The Art of Patent Trolling and How Big Tech Will Bring It To an End
Contrary to their namesake, patent trolls don’t live under bridges, but they can be just as odious. For generations, inventors, tech startups and large conglomerate companies alike have relied on the patent protections derived from the Constitution’s “intellectual property clause” – found in Article 1, Section 8 of the Constitution. Patent Assertion Entities, or patent “trolls” as they’re pejoratively called in the intellectual property world, abuse those rights. However, their reign of terror (on tech companies in particular) has convinced the industry that it’s time for a change.
The Patent Process
To understand patent trolls, a quick look into how patents work is a useful start. To register a patent, an inventor needs to show that the process or product is useful, novel, and non-obvious. The goal here is to make sure that patents only protect inventive leaps into areas of substantial and credible use. Second, an inventor needs to fully explain how the invention works in his patent application. So, in exchange for getting patent protection, the inventor enables the general public to benefit from the innovation.
Successfully registering a patent with the Patent and Trademark Office (PTO) ensures a 20-year term of uncontested monopoly power over the patented design or product. It allows the patent-holder to license out his product or process to others, use it for his own business, and most importantly, legally prevent others from using it or profiting from it. The remedy for a patent violation can either be damages for past harm or an injunction to prevent future harm.
Why are Patent Trolls a Burden?
Patent trolls abuse the system by buying up the intellectual property rights of others, usually in bulk, and then licensing out those patented innovations. They routinely sue other companies or individuals to prevent the usage of those innovations. In this context, the litigiousness of patent trolls inflicts a dual burden. First, a fair number of suits turn out to be frivolous; only costing the accused valuable time and money. Smaller tech start-ups that often don’t have the capital to fight off a patent suit wind up settling even if the suit is frivolous, and are usually hit the hardest because of this tactic. Second, if a patent troll wins on a patent violation claim, the violator suffers a particularly heavy burden. He not only has to pay damages and licensing fees to continue using the infringing technology, but he may have his own patent invalidated. In fact, because patent trolls don’t practice their patents, they have some immunity from patent lawsuits themselves.
A further problem is the difficulty in determining the true owner of a patent. This would seem simple enough, but patent trolls can hide behind an often-impenetrable veil of subsidiary companies and shell corporations as well as helpfully murky federal disclosure rules for private companies. Not knowing who’s really suing can not only make it difficult for companies to defend themselves fully, but can also allow them to become repeat victims.
In a telling example of this problem of ownership, Fortinet Inc., a California-based network security company, was able to trace the ownership of the company that was suing them to a couple of lawyers renting a windowless office in Texas, filing numerous patent infringement cases on behalf of various shell corporations.
What Are Technology Companies Doing about this?
Recently, even staunch competitors like Google, Apple, and Samsung have agreed to join forces to push forward patent reform. The Obama administration joined them with an ambitious 2014 agenda aimed at eradicating the abuses of patent trolls.
Late last year, the Innovation Act passed in the House of Representatives, and will be debated in the Senate soon. If it passes, the Act will require real owners of the patent in question to identify themselves and even require losing plaintiffs to pay the costs of litigation. To help prevent frivolous claims, the Act will require more specific pleadings, and will also limit the costs of litigation by delaying the expenses of producing documents for trial (in one case, this expense reached $1.5 million). The Innovation Act will also prevent patent trolls from coming after consumers, whom they can more easily defeat in court.
Overseas, Apple and Samsung helped to campaign the European Union for a unitary patent system, which would unify patent protection and enforcement under the Unitary Patent Court. The agreement was signed by 25 EU member states and is currently undergoing the ratification process. This new system would not only streamline patent litigation overseas for international companies but also help curb the old, costly, and scattered patent litigation model that has allowed patent trolls to thrive.
What Does the Future Hold for Patent Law?
Despite the lengthy process of enacting these sweeping, radical changes, success is only a matter of time. Corporations such as Google, Apple, and Samsung are not only highly motivated but have the power and capital necessary to campaign effectively for these changes. In fact, the Innovation Act is one of an impressive twelve separate bills currently before Congress aimed at creating a new host of patent laws. All these bills are geared towards increasing pleading requirements and transparency: the two main crutches of patent trolls. Given the overwhelming agreement within the industry, it seems clear that there is a new world order on the horizon for patent law – one that will not have a place for trolls.