24 May
2015

There is an intellectual dishonesty at the heart of the case for US patent reform that needs to be discussed

One notable aspect of the debate over whether there is a need for further legislative reform of the US patent system is that almost without fail those who call for new laws do so on the basis that only by making it harder for all patent owners to assert their rights will it be possible to tackle the scourge of patent trolls – entities, they say, that are doing untold harm to innovative American companies and, by extension, the US economy itself. You only have to read the words of Bob Goodlatte and the other backers of the Innovation Act 2015 to see that, as well as those employed by the senators that proposed the PATENT Act.

Likewise, the organisations lobbying for legislative action also justify their stance by citing the menace of trolls: Stop Patent Trolls: Support the Innovation Act of 2015, says the EFF; Patent trolls are threatening businesses, jobs and innovation. Tell lawmakers to pass patent reform legislation … now, says United for Patent Reform; [T]weet at your Representative and Senators. Tell them they need to take a stand against patent trolls and put meaningful patent reform up to a vote, says Engine; and so on.

However, when given the opportunity to identify just who these beasts doing so much harm are – as they were most recently at the Senate Judiciary Committee hearing on the PATENT Act – all of a sudden the argument of the pro-reform side changes; no longer are trolls the issue, they can’t really be defined, we are told; instead it is all about bad and abusive behaviours. The volte face is breathtaking. But not only that; it is also intellectually dishonest.

In order to justify their claims of immense damage being done by patent trolls, the pro-reform side routinely cites studies showing how much money they extract from operating companies, how many lawsuits they file and who they tend to target. But putting aside the very real doubts there are about the numbers many of these studies come up with, and the methodologies they employ, it is a fact that their authors have focused entirely on entities and entities alone.

From the Bessen and Meurer “troll” to the Chien “patent assertion entity”, what is being talked about are businesses pursuing lawsuits; there is no attempt to look at abusive behaviours or the quality of the patents being asserted. So, even if the figures these studies come up with are correct (and, as I say, it is very doubtful that they are) any relationship they have with lowdown strategies and predatory ways of operating is tangential at best, entirely non-existent at worst. All those who cite the figures when advocating reform are smart enough to know this.

When people say that it is hard to define what a troll is this blog could not disagree more. Everyone knows that trolls are out there and how they operate. Trolls leverage the expense of defending a claim of patent infringement in the US by asserting poor quality patents in the hope of extracting a relatively low-cost settlement fee from businesses that cannot or do not want to spend more than that royalty amount on fighting back. Trolls will never take a case to full trial because the cost of fighting a suit in front of a judge and a jury is too high and, in any case, they know that their patents will not pass muster. Trolls are NPEs, undoubtedly, but not all NPEs – by a long chalk – are trolls.

Do you want to see a troll in action? Take a look at MPHJ, the entity that agreed a settlement deal with the FTC late last year. It sent out 16,000 warning letters to SMEs accusing them of potentially infringing its rights and offering a low-cost licensing deal ($1,000 to $1,200 per employee) to go away. Each one of those letters was undoubtedly stressful for the recipient and a major inconvenience; but here’s the thing: MPHJ got two licensees from this campaign and did not take anyone to court; it tried it on and it failed. Now, this is not to say that other trolls do not ask for more money and do not get it, and it is definitely true that what they do is anti-social, unpleasant and plain wrong; but in terms of broadbrush, quantifiable damage such behaviours cause, we have absolutely no idea, none at all. And this is the problem that the pro-reform faces in providing a definition of “patent troll”, to do so would immediately throw into doubt the relevance of the figures they use to provide an empirical basis for their claims.

But without the figures – however dubious they are – all that exists is anecdotes; some of them very harrowing, but anecdotes nevertheless. Because of that we have no way of knowing whether the changes that are being proposed in Congress by the Innovation Act and the PATENT Act – changes that will affect all patent owners, of all sizes, employing every kind of business model, in every type of industry - will do more harm than good. That strikes me as not only being profoundly dangerous, but also plain stupid.

Joff Wild

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Joff Wild