The Only Way to Stop Patent Trolls

obamaAfter seeing the Obama Administration’s June 4 announcement on its plan to combat non-practicing entities (NPEs), a.k.a. patent trolls, and reading commentary on the President’s actions and recommendations, I’m having a hard time understanding why anyone in the patent community sees this as real progress toward a viable solution.

The Administration is going about this all wrong.  In typical Washington fashion, they’re not addressing the real problem.

The administration wants to outmaneuver NPEs by improving patent quality as well as the quality of our enforcement agencies.  It also seeks to punish trolls by allowing judges to award attorney’s fees in patent litigation where the plaintiff loses at trial.

But will that really stop patent trolls from suing companies and startups?

My answer is no.

The Administration is working off of a presumption that trolls thrive because of bad patents, in particular bad software patents. The assumption is that overbroad ill-defined patents allow trolls to go after multiple defendants even ones that the patent isn’t meant to cover.   Why doesn the Federal Government care?  If money is spent on patent litigation, it isn’t being spent on R&D thus weakening our economy.

Touting his solutions, the President is basically saying: “Ha ha, NPEs!  We’ll make better patents so you can’t enforce crappy patents anymore.  And if you try to enforce crappy patents, you’ll have to pay up.  What do you have to say about that patent trolls?”

Well if I’m a patent troll, here’s what I would say. “Thanks!  I’ll take the risk of punishment and enforce those better patents.”

Don’t get me wrong. I think improving patent and enforcement quality should be a top priority. It makes the entire system better, but I just don’t see how it specifically helps companies sued by NPEs.  It’s not like they can’t enforce better patents too.

(And just as an aside, better patents mean better ammunition for these well-funded litigation machines.  Better patents means their harder to invalidate, right?)

The real problem goes so much deeper than patent quality and punishment.

In my opinion, the real issue is the cost defendants must pay to defend themselves against patent infringement claims.

Patent litigation is one of the most expensive types of litigation a company can engage in, costing both parties millions of dollars if the case goes to trial.  Most companies, let alone startups, don’t have this type of money.

If you can’t afford to defend yourself, you will settle the case or stop the alleged infringing activity before a judge or jury can find a patent invalid or a judge can award attorney’s fees.

It doesn’t matter if the patent is good, bad, or ugly, or what powers the judge is given, if the case never goes to trial.

If Google and the other Silicon Valley technology giants really think trolls are a problem, then they need to start a fund to help startups pay for patent litigation defense.  Or better yet, stop settling these cases and use their resources to defend themselves in court.

It’s the only way the Administration’s recommendations are going to work.

Silicon Valley must stop paying Washington to solve their problems because the only solutions the President and Congress can come up with won’t work without companies challenging the NPEs in court, which means paying a lot of money to defend themselves.

NPEs aren’t banking on bad patents. They’re banking on the fact that defendants won’t be able to mount a defense.  If defendants can’t defend, patents can’t be found invalid and judges can’t award attorney’s fees.

It’s about money.  

It’s as simple as that.

More Stupid Patent Reform Attempts Brought to You by POTUS

I don’t even know where to start on this one but here goes.

Yesterday President Obama announced that his Administration is going to take on patent trolls.  From the White House press release on the matter:

“The White House issued five executive actions and seven legislative recommendations designed to protect innovators from frivolous litigation and ensure the highest-quality patents in our system. Additionally, the National Economic Council and the Council of Economic Advisers released a report, Patent Assertion and U.S. Innovation, detailing the challenges posed and necessity for bold legislative action.” (emphasis added.)

How exactly does the Executive Branch intend to solve these perceived problems?

1.  By requiring updated patent ownership information at the USPTO (so you know who’s suing you);

2.  By reeducating patent examiners to think like the Administration thinks they should about functional claims;

3.  By creating a “You will know that you have been sued by a Patent Troll when…” page;

4.  By discussing and studying the problem with Academics; and

5.  By auditing the ITC and Customs.

So if I can extrapolate from this, here’s how the Obama Administration sees the issue.  Patent examiners don’t know how to examine “functional claims”.  This leads to bad patents that somehow only end up in the hands of patent trolls, and you’ll know you’re dealing with a bad patent when a troll is the assignee.  (I’m really not sure why the President dragged in the ITC and Customs.)

Really?  This is the best the President’s men can do?

Just when I thought the discussion couldn’t get any worse, I’m floored by the incompetence, or perhaps it’s willful blindness, that our President and his administration is showing when it comes to patents, patent litigation, and “trolls”.

Seriously, people, we are living in the story of Chicken Little, and the Obama Administration is playing the starring role.

chicken littleCan’t you just hear the refrain now…

“The sky is falling!  The sky is falling!”

And the President is here to save us.

With all due respect, the President is so far off the mark here.   It’s laughable.

I know there are technology executives from Silicon Valley whispering in his ear about the crimes that the evil patent trolls have committed against them.  And they’ll be handing him tons of cash over dinner soon.  But couldn’t the Administration just try to gain some perspective.

And I know perspective is hard to find in Washington, D.C. right now.  But try.

Can’t he smell the hypocrisy?

These technology companies (his donors) want to stop “frivolous” lawsuits while at the same time be able to sue whomever they want with whatever patent they have.

Because of course, their patents are valid and well examined.  It’s just the ones enforced by “trolls” that aren’t.

In fact, I think the President would be better served by just decreeing that if you’re a non-practicing entity, there is a presumption of invalidity.  (I know. I know.  He can’t but you know he’d like to.)  Because based on the recommendations of the Administration, it’s obvious that trolls couldn’t own an enforceable patent.

Does there need to be a discussion about abusive patent litigation? Yes.  But when the President is only talking to (and receiving big fat donation checks from) very bias actors who play a central role in the problem, the discussion isn’t really worth much.

As Gene Quinn of said in his blog post of yesterday:

“Yes, tech giants get sued on terrible patents that are clearly invalid and which they don’t infringe anyway, but those same tech giants settled bad claims on crappy patents while at the same time they litigate to the death good, valid patents on important technologies that they do infringe. There are few “Snow White” players in the patent litigation space, and the constant vilification of patent trolls and claims that the patent system is broken are too broad to the point that they are misleading.”

Of course so much of the President’s remarks are simply rhetoric.  He can’t change the nature of patent litigation.  He has no power to change the patent laws.  We still have a Constitution and the Doctrine of Separation of Powers is still alive and well, so only Congress can do that.

And for that I am kind of grateful.  (But they did pass the AIA so I’m not totally confident that Congress won’t screw things up.)

10 Intellectual Property Questions that Might Be Answered in 2013

Question-Mark-300x2252012 was a momentous year in Intellectual Property law, but it left us with a lot of unanswered questions.  Here are 10 to ponder as we start 2013.

1.  What will the fall-out be from the full implementation of the America Invents Act?

2.  What will be the impact of the First-Inventor-to-File rules being implemented in March?

3.  Will the Federal Circuit and the Supreme Court ever get on the same page when it comes to a §101 standard?

4.  What is the future of software and business method patents?

5.  Will the US Supreme Court strike down gene patents?

6.  Who will be the next Director of the US Patent & Trademark Office?

7.  Will there be peace in the Smart Phone Wars or has another offensive just begun?

8.  Will Congress grant IP protection for the fashion industry?

9.  Will we continue to see an increase in patent litigation by NPEs?

10.  Will we see more $1,000,000,000+ damage awards in patent litigation cases?

I’m not sure we’ll have definitive answers to all of these questions prior to the end of the year, but the potential for the US Courts to significantly change patent law in this country is great.

So what do you think?  Do you think software patents are history?  Do you see peace in the Smart Phone Wars on the horizon?  Share your thoughts and some questions that I haven’t mentioned in the comments below.

Twitter, I’m Calling You Out!

It’s 2012.

The so-called “Smart-Phone Wars” rage across the planet.

Global technology giants are all vying for supremacy of entire markets by buying up patents and leveraging their portfolios as they try to knock each other off the mountain.

Then along comes Twitter.

In an attempt to stop the madness, the social media giant announced in late April it will be implementing a new Innovator’s Patent Agreement, a written agreement between Twitter and its inventors.

Under its terms, Twitter says that it will assert its patents only for defensive purposes, or only with the permission of the inventors, supposedly leaving ‘control of patents in the hands of inventors.’

I understand that Twitter is standing on its principles when it announced this move.  With no gun in any pending fight, Twitter is asserting its position on patent litigation to the world loud and clear.

Starting with the Preamble, Twitter wants everyone to notice how noble and egalitarian they are when they state:

WHEREAS Company and the Inventors believe that software patents should only be used to make a positive impact in the world and, accordingly, should only be used for defensive purposes;  (Emphasis added.)

What exactly are “defensive purposes” you might ask?  Paragraph 2 reads as follows:

2.  Company, on behalf of itself and its successors, transferees, and assignees (collectively “Assignee”), agrees not to assert any claims of any Patents which may be granted on any of the above applications unless asserted for a Defensive Purpose. An assertion of claims of the Patents shall be considered for a “Defensive Purpose” if the claims are asserted:

(a) against an Entity that has filed, maintained, threatened, or voluntarily participated in an intellectual property lawsuit against Assignee or any of Assignee’s users, affiliates, customers, suppliers, or distributors;

(b) against an Entity that has filed, maintained, or voluntarily participated in a patent infringement lawsuit against another in the past ten years, so long as the Entity has not instituted the patent infringement lawsuit defensively in response to a patent litigation threat against the Entity; or

(c) otherwise to deter a patent litigation threat against Assignee or Assignee’s users, affiliates, customers, suppliers, or distributors.

If Assignee needs to assert any of the Patent claims against any entity for other than a Defensive Purpose, Assignees must obtain prior written permission from all of the Inventors without additional consideration or threat. An “Entity” includes any related entities, where the entities are related by either ownership, control, financial interest, or common purpose.

All of this would be interesting and meaningful, but for one thing.  Twitter doesn’t have any US patents to assert against anyone.  Do a search for Twitter as Assignee at the USPTO.

They have one published US patent application, and one application came up when I did a search of the assignment database.  That’s it.  (If you can find more, please let me know.)

If this is true, the Agreement is for show.  This is a public image campaign that tries to make Twitter look like the hero.  Twitter is insinuating that it is making a noble choice about when and how to use its patent portfolio when in fact Twitter couldn’t bring a patent infringement suit against anyone even if they wanted to.

If you don’t like patents, patent litigation, or the whole system, just say so.  Don’t make up some holier-than-thou Agreement when you aren’t really doing anything that noble.

I find it odd that a company with no US patents to its name is publicly announcing an Innovator’s Patent Agreement.  Does anyone else find this Agreement a bit disingenuous?  Let me know what you think in the comments below.

A Case for Patent Trolls

What if Non-Practicing Entities (NPEs) are using patents the way patents are meant to be used?  I know this is a provocative question, but I’ve given this issue some thought, and I think that this is a question worth exploring.

Let me start by saying, I am not for bogus patent law suits.  A company should never sue another company using bogus patent threats.  But if a company does infringe an existing patent, should it matter who owns the patent?

There aren’t many fans of NPEs, hence the nickname, ‘Patent Trolls’.  People don’t like the idea that a patent owner that doesn’t make the patented invention has the right to sue a company that does make a product that might be embodying the patented invention.  The primary argument against NPEs is the notion that the purpose of the patent system is ‘to promote the useful arts and sciences’ (as stated in the US Constitution) and increase innovation.  Increased innovation means a better society.  Patent trolls stifle innovation when they bring law suits against ‘real’ businesses because the money that would otherwise be spent on innovation goes to the lawsuit, damages, and/or licensing fees.

To some degree that argument is correct.  Innovation is stifled when patents are used to exclude other companies from practicing the patented invention.  But then again, isn’t that the purpose of the patent?  There is a difference between the long-term purpose of the patent system (further innovation and society) and the short-term purpose of the patent.  The US Government gives patent owners the right to exclude others from making, using, or selling the patented invention for the life of the patent.  Well, how does one exclude others?  The patent owner sues a suspected infringer for patent infringement.  If the patent owner doesn’t want to fully-exclude others, he can seek a license or give away his patent rights, e.g. open source software.  Alternatively, a patent owner could do nothing about patent infringement.  Ultimately, it is up to the patent owner to decide what he, she, or it wants to do with their business asset.

In the short term, patents are designed to give a patent owner (inventor, corporate entity, or troll) a 20 year monopoly in the patented invention.  There is little restriction on who can by or sell a patent.  There is no requirement that the patent owner has to make, use, or sell a product embodying the patented invention in the United States.  So, should it matter whether the entity doing the excluding is an NPE or a Practicing Entity?

NPEs aren’t cheating the system.  Nothing they’re doing is illegal per se.  (Again, I would never support any one bringing bogus patent suits.)  I think a lot of people are uncomfortable with the idea of companies that use patents to do nothing but sue companies for profit.  It creates an unlevel playing field, and that is scary, but not necessarily wrong.

The Art of Patent War

An older attorney once told me that when times are good, companies build up their patent portfolios; when times are bad, they litigate.  Given the headlines today, I would say that might be true.  We have non-practicing entities (a.k.a. NPEs or Patent Trolls) filing an ever-increasing number of lawsuits, while the smart phone manufacturers and patent holders are pretty much engaged in WWIII with patent suits on multiple fronts around the globe.  (Check out my previous post on Patents as WMDs.)  This got me thinking.  How would Sun Tzu, the author of The Art of War, view intellectual property ownership, the bundle of rights that come along with IP, and the upsurge in litigation?   Keep in mind that it was Sun Tzu who said that “the supreme art of war is to subdue the enemy without fighting.”

There are two Sun Tzu quotes that actually hang on the bulletin board in my office.  They speak to how I view intellectual property, and the mission of my company, IP in focus.

1.  “If ignorant both of your enemy and yourself, you are certain to be in peril.”  I guess this quote is the opposite of the often-voiced quote “Ignorance is bliss.”  Let’s be honest.  Ignorance is only bliss until what you don’t know bites you in the behind.  What you don’t know can hurt you.  What you choose to ignore can cost you literally and figuratively.  (Google, the multi-billion dollar patent auctions, and the purchase of Motorola Mobile for $12.5 billion are great examples that come to mind.)  This quote reminds me that IP owners must actively manage risk as part of a comprehensive intellectual property strategy.

Risk can come in many forms.  Your competitors, employees, contractors, vendors, strategic partners, and outsourced manufacturers are all sources of potential risk.  At any given time, one or more of these groups can be the ‘enemy’.   You must understand your enemy and the risk your enemy presents to you, then take steps to reduce your exposure to that risk.   Without this understanding, you can’t possibly have a strategy that meets your business needs.  Without a meaningful strategy that takes into account your risk, your intellectual property rights are certain to be in peril.

2.  “Strategy without tactics is the slowest route to victory.  Tactics without strategy is the noise before defeat.”  So many bad tactics, so little strategy!  Having an IP strategy doesn’t do you any good if you don’t know how to make decisions.  Making decisions in a vacuum doesn’t help your company achieve its business goals.  When you have too much of one and not enough of the other, the only thing you can rely on is luck or your war chest to bail you out.  You must have tactics that make it possible to achieve the goals set forth in your strategy.

The mission of IP in focus is to make sure that our clients have the tactics they need to implement their intellectual property strategy, and achieve IP success.  Remember that what determines success is different for every organization.  However, I strongly believe that success lies in the intellectual property holder’s ability to conquer their enemy.

With that in mind, I will leave you with one more quote from Sun Tzu to ponder.

“In battle, there are not more than two methods of attack—the direct and the indirect; yet these two in combination give rise to an endless series of maneuvers.”  - Sun Tzu