Patent Trolls on Trial

By Maggie Tamburro
Lately many have taken a stand against the nefariously labeled patent troll.  Rarely have we witnessed such media vitriol and legal backlash targeted at those some criticize for asserting what is actually a perfectly legal, proprietary business interest. 

And perhaps not without good reason - according to a much publicized study out of Boston University School of Law, patent trolls allegedly cost the U.S. economy $29 billion per year. 

Emblematic of the mounting criticism is an August 1, 2012 bill, introduced to the U.S. House by Rep. Peter DeFazio, which seeks to curb allegedly frivolous patent litigation by the patent troll by making the loser of such a suit potentially liable for the defendant’s litigation costs.  Called the “Saving High-Tech Innovators from Egregious Legal Disputes of 2012” (SHIELD), the bill proposes to amend 35 U.S.C. chapter 29 to allow “the recovery of computer hardware and software patent litigation costs in cases where the court makes a determination that the claimant did not have a reasonable likelihood of succeeding, and for other purposes.” 

Are All Patent Trolls Inherently Evil? 

Patent troll is a derogatory label often used to describe an entity that enforces patents it owns against alleged infringers in a manner considered aggressive and opportunistic, without intent to manufacture or produce the product involved.  Often called non-practicing entities (NPEs), patent trolls have sparked much debate and been criticized for bringing meritless infringement suits against producing companies – thereby encouraging the accused infringer to settle or risk losing substantial investment made in the associated product.

Which caused us to consider:  When does a bona fide patent aggregator cross the line and become a so-called nefarious patent troll?  Are some licensing activities more equal than others?  And haven’t many companies been doing this for years – aggregating, licensing and asserting patents associated with areas other than that which is the company’s primary practice?  Is a troll someone who practices none of its patents?  If no, what ratio between licensing and practicing should be considered reasonable?

While some entities seem to exist for the sole purpose of lying in wait to bring infringement claims against producing businesses, on closer inspection, not all so-called patent trolls are created equal. Perhaps we should abandon the name-calling altogether, as the line between a patent troll, NPE, (or even a semi-practicing entity) seeking to enforce its patents becomes fuzzier.

For example, according to a recent article in the Wall Street Journal, IBM has been in the business of licensing and monetizing its ever-expanding patent portfolio for a decade. At what point does a company that holds and asserts patents but doesn’t practice all of the associated products earn the dubious distinction of patent troll?

In Defense of the Big Bad Troll

Some entities which aggregate and monetize patents actually contribute to innovation, pioneering ways to consolidate patents in pursuit of inventing.   These entities must find novel ways to navigate a malfunctioning system that stifles innovation, not to mention makes it virtually impossible for the independent innovator to exist.  Much has been written on the broken U.S. patent system, so we will spare the reader the details here.  Suffice it to say that according to some sources, an inventor has only a 3% chance of generating more commercial revenue than obtaining the patent actually costs.

Maybe some alleged patent trolls are able to offer a venue for pursuing a different path to a less costly, more “innovative” way to invent.  As with any business for commercial profit, there are always those in the system who will attempt to subvert it in bad faith to the commercial disadvantage of others.  But maybe it’s time to rethink the way we look at the issue and bring our thinking (and resulting labels) in line with the realities and modern business practices.

Not all Patent Trolls are Inherently Evil

As Juliet famously declared, “A rose by any other name would smell as sweet…”  Many of the companies decrying the opportunistic tactics of patent trolls are actively engaged in doing the same thing under different auspices.

For example, the Wall Street Journal recently reported that Kodak has 1100 patents up for sale, with no shortage of the largest and most powerful U.S. corporate giants lined up to buy them.  Would you consider Google a patent troll?  How about Apple?  Some of the most respected technological names in the world are no strangers to aggregation and monetization of patents.  And why should they be?  After all, intellectual property is a legitimate commercial asset and a protectable, legally recognized property right – and therefore arguably should be fair game in the commercial marketplace. 

Other instances of patent aggregation and monetization are out there – although you might have to look hard to find them.  Companies don’t seem keen on discussing their patent aggregating tactics and as far as we know aren’t required to disclose their patent portfolio.  According to the Wall Street Journal, last year five large and well known companies spent over $4.5 billion dollars buying up 6,000 patents, which they combined and placed into a separate business entity.  

Patent aggregation in an effort to keep patents out of the hands of competitors is not a new concept.  Although it may be a different side of the same coin, the concept of aggregating patents defensively is closely intertwined to aggregating them for offensive or licensing purposes, and serves yet another legitimate business interest.   But when does defensive aggregation turn into acceptable monetization and for-profit licensing? Isn’t that an inevitable and legitimate result?

Interestingly, even attorneys who used to defend some of the biggest corporations against patent infringement are reportedly jumping ship and switching sides, forming their own NPEs.  As the saying goes, if you can’t beat ‘em, join ‘em.

Further, consider a process practiced by governments, leading universities, and research institutions across the country:  Technology transfer.  Technology transfer encompasses the identification, aggregation, and development of burgeoning technologies that have potential for commercialization.  Some estimate that there are 230 U.S. universities and nonprofit research institutions engaged in technology transfer today, thanks in part to the Bayh-Dole Act of 1980, which gave universities control over their licensing activities and inventions.  The Association of University Technology Managers (AUTM) provides online Nine Points to Consider in Licensing University Technology.  The pamphlet makes sure to distinguish those which “add value” by aggregation of patents from the so-called patent troll, who allegedly “extracts payments in the absence of any enhancement to the licensed technology.”

Patent Troll Redefined

Perhaps we need to concentrate our efforts on how we think about what defines a patent troll and what kinds of licensing and patent asserting practices are acceptable, as opposed to those that clearly cross the line.  Some innovators have come up with ideas for redefining the entire patent marketplace, such as creating a patent financial exchange like IPX International.

Do you think we should redefine the term patent troll?
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Maggie Tamburro

Maggie Tamburro is an attorney and writer who holds a Juris Doctor from The John Marshall Law School and a Bachelor of Arts from the University of Texas. She was admitted to the Illinois Bar in 1994 and Florida Bar in 1999 and has significant experience in legal research, editing, and writing. Maggie is active her in local community, holding various publicly appointed civic board positions.

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