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Patent troll

Note: patent trolls get a lot of attention, but they are not the biggest problem.

"patent troll" is a term for companies that acquire patents for the purpose of extracting money from product developers. They thus harm the economy, make business less efficient, make some types of business too expensive for small businesses and clog up the legal system.

Although they attract a lot of media attention, patent trolls are not the biggest problem caused by software patents.

A narrower term is non-practising entity (NPE) or patent assertion entity (PAE), which denotes a sub-category of patent trolls whose only activity in a domain is patent trolling. One definition of NPE is "an entity that does not have the capabilities to design, manufacture, or distribute products that have features [covered] by the patent".[1]

As evidence that "patent troll" has a broader definition, Microsoft is often called a patent troll,[2] despite making and marketing a lot of software itself.

Who do they harm most?

Patent trolls (and NPEs) are mostly a problem for the large software corporations such as IBM, Microsoft, Google, and Apple.[3]

Patent trolls are generally not a problem for free software projects, although a large software company could be targeted for its distribution of said software. Free software projects suffer more from harm with neither litigation nor threats and the harm to standards.

Trolling is legal

Indeed, when Microsoft repeatedly told the jury that i4i was a non-practising entity, the judge fined Microsoft for trial misconduct.[4] Microsoft's lawyers were criticised for trying to get i4i condemned for something other than the accusation at hand.

Why a "practising" requirement wouldn't suffice

One suggestion is to require that litigators practise the patent in order to demand damages, however, there seem to be fundamental problems with this: How should courts deal with litigators who claim to have the intention to practise the patent in the future? or litigators who say that they are in the process of practising the patent and their lack of a tangible product is because they're still in the fund raising phase?

It's also unreasonable for fields such as pharmaceuticals, where it's normal to spend 10 years on development before having a product to show.

In any case, this sort of requirement would do nothing against a company that has a trivial or tangential product (which may not even be making money). Any litigator could make a phantom project before going to court, so this requirement would be easily reduced to a formality.

How to protect only the big companies against trolls

There are certain software companies who want to solve the problems caused to them by patent trolls, but at the same time they want to continue to use their own software patents against other software developers. These companies don't want to fix the unfair system, they just want to be the ones profiting from it. So they support:

  • Making harsh measures such as injunctive relief harder to achieve (this has been partly achieved in the US case EBay v. MercExchange (2006, USA))
  • Making it harder to block imports and exports (for example, in the US, via the US International Trade Commission)
  • Reducing the damages that patent holders can expect
  • Making particularly low damage for cases where the patent holder is a non-practising entity

Each of these steps is somewhat useful for society too, but it will never solve the problem, and it distracts politicians and judges from the real solution.

Activity levels

According to Stanford University's Lex Machina,[5] patent trolls account for 30% of all patent litigation. Kyle Jensen puts the number at just below 20% (500 of the 2,600 suits filed in 2009).[6] Neither of these focus on software patents - it would be interesting to see how much higher the percentage is there.

PatentFreedom found that lawsuits from NPEs has increased from 100 in 1998 to 200 in 2004 and to 500 in 2008.[7]

Google's Head of Patents and Patent Strategy said in March 2009:[1] "Of the 20 patent lawsuits filed against Google since late 2007, all but two have been filed by plaintiffs who don’t make or sell any real product or service — in other words, by non-practicing entities or “patent trolls.”"

Example trolls and their lawsuits

An example of a grey area is Microsoft. They clearly do practise their patents, but are still called a troll by some.[14]

Troll incidents

  • Google Fights Back And Wins Against Bogus Patent Lawsuit From Guy Who Couldn't Even Code His 'Invention' [4][5]

While the broad facts of the case—a pair of entrepreneurs with one failed business idea, almost no computer programming experience, and a couple of patents march into court waving those patents and demand $600 million from one of the most successful companies of the digital age—might seem far-fetched, but they’re actually quite commonplace."

Formative factors

An variation of the problem is when companies do make some degree of attempt to develop products but, when their product fails, conclude that they can instead be more successful at litigating a portion of the profits from those that become more successful at development.

The problem is particularly acute when a company fails, and the only assets it has left are its patents. The receivers have a legal duty to shareholders to obtain maximum value from the remaining assets, and this may involve pursuing competitors who have succeeded in exploiting and marketing similar concepts to the ones that the failing company failed to exploit and market. The more successful the competitor, the better the chance of extracting a generous out-of-court settlement. Thus patents reward failure and penalise success.

Related pages on ESP Wiki

External links

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  1. Definition used by PriceWaterhouseCoopers in their 2009 patent litigation study
  2. "'s Benioff likens Microsoft to patent 'alley thug'". "The reality is that these patent trolls are unfortunately just part of doing business and technology these days." 
  4. "Microsoft Trial Misconduct Cost $40 Million". ""Throughout the course of trial Microsoft's trial counsel persisted in arguing that it was somehow improper for a non-practicing patent owner to sue for money damages," [Judge] Davis wrote." 
  7. "Patent Lawsuits Involving NPEs Over Time".