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The joy of patents, part 3: Patent trolls degrade innovation

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By Peter Clarke

Normally one starts out a blog with an introduction instead of a closing statement such as: “In 2011, United States business entities incurred $29 billion in direct costs,” due to patent trolls, infringement lawsuits, and the like.

The bottom line is patent trolls cost companies money spent on defense that could otherwise be spent on new innovations. Not only do they use salaries for lawyers that could be spent on engineers, the payments also cost dearly as indicated by this excerpt: “firms forced to pay patent trolls reduce R&D spending, averaging $211 million less than firms having won a lawsuit against a troll.”

The majority of this blog will reference the Wikipedia subject of “Patent Troll” as it is most inclusive.

As a blogger, I’m more interested in introducing a subject for debate than giving credit to one source. I often investigate a number of sources. After looking at only a few, I really wasn’t getting any new information. On occasion, one source provides enough background on a subject to start the discussion. In addition to that, Wikipedia does a lot of the leg work for me by researching the topic and providing references to their findings.

Patent trolls have many definitions and the definition itself has seen quite a bit of evolution and change. Currently it refers to an entity that uses patents to make life miserable for others. Most entities are companies that enforce patent rights against infringers. Worse yet is that these companies are all about profiting from the threat and rarely about using the patent for profit by implementing the invention. These underhanded methods are even more deviant when one considers that the patents are obtained from those experiencing hard luck while the enforcement is beyond the “good circle” of the original patent into the area of remote claims that cast a net much larger than intended by the inventor. In other words, it’s the typical US legal system at work where right doesn’t always mean you will win the case. Been there, done that, more than once.

Companies that troll patents fall under three basic types: the patent holding company (PHC); the patent assertion entity (PAE); and the non-practicing entity (NPE).

According to Wikipedia, these labels are not inclusive and instead depend on the company’s mode of operation. Still, there is a commonality among them that seems to lead towards unscrupulous behavior for the most part.

Some say the cause of this epidemic is the slow nature of the USPTO due to the examination backlog. Others say that allowing broad claims opens the door for going after others dancing in similar areas of technology. Some mention of ignoring prior art is also blamed. In reality, I think the US has over 9 million patents listed so there is a high probability that prior art can be overlooked. Couple that with the way terminology varies from patent to patent on such a grand scale and most searches seem to overlook quite a bit in terms of prior art. Even the best search firms have a disclaimer stating that prior art verification is not guaranteed in this sea of disclosures.

So, what is being done about these trolls? In 2013 five federal measures were introduced in order to thwart them. States also got involved. Here is a summary:

the President ordered the USPTO to require companies to be more specific about exactly what their patent covers and how it is being infringed

tighten scrutiny of patent claims that appear overly broad

the President asked Congress to enact legislation to more aggressively curb “abusive” lawsuits

In February 2014, Apple filed two friend-of-the-court briefs for cases pending in the U.S. Supreme Court, claiming to be the #1 target for patent trolls, having faced nearly 100 lawsuits in the preceding three years.

In November 2014, the U.S. Federal Trade Commission (FTC) settled its first consumer-protection lawsuit against a company, for using “deceptive sales claims and phony legal threats”

Like the Feds, states are stepping up as well:

May 2013 Vermont’s Consumer Protection Act

August 2013 Nebraska’s Attorney General sent warnings to a patent troll’s law firm

2013 Minnesota’s Attorney General obtained a settlement prohibiting MPHJ Technology Investments LLC from continuing its licensing campaign

April 2014 the Wisconsin passed legislation that would make patent trolling Wisconsin companies more difficult.

2014 Idaho passed the “Patent-troll” bill which protected companies from “bad faith assertions of patent infringement”

It’s hard to say whether or not all of this is working. Patent infringement lawsuits were at an all-time high in 2015. Incidentally the 2013 efforts were due to infringement lawsuits going up by a factor of six from 2006 to 2012. In 2016 there was a win according to this article, “One of the most profitable patent trolls has been defanged“. So again, it’s hard to say what’s working and what isn’t.

Like a bad divorce with children, it’s the innocent that suffer. My experience with law is that it’s not about fairness. Instead it’s about the ability to twist the law in a manner that guarantees a win. This is why I will stop short of ever becoming an attorney. I may become a patent agent at some point however the lack of integrity in the modern court room would not suit my ethics very well. The rewards often overlook the innocent engineers who invent the idea and instead reward lawyers who either enforce or defend it. Couple that with judges who decide based on “case law” and you have a system that’s more about covering one’s behind than it is about fair awarding to the party that is right. Have you ever seen a lawyer promise to tell the truth in court? Exactly. It’s the non-lawyers that are sworn in. Of course, like any profession, there are good and bad. That’s not my point here. My point is that my audience of engineers is being swept aside due to unintended consequences of the rules as they stand. I write for this audience. We are a brotherhood of creators, all political correctness aside.

As for the targeted companies in this fiasco, here are some numbers: Lawsuits against large corporations (2009 through mid-2013): Apple Inc. (171); Hewlett-Packard (137); Samsung (133); AT&T (127); Dell (122). Small companies: In 2005 patent trolls sued 800 small firms (those with less than $100 million annual revenue) and the number grew to nearly 2,900 such firms in 2011 The median annual revenue of these small firms was $10.3 million

Nowadays it’s easier to patent as a micro entity. Costs are reduced to encourage more patenting. However, the patent only provides a stake in the sand. Defending a patent can cost $1 million or up to $2.5 million for detailed efforts. Couple this with the costs to get started and it’s no wonder so many small businesses fail while large corporations dominate. It’s as if the name Sherman were more associated with the general that tore through the south in the Civil War (in a manner similar to large corporations) than it is associated with anti-trust.

Here is a bit more about who is targeted: “Trolls tend to sue firms with fewer attorneys on staff, in effect encouraging firms to invest in legal representation at the expense of technology development.” Again, this works against the engineering pool in favour of the legal realm. In this “make work” scenario the legal system almost guarantees its market while engineering becomes a less coveted career choice. Hence fewer engineering students will want to enter the market in the US. But China isn’t slowing down. India isn’t slowing down. The lower classes in those countries are seeing their lives improve. In the US, it’s the opposite. We are being legalized into failure.

References

“Patent troll,” From Wikipedia, the free encyclopedia https://en.wikipedia.org/wiki/Patent_troll

“One of the most profitable patent trolls has been defanged,” https://www.engadget.com/2016/03/26/uniloc-patent-troll-defeated

Trolls made 2015 one of the biggest years ever for patent lawsuits”, ARS Technica website,

Scott Deuty is a power electronics consultant and technical author having spent much of his career writing technical documents and application notes.

This article first appeared on eeNews Europe’ sister site Planet Analog.

Related links and articles:

The joy of patents, part 2: Why patent?

The joy of patents, part 1: The fun stuff

Losing the ability to troubleshoot

How to increase your engineering value in just 20 minutes a day


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