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Wednesday, June 19th, 2013
Recently, President Obama called for cracking down on “patent trolls.” Who are these people? Is there a real problem here?
He was referring to some companies that sue for infringement of patents they own when they don’t make anything using their patented technology.
“Patent troll” is a pejorative term. It implies the plaintiff − the patent owner − is doing something bad.
That’s not always true. For that reason, I prefer the neutral term “non-practicing entity,“ or “NPE” for short.
While some NPEs commit abuses, some patent plaintiffs that make products also commit them.
The primary complaint is that people sometimes get threatened by NPEs with patent infringement suits in which the asserted patent covers what appears to be commonplace technology and the NPE demands a sum of money low enough to try to entice you to immediately pay a settlement fee rather than litigate or even investigate the validity of the patent asserted.
I had a client that recently received one of these demands from an NPE. The asserted patent was on what looked like an ordinary copier function in which you scan a document to PDF and send the PDF to a computer on that copier’s network. That’s been a common function of office copiers for many years.
The patent owner’s real identity was hidden behind a shell LLC specially formed to sue on the patent. Hiding the identity of the real patent owner is one of the abuses many complain about.
The plaintiff threatened harsh action if my client made public mention of the claim. Such a demand of silence also is a common abuse.
So should we enact a law to shut down NPEs – to say you can’t sue on a patent if you don’t make something covered by it? I think not.
First, consider how a patent works. A patent usually isn’t a right to make anything. Instead, it’s the right to exclude others from making, using or selling your patented technology, which might be less than your whole product.
For example, a big problem at swim meets is having your goggles roll down your face when you dive in at the start. Swimmers call this “eating your goggles.”
What if I invent a system that automatically tightened the goggles at the dive-in and then relaxed a bit afterward so that the goggles don’t suck the swimmer’s eyes out?
If that tensioning system is new and not an obvious improvement from previous technology, I may be able to get a patent on it.
But the patent would not be on the whole goggles. It would cover just the tensioning system. In fact, perhaps other parts of the goggles have been patented by others, so I may need to pay those others for a license to use their technology in making my goggles.
Thus, it’s messy to say people should only be able to sue on patents when they use the technology in a product. What if the patented technology is an insignificant part of the product? What if you outsource manufacturing?
Preventing NPEs from suing would discourage invention. Most small inventors don’t have the capital or experience to do product manufacturing. Prohibiting them from suing would reduce the market price for selling their patents to potential manufacturers, which reduces the incentive to invent.
Instead of focusing on whether the plaintiff is an NPE or a product maker, I recommend we focus on fixing the sources of patent abuse by NPEs and manufacturers alike.
First, we should require that an invention be a major leap forward in technology to be patentable. While the law requires that, to get a patent, an invention be novel and not obvious from previous technology, in practice those requirements are low.
Second, litigating any case in federal court is expensive and patent-infringement litigation may be the most expensive kind. Patent-infringement plaintiffs often can extract large settlements because the cost to fight is even higher.
Third, usually if you win the patent infringement case you don’t get your attorneys’ fees paid by the other side. Make the loser pay and people would be disinclined to assert weak patents.
Unfortunately, the chances of these changes being made are almost nil.
You won’t see an increase in the level of novelty required to get a patent because there would be fewer patent applications for patent attorneys to prosecute, fewer patents for patent litigators to assert, and many companies would not be able to stave off competition using thickets of weak patents.
Also, the only way to make litigation much cheaper is to get courts much more involved in limiting and controlling the litigation process. Folks would complain that their “day in court” is being taken away.
Finally, plaintiffs lawyers don’t want a requirement that the litigation loser pay the winner’s attorneys’ fees even in patent cases because that would set a precedent for making such a change in personal injury cases.
Yet, while the non-manufacturing nature of NPEs isn’t the problem, fighting NPEs can be good politics. Mr. Obama made his anti-NPE pitch right before taking a fund-raising trip to Silicon Valley, which sees NPEs as an expensive thorn in its side. Perhaps that explains what’s really going on here.
Written on June 18, 2013
by John B. Farmer
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