PublishedApril 8, 2016

VirnetX Doesn’t Like Being Called a Patent Troll

Well-dressed trollVirnetX’s CEO, Kendall Larsen, is out with an op-ed in Corporate Counsel where he complains that VirnetX is labeled a “patent troll.” He uses a conveniently narrow definition of “patent troll” that, unsurprisingly, doesn’t seem to fit VirnetX:

  • Their patents cover no real invention, no true breakthrough in science or technology.
  • They are led by lawyers, not scientists, engineers or technology business executives.
  • They neither develop, make nor sell any real products or licensable technology.
  • They assert weak patents — and usually seek nuisance settlements.

A patent troll is, essentially, a company that makes its money by suing companies that it claims are using patents that it has acquired. (For comparison, the FTC said that “The business model of [patent assertion entities] focuses on purchasing and asserting patents against manufacturers already using the technology, rather than developing and transferring technology.” Brian Kahin describes patent trolls as companies whose business is being infringed and whose product is litigation.)

The patent troll may well have strong patents (although they usually don’t), and the patent troll may even do some small amount of research and development (generally to point to in claiming not to be a patent troll). Patent trolls frequently try to settle for nuisance value, but not all do. And not all patent trolls are headed by lawyers.

The real central feature of being a patent troll is that the company has decided to make all (or substantially all) of its revenue by suing companies who are already using a technology, without doing any technology transfer itself. That describes VirnetX.

In fact, VirnetX, which is a publicly traded company, tells the SEC and investors that:

We derive our revenue from patent licensing.

According to its own filing, its “Gabriel Collaboration Suite” doesn’t generate significant revenue. That is, while it may offer a product, VirnetX makes all its money from patent licensing. Moreover, its key patents are at least 15 years old, which is a lifetime in the tech sector. (Larsen references the movie The Bourne Identity as using VirnetX’s technology. That movie came out in 2002.)

I understand that the term “patent troll” is pejorative; that’s why I use it.

VirnetX waited until new industries developed and became profitable before swooping in to sue. It relies on the imbalances favoring patent plaintiffs to make money from litigation, and it doesn’t make money any other way.

Guess what? VirnetX, you’re a patent troll.

Matt Levy

Previously, Matt was patent counsel at the Computer & Communications Industry Association

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