U.S. Supreme Court Deals a Blow to Patent Trolls

Anonymous Coward writes "Forbes is reporting that the Supreme Court has just limited the power of patent trolls to obtain permanent injunctions against infringers as a matter of course. The court has ruled that the principles of equity apply, meaning that a court considering slapping an injunction on the infringer must consider how much damage is really being done ... which in the case of EBay's Buy It Now feature, isn't much, since the company that owns this so-called patent only has it for the purposes of suing other people." From the article: "The high court's decision deals a blow to patent trolls, which are notorious for using the threat of permanent injunction to extort hefty fees in licensing negotiations as well as huge settlements from companies they have accused of infringing. Often, those settlements can be far greater than the value of the infringing technology: Recall the $612.5 million that Canada's Research in Motion forked over to patent-holding company NTP to avoid the shutting down of its popular BlackBerry service."

Comments

Clarity in reporting please.

[Whiney Mac Fanboy]

All through this article, Ms Holzer uses the term "intellectual property owner" where she means "patent owner". I know its all the rage these days to blur the lines between copyright, trade secrets, attribution rights, patents, moral rights, trademarks, etc etc, but this is the legal section of an economics rag.

If they can't get simple terminology correct, how can we trust their reporting?

For those who're not following me, consider the following quote from the article:

Patent law unambiguously grants owners of intellectual property the same rights as regular property holders, including the right to exclude others from using their property.

As they've written "owners of intellectual property" rather then "patent owners", the sentence actually means:

Patent law unambiguously grants owners of copyright, trademarks, etc the same rights as regular property holders, including the right to exclude others from using their property.

This is clearly not true.

Re:Clarity in reporting please.

[espinafre]

"What do you call 1000 trolls buried up to their necks in sand?"
"A good start."


You got it wrong.

"What do you call 1000 lawyers buried up to their necks in sand?"
"Not enough sand."

Re:Which is kind of funny since...

[Whiney Mac Fanboy]

I'm not sure what you mean - but if you're saying Creative was another "Patent Troll", then I don't think you're correct.

Patent troll companies generally do not produce technology, just sit on patent portfolios. While Creative's suit has no merit, Creative have been selling mp3 players for far longer then Apple has (they even bought out a 'nano' branded model first!).

Oh - and there's another big patent threat to the iPod out there - the click wheel patent... and the company who owns that patent produces real (if crap) technology products too.

Re:Am I the only one who sees a problem with this?

[The_REAL_DZA]

And why should I care if my "competition" manufactures a product for which I have a patent as long as I can still reap some benefits from all their hard work? Here's a few scenarios:
 
 

1. I have a patent for widgets. My company makes high quality widgets. My competition makes even better widgets (without my permission)

   I sue the living crap out of them. I just don't get an immediate injunction against them while the case is in court. Result: they make a million widgets while the litigation rages and, since I have a valid and enforcable patent (see "My company makes widgets" above), I win the lawsuit and reap the benefits of my competition's (illegal) work.

2. I have a patent for widgets**. My company makes high quality widgets. My competition makes cheap, crappy widgets and floods the market with their garbage at a price that not only undercuts my price but one that they aren't able to sustain, causing them to go out of business quickly.

   I want to sue the living crap out of them, but I'm screwed because there's nobody to sue (but no more screwed than I'd have been if all this had happened six months ago...)

3. I have a patent for widgets. My company doesn't make widgets (and hasn't for the lifetime of the patent; I've just been sitting on the thing hoping someone would make some widgets so I could sue them...) My competition makes widgets (at this point I'm getting tired of typing, so flip a coin on whether they make good ones or crappy ones...)

   I try to sue the living crap out of them but find that I'm screwed, and I deserve to be ; my competition will reap the rewards of their hard work and I'll be punished for being a "patent troll."

 
There are many other possibilities, but overall they're all a little brighter from the inventor/innovator's point-of-view (heck, I might even dust off some of those old ideas I've been figuring someone'd been sitting on the patent for...and I'm a classic cynic!)

**I know, I know, this is assuming a fairness that in all probability won't actually show up in court...

Re:Am I the only one who sees a problem with this?

[BrianRoach]

I thought the whole point of getting a patent was so that you were the only one that could legally create instances of your invention. Now it seems you can get a patent, and your competition can go ahead and use it anyway?

If you read the article, you'll find this has nothing to do with the validity of patents or eventual compensation.

What it does mean is that you can't extort an inflated price for your "technology" by getting the infringer shut down while the legal proceedings take place if you are not somehow actually suffering damages by its use.

The legal process still occurs, and if you have a valid patent that is being infringed upon, you will win. The difference is that if your never-implemented-obvious-idea gets tossed out, the "infringer" didn't have to cave in to your demands or suffer huge business losses while the proceedings occured.

Makes perfect sense to me.

- Roach

Re:The Decision

[servoled]

Roberts concurring opinion is pretty useless, but this gem is found in Kennedy's concurring opinion (joined by Stevens, Souter and Breyer):

In cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. See FTC, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, ch. 3, pp. 38-39 (Oct. 2003), available at http://www.ftc.gov/os/2003/10/innovationrpt.pdf (as visited May 11, 2006, and available in Clerk of Court's case file). For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. See ibid. When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest. In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.

Sounds like a huge blow to businesses based entirely around patent licensing.