The NY Times reported on Wednesday that the chairwoman of the Federal Trade Commission (FTC) is planning to ask the full FTC to launch an inquiry into the issue of patent trolls. This comes on the heel of President Obama’s executive orders taking steps to “protect innovators from frivolous litigation.” The real issue here is that we are dealing with the symptoms and not the root cause. Our patent system may indeed be broke, but it is not broke in the way most people think.
I was really amused by the picture that the NY Times chose to lead the story with. Exhorting the value of ‘innovation, not litigation,’ the White House press secretary announced President Obama’s initiatives on June 4. I’m still trying to figure out what E.T. has to do with patent litigation. Alternatively, it could be the baby in Dinosaurs. Maybe it was a subliminal rorschach test to see what we thought was on the cover.
I digress. The problem isn’t the issue of individuals and companies taking advantage of the playing field as they find it. The problem isn’t even the playing field. It is the construction of the stadium within which the playing field is placed. The U.S. Constitution grants, in Article I, Section 8, Congress the power to “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Within that framework the patent system has been created. Think of the Constitution as the zoning regulations governing the area in which we build our stadium. Tortured metaphor, but go with me.
What is a Patent Troll?
We need to start at the beginning. At the beginning, and center, of this controversy are entities known as patent trolls. The term was first used by Intel’s Peter Detkin to describe the opposing party in an ongoing lawsuit. Understandably it was meant as a pejorative, and the term has stuck. As with any discussion about intellectual property, even the origin of the term is sometimes misunderstood.
Wikipedia defines patent troll as a “person or company that enforces its patents against one or more alleged infringers in a manner considered unduly aggressive or opportunistic, often with no intention to manufacture or market the product.” The problem in the definition is the terms unduly aggressive or opportunistic. What is unduly to you, is not unduly to me. If I am the subject of something that causes me great corporate pain, I consider that unduly.
What about big companies as Patent Trolls. IBM secured 6,478 patents in 2012, according to IFI Claims Patent Services 2012 rankings. Considering that they were granted a patent on extracting value from a patent portfolio, I propose that they are not manufacturing or marketing at least a portion of those 6,478 property rights.
So is IBM a patent troll? What about Apple? Apple had 1,136 patents granted in 2012. Are they practicing each of those patents? The dirty little secret of the companies with these huge portfolios is that in addition to their publicized defensive purpose, some of these companies use them as an offensive weapon in negotiations. Bloomberg reported earlier this year that IBM receives over $1 Billion in revenue from licensing their patents. How many of those license are related to products that IBM actually markets or makes?
Fixing the Problem?
Trying to control patent trolls is ignoring the real problem and it is practically impossible. How you define patent trolls will always leave wiggle room for savvy lawyers and companies. If you define it large enough, you bring in too many companies and guts the innovation economy. What about the company that tried to market a product, failed, and the now bankrupt founders are trying to make some money from their investment? Should they be allowed to monetize their intellectual property? You cry yes, they should be allowed to file lawsuits. What if their monetization strategy is less money, less risk now, by selling to a larger company? If you take away the ability for that company to make money on their investment, your original inventors make no money. How does it feel now?
The problem is not those who assert patents. The problem is the patent itself. I believe that if you have an idea worth protecting, you should be able to protect it. If it is truly new and non-obvious, it is yours, and you should be able to make money off of it. However you want to. Who are you to tell me I can’t sell my invention to Intellectual Ventures and make some money today to put food on the table?
Anything that reduces the amount of possible money a patent purchaser can make on their investment decreases the amount of money that the original inventor can get for their idea. Yes, nuisance lawsuits are a problem. Why are we so concerned just here though? If you are sued for wrongful whatever for $1 million dollars, but the party says you can make it all go away for $500, do you take the deal? Or do you hire a lawyer, who is going to cost you more than $500 to legally make it go away. The rational actor takes the deal and moves on with their life. Same with the patent space. Tort reform isn’t working by some reports, and patent troll legislation is tort reform by another name, folks.
Rebuild the Stadium
The solution here is to tear down the stadium and rebuild it. Or if you are in Green Bay, it is to wrap new sky boxes around the old stadium. The problem with patents are two-fold in my mind. They last too long for certain technologies, and they are not examined properly. Solve these problems and you get to the intent of Article 1, Section 8. To allow creative folks the full fruit of their labors. Don’t solve the root cause and you end up regulating us to a place where only the truly big players can play. My two solutions are:
- Allow the USPTO to use the full value of the fees collected and to set their fees appropriately without the ineffective and wasteful oversight.
- Create a new patent category for short-lived technologies, such as software. Examine them quickly, with grant/deny decisions within months, not years. And then limit their term to something reasonable, say 5 times the average examination time, so maybe 5 or 7 years.I have reached my self-imposed length limit on blog posts, so I will pick up this topic on another day. As to regular readers, this topic should be something you watch. Patent litigation in the mobile space is one of the areas put forward as needing work. Disruption by patents, or even broad based disruption to the patent system has the potential to move the dial there as well.