Is the Price of Patent Trolling Finally Becoming Unsustainable?

German courts just dismissed a multi-billion dollar lawsuit against Apple by a patent troll firm in that country. The US courts are tightening restrictions on such legal tactics and have let it be known that they see such activity as economically injurious and counter-productive.

The 30+ year trend favoring intellectual property warfare appears to be taking a decided turn away from the have-patent-will-sue approach that has dominated the innovation space ever since 1980.

The question is which set of protagonists is stronger. The trolls have amassed a sizable war chest and have set up a PAC (political action committee) to hand out favors in order to press their case.

Interestingly, however, some of the opposition appears to be as much ideological as financial: there are many in the legal and legislative communities who believe that patent trolling is a form of illegal taxation as the following article explains. While this does not render them entirely immune to the siren song of political contributions, it does raise obstacles to those whose primary claim to benefits is legal rather than operational or intellectual. And given the instinctive conservative business abhorrence of lawyers (at least those who are not working for them), this puts the troll community at a disadvantage. For now.

Whether this tide of legal opinion is sufficient to change US and European patent law remains to be seen. A similar attempt in 2011 was ultimately thwarted. The trolls are more determined than ever, understanding that the forces against them are growing in resolve and resources. Should their opponents prevail, it will end a pretty sweet financial gig for those who pursued it. For the rest of the world, such a victory would portend broader distribution of innovation's benefits. JL

Jeff Roberts comments in GigaOm:

Instead of delivering a wave of new science, the trolls instead unleashed a ruinous regime of lawsuits that amounted to a direct tax on some of the most productive companies in the country.

Momentum is building in Washington to finally fix the country’s patent system, but the good guys better hurry. While Sen. Clare McCaskill, who has decried patent troll “bottom feeders,” moved to fast-track a reform bill this week, the trolls have been busy too. The most pernicious of them, Intellectual Ventures, has started a PAC and could succeed in neutering real reform before Congress scatters to campaign for the mid-terms.
If patent reform fails like it did in 2011, the patent system originally intended to encourage ideas will ironically remain a prisoner of a bad idea: that the economic model of patent trolling somehow produces innovation. Fortunately, every bad idea has a shelf life and sooner or later people abandon it for a better one.

Quack medicine and poor patents

Up until the early 20th century, America’s leading physicians still used scalpels and leeches to draw blood and drain “ill humors” from their patients. Eventually, modern science concluded that this practice, known as bloodletting, did nothing to cure patients and could end up killing them instead. Yet many doctors continued to use it all the same.
Today’s patent troll proponents share something in common with the bloodletting doctors of a century ago: both defend an ill-conceived idea despite mounting evidence that it doesn’t work.
In the case of the patent system, the story of its dysfunction (this time) began in 1980, when courts loosened the rules for what could qualify as a patent. The new rules resulted in ridiculous patents, including for a five-year-old’s method of swinging on a swing, and a general flood of software patents too. More dangerously, this proliferation also led to the rise of patent trolls who amassed old patents by the thousands and promised to spin these “inventions” into gold.
For a time, the trolls succeeded in tricking the public into believing that they were brewing marvelous medicine. In 2009, for instance, the leading patent troll Intellectual Ventures gulled New Yorker writer Malcolm Gladwell into publishing a gushing account of its grand plans to cure malaria and to perfect nuclear fission. But it didn’t work out that way.
Instead of delivering a wave of new science, the trolls instead unleashed a ruinous regime of lawsuits that amounted to a direct tax on some of the most productive companies in the country. Backed by speculative investors, the trolls did their dirty work by distributing their patents to thousands of shell companies, and instructing them to sue everyone in sight. The results have been depressing and expensive.

Stealing joy

Google and Apple recently complained that trolls take them to court hundreds of times a year. Popular startups like Etsy and small app developers are also among the trolls’ targets and, as NPR explained in its landmark documentary “When Patents Attack,” the trolls are even attacking mom-and-pop stores. All of these companies had to divert money from expand their business or hiring employees to pay for the patent trolls instead.
And then there is the emotional toll of getting sued. As one startup entrepreneur explained this week, “a frivolous and unfounded lawsuit like this steals your joy. The joy of running a business, creating and innovating becomes the bane of attorney’s fees, court dates and legal strategy.”
The anti-troll evidence isn’t just anecdotal. There is also mounting scholarly evidence that the patent system is draining billions from the innovation economy, and that trolls threaten emerging industries like biopharmaceuticals.
So why does this continue? Why doesn’t the government simply rewrite the patent laws and put a stop to this? The problem has a lot to do with the power of entrenched ideas — even if the idea is a bad one.

End the bloodletting

Like the bloodletters of old, the patent trolls don’t respond with evidence but with authority. The trolls are fond of solemn pronouncements like “we have to be careful not to harm innovation” and invoking the “intellectual property clause” (a relative neologism) of the U.S. Constitution. Given American’s reverence for inventors — from Ben Franklin to Steve Jobs — those appeals pack a punch. But that doesn’t change the fact that the patent system isn’t working.
That won’t stop the trolls from trying. This month, look for the trolls’ rhetoric to get more shrill at a time when all three branches of government are pondering how to stop the harms they cause. This pressure appears to be what led Intellectual Ventures to launch a PAC to give money to members of Congress who will vote for its twisted vision of “innovation.” If this works, IV’s victims will have to grit their teeth extra hard as they watch the extortion money they paid being used not for malaria cures, but for more patent trolling.
Enough is enough. It’s time for Congress to reject the trolls’ basic premise — that most patents are promoting innovation — and restore a cheap and effective proposal that would let troll victims spear bad patents once and for all. Nervous law makers can take comfort in the fact that the measure would only create a way to challenge bad patents — not all patents — and that innovators have plenty of other methods such as trademark, trade secrets and copyright to protect their inventions.
Real entrepreneurs already confront myriad obstacles to succeed in a tough economy. The least we can do is to take away a government-issued tool that gives parasites a legal way to bleed them.