March 4, 2014
Well, the numbers are in for 2013, and it seems that patent trolling shows no signs of slowing down. According to RPX, trolls sued over 4,800 companies last year, up from the 4,282 they sued in 2012.
Now, some argue that it’s not patent trolls that are the problem; it’s big companies “stripping garage inventors of their rights.” What are poor patent trolls to do?
Hath not a patent troll eyes? Hath not a patent troll hands, organs, dimensions, senses, affections, passions? If you prick a patent troll, does it not bleed?
(Yes, I did say this, which is why you should try to attend any panel I’m on.)
Seriously, do you expect us to believe that, for example, Google and Apple ripped off a few “geniuses” a month in 2013?
The number of companies targeted by entities that do nothing but make money from patent litigation is increasing steadily. The Government Accountability Office, for example, which was fairly conservative in its estimates, found that the number quadrupled from 2007 to 2011.
When you start to look at the scale of the patent trolling, it becomes harder and harder to swallow the argument that this is mostly inventors (and their proxies) defending their hard work.
Yes, it’s possible that the number of companies intentionally ripping off innocent inventors quadrupled over a five year period, and increased 13% from 2012 to 2013 (notwithstanding all the media coverage of extraordinary damages in patent cases coming out at the same time).
But isn’t it more likely that this growth in patent trolling represents a simple expansion of a profitable industry? I’m thinking that Occam’s Razor (which suggests that the theory with the fewest assumptions is most likely the correct one) supports this explanation.
Not that I expect the argument that big companies are a bunch of thieves to go away. As Upton Sinclair famously said, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
March 4, 2014
There are now twelve bills that have been introduced this Congress to deal with some aspect of the patent troll issue. We thought it might be helpful to give you a quick rundown of each of the currently pending bills:
- Innovation Act (H.R. 3309)
- Patent Transparency and Improvements Act (S. 1720)
- Patent Quality Improvement Act (S. 866)
- Patent Abuse Reduction Act (S. 1013)
- Patent Litigation Integrity Act (S. 1612)
- Transparency in Assertion of Patents Act (S. 2049)
- Demand Letter Transparency Act (H.R. 3540)
- Innovation Protection Act (H.R. 3309)
- Patent Litigation and Innovation Act (H.R. 2639)
- SHIELD Act (H.R. 845)
- Stopping the Offensive Use of Patents Act (STOP Act) (H.R. 2766)
- End Anonymous Patents Act (H.R. 2024)
There are a few basic areas that are being addressed:
making the Covered Business Method review program available to more industries to allow them to deal with existing bad patents patent trolls often assert
curbing abusive litigation tactics patent trolls use
adding transparency to get at who is really supplying patent trolls with patents and with funding
I’ll go through them individually below.
February 27, 2014
Yesterday, the U.S. Supreme Court heard arguments in two related patent cases, Octane Fitness LLC v. ICON Health & Fitness LLC and Highmark Inc. v. Allmark Health Management Systems. Both cases have to do with the standard for fee-shifting in patent cases, but it’s the Octane case that is the most relevant.
The statute, 35 U.S.C. § 285, says that,
The court in exceptional cases may award reasonable attorney fees to the prevailing party.
In the Octane case, the question is pretty simple: when is a case “exceptional”? It turns out that the answer isn’t so simple. As the New York Times reported, the Justices were all over the map in trying to figure out how to draw the line. They really struggled in trying to understand what Congress intended.
One argument we’ve heard against patent reform is that the Supreme Court was going to take up the whole fee-shifting issue and might fix everything. After yesterday, I wouldn’t bet on the Court being able to fix fee-shifting or even improve the status quo.
So keep going, Senate!
February 25, 2014
The patent troll debate can get abstract, with people debating numbers and data. But there’s a real, human toll.
Here’s a powerful video that tells the story of two patent troll victims in Illinois and the real consequences:
February 21, 2014
I just heard the news that Intellectual Ventures formed a political action committee, apparently to lobby against patent reform. It’s certainly an interesting use of IV’s funds at a time when the company is laying off workers.
I completely understand IV’s desire to improve its image. But I think that this move will be perceived kind of like potholes forming a PAC to lobby against road maintenance.
At some point, IV may just have to face the reality that the hate directed towards it isn’t just about a poor product launch. Americans instinctively don’t like it when someone comes along to claim a piece of something he didn’t have any part in building, but that’s how IV makes its money.
Intellectual Ventures can buy political ads and donate to candidates, but I really don’t think patent trolling is going to become politically popular, no matter how much IV spends.
February 20, 2014
Last June, the Obama Administration announced a number of executive actions to tackle the patent troll problem and improve patent quality. President Obama also talked about patent reform in his State of the Union speech this year. Today, the Administration followed up with a progress report and some new actions.
Overall, there are good developments to report. The USPTO has moved forward with rules requiring patent owners to disclose the full chain of ownership, which should help deal with the problem of patent trolls using shell companies to hide the real owners. The USPTO is also launching a pilot program that will try to use glossaries in patent applications to make patent claims clearer.
Today the USPTO launched the website http://www.uspto.gov/patents/litigation to provide information to “main street” businesses that get sued by patent trolls.
And the Administration announced today that it’s reaching out to industry to get help gathering prior art and training examiners in current technology.
These are all positive steps, and the Administration’s recognition of the need for dealing with poor quality patents and patent trolls has been a major factor in moving reform forward. The Administration has renewed its push for patent reform legislation as well.
The House of Representatives passed the Innovation Act late last year, and now the Senate needs to pass similar legislation; the PTO needs the help to deal with low quality patents that are too often the basis for costly, abusive and frivolous litigation by patent assertion entities.Only Congress can put a stop to abusive patent litigation tactics and make patent trolling less profitable. Hopefully, the Administration’s attention to the issue will help patent reform keep momentum in the Senate so that we can get a good bill done this year.
February 19, 2014
This story is so embarrassing for the U.S. Patent & Trademark Office and the patent system, I almost don’t want to write about it.
You might remember that about a decade ago, a South Korean scientist, Hwang Woo-Suk, claimed to have cloned a human embryo. Then, it turned out that the work was a fraud, and a few years ago Hwang was fired and convicted of various crimes in South Korea.
And yet, he just got a U.S. patent on his work. That is, the work that didn’t exist.
According to the NY Times article, the USPTO knew about the fraud and issued the patent anyway. But it’s much worse than the Times article describes.
According to the prosecution history of the patent, the USPTO actually relied on an affidavit from Hwang in issuing the patent. And the affidavit was submitted four years after his conviction in South Korea for embezzling his research funding.
This is what happened: The examiner rejected Hwang’s application as not teaching how to perform the cloning technique Hwang claimed. That makes sense, because Hwang didn’t actually know how to do it — he’s a fraud.
But just last year, Hwang submitted an affidavit claiming that he had actually done the things the examiner cited, and giving his expert opinion that they were within the skill of an ordinary person in the art.
One might expect the examiner to respond with peals of laughter followed by throwing the affidavit in the trash. Nope.
The examiner accepted the affidavit and issued the patent.
Inventors submit such affidavits all the time, and the affidavits are presumed to be accurate. But this is hardly a normal situation.
Hwang is a known fraud, who admitted falsifying the results from the supposed invention that he was trying to patent!
January 23, 2014
The Supreme Court just issued a decision in the Medtronic case, and it was a unanimous reversal of the Federal Circuit. Since the Supreme Court first reviewed a patent decision by the Federal Circuit in 1996 (the Federal Circuit was formed in 1982, but it was 14 years before the first review by the Supreme Court), the Federal Circuit has been affirmed a fraction of the time and reversed unanimously a majority of the time.
Has any court’s reasoning ever been so soundly and consistently rejected by the Supreme Court?
If the purpose of the Federal Circuit was to make life easier by unifying patent law, it’s arguably done that. It might be nice if that “unified” court actually got most of the important patent questions right, but I guess you can’t have everything. (To be fair, the Federal Circuit did get affirmed 3 times in the 2010-11 term, but the reversals started again the next term with Mayo v. Prometheus, which was unanimous.)
I get that there’s a certain sense of prestige that comes with having a specialized court for one’s area of law. But wouldn’t it be better to have the courts of appeals get it right more of the time?
January 23, 2014
At the end of last week, the Supreme Court granted petitions for certiorari for two more patent cases. That means that there will probably be six patent cases decided this term. And several of them are big.
Here’s a very quick summary of the issues in the cases the Court will hear (or has heard) this term:
This case was argued back in November. Essentially, Medtronic licenses patents from Boston Scientific for a type of pacemaker. Medtronic doesn’t want to have to pay royalties for new products that it doesn’t believe infringe the licensed patents, so it filed a declaratory judgment action against Boston Scientific, asking the court to declare that Medtronic’s new devices don’t infringe Boston Scientific’s patents. The issue is whether Medtronic has to prove its devices don’t infringe, or Boston Scientific has to prove that they do.
These two cases will be argued the same day, February 26, and they deal with essentially the same issue: when is a case “exceptional” within the meaning of the fee-shifting provision of the patent statute?
The Federal Circuit has set the standard extremely high: a winning defendant must prove by clear and convincing evidence that the patent owner’s claims were objectively baseless (meaning that no reasonable person would think they would succeed) and brought in subjective bad faith (meaning that the patent owner knows that claims are baseless). In practice, it’s rare that a defendant can meet this standard, and because the statute only awards attorneys’ fees but not expenses, it’s common for defendants to just walk away without asking for fees.
January 15, 2014
MPHJ is probably the most notorious bottom feeder troll, threatening thousands of small businesses who might own scanners that scan documents and email them. It’s been so active that it’s drawn fire from the attorneys general in Vermont, Minnesota, and Nebraska. New York recently joined the fray, negotiating a settlement with MPHJ that requires the troll to refund license fees to some New York businesses.
One big complaint about MPHJ has been that its threats were empty, because it never sued anyone. (Except for one company — an earlier incarnation of MPHJ called Project Paperless sued a company called BlueWave Computing and ran when the company fought back. Soon the patents were transferred to MPHJ and a network of shell companies started sending thousands of threat letters.)
It turns out that MPHJ’s strategy of sending thousands of demand letters to small businesses didn’t work too well. It seems that MPHJ got only seventeen companies to take licenses.
So not only did MPHJ become the symbol of the patent troll problem, it didn’t even manage to make much money for all that grief.
Well, MPHJ is mad as hell, and it’s not going to take it any more. MPHJ recently sued some big companies, including Coca-Cola, UNUM, and Dillard’s.
And in even bigger news, MPHJ has now sued the Federal Trade Commission along with all of the Commissioners. It seems that the FTC was ready to take action and MPHJ decided to sue preemptively. MPHJ is basically claiming that it’s doing nothing wrong and the FTC is cramping its style.
January 13, 2014