Patent troll
Encyclopedia
Patent troll is a pejorative
but questioned term used for a person or company who is a non-practicing inventor, and buys and enforces patent
s against one or more alleged infringers
in a manner considered by the target or observers as unduly aggressive or opportunistic, often with no intention to further develop, manufacture or market the patented invention
.
The term "patent pirate
" has been used to describe both patent trolling and acts of patent infringement. Related expressions are "non-practicing entity" (NPE), "non-manufacturing patentee", "patent shark", "patent marketer", "patent licensing company", and "patent dealer", which describe a patent owner who does not manufacture or use the patented invention
.
" was used as early as 1993 to describe companies that file aggressive patent lawsuits. The Patent Troll was originally depicted in "The Patents Video" which was released in 1994 and sold to corporations, universities and governmental entities. In "The Patents Video," an unsuspecting victim is surprised by the Patent Troll who strategically positions himself to collect patent licensing revenue.
The metaphor was popularized in 2001 by Peter Detkin
, former assistant general counsel
of Intel, who chose the term from amongst a number of suggestions during a discussion with Anne Gundelfinger, Vice President and Associate General Counsel at Intel. Detkin first used it to describe TechSearch, its CEO, Anthony O. Brown, and their lawyer, Raymond Niro, while Intel was defending a patent suit against them. Detkin had previously used the term "patent extortionist" to refer to a number of companies who were suing Intel for patent infringement and who were trying to "make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced." After Intel was sued for libel, he began using the term "patent troll" instead. Those accused of being patent trolls typically viewed Intel as being a large and manipulative company who had stolen their ideas.
By 2005, Detkin believed that the term was being used to mean any unpopular plaintiff, a more broad definition than he had originally intended. Some definitions could be applied to Intel themselves, contrary to Detkin's intention, in view of their routine practice of asserting patents that they had bought but were not practicing.
Patent troll is currently a controversial term, susceptible to numerous definitions, none of which are considered satisfactory from the perspective of understanding how patent trolls should be treated in law. Definitions include a party that does one or more of the following:
to auction
its patents.
The cost of defending against a patent infringement suit, as of 2004, is typically $1 million or more before trial, and $2.5 million for a complete defense, even if successful. Because the costs and risks are high, defendant
s may settle even non-meritorious suits they consider frivolous
for several hundred thousand dollars. The uncertainty and unpredictability of the outcome of jury trial
s also encourages settlement.
It has also been suggested that distortions in the patent market, such as those caused by long patent application pendency, promote patent trolling.
If the patent office accepts claims that have been invented, published or even patented before, ignoring prior art
, then even existing technologies in use are subject to patent trolling. Reexamination
to invalidate the patent based on prior art can be requested, but these occur rarely (0.33% of patents in U.S.) and often in conjunction with infringement lawsuit. Only the patent holder will participate in this process, and the party requesting the reexamination has no right of appeal and is estopped
from using the same evidence in any subsequent civil action; this risk keeps the popularity of reexamination low despite its lower cost. Furthermore, the most common outcome is not the validation or invalidation of the patent, but narrowing the scope of the claims.
There is also no obligation to defend an unused patent immediately, thus manufacturing companies may produce the patented product for years until the patent troll sues them. For example, the JPEG
format, intended to be free of license fees, was subject to two patent attacks, one by Forgent Networks
during 2002–2006 and by Global Patent Holdings during 2007–2009. Both patents were eventually invalidated based on prior art, but before this, Forgent collected more than $100 million in license fees from 30 companies and sued 31 other companies (see JPEG#Patent issues and references therein).
fees that are grossly out of alignment with their contribution to the alleged infringer's product or service", not their non-practicing status or the possible weakness of their patent claims. The risk of paying high prices for after-the-fact licensing of patents they were not aware of, and the costs for extra vigilance for competing patents that might have been issued, in turn increases the costs and risks of manufacturing.
On the other hand, the ability to buy, sell and license patents is generally productive. By creating a secondary market
for patents, these activities make the ownership of patents more liquid, thereby creating incentives to innovate and patent. Also, aggregating patents in the hands of specialized licensing companies facilitates access to technology by more efficiently organizing ownership of patent rights.
In an interview conducted in 2011, former U.S. federal judge Paul R. Michel regarded "the 'problem' [of non-practicing entities, the so-called "patent trolls"] to be greatly exaggerated." Although there are a number of problems with the U.S. patent system, i.e. "most NPE infringement suits are frivolous because the defendant plainly does not infringe or the patent is invalid", "patent infringement suits are very slow and expensive", and venue abuses, "[...] NPEs may add value to the patents by buying them up when manufacturers decline to do so. Inventors may have benefitted from the developing market in patent acquisition."
s for signs that another company is developing infringing technology, possibly unaware of their own patents. They then develop a plan for how to proceed. They may start by suing a particularly vulnerable company that has much to lose, or little money to defend itself, hoping that an early victory or settlement will establish a precedent to encourage other peer companies to acquiesce to licenses. Alternately they may attack an entire industry at once, hoping to overwhelm it.
An individual case often begins with a perfunctory infringement complaint
, or even a mere threat of suit, which is often enough to encourage settlement for the nuisance or "threat value" of the suit by purchasing a license to the patent. In the United States, suits are often brought in United States District Court for the Eastern District of Texas
, known for favoring plaintiff
s and for expertise in patent suits.
The uncertainty and unpredictability of the outcome of jury trial
s also encourages settlement. If it wins, the plaintiff is entitled as damages
an award of at least a "reasonable" royalty
determined according to the norms of the field of the patented invention.
Patent trolls are at a disadvantage in at least two ways. First, patent owners who make and sell their invention are entitled to awards of lost profits. However, patent trolls, being non-manufacturers, typically do not qualify. Further, patent owners' rights to bar infringers from manufacture, use, or sale of technologies that infringe their patents has recently been curtailed in the court decision eBay Inc. v. MercExchange, L.L.C.
. Rather than automatically granting an injunction, the US Supreme Court stated that Courts must apply a standard reasonableness test to determine if an injunction is warranted. Writing in Forbes magazine about the impact of this case on patent trolls, writer Jessica Holzer concludes: "The high court's decision deals a blow to patent trolls, which are notorious for using the threat of permanent injunction to extort hefty fees in licensing negotiations as well as huge settlements from companies they have accused of infringing. Often, those settlements can be far greater than the value of the infringing technology: Recall the $612.5 million that Canada's Research in Motion forked over to patent-holding company NTP to avoid the shutting down of its popular BlackBerry service."
, most prominently the Eastern District of Texas.
Many common techniques used by companies to protect themselves from producing competitors are rendered ineffective against patent trolls. These techniques include monitoring patent activities of competitors to avoid infringing patents (since patent trolls are not competitors, productive companies usually have no way to find out about the troll or its patents until after significant investments have been made to produce and market a product); going on the offensive with counterclaim
s that accuse the patent plaintiff of infringing patents owned by the defendant (the mutual threat often leads the parties to arrive at a mutually beneficial cross-licensing
arrangement); or a "scorched earth" defense designed to drive up litigation costs (which is equally ineffective because patent trolls plan for and have the finances to fully litigate a case; in fact, some are able to draw on hedge fund
s and institutional investor
s to finance their patent cases). Patent "pooling" arrangements where many companies collaborate to bring their patented knowledge together to create new products are also inapplicable to patent trolls because they don't produce products.
Substantial companies that attempt over-reaching patent litigation are subject to losing their patent rights to a defensive claim of patent misuse
. However, defendants find it difficult to charge patent trolls with misuse because the antitrust
violations typically involved require significant market power on the part of the patent holder. Nevertheless, manufacturers do use various tactics to limit their exposure to patent trolls. Most have broader uses as well for defending their technologies against competitors. These include:
Patent defense companies have been formed In order to counteract problems caused by patent trolls in the high technology industry:
owner who does not manufacture or use the patented invention
, but rather than abandoning the right to exclude, an NPE seeks to enforce its right through the negotiation of licenses and litigation."
Pejorative
Pejoratives , including name slurs, are words or grammatical forms that connote negativity and express contempt or distaste. A term can be regarded as pejorative in some social groups but not in others, e.g., hacker is a term used for computer criminals as well as quick and clever computer experts...
but questioned term used for a person or company who is a non-practicing inventor, and buys and enforces patent
Patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....
s against one or more alleged infringers
Patent infringement
Patent infringement is the commission of a prohibited act with respect to a patented invention without permission from the patent holder. Permission may typically be granted in the form of a license. The definition of patent infringement may vary by jurisdiction, but it typically includes using or...
in a manner considered by the target or observers as unduly aggressive or opportunistic, often with no intention to further develop, manufacture or market the patented invention
Invention
An invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...
.
The term "patent pirate
Patent pirate
Patent pirate may refer to:* Someone who willfully commits patent infringement* Patent troll, someone who defends his patents with undue aggression, often with no intention to market or manufacture the patented invention...
" has been used to describe both patent trolling and acts of patent infringement. Related expressions are "non-practicing entity" (NPE), "non-manufacturing patentee", "patent shark", "patent marketer", "patent licensing company", and "patent dealer", which describe a patent owner who does not manufacture or use the patented invention
Invention
An invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...
.
Etymology and definition
The term "patent trollTroll
A troll is a supernatural being in Norse mythology and Scandinavian folklore. In origin, the term troll was a generally negative synonym for a jötunn , a being in Norse mythology...
" was used as early as 1993 to describe companies that file aggressive patent lawsuits. The Patent Troll was originally depicted in "The Patents Video" which was released in 1994 and sold to corporations, universities and governmental entities. In "The Patents Video," an unsuspecting victim is surprised by the Patent Troll who strategically positions himself to collect patent licensing revenue.
The metaphor was popularized in 2001 by Peter Detkin
Peter Detkin
Peter N. Detkin is a managing partner for Intellectual Ventures.He graduated from the University of Pennsylvania, with a B.S.E.E. in 1982 and J.D. in 1985...
, former assistant general counsel
General Counsel
A general counsel is the chief lawyer of a legal department, usually in a corporation or government department. The term is most used in the United States...
of Intel, who chose the term from amongst a number of suggestions during a discussion with Anne Gundelfinger, Vice President and Associate General Counsel at Intel. Detkin first used it to describe TechSearch, its CEO, Anthony O. Brown, and their lawyer, Raymond Niro, while Intel was defending a patent suit against them. Detkin had previously used the term "patent extortionist" to refer to a number of companies who were suing Intel for patent infringement and who were trying to "make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced." After Intel was sued for libel, he began using the term "patent troll" instead. Those accused of being patent trolls typically viewed Intel as being a large and manipulative company who had stolen their ideas.
By 2005, Detkin believed that the term was being used to mean any unpopular plaintiff, a more broad definition than he had originally intended. Some definitions could be applied to Intel themselves, contrary to Detkin's intention, in view of their routine practice of asserting patents that they had bought but were not practicing.
Patent troll is currently a controversial term, susceptible to numerous definitions, none of which are considered satisfactory from the perspective of understanding how patent trolls should be treated in law. Definitions include a party that does one or more of the following:
- Purchases a patent, often from a bankruptBankruptcyBankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
firm, and then suesLawsuitA lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
another company by claiming that one of its products infringes on the purchased patent; - Enforces patents against purported infringers without itself intending to manufacture the patented product or supply the patented service;
- Enforces patents but has no manufacturing or research base;
- Focuses its efforts solely on enforcing patent rights; or
- Asserts patent infringement claims against non-copiers or against a large industry that is composed of non-copiers.
Causes
Patent trolls may buy patents cheaply from entities not actively seeking to enforce them. For example, a company may purchase hundreds of patents from a technology company forced by bankruptcyBankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
to auction
Auction
An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...
its patents.
The cost of defending against a patent infringement suit, as of 2004, is typically $1 million or more before trial, and $2.5 million for a complete defense, even if successful. Because the costs and risks are high, defendant
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...
s may settle even non-meritorious suits they consider frivolous
Frivolous litigation
In law, frivolous litigation is the practice of starting or carrying on law suits that, due to their lack of legal merit, have little to no chance of being won. The term does not include cases that may be lost due to other matters not related to legal merit...
for several hundred thousand dollars. The uncertainty and unpredictability of the outcome of jury trial
Jury trial
A jury trial is a legal proceeding in which a jury either makes a decision or makes findings of fact which are then applied by a judge...
s also encourages settlement.
It has also been suggested that distortions in the patent market, such as those caused by long patent application pendency, promote patent trolling.
If the patent office accepts claims that have been invented, published or even patented before, ignoring prior art
Prior art
Prior art , in most systems of patent law, constitutes all information that has been made available to the public in any form before a given date that might be relevant to a patent's claims of originality...
, then even existing technologies in use are subject to patent trolling. Reexamination
Reexamination
In United States patent law, a reexamination is a process whereby a third party or inventor can have a patent reexamined by a patent examiner to verify that the subject matter it claims is patentable...
to invalidate the patent based on prior art can be requested, but these occur rarely (0.33% of patents in U.S.) and often in conjunction with infringement lawsuit. Only the patent holder will participate in this process, and the party requesting the reexamination has no right of appeal and is estopped
Estoppel
Estoppel in its broadest sense is a legal term referring to a series of legal and equitable doctrines that preclude "a person from denying or asserting anything to the contrary of that which has, in contemplation of law, been established as the truth, either by the acts of judicial or legislative...
from using the same evidence in any subsequent civil action; this risk keeps the popularity of reexamination low despite its lower cost. Furthermore, the most common outcome is not the validation or invalidation of the patent, but narrowing the scope of the claims.
There is also no obligation to defend an unused patent immediately, thus manufacturing companies may produce the patented product for years until the patent troll sues them. For example, the JPEG
JPEG
In computing, JPEG . The degree of compression can be adjusted, allowing a selectable tradeoff between storage size and image quality. JPEG typically achieves 10:1 compression with little perceptible loss in image quality....
format, intended to be free of license fees, was subject to two patent attacks, one by Forgent Networks
Forgent Networks
Asure Software is a software company which has licensing as its primary revenue source. Prior to September 13, 2007, the company was known as Forgent Networks. Critics claim Asure profits primarily as a patent troll...
during 2002–2006 and by Global Patent Holdings during 2007–2009. Both patents were eventually invalidated based on prior art, but before this, Forgent collected more than $100 million in license fees from 30 companies and sued 31 other companies (see JPEG#Patent issues and references therein).
Effects
A core criticism of patent trolls is that "they are in a position to negotiate licensingLicense
The verb license or grant licence means to give permission. The noun license or licence refers to that permission as well as to the document recording that permission.A license may be granted by a party to another party as an element of an agreement...
fees that are grossly out of alignment with their contribution to the alleged infringer's product or service", not their non-practicing status or the possible weakness of their patent claims. The risk of paying high prices for after-the-fact licensing of patents they were not aware of, and the costs for extra vigilance for competing patents that might have been issued, in turn increases the costs and risks of manufacturing.
On the other hand, the ability to buy, sell and license patents is generally productive. By creating a secondary market
Secondary market
The page applies to the finanical term; For the merchandising concept, see Aftermarket .The secondary market, also called aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold....
for patents, these activities make the ownership of patents more liquid, thereby creating incentives to innovate and patent. Also, aggregating patents in the hands of specialized licensing companies facilitates access to technology by more efficiently organizing ownership of patent rights.
In an interview conducted in 2011, former U.S. federal judge Paul R. Michel regarded "the 'problem' [of non-practicing entities, the so-called "patent trolls"] to be greatly exaggerated." Although there are a number of problems with the U.S. patent system, i.e. "most NPE infringement suits are frivolous because the defendant plainly does not infringe or the patent is invalid", "patent infringement suits are very slow and expensive", and venue abuses, "[...] NPEs may add value to the patents by buying them up when manufacturers decline to do so. Inventors may have benefitted from the developing market in patent acquisition."
Mechanics
Patent trolls operate much like any other company that is protecting and aggressively exploiting a patent portfolio. However, their focus is on obtaining additional money from existing uses, not from seeking out new applications for the technology. They monitor the market for possibly infringing technologies by watching popular products, news coverage and analysis. They also review published patent applicationPatent application
A patent application is a request pending at a patent office for the grant of a patent for the invention described and claimed by that application. An application consists of a description of the invention , together with official forms and correspondence relating to the application...
s for signs that another company is developing infringing technology, possibly unaware of their own patents. They then develop a plan for how to proceed. They may start by suing a particularly vulnerable company that has much to lose, or little money to defend itself, hoping that an early victory or settlement will establish a precedent to encourage other peer companies to acquiesce to licenses. Alternately they may attack an entire industry at once, hoping to overwhelm it.
An individual case often begins with a perfunctory infringement complaint
Complaint
In legal terminology, a complaint is a formal legal document that sets out the facts and legal reasons that the filing party or parties In legal terminology, a complaint is a formal legal document that sets out the facts and legal reasons (see: cause of action) that the filing party or parties In...
, or even a mere threat of suit, which is often enough to encourage settlement for the nuisance or "threat value" of the suit by purchasing a license to the patent. In the United States, suits are often brought in United States District Court for the Eastern District of Texas
United States District Court for the Eastern District of Texas
The United States District Court for the Eastern District of Texas is the Federal district court with jurisdiction over the eastern part of Texas and is a part of the Fifth Circuit. The court's headquarters are in Tyler, Texas and has five subdivision offices in Beaumont, Lufkin, Marshall,...
, known for favoring plaintiff
Plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...
s and for expertise in patent suits.
The uncertainty and unpredictability of the outcome of jury trial
Jury trial
A jury trial is a legal proceeding in which a jury either makes a decision or makes findings of fact which are then applied by a judge...
s also encourages settlement. If it wins, the plaintiff is entitled as damages
Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
an award of at least a "reasonable" royalty
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
determined according to the norms of the field of the patented invention.
Patent trolls are at a disadvantage in at least two ways. First, patent owners who make and sell their invention are entitled to awards of lost profits. However, patent trolls, being non-manufacturers, typically do not qualify. Further, patent owners' rights to bar infringers from manufacture, use, or sale of technologies that infringe their patents has recently been curtailed in the court decision eBay Inc. v. MercExchange, L.L.C.
EBay Inc. v. MercExchange, L.L.C.
eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 is a case in which the Supreme Court of the United States unanimously determined that an injunction should not automatically issue based on a finding of patent infringement, but also that an injunction should not be denied simply on the basis that...
. Rather than automatically granting an injunction, the US Supreme Court stated that Courts must apply a standard reasonableness test to determine if an injunction is warranted. Writing in Forbes magazine about the impact of this case on patent trolls, writer Jessica Holzer concludes: "The high court's decision deals a blow to patent trolls, which are notorious for using the threat of permanent injunction to extort hefty fees in licensing negotiations as well as huge settlements from companies they have accused of infringing. Often, those settlements can be far greater than the value of the infringing technology: Recall the $612.5 million that Canada's Research in Motion forked over to patent-holding company NTP to avoid the shutting down of its popular BlackBerry service."
Defenses
Patent troll "companies have no interest in using the patents... but instead hope to reap large sums of money from the lawsuits themselves." This gives them an advantage over manufacturers since they are relatively immune to the typical defensive tactic large entities use against small patent plaintiffs, because the cost of litigation tends to fall more heavily on an accused infringer than on a plaintiff with a contingency-fee lawyer, and because trolls have an almost-unrestricted ability to choose their preferred plaintiff-friendly forumsForum shopping
Forum shopping is the informal name given to the practice adopted by some litigants to get their legal case heard in the court thought most likely to provide a favorable judgment...
, most prominently the Eastern District of Texas.
Many common techniques used by companies to protect themselves from producing competitors are rendered ineffective against patent trolls. These techniques include monitoring patent activities of competitors to avoid infringing patents (since patent trolls are not competitors, productive companies usually have no way to find out about the troll or its patents until after significant investments have been made to produce and market a product); going on the offensive with counterclaim
Counterclaim
In civil procedure, a party's claim is a counterclaim if the defending party has previously made a claim against the claiming party.Examples of counterclaims include:...
s that accuse the patent plaintiff of infringing patents owned by the defendant (the mutual threat often leads the parties to arrive at a mutually beneficial cross-licensing
Cross-licensing
A cross-licensing agreement is a contract between two or more parties where each party grants rights to their intellectual property to the other parties.-Patent law:...
arrangement); or a "scorched earth" defense designed to drive up litigation costs (which is equally ineffective because patent trolls plan for and have the finances to fully litigate a case; in fact, some are able to draw on hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s and institutional investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
s to finance their patent cases). Patent "pooling" arrangements where many companies collaborate to bring their patented knowledge together to create new products are also inapplicable to patent trolls because they don't produce products.
Substantial companies that attempt over-reaching patent litigation are subject to losing their patent rights to a defensive claim of patent misuse
Patent misuse
In United States patent law, patent misuse is an affirmative defense used in patent litigation when a defendant has been accused to have infringed a patent. It has also been used to mitigate damages following a finding of infringement or justify a failure to pay contracted-for royalties...
. However, defendants find it difficult to charge patent trolls with misuse because the antitrust
Antitrust
The United States antitrust law is a body of laws that prohibits anti-competitive behavior and unfair business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws make illegal certain practices deemed to hurt businesses or consumers or both,...
violations typically involved require significant market power on the part of the patent holder. Nevertheless, manufacturers do use various tactics to limit their exposure to patent trolls. Most have broader uses as well for defending their technologies against competitors. These include:
- Design aroundDesign aroundIn the field of patents, the phrase "to design around" means to invent an alternative to a patented invention that does not infringe the patent’s claims. The phrase can also refer to the invention itself....
s can be a defense against patent trolls. The amount of license fee that a patent troll can demand is limited by the alternative of the cost of designing around the troll's patent(s). - Patent watchPatent watchIn patent law, a patent watch is a process for monitoring newly issued patents on a periodic basis to see if any of these patents might be of interest. Patent watches may for instance be performed on a quarterly basis. It is common practice for corporations in patent-based businesses In patent...
. Companies routinely monitor new patents and patent applications, most of which are published, to determine if any are relevant to their business activities. - Clearance search. A standard practice is to perform a clearance search for patents or pending patent applications that cover important features of a potential product, before its initial development or commercial introduction. For example, a search by Thomas EdisonThomas EdisonThomas Alva Edison was an American inventor and businessman. He developed many devices that greatly influenced life around the world, including the phonograph, the motion picture camera, and a long-lasting, practical electric light bulb. In addition, he created the world’s first industrial...
uncovered a prior patent by two CanadianCanadaCanada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
inventors, Henry Woodward and Mathew EvansMathew EvansMathew Evans is one of two Canadians who developed and patented an incandescent light bulb, on July 24, 1874, five years before Thomas Alva Edison's U.S...
for carbon filament in a non-oxidizing environment, , the type of light bulb Edison wanted to develop. Edison bought the patent for US$5,000 ($ in present-day terms) to eliminate the possibility of a later challenge by Woodward and Evans. - Opposition proceedingOpposition proceedingAn opposition proceeding is an administrative process available under the patent and trademark law of most jurisdictions which allows third parties to dispute the validity of a granted patent or trademark.-Patents:...
. In Europe, third parties may conduct a proceedingOpposition procedure before the European Patent OfficeThe opposition procedure before the European Patent Office is a post-grant, contentious, inter partes, administrative procedure intended to allow any European patent to be centrally opposed...
to oppose overly broad patents. There is a more limited process in the United States, known as a reexaminationReexaminationIn United States patent law, a reexamination is a process whereby a third party or inventor can have a patent reexamined by a patent examiner to verify that the subject matter it claims is patentable...
. As an example, Research In MotionResearch In MotionResearch In Motion Limited or RIM is a Canadian multinational telecommunications company headquartered in Waterloo, Ontario, Canada that designs, manufactures and markets wireless solutions for the worldwide mobile communications market...
, filed reexaminations against broad NTP, Inc. patents related to BlackBerryBlackBerryBlackBerry is a line of mobile email and smartphone devices developed and designed by Canadian company Research In Motion since 1999.BlackBerry devices are smartphones, designed to function as personal digital assistants, portable media players, internet browsers, gaming devices, and much more...
technology. - Litigation. Whereas some companies acquiesce to a troll's demands, others go on the offensive by challenging the patents themselves, for example by finding prior artPrior artPrior art , in most systems of patent law, constitutes all information that has been made available to the public in any form before a given date that might be relevant to a patent's claims of originality...
that invalidates their patentabilityPatentabilityWithin the context of a national or multilateral body of law, an invention is patentable if it meets the relevant legal conditions to be granted a patent...
. They may also broadly challenge whether the technology in question is infringing, or attempt to show patent misuse. If successful, such a defense not only wins the case at hand but destroys the patent troll's underlying ability to sue. Knowing this, the patent troll may back down or lessen its demands. - Early settlementSettlement (law)In law, a settlement is a resolution between disputing parties about a legal case, reached either before or after court action begins. The term "settlement" also has other meanings in the context of law.-Basis:...
. An early settlement is often far less expensive than litigation costs and later settlement values. - Patent infringement insurance. Insurance is available to help protect companies from inadvertently infringing a third party's patents.
- Defensive patent aggregationDefensive patent aggregationA defensive patent aggregation is the purchasing of patents or patent rights to keep such patents out of the hands of entities that would assert them against operating companies...
, the practice of purchasing patents or patent rights from patent holders so they don't end up in the hands of an individual or enterprise that can assert them. Increasingly aggregations are focused on purchasing patents and patent rights off the open market, or out of NPE assertion and litigation, which directly impact the businesses of the aggregation's members. The aggregator then provides members a broad license to everything it owns in exchange for an annual fixed-fee.
Patent defense companies have been formed In order to counteract problems caused by patent trolls in the high technology industry:
- A group of 11 high-tech companies including Cisco SystemsCisco SystemsCisco Systems, Inc. is an American multinational corporation headquartered in San Jose, California, United States, that designs and sells consumer electronics, networking, voice, and communications technology and services. Cisco has more than 70,000 employees and annual revenue of US$...
, EricssonEricssonEricsson , one of Sweden's largest companies, is a provider of telecommunication and data communication systems, and related services, covering a range of technologies, including especially mobile networks...
, GoogleGoogleGoogle Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
, Hewlett-PackardHewlett-PackardHewlett-Packard Company or HP is an American multinational information technology corporation headquartered in Palo Alto, California, USA that provides products, technologies, softwares, solutions and services to consumers, small- and medium-sized businesses and large enterprises, including...
, and Verizon formed in 2008 Allied Security TrustAllied Security TrustAllied Security Trust is a member based patent holding company that helps protect members from patent infringement lawsuits by non-practicing entities.-Business:...
with the goal of identifying and obtaining key patents prior to falling into the hands of patent trolls. - In 2008 RPX CorporationRPX corporationRPX Corporation is a provider of patent risk management solutions, offering defensive buying, acquisition syndication, patent intelligence and advisory services. Since the company was founded in March, 2008, RPX claims to have introduced efficiency to the patent market by providing a rational...
introduced the RPX Defensive Patent Aggregation service to help e-commerce, financial services, hardware manufacturing, networking, software, and wireless companies reduce the risk of NPE assertion and litigation by purchasing patents off the open market.
Criticism of the term
- Overbreadth. Defining trolls broadly as patent holders that do not practice or promote the patented invention includes holding companiesPatent holding companyPatent holding companies are companies set up to administer, consolidate and license patents or otherwise enforce patent rights, such as through litigation...
, most U.S. universities and some individual inventors (e.g. Thomas EdisonThomas EdisonThomas Alva Edison was an American inventor and businessman. He developed many devices that greatly influenced life around the world, including the phonograph, the motion picture camera, and a long-lasting, practical electric light bulb. In addition, he created the world’s first industrial...
). Some of these entities might not intend to profit from the tactics described above: For instance, large businesses typically have separate licensing departments, and may have separate patent holding companies, that are distinct from their research and development operations. - Misapplied. Accusations of trolling may be conflated with broader criticisms of the patent office, or of patent rights in general, by those who claim the patent system is "broken", when in fact problems like poor quality patents, and patent thicketPatent thicketA patent thicket is "a dense web of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology," or, in other words, "“an overlapping set of patent rights” which require innovators to reach licensing deals for multiple patents...
s, are issues compounded by patent trolling, but distinct from it. Critics of the term argue that it is misguided to use it to criticize the patent system, because there are already mechanisms in place to restrain troll-like behavior. The two primary factors are the limited patent term and the obligation to disclose. However, others, such as former Assistant Attorney General Viet Dinh, make the case that the need for patent reform is made all the stronger by the existence of patent trolls who exploit vulnerabilities in the existing patent law. - Political agendaPolitical agendaA political agenda is a set of issues and policies laid out by an executive or cabinet in government that tries to influence current and near-future political news and debate....
. The term is used in a partisan manner by companies seeking to gain benefit at trialTrialA trial is, in the most general sense, a test, usually a test to see whether something does or does not meet a given standard.It may refer to:*Trial , the presentation of information in a formal setting, usually a court...
or by public relationsPublic relationsPublic relations is the actions of a corporation, store, government, individual, etc., in promoting goodwill between itself and the public, the community, employees, customers, etc....
by accusing competitors of being trolls, and also those objecting to or wanting to change the current patent laws on equitable grounds Nathan MyhrvoldNathan MyhrvoldNathan Paul Myhrvold , formerly Chief Technology Officer at Microsoft, is co-founder of Intellectual Ventures. Myhrvold, usually with coinventors, holds 17 U.S. patents assigned to Microsoft and has applied for more than 500 patents. In addition, Myhrvold and coinventors hold 115 U.S...
, the co-founder of Intellectual VenturesIntellectual VenturesIntellectual Ventures is a private company notable for being one of the top-five owners of U.S. patents, as of 2011. Its business model has a focus on developing a large patent portfolio and licensing these patents to companies. Publicly, it states that a major goal is to assist small inventors...
, an alleged patent troll firm, accused the use of the expression "patent troll" as primarily a public relations tactic that large corporations use to intimidate individual inventors in an effort to tilt the playing field in their favor. Parties that themselves actively enforce and license patents they do not practice, may criticize other companies for trolling when it suits their interest to do so. - Legality of conduct Under US law patent owners need not commercialize the inventionInventionAn invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...
to enforce their patents. Patent owners may negotiate any royalty others can be convinced to pay in exchange for a license to not be prohibited from making, using or selling the patented invention, but the only right conferred by holding a US patent is the right to sue to prevent others from making, using or selling the invention or to collect damages for the breach of that right (UK and European patent law, by contrast, contains provisions for compulsory licenseCompulsory licenseA compulsory license, also known as statutory license or mandatory collective management, provides that the owner of a patent or copyright licenses the use of their rights against payment either set by law or determined through some form of arbitration.- Copyright law :In a number of countries...
s). Moreover, the owner of a patent need not be the inventor. Patents are legally transferrableTransfer (patent)As objects of intellectual property or intangible assets, patents and patent applications may be transferred. A transfer of patent or patent application can be the result of a financial transaction, such as an assignment, a merger, a takeover or a demerger, or the result of an operation of law,...
in the sense that they can be bought, sold and licensed to entities other than the inventor(s).
Non-practicing entity
It has been suggested that the term "non-practicing entity" (NPE) be used instead of the term "patent troll". NPEs are however distinct from patent trolls. While many patent trolls are NPEs, not all commonly accused patent trolls are NPEs. An NPE is "a patentPatent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....
owner who does not manufacture or use the patented invention
Invention
An invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...
, but rather than abandoning the right to exclude, an NPE seeks to enforce its right through the negotiation of licenses and litigation."
See also
- Defensive patent aggregationDefensive patent aggregationA defensive patent aggregation is the purchasing of patents or patent rights to keep such patents out of the hands of entities that would assert them against operating companies...
- Defensive publicationDefensive publicationA defensive publication, or defensive disclosure, is an intellectual property strategy used to prevent another party from obtaining a patent on a product, apparatus or method for instance. The strategy consists in disclosing an enabling description and/or drawing of the product, apparatus or method...
- Independent inventorIndependent inventorAn independent inventor is an inventor who creates inventions by himself. They often earn their income from selling or licensing the patents they get on their inventions.Independent inventors are distinguished from inventors who work for corporations...
- Intellectual property brokeringIntellectual property brokeringA intellectual property broker mediates between the buyer and seller of intellectual property and may manage the many steps in the process of creating a deal. This may include; patents, trademarks, know-how and prototypes....
- Patent ambushPatent ambushA patent ambush occurs when a member of a standard-setting organization withholds information, during participation in development and setting a standard, about a patent that the member or the member's company owns, has pending, or intends to file, which is relevant to the standard, and...
- PatentFreedomPatentFreedomPatentFreedom LLC is an on-line community of companies that share information about non-practicing entities that own and enforce patents primarily to collect license fees. Membership is restricted to companies that have more than $100 million in sales per year, exclusive of any income they...
- Projector (patent)Projector (patent)Projector is a 19th century term in United States patent law meaning the original true inventor. “True inventor” at the time meant the first inventor to reduce an invention to practice....
- Rent seekingRent seekingIn economics, rent-seeking is an attempt to derive economic rent by manipulating the social or political environment in which economic activities occur, rather than by adding value...
- Richard FrenkelRichard FrenkelRichard "Rick" G. Frenkel was an in-house intellectual property counsel and director of intellectual property at Cisco Systems.Michelle Massey, , The Southeast Texas Record, March 13, 2008. Retrieved on March 15, 2008...
, once anonymous author of the Patent Troll Tracker blog - Stick licensingStick licensingStick licensing is the practice of licensing a patent or other form of intellectual property where the patent holder threatens to sue the licensee for patent infringement if the licensee does not take a license. In contrast to the stick licensing, the "carrot licensing" is a "friendly approach in...
- Submarine patentSubmarine patentA submarine patent is a patent whose issuance and publication are intentionally delayed by the applicant for a long time, such as several years. This strategy requires a patent system where patent applications are not published. In the United States, patent applications filed before November 2000...
- PatentleftPatentleftPatentleft is the practice of licensing patents for royalty-free use, on the condition that adopters license related improvements they develop under the same terms...
- Trademark trollTrademark trollTrademark troll is a pejorative term for any entity that attempts to register a trademark without intending to use them and who then threatens to sue others who use that mark....
External links
Further reading
- Connell O'Neill, The Battle Over Blackberry: Patent Trolls and Information Technology, The Journal of Law, Information, and Science, 2008, Vol. 17, p. 99-133.
- Maggie Shiels, Technology industry hits out at "patent trolls", BBC NewsBBC NewsBBC News is the department of the British Broadcasting Corporation responsible for the gathering and broadcasting of news and current affairs. The department is the world's largest broadcast news organisation and generates about 120 hours of radio and television output each day, as well as online...
, June 2, 2004. http://news.bbc.co.uk/1/hi/business/3722509.stm - Lorraine Woellert, A Patent War Is Breaking Out On The Hill, Business Week, July, 2005.http://www.businessweek.com/magazine/content/05_27/c3941058_mz013.htm
- Joe Beyers, Rise of the patent trolls, CNET News.com, October 12, 2005.http://news.com.com/Rise+of+the+patent+trolls/2010-1071_3-5892996.html
- Raymond P. Niro, The Patent Troll Myth, Professional Inventors Alliance web site, August 4, 2005.http://www.piausa.org/patent_reform/articles/raymond_p_niro_08_04_2005
- Raymond P. Niro, Who is Really Undermining the Patent System – "Patent Trolls" or Congress?. 6 J. Marshall Rev. Intell. Prop. L. 185 (2007).
- Jennifer Kahaulelio Gregory, "The Troll Next Door", 6 J. Marshall Rev. Intell. Prop. L. 292 (2007).
- Simon Phipps, On Cane Toads, Fire Ants and Patents, SunMink, February 13, 2005.http://blogs.sun.com/webmink/entry/on_cane_toads_fire_ants
- Bakos, Tom, "Patent Trolls", Insurance IP Bulletin, Vol. 2005.3, June 2005. http://marketsandpatents.com/IPB%2006152005.mht
- Ferrill, Elizabeth, "Patent Investment Trusts: Let's Build a PIT to Catch the Patent Trolls", N.C. J. of Law & Tech., Vol 6, Iss. 2: Spring 2005.http://www.jolt.unc.edu/Vol6_I2/pdf/Ferrill%204-23-05.pdf
- Kurt Leyendecker, "Patent Trolls!", Control, Protect & Leverage, A Leyendecker & Lemire Blog, March 14, 2006. http://www.lld-law.com/2006/03/patent-trolls.html
- Colleen Chien, Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High-Tech Patents, 87 N.C. L. Rev. 1571 (2009), available at SSRN. Summarized at Jotwell.