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Report Shows Patent Trolls Are Thriving
eldavojohn writes "The 2009 Patent Litigation Study has been released by Price Waterhouse Coopers. It shows evidence that patent trolls are growing and doing quite well. Using a very conservative view of a non-practicing entity (referred to as NPE in the report), PWC noted that 'damage awards for NPEs have averaged more than double those for practicing entities since 1995' and 'certain federal district courts (particularly Virginia Eastern and Texas Eastern) continue to be more favorable to patent holders, with shorter time-to-trial, higher success rates, and higher median damages awards.' The report paints a dire picture of the state of patent lawsuits and especially those brought by NPEs and also shows that in the past eighteen years the number of patent cases filed yearly is on the rise significantly when normalized against the number of patents granted yearly."
Is favorable to both sides. It's especially favorable to the defendant if a preliminary injunction is issued.
Warning: this article may contain humor, sarcasm, parody, and perhaps even irony. Read at your own risk.
It's a real shame that the patent system has been able to be manipulated so effectively, to siphon hard-earned money from real companies, and real inventors, into the pockets of these parasites. They're nothing but a drain on everyone. Lemelson's legacy lives on!
I'm glad this is getting some attention, though.
Don't abbreviate it to NPE. Spell it out, each time - non-practicing entity. By just saying three letters, it weakens the point that these companies do nothing. They exist solely to sue. They are the personification of what is wrong with the patent system. Make it clear that these companies are leaches that do nothing of good. They are non-practicing entities.
We may have issues when companies like (for example) Nokia and Apple wage patent warfare but both of these companies spend enormous fortunes on R&D and they both produce exceptional products. While the patent system may be borked, it exists so that companies like Nokia and Apple may exist and view R&D as a worthwhile expense. Patent trolls should be legislated out of existence. Don't produce anything using the patent? Bye bye patent. Your business model is built around "buy patent, sue everybody in sight"? Bye bye company. Start with that and we might get closer to a point where the patent system isn't a joke.
Non-practicing entity. Spell it out. Make it clear. Leaches who do nothing of value.
It would probably be pretty easy to fake that though. Create some bogus plans to produce the thing you're patenting but never actually go through with it. It would be too costly to follow-up on every patent to make sure people actually did what they said they would.
Plus there are folks who get patents who don't intend to actually produce the thing themselves, rather they want to license it to others. Sort of an "R&D Department for Hire" concept. Unfortunately it's a fine line between those who intend to license their patents and those who intend to lay in the weeds and wait for somebody to infringe their patent and then sue.
It's those kinds of parasites we need to figure out way to deal with.
-B-
how come patent trolls are awarded patents in the first place? Would it be possible to make an applicant show proof that they are in the planning stages or are currently using what they are trying to patent?
That's called a 'working requirement' or a requirement to practice the invention. A few countries have such a requirement (Turkey, for example), but the requirement is usually riddled with exceptions that make it essentially toothless. There are several reasons why a strong working requirement is a bad idea, as I explained in a comment on a recent Slashdot story that suggested forbidding patent ownership by or assignment to non-practicing entities.
In the US patents are personal property--and thus freely assignable--by statute. 35 U.S.C. 261. Assignability is also guaranteed by Article 28 of the TRIPS Agreement, which is a treaty that the US is party to. So changing the assignability of patents would require amending the law and withdrawing from or amending a very important international treaty.
And even if the law were changed, it would mean that hundreds of patent holding companies would suddenly lose their patent rights because of an action by the government. That's called a taking, and the ex-patent holders would be able to sue the government for the value of the patents. It would be a massive litigation and cost the tax payer an enormous amount of money.
But anyway, how would we implement such a requirement? We could require that patents only be assigned to an entity that intended to practice the invention. Sounds great, right? No more patent holding companies, therefore no more trolls. There are at least five big problems with that:
1. Not all patents can be freely practiced because of other patents surrounding the technology. Imagine I own a startup company. If I invent a new transistor design I can't be expected to practice it myself: other companies have patents on things like manufacturing processes, bus designs, chip packaging, etc. I would have to license dozens of other patents in order to sell chips with my new transistor design. But that's backwards. Instead, I should license my one patent to companies like Intel and AMD and let them do the manufacturing and sales. But a requirement to practice means I couldn't do that; I'd have to practice it myself.
2. And what about pure research institutions like universities? They can't be expected to also become manufacturers.
3. But suppose we say it's worth making universities sell their patents. So now the patent will be owned by a single practicing entity. The patent can no longer stay with the university and be licensed to whoever will pay the fee. The end result is less competition in the market place for the finished product.
4. Okay, suppose we say that it's sufficient that the patent owner license the patent to at least one entity that is going to practice it. But then the law is too narrow. Almost no patent trolls actually rely on litigation damages for income; it's too uncertain and the margins are too narrow--and often negative. Litigation is just a tool to extract a licensing fee. So the end result is that the trolls can point to a manufacturer who licenses the patent and nothing changes.
5. What about patents on technologies that are ahead of their time? For example, suppose I invented an amazing new transistor design. It will make computers much faster but it requires X-ray lithography in order to work. Well, X-ray lithography is not cost-effective yet, so I can't really practice my invention. Does my patent just evaporate? How does that spur innovation?
As you can see, there are a lot of problems with such a proposal.
This is great! The only way these things changing is if the game becomes to costly for the corporations who write the rules. I hope "NPEs" start putting more companies through the wringer.
Sounds harsh but consider this: If I independently created something useful and it blows up like Facebook or Google but infringes on some minor or trivial patent for IBM/MS/Apple/Etc, the fruits of my labor will be taken from me.
God bless the NPEs for taken advantage of the game created by the advantaged.
I'm probably alone in this, but if the patents were of significant value, I wouldn't have a problem with the "trolls".
The problem is that they are not of significant value. Usually, they are trivial extensions of existing technology which are inevitable. Thus, they are worthless to exploit directly, but if you wait for someone else to exploit it you can derive more value from them. That's the problem that needs to be fixed.
Mod me down with all of your hatred and your journey towards the dark side will be complete!
It'd be a nightmare. The guy who invented pulse wipers has sued every car company for royalties now; when he first invented them, he presented the idea to 2 car companies, who dismissed him because his idea was non-useful. They immediately implemented pulse wipers, followed by every other car manufacturer. After several years of legal bullshit, he managed to start making some headway and getting judgments against them for the theft of his idea.
Patents are marketable. Some folks like to sit back on a patent and wait for someone else to re-invent it, rather than go out there and risk someone finding a way to work around your idea so you can't sue them for it. If they successfully work around it, then they don't have to license the patent from you and can't be successfully sued, so there is incentive to attempt to come up with a similar-but-legally-different implementation. On the other hand, waiting for the entire industry to implement your invention and then suing everyone in the world is a shit move.
Forbidding inventors from profiting from their inventions would be a disaster. It would prevent small-shop inventors without the capital to make a real, marketable product from capitalizing on their work at all. I could design a new type of nuclear reactor, but I can't build any significant components for it and thus my invention is impossible for me to actually manufacture (I'd need hundreds of millions of dollars). I could license the design to someone else, of course. There may not be a market for new nuclear reactors at this time, though; maybe I need to wait 10 years....
What a mess, yes? The system has to make these considerations, but in doing so it leaves itself open for abuse. In failing to do so, however, it also leaves itself open for abuse.
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It's legitimate if they're actually doing research. It's not legitimate if they're just brainstorming a bunch of ideas based on the current state of the art and then patenting everything which comes out of the brainstorming session.
Non-practicing entities exist in other legal and business contexts. Consider a car rental company, for example. It might own thousands of cars, yet it does not build cars, sell cars, or use the cars itself. What's more, it charges an obscene fee to rent a car compared to buying one (~$20/day for a compact is $7300/year!).
Sounds a lot like a patent troll, right? It doesn't use the technology, it won't sell the technology outright, and it quite possibly didn't even invent it in the first place.
But what both kinds of NPE provide is convenience and certainty. People pay car rental companies a comparative fortune because it's cheaper than owning a car in every city you might want to fly to, and the car rental company provides certainty that the car will be available, in reasonably good condition, properly titled, etc.
By the same token, a patent holding company provides convenience and certainty. Patents and patent applications are publicly available, so you can avoid wasting time and money on duplicate research and development by simply seeking a license from a company that has already done the work. And of course a license gives you legal certainty. Knowing that your product is licensed reduces the risk of an infringement lawsuit, which makes things like developing venture capital and contracting with suppliers and distributors easier.
Now, of course, there are problems. Too may patents are too vague to be of much practical use to a practicing entity because they don't go into adequate detail on how to actually make and use the invention. In response the courts are moving towards tightening the written description and enablement requirements, which I support. Another problem is that too many patents are actually invalid, and Microsoft is currently asking the Supreme Court to make patents easier to invalidate by eliminating the strong presumption of validity that patents currently enjoy, which is another reform I support. (That's right, Microsoft is trying to make it easier to invalidate patents).
The answer to the problem of non-practicing entities is not to ban them outright, nor to engage in overly narrow reforms that will only add complexity to the law. The solution is simple, broad reform that will increase the societal value of all kinds of patents while at the same time reducing the incentive to file for unsupported patents.
Well, considering that one of the hotbeds is Texas, maybe some of the defendants can use the "Well, he needed killin'" defense? ;)
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Being from Eastern Texas, I feel like I can speak with some authority in the matter. I've known many of these judges and lawyers (and bar-tended a few of their private functions) and I have found that they are idiots. It's really that simple. There is no conspiracy, there is only a mindset of "If someone sues someone else, then the defendant must deserve it".