone that legal actions are more a game than an effort to determine who actually is right or wrong. The entity with the greater amount of money in the bank can afford attorneys who are better at playing the game; while everybody loves a good story of the self-taught layman winning a case, in reality most laymen would get absolutely screwed.
Certainly if it's a fight worth fighting -- if the patent dispute is that important to the victim's business -- then they should fight it as well as they can, especially since they would have so much riding on the outcome: potential grievous damages awarded to the plaintiff, for one.
And, this all presupposes that the layman is lucky enough to get a judge presiding over the case that has some competence in the area of expertise covered by the patent. If the suit is held in the East District Court of Texas, well, the defendant already has the odds stacked against them.
Even if the lawsuit doesn't go to trial, and gets settled like 96% of other such suits [1], the layman's ignorance of process could likely end up costing them far more in the settlement than they would spend on letters from a patent attorney's desk. The layman would be attempting to negotiate from a much weaker position, and the attorneys for the patent troll would know it.
[1]: http://www.ipwatchdog.com/2011/06/02/what-to-do-sued-for-pat...
You would know as well as anyone that legal actions are more a game than an effort to determine who actually is right or wrong. The entity with the greater amount of money in the bank can afford attorneys who are better at playing the game; while everybody loves a good story of the self-taught layman winning a case, in reality most laymen would get absolutely screwed.
Certainly if it's a fight worth fighting -- if the patent dispute is that important to the victim's business -- then they should fight it as well as they can, especially since they would have so much riding on the outcome: potential grievous damages awarded to the plaintiff, for one.
And, this all presupposes that the layman is lucky enough to get a judge presiding over the case that has some competence in the area of expertise covered by the patent. If the suit is held in the East District Court of Texas, well, the defendant already has the odds stacked against them.
Even if the lawsuit doesn't go to trial, and gets settled like 96% of other such suits [1], the layman's ignorance of process could likely end up costing them far more in the settlement than they would spend on letters from a patent attorney's desk. The layman would be attempting to negotiate from a much weaker position, and the attorneys for the patent troll would know it.
[1]: http://www.ipwatchdog.com/2011/06/02/what-to-do-sued-for-pat...
I'm talking about "legal procedures" here, and the claim that ordinary people couldn't hope to follow them. They are pretty streamlined and easy to follow for a framework that must scale from small controversies to enormous ones. I think it's totally possible for an ordinary intelligent person (say an engineer) to pick up a couple of books and navigate that process. The judiciary goes to great lengths to ensure that, because it is very sensitive to the fact that a lawyer should not be necessary to defend yourself in court.
Now, would I recommend taking on a patent troll yourself? No, but that doesn't mean you couldn't do it, and even have a good chance if winning if the case is indeed totally meritless.
Now, would I recommend taking on a patent troll yourself? No, but that doesn't mean you couldn't do it, and even have a good chance if winning if the case is indeed totally meritless.
> Nothing prevents you from representing yourself.
If you have foolishly decided to conduct business without creating a corporate entity to protect your personal assets from lawsuits, then yes you may.
If you have created a corporate entity it may only be represented by a licensed attorney.
If you have foolishly decided to conduct business without creating a corporate entity to protect your personal assets from lawsuits, then yes you may.
If you have created a corporate entity it may only be represented by a licensed attorney.
If you're incorporated, then you're not representing yourself if the corporation is sued.
You can't have your cake and eat it too. If you want to treat the corporation as a separate person for liability purposes, you have to accept that it'll be treated as a separate person for other purposes.
You can't have your cake and eat it too. If you want to treat the corporation as a separate person for liability purposes, you have to accept that it'll be treated as a separate person for other purposes.
In the USA, you can't represent yourself if you are a corporation or an LLC. Gotta pay a lawyer. Although I suppose you can find some unemployed law school graduate pretty cheap on craigslist.
A corporation is not "yourself" it's a distinct legal entity. Corporate form isn't just a neat little giveaway to businesses--treating your business as a separate person has both advantages and disadvantages.
Would be awesome, but smells risky.
This article gives me an idea. Theoretically, problem with trolls is that they can't be counter-sued because they're non-practicing entities, ie. they're not technology companies. But build.com isn't a technology company either, they just happen to use it in their operations.
From the article: "There was one for transferring data through a network, another for using images on a website, another for having a computer that connects to a database." Quick check... yup, intellectualventures.com has a web site with images. I bet they have a database of patents, too. Let's see... lodsys.com bingo.
So the real problem is just that "defensive" patents are optimized for counter-suing other technology companies, not trolls. (Well, no, the real problem is that the patent system is broken. But given the system we have...) What's needed is a pool of patents that could be used to counter-sue trolls. And hey, there are "business method" patents as well as technology patents. Could we get a patent on sending threatening letters? How about a patent on shell companies?
Now I'm off to work on my new invention: "method and apparatus for travelling to a courthouse by means of a motorized vehicle."
From the article: "There was one for transferring data through a network, another for using images on a website, another for having a computer that connects to a database." Quick check... yup, intellectualventures.com has a web site with images. I bet they have a database of patents, too. Let's see... lodsys.com bingo.
So the real problem is just that "defensive" patents are optimized for counter-suing other technology companies, not trolls. (Well, no, the real problem is that the patent system is broken. But given the system we have...) What's needed is a pool of patents that could be used to counter-sue trolls. And hey, there are "business method" patents as well as technology patents. Could we get a patent on sending threatening letters? How about a patent on shell companies?
Now I'm off to work on my new invention: "method and apparatus for travelling to a courthouse by means of a motorized vehicle."
Having them rely on an industry group to take pity on their case and come to their defense is not a good long term solution. The only way this will change is if large companies (Google/Apple/MS/Amazon) decide it's in their best interest to put lobby money behind patent reform.
And hey, there are "business method" patents as well as technology patents. Could we get a patent on sending threatening letters? How about a patent on shell companies
Yes, of course. This has been the go-to joke in these stories since at least SCOX v. IBM (8+ years).
Yes, of course. This has been the go-to joke in these stories since at least SCOX v. IBM (8+ years).
Patents are completely broken in the software world - if your web/ecommerce company reaches ~$10m in revenue at any point, the corresponding rise in media attention will likely also bring you trolls demanding settlements. This is most certainly not what the patent system was intended to be used for. These people are legal criminals exploiting the law. The Acacia CEO's rationale is rubbish in my opinion. Protecting inventors, my foot.
ps. I'm curious about the patent that was used to extract hundreds of millions from defendants, including $565m from Microsoft, and was subsequently invalidated. Will that money now have to be refunded, along with the defendants legal fees, interest charges, etc.?
ps. I'm curious about the patent that was used to extract hundreds of millions from defendants, including $565m from Microsoft, and was subsequently invalidated. Will that money now have to be refunded, along with the defendants legal fees, interest charges, etc.?
I think the trolls are making a strategic error by piling on (when more trolls sue a victim that has demonstrated a willingness to settle).
Once it becomes clear that settling is as risky as going to court -- because if you settle, you'll be faced with more suits from other trolls -- the calculation changes. Business owners may as well take their chances in court.
I would love to see some business owners defending themselves pro se, on a shoestring budget, and winning.
Maybe I'm just a dreamer.
Once it becomes clear that settling is as risky as going to court -- because if you settle, you'll be faced with more suits from other trolls -- the calculation changes. Business owners may as well take their chances in court.
I would love to see some business owners defending themselves pro se, on a shoestring budget, and winning.
Maybe I'm just a dreamer.
Here, alas, is why that probably won't work: http://arstechnica.com/tech-policy/2012/09/how-a-rogue-appea...
Previous discussion on HN: http://news.ycombinator.com/item?id=4594122
Previous discussion on HN: http://news.ycombinator.com/item?id=4594122
My understanding is that you'll be sued in a particular part of Texas where juries greatly favor the patent trolls. It seems that currently you can depend on losing if you don't settle.
Does anyone have a reference for how much trolls tend to pay inventors for their patents?
Trolls get a bad rap, and I'm opposed to trolling as opposed to licensing to manufacturers, but they're one possible form of middleman between inventors and infringers.
One major point of a patent is to compensate the inventor for doing something smart. If the trolls are "non-practicing", then they must have acquired their patent from an inventor. How much are inventors getting paid?
Trolls get a bad rap, and I'm opposed to trolling as opposed to licensing to manufacturers, but they're one possible form of middleman between inventors and infringers.
One major point of a patent is to compensate the inventor for doing something smart. If the trolls are "non-practicing", then they must have acquired their patent from an inventor. How much are inventors getting paid?
First: if an inventor comes up with some idea but decides that instead of producing products based on their invention waits for other people to come up with the same idea and get money from them (or has someone do it by proxity), then is that actually something we want to encourage?
Second: both the times an entity I was part of was on the receiving end of a patent troll, there was at least circumstantial evidence that the troll hadn't invented anything. The first time was when one of the students at my dorm came up with the idea of hooking up our laundry machines to the Internet for a senior project. Shortly after they got Slashdoted someone filed for a patent on the idea. The second time was when the place I worked went to some outside contractors, and they tried to file patents based on the designs we gave them.
Second: both the times an entity I was part of was on the receiving end of a patent troll, there was at least circumstantial evidence that the troll hadn't invented anything. The first time was when one of the students at my dorm came up with the idea of hooking up our laundry machines to the Internet for a senior project. Shortly after they got Slashdoted someone filed for a patent on the idea. The second time was when the place I worked went to some outside contractors, and they tried to file patents based on the designs we gave them.
> First: if an inventor comes up with some idea but decides that instead of producing products based on their invention waits for other people to come up with the same idea and get money from them (or has someone do it by proxity), then is that actually something we want to encourage?
The idea is that the original inventor publishes the secret sauce via the required public disclosures and people either license the technology from him, he sues people who copy the technology without licensing, or he just cashes out and sells his whole interest to some other entity that does any of the above.
If someone else independently comes up with the same idea within a relatively short time frame, well in that case I don't think the patent should be granted. I think the legally sensible thing to do is to move patents in the direction of being an unfair competition type claim (unfair because you simply copy someone else's technology instead of developing your own).
The idea is that the original inventor publishes the secret sauce via the required public disclosures and people either license the technology from him, he sues people who copy the technology without licensing, or he just cashes out and sells his whole interest to some other entity that does any of the above.
If someone else independently comes up with the same idea within a relatively short time frame, well in that case I don't think the patent should be granted. I think the legally sensible thing to do is to move patents in the direction of being an unfair competition type claim (unfair because you simply copy someone else's technology instead of developing your own).
I find it extremely unlikely that someone can conceive of and take the time patent something so novel that someone, somewhere, hasn't already tried it at least once.
In those rare cases, it should be a requirement to produce a detailed description of the method by which the desired result is achieved, and that the patent would cover that specific method.
"Attaching a computer to a database" is not a method. A very specific driver format employing particular protocols is.
In those rare cases, it should be a requirement to produce a detailed description of the method by which the desired result is achieved, and that the patent would cover that specific method.
"Attaching a computer to a database" is not a method. A very specific driver format employing particular protocols is.
> it should be a requirement to produce a detailed description of the method by which the desired result is achieved
In theory, that's how it is. In order to receive a patent, you must first "reduce it to practice". That doesn't mean you have to build it yourself, but it does mean that you have to describe it in sufficient enough detail that a person of "ordinary skill in the art" should be able to actually build it.
In practice, that doesn't happen. Part of that is that a lot of really general patents got through in the 90s, as the article states. Another part is that patents are written in such thick legalese that you almost need formal education just to make sense of the language, and most people in software won't even bother.
In theory, that's how it is. In order to receive a patent, you must first "reduce it to practice". That doesn't mean you have to build it yourself, but it does mean that you have to describe it in sufficient enough detail that a person of "ordinary skill in the art" should be able to actually build it.
In practice, that doesn't happen. Part of that is that a lot of really general patents got through in the 90s, as the article states. Another part is that patents are written in such thick legalese that you almost need formal education just to make sense of the language, and most people in software won't even bother.
That's at the heart of what it is to be a patent. It is neither an idea, nor a specific device. Its supposed to be a technique or method or something equally slippery - thus all the lawyers have something to argue about.
That's exactly what a patent is! You don't patent "communicating wirelessly between two devices." That's a result. Instead, you patent something like OFDM, a particular, novel, way of achieving that result. Infringement is only found if someone else not only achieves the same result, but does so in substantially the same way. Even further, the scope of that way is cabined by prior art--you only get to claim protection over the parts of that mechanism that are actually novel.
...in theory...
The patents trolls use are mostly the detritus of failed businesses acquired for nothing during liquidation, not garage inventors making good.
Part of the problem was that every web business in the 90's figured that storing their data online and delivering it by browser was a brand new idea so they all got the same patents over and over. Every troll on the block has a "data on a server" patent.
Part of the problem was that every web business in the 90's figured that storing their data online and delivering it by browser was a brand new idea so they all got the same patents over and over. Every troll on the block has a "data on a server" patent.
From what I understand they don't even pay inventors, they hire lawyers to game the systems with ridiculously vague patents that will get through and then sue people who actually invent thing.
This is probably the biggest barrier preventing me from starting a business.
I know that if I ended up getting hit with NPE patent infringement claims, I'd probably just buy a gun and go shoot up their office.
I know that if I ended up getting hit with NPE patent infringement claims, I'd probably just buy a gun and go shoot up their office.
I hope you're not serious. Not about the second part, that sounds like a great idea.
About the first part. You need for your business to be successful in order to have any chance of attracting a patent troll. Most businesses don't get successful enough to warrant a shake-down.
About the first part. You need for your business to be successful in order to have any chance of attracting a patent troll. Most businesses don't get successful enough to warrant a shake-down.
You're more than 100 years too late with that strategy.
http://forthillhistory.tumblr.com/post/16595519368/josiah-ba...
http://forthillhistory.tumblr.com/post/16595519368/josiah-ba...
NPE's are, almost by definition, shell companies for larger interests. [1] If you paid one of those off, it's quite obvious and inevitable that any of the other NPEs in that 'family' that have half a case would not even have to wait for word to 'leak out', but would be explicitly notified and ordered to come after you.
[1] Myhrvold's Intellectual Ventures has been reported to have a network of over a thousand such shell companies for this kind of thing. https://www.techdirt.com/articles/20100217/1853298215.shtml