From March to September 2016 the team is joined by Guest Kats Emma Perot and Mike Mireles.

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Sunday, 13 March 2016

Where has the patent troll gone?


Guest Kat Mike Mireles last week reported on partent trolls in terms of myth and metaphor. This Kat would like to explore the patent troll from a different angle. Is it this Kat’s misplaced impression, or has the issue of the patent troll (or in its more anodyne form—patent assertion entity or PTE) moved off center IP stage to at best a supporting role? Indeed, is it on a path of extinction as a patent agenda item?

Most Kat readers will recall the lavish attention paid to calls that the patent troll posed a threat to the integrity of the patent system. Mind you, the patent troll is the lawful owner of a patent who makes no use of the patented invention, but rather seeks to extract payment from third parties against the backdrop of a threat to sue if the third party declines the offer. As the golden age of patent system began to give way at the beginning of 21st century to increasing questions about the system’s ultimate efficacy and social value, the patent troll provided a perfect image to embody these concerns. Yes, trolling might be legal in a narrow technical sense, but it was an affront to the bargain between the inventor and the public to allow exclusive rights in a patented invention. Trolling was not what the patent system was meant to be.

Even after the U.S. Supreme Court in the eBay decision in 2006 curtailed the presumed right of the patentee to receive injunctive relief upon a finding of an infringement, the patent troll continued to be front and center in public discourse about what was wrong with the system. Most notably, the patent troll moved from posing a threat to individuals to constituting a threat in the aggregate to national and even international economic well-being. In particular, the claim was increasingly being made that patent trolls negatively impacted on innovation. Patent trolls were fingered as a material cause for the decline in innovation, and became the object of policy commentators both from the economics and intellectual property law communities.

The high point perhaps was the June 2013 White House Report, PATENT ASSERTION AND U.S. INNOVATION, which concluded in the Executive Summary, as follows;
“A range of studies have documented the cost of PAE activity to innovation and economic growth. For example: One study found that during the years they were being sued for patent infringement by a PAE [i.e., a patent troll], health information technology companies ceased all innovation in that technology, causing sales to fall by one-third compared to the same firm’s sales of similar products not subject to the PAE owned patent.

Another study found that the financial reward received by winning PAEs amounted to less than 10% of the share value lost by defendant firms, suggesting that the suits result in considerable lost value to society from forgone technology transfer and commercialization of patented technology.

History suggests that it should be possible to address these challenges.“
In November 2013, as this Kat previously reported, over 60 intellectual property professors sent a letter to the United States Congress, setting out their critique of the patent system and suggestions for reform. Inter alia, the letter discussed the negative aggregate effect of patent trolls on innovation, as follows--
“To be sure, PAEs can in theory play a beneficial role in the market for innovation and some undoubtedly do. However, empirical evidence strongly suggests that many PAEs have a net negative impact on innovation. Technology companies – which, themselves, are innovators –spend tens of billions of dollars every year litigating and settling lawsuits filed by PAEs, funds that these tech companies might otherwise spend on additional research and design.”
Based on these quotations, it would have seemed that patent trolls were poised to become a (the?) central patent policy issue of our time, engaging no less than the White House and the Congress and attracting wide-spread support by IP academics not usually known for herd-like thinking. After all, what is at stake, it appeared, is the state of US innovation and perhaps even the future of the US economy. But then, interest in patent trolls seems to have waned.

In considering this decline, this Kat first relies on his own anecdotal impressions. The subject of patent trolls seems to be less discussed at conferences, in the professional literature and in the press. In a word, there simply seems to be less buzz about the subject. Interestingly, as this Kat has suggested elsewhere, the poster child for the risks (or opportunities) in the potential for scaling-up patent trolling, namely Intellectual Ventures, seems to have a significantly lowered public presence. Whether a cause or effect of the more general decline of the patent troll is an interesting question. Moreover, this Kat wonders whether the difficulty in defining what is meant by a patent troll has also contributed to this decline. (See pages 22-49 for a discussion of this problem.) When there is no broad consensus on what is being discussed, the ability to offer meaningful policy prescriptions becomes more limited. Perhaps the claim that patent trolls are a drag on innovation is simply an empirical bridge too far that will not (cannot?) yield meaningful results. Or maybe there is simply less patent trolling, whatever that means.

Myth, metaphor, rhetoric or substance—Kat readers can decide for themselves.

5 comments:

THE US anon said...

Neil,

Your piece here is missing a sizable item, especially in light of the writings of Guest Kat Mike Mireles, and referencing the use of the pejorative "Tr011" in the U.S. propaganda battle of the soundbytes.

The piece that you miss is the fact that Ron Katznelson properly put in front of our executive branch a legal request for clarification of sources for the use and meaning of the word "Tr011" in that very same presidential policy "white paper" that your trumpet. He did this on what is fast approaching a full year ago.

The White House has a statutory reply period (if I recall correctly) of three months.

That reply period has come and gone - and yet to this day the White House has not responded to the well written (and exhaustive) critique of the pandering use of the pejorative by the White House.

Your "high point" is upside down.

You (one sidedly) omit as well the more objective (read that as not pushing policy) OMB report earlier that summer that largely dismissed the "Tr011" as a driver in the "evils" that the "Tr011s" were supposedly engaging in.

You also (one sidedly) omit a response letter to the letter of "60 intellectual property professors" that panned the first letter - as well as make reference to the fact that the US blogosphere ALSO largely panned that first letter.

I will also point out that your statement of "Yes, trolling might be legal in a narrow technical sense, but it was an affront to the bargain between the inventor and the public to allow exclusive rights in a patented invention. Trolling was not what the patent system was meant to be." is completely wrong as a point of historical accuracy.

The actions which underlie the accusation of "Tr011ing" were in fact deliberately made a part of the US patent system - right from the beginning. This is easily reflected in the aspect that patents are property - a property that was meant to be fully and freely alienable. It very much was a part of our sovereign wish and design to allow third parties to acquire - and enforce - property rights that they had no hand in bringing into being. Further, the nature of the patent being a negative right (and not a positive right) ALSO reflects on the aspect of a (secondary) property owner to NOT have to be "practicing" that which is protected by the patent.

The call for "Kat readers to decide for themselves" would have a more "authentic" ring to it, if your own call were a bit more balanced and objective.

Sadly, your "piece" lacking such balance, merely falls into that which needs to be guarded against.

MaxDrei said...

Neil, I read your piece and my first thoughts were:

Yes, me too. I also see less hand-wringing about trolls. It could be that these days there is indeed less troll activity.

How that? Well, if you are an NPE and have plans to shake down infringers, you need investors. Perhaps there are fewer of them around, these days. Perhaps they have lost their enthusiasm so to invest.

Why that? Because at the poker table, instead of folding, targets take their chances with the courts.

Why that? Because of the Sea Change at the courts, effectively reversing State Street and finding (over and over again) ineligible the claimed subject matter that is being asserted by the NPE. After all, most of the claims asserted by the NPE's are business methods with a contribution to the useful arts that we can summarise as "do it on the internet". Investors have rumbled that such claims simply don't cut the mustard any more.

Stephen Johnson said...

It is fair to say that in the US in 2015, there was gloom surrounding patent assertion as an investment proposition, brought about by successful and early court challenges to patentability under Section 101 following the Supreme Court cases on the topic of the past few years, the success of challengers invalidating patents using the newer patent office proceedings such as IPRs, further Supreme Court decisions which enabled more frequent fee shifting and Federal Circuit damages cases which led to more focused damages awards. Some suggested patent assertion would be exported to Europe and the new UPC. However, in 2016, things may change. The Supreme Court is to review the standard for invalidity applied in IPRs and will also decide whether enhanced (potentially trebled) damages for willful infringement of a patent will be more easily obtained.

Unknown said...

Anon is correct.
My IQA administrative challenge to the White House PAE Report, which relied on sources purporting to document patent litigation rates, quantify the private and social costs of patent litigation, survey “victims” of PAE litigation, and show the purported adverse effects of PAE activities. This information includes studies that have undergone no peer review; that have relied on opaque or erroneous methods and surveys; that lack objectivity; and lack practical utility.

My Petition concludes with 21 specific requests for correction supported by evidence and arguments. It provides a compendium of detailed analyses of fundamental flaws surrounding data and methods used in eight commonly cited academic studies purported to document PAE harms, upon which the PAE Report relies.

The IQA petition is available at http://bit.ly/WH-IQA

Ron Katznelson, USA.

THE US anon said...

From another thread, the quote "As Blogmeister Emeritus Jeremy warned in his parting comments, the traditional media needs to be watched when it comes to their positions on intellectual property." reverberates here - perhaps most loudly.

As can be noted on several threads, the next question is "who is watching those watching the traditional media?"

Do we (the royal we) want to not watch a rather non-objective academia be the un-watched watchers?

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