Patent Trolls
The U.S. Patent System is supposed to represent a bargain between inventors and the public. In theory, it is simple: in exchange for dedicating a novel invention to society, along with a clear explanation of how to practice that invention, a patent applicant gets a 20-year monopoly.
But, lately, we’ve watched as the system appears to fall apart, harming innovation, the very thing it was designed to foster. Many factors contribute to the problems we’ve seen with the patent system, but perhaps none so much as the rise of the patent troll. To be sure, the patent troll problem is not a new one (remember the infamous RIM v NTP case?), but recently, we’ve followed a troubling new trend: more and more small developers and companies targeted by trolls.
What is a patent troll?
A patent troll uses patents as legal weapons, instead of actually creating any new products or coming up with new ideas. Instead, trolls are in the business of litigation (or even just threatening litigation). They often buy up patents cheaply from companies down on their luck who are looking to monetize what resources they have left, such as patents. Unfortunately, the Patent Office has a habit of issuing patents for ideas that are neither new nor revolutionary, and these patents can be very broad, covering everyday or commonsense types of computing – things that should never have been patented in the first place. Armed with these overbroad and vague patents, the troll will then send out threatening letters to those they argue infringe their patent(s). These letters threaten legal action unless the alleged infringer agrees to pay a licensing fee, which can often range to the tens of thousands or even hundreds of thousands of dollars.
Many who receive infringement letters will choose to pay the licensing fee, even if they believe the patent is bogus or their product did not infringe. That’s because patent litigation is extremely expensive — often millions of dollars per suit — and can take years of court battles. It’s faster and easier for companies to settle.
Lodsys
In particular, we’ve watched with dismay as Lodsys, a company that neither makes nor sells a product, targets small app developers, claiming the use of in-app purchasing technology (usually provided by Apple or Google) infringes Lodsys’ patents.
It’s impossible to know how many app developers Lodsys has actually threatened, but we do know that it has sued at least 11. Apple has moved to intervene in that suit, claiming that the license it took from the patents’ former owner covers its app developer’s uses of that technology, and Google has filed a Notice of Reexamination with the Patent Office challenging the validity of Lodsys’ patents. But Apple’s and Google’s actions — while noteworthy — will take years to reach resolution. In the meantime, app developers are faced with an unenviable choice: either take a license from Lodsys or live with the fear that they could be the next party facing a lawsuit.
Resources
Trolling Effects (EFF’s online database of patent demand letters)
EFF’s Virtual Boot Camp (video)
Patent troll
A patent troll is an informal, pejorative term for a type of non-practicing entity (NPE) that gathers large numbers of patents and attempts to enforce these patent rights against accused infringers in an overreaching fashion, far beyond the patent’s actual value or contribution to the prior art.[1] As NPEs, patent trolls do not manufacture products or supply services based upon the patents in question. In the United States, the Federal Trade Commission (FTC) uses terms other than NPE, such as patent holding company (PHC) or patent assertion entity (PAE) to differentiate their typically very arguable protection of inventor rights from that of the overreaching behavior of a so-called “patent troll.”[2]
Patent trolling has been less of a problem in Europe than in the U.S. because Europe has a loser pays costs regime.[3] In contrast, the U.S. generally used the so-called American rule, providing that each party is responsible for paying its own attorney’s fees, until U.S. Supreme Court decided Octane Fitness, LLC v. ICON Health & Fitness, Inc. on April 29, 2014. Read More
