Joff Wild

The debate about patents and patent reform is taking a nasty turn in the United States. Over recent months, a series of articles have appeared in various online and printed publications discussing what are usually termed as government or state sponsored patent trolls. According to the authors of such pieces, these are entities established by foreign governments in order to leverage the patent system for their own selfish, predatory ends.

In the Boston Globe at the start of November, James Bessen and Michael Meurer described them as “firms with no interest in innovation or technology transfer; they hold patents to assert them against innocent businesses to extract some of the profit from genuine innovators”. More recently, in an article published on the Forbes website and also in the American Spectator, Donald Rieck and Wayne Winegarden labelled them as entities that “exploit loopholes in the current patent system for the sole purpose of extorting royalties from innovators who are actually using the new technology in their production processes”.

In both articles and others, a lot of the same organisations are held up as being examples of this new and damaging phenomenon: France Brevets, the Innovation Network Corporation of Japan (INCJ), Taiwan’s Industrial Technology and Research Institute (ITRI) and Ruichuan IPR Funds in China. These are all entities, the reader is invited to believe, that have been set up essentially to extort money from innovative American companies, so increasing their costs, hampering their ability to invest and in some circumstances possibly closing them down.

The problem, though, is that none of it is actually true. And that means one of two things is happening: lies are being deliberately told to misinform readers and skew debate; or the authors of these pieces are too incompetent to do even basic research. Either way falsehoods are being propogated for political ends - and it stinks.

This blog has already looked at the attempts by Bessen and Meurer to label France Brevets, INCJ and ITRI as trolls. And we have demonstrated that what the two Boston University academics claimed was almost comically incorrect. The Rieck and Winegarden article repeats these untrue accusations, but in addition also talks about China seeding “its version of the state-run patent troll – the Ruichuan IPR Funds – with $50 billion”. Once again, this is false.

Ruichuan IPR Funds was established earlier this year, not by the Chinese government but by a consortium of private companies, including the likes of Xiaomi, electronic appliances producer TCL and software developer Kingsoft. It has received some funding from local government in Beijing, but most comes from operating companies that make and sell products. The projected maximum size of the fund is RMB500 million, which equates to around $80 million. It was set up to enable Chinese companies to purchase patents that will allow them to secure improved freedom to operate as they move into foreign markets.

As anyone who knows anything about patent litigation will be able to tell you, Asian companies that have come to the US to sell their products have been subjected to patent attacks from both operating companies looking to protect market share and NPEs looking to generate licensing income. A lack of IP has made them susceptible to the former by minimising the opportunity for cross-licensing, while allowing the latter to acquire certain portfolios unchallenged has heightened exposure to assertion for monetisation. Establishing and investing in entities such as Ruichuan is a way of combatting both vulnerabilities. That is the reality. The Chinese companies concerned are reacting rationally to the very specific IP challenges that the US presents.

However, from a political perspective to portray Ruichuan as a patent troll created by the totalitarian Chinese government with the aim of disadvantaging brave and blameless US businesses is a very powerful thing. If the narrative catches on, it would virtually make it a patriotic duty for legislators to do something – through reform legislation and/or through trade treaties. Thus, you can see why it is in certain interests to make the claims that are being made.

But here’s the thing: it is just wrong to deliberately misreport and misrepresent. And doing a brief internet search for government sponsored or state sponsored patent trolls shows that there are far too many articles of a very similar type for it to be coincidence. Something is going on; there is a co-ordinated effort to place the threat of evil foreign trolls into the reform debate. And it stinks. If you want change, make the case fairly and squarely. Invoking a non-existent threat supposedly posed by non-American entities to get what you want is dog whistle politics of the basest, most disgraceful kind. Those who do it are basically admitting they have no decent arguments to make. Unfortunately, there is every chance their shamelessness will end up succeeding.