The Real Toll of Patent Trolls

http://www.inc.com/magazine/201202/kris-frieswick/patent-troll-toll-on-businesses.html

by bgossage • 14 years ago

63 52 14 years ago

ISL• 14 years ago

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?

indiecore• 14 years ago

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.

Symmetry• 14 years ago

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.

rayiner9• 14 years ago

> 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).

noonespecial3• 14 years ago

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.

nlh• 14 years ago

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?

roc3• 14 years ago

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.

d2vid• 14 years ago

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.

JoshTriplett• 14 years ago

> 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.

lowboy• 14 years ago

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.

rayiner9• 14 years ago

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.

finnw• 14 years ago

> this literally makes my blood boil

Unlikely unless you're the Human Torch.

lancefisher2• 14 years ago

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."

roc3• 14 years ago

> "Friedland isn't sure how word of the settlement leaked to Troll Town, but he says that after he paid the fee, he was inundated with infringement letters from trolls."

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

arbuge• 14 years ago

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.?

cwp• 14 years ago

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."

dbrian• 14 years ago

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.

rhizome• 14 years ago

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).

ScottBurson2• 14 years ago

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.

ScottBurson2• 14 years ago

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

genwin• 14 years ago

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.

blindhippo• 14 years ago

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.

rayiner9• 14 years ago

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.

dllthomas• 14 years ago

Would be awesome, but smells risky.

thaumaturgy2• 14 years ago

> Nothing prevents you from representing yourself.

...other than good sense.

pravda2• 14 years ago

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.

krichman2• 14 years ago

> 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.

gav• 14 years ago

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.

zalzane• 14 years ago

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.

noonespecial3• 14 years ago

You're more than 100 years too late with that strategy.

http://forthillhistory.tumblr.com/post/16595519368/josiah-ba...

pravda2• 14 years ago

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.

The Real Toll of Patent Trolls

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