Patent Troll: Bloomberg calls it what it is

http://preview.bloomberg.com/news/2010-06-01/billion-dollar-lawyer-quits-firm-buys-patents-to-troll-for-license-fees.html

by wheaties • 16 years ago

108 49 16 years ago

preview.bloomberg.com

aptimpropriety• 16 years ago

Website of the newly founded company: http://www.roundrockresearch.com/index.html

Very little content, but interesting to look at the design of the top graphic. According to article, logo was designed by his 14-year old daughter.

wmeredith• 16 years ago

It looks like it was designed by a 14 year old. I think it's hilariously appropriate for this venture–literally adding no value to the world whatsoever, not even aesthetically.

gloob• 16 years ago

For what it's worth, I'm sure that many lawyers would think that most of the legal analysis on this site is comparable to that of a 14-year-old as well.

grellas2• 16 years ago

There is so much here that is just sad:

1. One of the nation's top patent lawyers (a "top earner" at Kirkland & Ellis - one of the nation's most prestigious firms - who served for the past 6 years on its management committee) walks away from his position in order to capitalize on buying a patent portfolio from Micron, setting up a holding company for those patents, and positioning himself in his own boutique firm to use that portfolio (we assume) either to file a multitude of infringement actions or to exact royalties on threat of legal action - vividly underscoring what is wrong with a patent system that hugely rewards "non-practicing entities" that specialize in litigation far more than in any form of true inventing.

2. A patent system that so skews money incentives that the best and the brightest (and, yes, by all accounts, Mr. Desmarais is a highly likable and much admired and talented fellow) would be drawn to the seamy side of this business in this way.

3. What this illustrates about how a patent nightmare scenario can so easily arise from the fall or decline of a traditional tech company. Here, it was Micron. What happens, then, when Novell auctions its IP assets to private equity firms who in turn parcel them out to firms such as this? Developments such as this can raise significant threats for Linux and the open source community, among others (see the write-up here on this issue: http://url4.eu/3p37m - "Novell auction could be patent troll bonanza").

4. How easy it would be for Congress to make simple modifications to the patent laws so as to preclude this type of trolling, as for example by imposing a simple test that an invention be truly "useful" (and not merely theoretically so) before qualifying for patentability (see a recent proposal to this effect here: http://ip.jotwell.com/patent-utility-reduxit/).

5. How patent drafting in large corporations can become as much a function of the legal department as of legitimate engineers who are actually inventing things.

6. How this sort of activity does not promote inventions or the useful arts in the slightest and yet characterizes so much of the day-to-day activity in the patent world.

Patents generally have had a useful role in our society, whatever their limitations, but this side of the business basically makes one want to scream.

thatoneguy• 16 years ago

Thanks for the great summary. IANAL, but I've been wondering lately if it wouldn't be prudent to borrow from the Lanham Act and try to add a requirement to US patent law that patents must always be defended by their owners or they're invalidated. What do you think?

mjgoins• 16 years ago

Can you point to some evidence that patents generally have had a useful role in our society, other than pharmaceuticals, which is the usual (and also incorrect) answer?

potatolicious3• 16 years ago

Sure. I've worked in manufacturing in the past - in the automotive context. Patents are incredibly important there: the safety regulations and requirements, along with the innate costs of producing a tangible physical product, make it incredibly expensive to bring a new technology to market. Tens, if not hundreds of millions.

If anyone could simply reverse engineer your work and produce it willy nilly, there really would be no incentive to innovate.

The patent system is broken, no doubt about it - but IMHO the view that all patents are evil/useless is myopic, and really only possible from the perspective of someone who doesn't have any experience with fields with high intrinsic costs (e.g., software, where marginal cost is basically nil).

loewenskind3• 16 years ago

Without patents the only source for R&D is going to be universities. But private R&D made: the desktop, the mouse, C, Unix (do you think Berkley would have made unix without seeing what AT&T had?), C++, etc., etc.

They need to change. No doubt about that, but anything that causes even less R&D than is already going on is very short sighted.

andreyf• 16 years ago

4. How easy it would be for Congress to make simple modifications to the patent laws so as to preclude this type of trolling

Considering that you just said one of the top lawyers in the nation has started a "patent portfolio company". I'd imagine his influence in Washington alone would make it pretty damned hard for Congress to do anything. Not to sound crass, but someone who is an enormously ambitious lawyer with a lot of money has the wisdom to understand his control over legal risks like the one the changes you propose. If passing the laws you're suggesting were a possibility, he never would have "gone trolling", so to say.

astine• 16 years ago

I think that he meant easy in the sense of crafting effective legislation (usually a herculean task) and not in the sense of getting that legislation passed.

grellas2• 16 years ago

The near-term prospects for fixing what is seriously broken with the patent system are very slight. I did a post just the other day on the so-called Patent Reform Act of 2010 and entitled it, "Looking for radical patent reform - look again" (http://news.ycombinator.com/item?id=1365788).

The piece I cite to above is basically a law professor's proposal and hence academic only at this point. It could theoretically work but there is probably little or no impetus behind it.

Didn't mean to suggest that the process of reform would be easy. It clearly won't (Bilski might bring some needed sanity to the area of software patents but congressional action is likely to be merely cosmetic along the lines of the Patent Reform Act of 2010 cited above). The entrenched interests are very strong here.

megablast4• 16 years ago

I know we all hate what he is doing, but nothing he is doing is illegal. Is it immoral? That one is harder to answer, depending on your perspective. He is providing work for a whole set of new lawyers and staff in his company. He is getting money from companies that are already rich, like Apple, Microsoft, Intel (probably).

Obviously we are all against it, but why is that? It doesn't affect most of us. Sure, he is making money of something he didn't create, but so do lots of peoples, anyone who owns a shop for one.

lionhearted• 16 years ago

Accidentally upvoted you.

1. The point is that the legal system is broken and he's doing something scummy by weaponizing the law. Just because something is legal/illegal doesn't change the right/wrongness of it. What he's doing is wrong.

2. "companies that are already rich" - this has a ripple effect that matters for everyone. All the money that is siphoned into the legal process isn't going to R&D, hiring, expansion, or giving people money to invest into other productive endeavors. But that's not the worst part, the worst part is it creates a huge scary barrier to entry for little guys who want to innovate.

3. It's not that he's making money off of something he didn't create, it's that he's not adding any value. He's not even pretending to add value, or questionably adding value. He's a parasite. Shopkeepers display and store things for you to use and make it easier to get what you want. Immigrants to the USA from the Soviet Union would always be amazed at supermarkets - "There's all this food? And you can just... buy it?" Truly, we live in a great era if people don't realize that stuff doesn't just magically appear all over the place for them to buy whenever they want. That kind of sorting, storing, logistics, display, packing, unpacking, and cleaning takes a lot of work and effort and planning, and adds a lot of value. This court lawsuit extortion racket does not add value, it destroys value.

loewenskind3• 16 years ago

>He is providing work for a whole set of new lawyers and staff in his company.

So drug dealers and pimps are good people then? They do, after all, provide jobs.

pwhelan2• 16 years ago

I am asking in all seriousness, what about this venture seems moral? This screams sleazy personal injury lawyer to me that wants to sue for car collisions where the paint didn't even chip.

rudin• 16 years ago

How does the world tolerate these kind of people? This kind of stuff makes me boil over in anger.

jrockway• 16 years ago

The market is efficient. When this sort of thing starts causing real problems, the problem will be made to go away. He just need to pick on the wrong big company, and patents are all over.

sabat• 16 years ago

The market is subject to manipulation, and the problem often doesn't go away purely because of market forces. Any system can be gamed. The patent system is an example.

pwhelan2• 16 years ago

Even Eugene Fama no longer believes in the efficient market hypothesis.

potatolicious3• 16 years ago

It puzzles me how an already extremely wealthy man, who is described as being a family man also, would care so little about his legacy and how he is remembered.

It's not so much how the world tolerates these people - how do these people tolerate themselves?

I can imagine doing some pretty seedy stuff in desperation, but the people participating in shenanigans like this are usually very intelligent, wealthy, and already successful. Surely they have higher-level goals (e.g., leaving a proud legacy, making the world better, etc) than merely more cash?

This reminds of the story of the creation of the Nobel Prize: a Parisian paper accidentally published Nobel's obituary early, and having read it he became concerned with being remembered as a merchant of death (being the inventor of TNT). It's one of the main drivers of why he established the prize. Surely smart, already successful people care about what they leave behind?

starkfist2• 16 years ago

If you're a trial lawyer with a family you don't have the time to be very introspective. There is also a class of people who don't give a fuck about the world, they are just here to win a game. New York is filled with these types.

zaphar2• 16 years ago

You assume there is a causal relationship between intelligence with success and moral fiber.

While there may be some correlation I don't think there is necessarily any causative relation. You also assume the patent and IP law issues have an obvious morally correct stance to everyone else.

I'm not sure either assumption is warranted.

varjag• 16 years ago

> It's not so much how the world tolerates these people - how do these people tolerate themselves?

He's a lawyer.

pyre2• 16 years ago

> he became concerned with being remembered as a merchant of death (being the inventor of TNT).

TNT != dynamite. TNT is an explosive compound in its own right, and dynamite is a stabilized form of nitroglycerin.

[According to Wikipedia: "The energy density (joules/kilogram or J/kg) of dynamite is approximately 7.5 MJ/kg, compared to 4.6 MJ/kg of TNT."]

Which is why I find it a little funny for him to be considered a merchant of death since the development of dynamite was prompted by the instability of nitroglycerin and the hazards of transporting it (which was usually a dangerous line of work). IIRC, it's main use was construction, mining, etc.

andrew1• 16 years ago

In fairness, we don't actually know everything there is to know about the guy so maybe he gives 99% of his income away to charity. If he is 'doing good' in some unrelated way then maybe he feels this patent silliness is the best way to maximize his income so he can do good with it.

noonespecial2• 16 years ago

I think we still need this kind of person. We've outgrown the stage where we tolerate armed thugs riding around in Jeeps terrorizing the villagers with AK-47's but we haven't grown so much as to permanently quell the impulse to do so in all of our citizens. So its kind of a compromise. We tolerate this kind of asshattery while we collectively wait to grow up because this way, at least no one dies.

dasil003• 16 years ago

“The good story about nonpracticing entities is that they are developing liquidity in the market for these patent rights,” he said.

Good fucking god. Have we become so beholden to capitalist buzzwords even after the financial wizards stole reams of cash from the taxpayers and made it impossible for the middle class to afford a home, that we unequivocably deem "liquidity" to be a good thing?

Before making such statements there has to be some analysis of whether the sale of said "asset" is beneficial to society in any way—doubly so in the case of government-granted monopolies. Otherwise we may as well just jump right to urging serial killers to become hitmen so we can add liquidity to the murder market and boost the GDP.

starkfist2• 16 years ago

The true entrepreneurial lesson to be learned from this is that the opportunity is ripe for someone package up the side effects of these patents into complicated IP instruments nobody understands and become the market leader in patent trolling derivative trading.

megablast4• 16 years ago

Hopefully he can start up a patent market, where moms and pops can invest in patents they like the look off, in the hope that one day they will make them some money back.

That way, say when a new company like Apple gets into making phones, there can be a rush on mobile oriented patents.

aaronblohowiak• 16 years ago

that's pretty much what patent consortiums like MPEG are.

EugeneG• 16 years ago

Liquidity is a decent point.

R&D is very risky. A company invests a lot of money into R&D. A large part of this money produces no return. Some of this money may yield patents. A liquid market means that a company can take some of these patents (which may be worth nothing in an illiquid market) and convert them into cash. Liquidity increases return on a firm's investment into R&D and so may have the consequence of incentivizing corporate research spending.

pyre2• 16 years ago

But what happens with these patents once they are sold is just as important. It's short-sighted to only be concerned with the initial sale of the patent. [i.e. Loosening restrictions on the sale of weapons would increase liquidity for weapons-makers, but it's not necessarily a 'good' thing because you have to consider what will happen with these weapons after they are sold.]

bartl• 16 years ago

This does indeed sound a lot like the Broken Window Fallacy (http://en.wikipedia.org/wiki/Parable_of_the_broken_window): despite the money changing hands, having to pay to have a broken window fixed, is not good for the economy, because now people are forced to pay for costs that serve no benefit.

donaldc• 16 years ago

I wonder how many decades it will be before the laws concerning copyright, patents, and all things related are updated to reflect the realities of the information age. I don't see things getting better anytime soon.

kevinelliott• 16 years ago

Domain squatters, patent trolls, and spammers. They're of the same breed, driven by greed and line the underbelly of the grey/black market border. This highlights a particular exploitation of our legal system, our particular implementation of "free market," and socio-political infrastructure.

noonespecial2• 16 years ago

He spent so much time trying to beat them that he finally decided to join them.

megablast4• 16 years ago

Just as Bugs Bunny taught me in his informative educational movies. If you can't beat them, join them.

jcromartie• 16 years ago

"The question of whether allowing nonpracticing entities to litigate is promoting innovation or taxing innovation is a big question"

No, it's not a big question.

aidenn0• 16 years ago

I don't see patent trolls as being as cut-and-dry as most other people.

Consider this, if Micron had decided to enforce their patents across the industry would that be bad? They technically wouldn't be a patent troll since they actually are making products. Now they would almost certainly be countersued for patents in their competitors portfolios, whereas this company doesn't work in the industry so has no fear of defensive patents.

I could certainly see it funny if their competitors made similar agreements with this company or some similar one and all got sued for patents that had originally been in the hands of competitors. That seems to me to be the equilibrium if what Micron has just done becomes standard industry practice for generating liquidity from R&D.

The only thing I can think of that might improve the situation would be to apply something like adverse possession to the patent system. That is to say if someone is openly violating some patent that you have, then you have a limited amount of time to seek compensation.

That would fix a lot of the problem with patent trolls: namely that the industry has adopted some innovation wide-scale and suddenly someone shows up with a patent on it from 15 years ago.

I'm sure there would be negative consequences too, since every change has those, but I'm not thinking of them at the moment.

loewenskind3• 16 years ago

>Consider this, if Micron had decided to enforce their patents across the industry would that be bad? They technically wouldn't be a patent troll since they actually are making products. Now they would almost certainly be countersued for patents in their competitors portfolios, whereas this company doesn't work in the industry so has no fear of defensive patents.

But this is precisely why it's wrong. Micron made patents for things they made. Instead of using them to stop others from using their inventions they chose to use the patents to let them violate other company patents. This was their choice. If they had chosen to enforce those patents, maybe no other company would have violated them. Now someone who wasn't involved gets to flip the table on all those companies who played along.

Imagine being a co-founder in a start up where your partner said "I'll never screw you out of anything" and then promptly hires someone else to do it. Would that be cut-and-dry enough for you?

motters• 16 years ago

I think there needs to be reform of the patent system, so that people who hold the rights to an invention but are not exercising those rights in any way (making or selling products) cannot sue others for royalties. Patents were intended to support inventors, not parasites.

Patent Troll: Bloomberg calls it what it is

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