By Stephen B. Schott
Up is down and right is left when my inbox fills up with 10 friends linking me to something about patents. But this floppy-watches-hanging-from-trees moment came recently after comedian John Oliver, during his Last Week Tonight show, took on patent trolls. In doing so, he follows comedian Adam Corolla, who also had an anti-patent troll rant go viral (for patent news) last year.
Take a gander: It’s possibly not safe for work on language.
My favorite line, of a few that were excellent, is his comparison of patents to “legally binding ‘dibs.'” Unfortunately, as with his rant about pharmaceutical companies marketing to doctors, Oliver took the easy route and attacked a few bad actors who everyone would dislike and ignored many other businesses that fulfill an important role in the idea economy.
Who are these patent trolls?
Patent trolls prefer to be called non-practicing entities or NPEs, but the patent troll term is too pejoratively inviting to go away. The problem of patent trolls is, as my friends across the Atlantic might say, a sticky wicket. A lot of people feel like there’s some kind of a problem but no one seems to agree on who’s an actual troll.
A few examples illustrate the difficulty of defining a patent troll. Let’s say that a major automobile manufacturer invests several million dollars developing a new diesel engine. Along the way, it secures 50 patents on the technology, but then decides not to pursue the diesel engine and instead focuses on hybrid engines. A few years pass and one of its competitors releases a diesel engine using the patented technology. Is our automobile manufacturer a troll if it pursues the competitor for patent infringement, just because it didn’t produce the diesel engines?
Another problem example that commonly arises is universities, which are petri dishes of innovation that rarely make any products. Most universities do, however, have a technology transfer office that secures patent protection for innovations. If a university sees a company using its patented technology and approaches the company seeking a royalty, is the university a troll that should be punished?
And a third category is also troublesome. Picture a small business that invents a new technology and secures a patent on it. Later, a multinational corporation starts using the technology. The small business doesn’t have millions of dollars to bring a patent infringement lawsuit so it sells its patent to a third party who has enough money to bring the lawsuit. In this David and Goliath scenario, small-business David needed a sling, and the third party provided it. The third party may be in the business of nothing more than collecting promising patents—but legislation attacking the third party patent collector harms the small business and stifles innovation.
At the other end of the spectrum is an example where a patent attorney purchased a patent from an inventor. The patent was for a consumer product. The patent-owner/attorney sued a manufacturer for infringement even though it was clear that there was no infringement. The manufacturer was faced with a terrible decision tree: Choice 1: Pay the patent-owner a small amount of money to settle the lawsuit, or Choice 2: Pay litigation costs (hundreds of thousands of dollars at least) to win the lawsuit and pray for the never-to-be-found Questing Beast that is judge-awared attorney’s fees for bringing a frivolous lawsuit. Choice 1, as painful as it is, is often the better business decision. So yes, there are definitely bad patent trolls.
The Problems With Oliver’s Rant
One of the biggest problems with the Oliver rant is that he fails to acknowledge that in the last two years, a lot has happened to curb bad actors in the patent world. Patent litigation is down 20% in the last year. The most-abused patents, those based on software, are now undergoing heightened legal scrutiny following the Alice Supreme Court case. The US Patent and Trademark Office has set up several new procedures for challenging the validity of granted patents. In all, a lot of work has already been done to fix this problem: The laws, procedures, and cases are having an effect.
Another problem, and perhaps it is obvious from the above descriptions of trolls, is that some of these patent entities help, not hurt, smaller inventors. Patent enforcement is expensive, and without patent entity companies help smaller companies enforce their patent rights against infringers. Thus, many trolls fill an economic need by helping small inventors protect their rights when the costs for doing so get too high.
Oliver encourages more legal action to curb patent trolls, but no one yet knows how all the solutions that were enacted in the last 2 years will play out. In the end, Oliver will hopefully get his dream of fewer true trolls and more innovation, but that will take time and politicians should be careful not to create more problems in their haste to react to the anti-troll sentiment.
If you have questions, contact me.
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