President Obama takes aim at "trolls", but fails to appreciate the complexity of the patent market 17 Feb 13
Barack Obama has put the cat among the pigeons with comments made during a Google Hangout. Answering a question from an entrepreneur who claimed that she and others are “worried” about being “targeted by software patent trolls” and that one potential solution may be reducing the term of software patent protection to five years, the US president replied that while the America Invents Act had taken some steps to tackle the problems that entities “just trying to essentially leverage and hijack somebody else’s idea [to] see if they can extort some money out of them” pose, there is still more to do. He did not dismiss the idea of a reduction in the patent term and stated: “I do think that our efforts at patent reform only went about halfway to where we need to go and what we need to do is pull together additional stakeholders and see if we can build some additional consensus on smarter patent laws.”
There’s a lot that can be said about this, but as I am currently visiting my Kiwi brother and his family in New Zealand, and am supposed to be on holiday until Wednesday (what a great country The Land of the Long White Cloud is, by the way; if you ever get the opportunity, come here), I’ll limit myself to a few points. Before I do, though, it’s noteworthy that the president chose to say what he said during a Google-organised event. Google, of course, is not noted for its love of software patents, even though at least one was absolutely fundamental to its foundation.
Anyway, I am not sure that the entrepreneur who asked the question has been identified, but it would be interesting to know more about her. She needs to be told that the vast majority of companies operating in the US – of whatever size – are never going to come close to a patent suit, let alone one relating to software; and that while there are always plenty of things for entrepreneurs to stay up at night fretting over, software patent litigation should not be one of them. That she and others like her think otherwise is testament to the effectiveness of the concerted campaign that opponents of NPEs and software patents in the US have waged, and the inability of those who hold different views to frame an accessible argument. That the most powerful man on earth is now passing comment on these issues shows just how successful campaigners have been. It is clear that a head of steam is now building and that “The Something Must Be Done About Trolls and Software Patents” point of view is becoming ever-more powerful. In my view that is very worrying indeed.
No-one would claim that there are not parasitic entities out there that do just as President Obama describes. What is much more open to question, though, is just how many there are, how many businesses are affected by them and at what cost. You need to begin with the acknowledgement that not all trolls/NPEs/PAEs or whatever you want to call them are the same. Instead, there is any number of different kinds, pursuing very different types of business model. Universities and companies that spend tens or even hundreds of millions on R&D each year and then license the fruits of their labour do not, in the words of President Obama, “actually produce anything themselves”; are they to be considered trolls? And what of the privateers who are created by or partner with operating companies to assert patents? Then there are organisations which work with lone inventors and micro-entities to help them pursue deep pocket infringers of their rights able to drag a case out in the knowledge that the other side would normally have a finite amount of money to play with. Should they be seen as hijackers and extortionists? I would be surprised if President Obama thought so.
But if you accept that these are all essentially legitimate operators, how do you frame laws which do not get in the way of what they do? And more than that, how do you frame laws which will not affect the business strategies of the hundreds of thousands of US entities that currently hold patents, or those which may want to in the future? It’s all very well saying abolish jury trials, or make a losing plaintiff cover the costs of a successful defendant, or limit the rights of non-manufacturers or service providers; but those strictures will end up limiting the freedom of manoeuvre of not just the terrible “trolls” you do not like, but will also have a potential kickback onto the hundreds of thousands of businesses that you are rather amenable to. Equally, it’s easy to say get rid of software patents, limit their application or cut the number of years of protection they provide, but don’t forget that there are many businesses of all sizes, employing a huge number of Americans and generating large amounts of tax dollars, that have built software patent portfolios and which sell and license products containing them. They are going to be affected by restrictions just as much as wicked “trolls”.
While I have no argument with the findings of people such Colleen Chien at Santa Clara University Law School on the impact that “trolls” have on some start-ups, what I do think is lacking is perspective about these companies as a percentage of the overall number in a particular sector, let alone a concrete and fully transparent definition of what the term “troll” means. If you are going to change the law, surely both need to be established beyond question. Legislation that may make life easier for the few while making things harder for the many is probably not what President Obama is after. Neither will he want his world view framed by research that is questionable. If he wants to take action against what he perceives as a problem, he has to be absolutely certain that the problem is what he has been told it is. After all, there are many companies and organisations with pretty clear agendas in this debate and every reason to present information in a way that benefits their cause.
As stated above, there is no doubt that there are some unsavoury entities out there which do prey on SMEs and others and which essentially seek to extort cash from them. However, it is far from established just how many of them there are or what negative impacts they have. Some people use the term “troll” to mean one thing, others use it to mean something else entirely. There are companies which feel they have a right to appropriate the IP others have created and that they are victims when called to account for doing so; there are others whose business models are about offering anti-“troll” solutions and which have an interest in making the problem seem huge; there are others who are philosophically opposed to IP and see “trolls” as a stick with which to beat the entire system; and, of course, there are others still who are genuinely convinced that a problem exists and that it is causing significant harm. The trick is to be able to tell one from the other, and to look very carefully at the evidence they offer in support of their arguments to see whether it stands up to proper scrutiny. Only then is President Obama or anyone else in a position to start to make big calls about what should be done.
Given what the patent system has helped to enable in the US over the last 200 years, reform based on anything other than the most thorough scrutiny of the facts about trolls/NPEs/PAEs and software patents, and rock solid assessment of the consequences change might bring about, would be extremely dangerous. We do not have any of that yet. That’s why I have always been an advocate of market-based solutions to perceived problems with the patent system, devised by people who know exactly how the market works and precisely what they want to achieve. I have yet to see any evidence to make me change my mind.
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