In Defense of Patent Trolls

By Ian Maxwell

In this essay I will avoid using the term ‘Non-Practicing Entity’ because I am sick of hearing the ubiquitous ‘pejorative’ associated with the explanation of relationship between the terms ‘Non-Practicing Entities’ and ‘patent trolls’. Let’s just call a spade a spade – they are patent trolls. This is not to say that I do not like patent trolls; in fact I think they have been a positive development and I am quite perplexed by the antagonism that many IP commentators have towards patent trolls.

As a founder of a number of high-tech start-ups I have become very accustomed to having larger companies copying my start-ups’ products and technology, and in the process blithely ignoring each of my start-ups’ patent rights. Either they were assuming that we would just ‘go away’ or that we would never have the where-with-all to properly enforce our patents. I am sure they believed that if the worse came to pass and we ended up in court with them, they would simply use their resources to find some obscure prior art, or they might acquire some patents that we were unwittingly infringing so as to force some sort of cross-license deal, or simply drag the whole process out so long that we would run out money and energy. All of this in order to avoid having to license off us, or buy us or simply respect our patent rights and not compete with us.

From a start-ups’ perspective, the emergence of patent brokers and patent trolls has meant that all patents, even those of a start-up, need to be taken far more seriously because one can never be sure who will end up owning or enforcing them. And for me this means that start-ups have a greater chance of success. And I think we would all agree that much of the true innovation in the tech world comes from start-ups, since they are somewhat unshackled by past orthodoxies and also do not have the resistance to the ‘new’ that is inevitable in any large organization.

For those of you complaining that the Tier 3 patent trolls are also targeting start-ups, my advice is for these start-ups to start developing their own patent portfolios. This will be a value-creating hedge against the relatively small penalties from successful enforcement against them. Remember, start-ups collectively, as an asset class, have much more to gain from the activities of patent trolls than they have to lose.

I am also puzzled why universities and large corporations, for example, can enforce patents outside their specific field of operations, and not be labelled as patent trolls. Or how they can sell patents to a patent troll (often via patent broker), and yet somehow avoid the stigma associated with the patent troll activities. And I also wonder why groups of large corporations can form industry bodies to enforce licensing of copyright, as happens in the music industry, without being labelled trolls. These licensing bodies do not write or record music, nor promote its creation through marketing and development; all they do is aggregate rights and then and sue or license in bulk. Many more examples exist.

Any legislative attempts to limit the activities of patent trolls, as have been suggested by many and that are being considered seriously in the US, are somewhat doomed because, needing to be specific in their model so as to avoid accidently capturing operating companies (and their related interests) in their net, they will ultimately have many loop-holes which will enable plenty of ‘work-arounds’ by the patent trolls.

The reason that patent trolls thrive is because technology these days is so complex that any single product can potentially include technology from tens or hundreds of patent ‘disciplines’. As a result any new product invariably suffers some unknown ‘Freedom to Operate’ issues and therefore there is essentially unlimited opportunity for patent infringement and enforcement. To underline this fact, I know of a number of large technology corporations that forbid their technical staff from searching the patent databases simply to limit damages from future patent infringement; how messed up is that? Compounding the problem of universal infringement, patent claims are often granted quite broadly and without enough consideration of genuine inventiveness, the prior art, nor of the intended use by the inventor/assignee.  Finally, damages and settlements, especially with the threat of injunctions, as determined by courts in various jurisdictions represent a lottery that worries many operating companies.

All of these problems exist with or without the patent trolls. Cast your mind towards Apple and Samsung and re-read the last paragraph. Yes, all the issues still exist. In my mind the positive benefit that the patent trolls provide is the controversy that will result in the systematic attention of legislators and others, which is needed to address the underlying issues with the patent systems. Patent trolls are not the problem but they may be the path to the solution.

I also find it strange that any party, other than a large operating company, complains about patent trolls. For inventors, universities, start-ups and all the various IP service providers, patent trolls are creating a lot of churn which simply leads to more financial opportunity.

However I very much understand why large corporations are disturbed by patent trolls. Corporate patent actions against each other, e.g. Apple v. Samsung, generally net out to zero over time or in cross-license deals, but the actions of patent trolls results in a flow of wealth away from the corporate sector. Effectively each corporation now has a large and unknown, and probably growing, liability sitting on their books; the result of future patent actions against them by patent trolls. In effect this reduces their value and in an extreme case will make them un-saleable (by merger or any other means), assuming that that the actuaries won’t get their heads around all this. Which is why the corporate world will eventually get its act together and insist the patent system is changed. Until now, corporations have been major beneficiaries of the vagaries of the patent systems, but now this is becoming not so. And all thanks to patent trolls.

[This post originally appeared at Accordia IP]