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The Ridiculousness of Patent Trolls, and Marshall, Texas

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The Ridiculousness of Patent Trolls, and Marshall, Texas

April 24, 2015
By Tara Seals, TMCnet Contributor

Most Americans are unfamiliar with the term “patent trolls”—companies who buy up patents and then quite literally troll around looking for other companies that may be (mostly inadvertently) violating them.

But, as Last Week Tonight’s John Oliver said, “Calling them trolls is a little misleading because trolls actually do something. They control bridge access for goats and ask fun riddles. These people simply sue the living [bleep] out of people.”


Patent trolls are companies—often with shadowy ownership, with nondescript names like IP Nav and Pragmatus—that buy up patents but create no products themselves. They solely exist to litigate and, some say, extort businesses of all kinds into giving them money via settlements.

And it’s a not-un-sizable problem: Of the 4,700 patent suits mounted in 2012, 3,000 came from trolls, Oliver pointed out in a segment on his HBO show. The White House said that since then, the volume of suits has tripled. In all, there has been a half a trillion dollars in payouts since 1990; right now, patent trolls cost are costing companies $29 billion per year.

“In order to lose that amount of money, Johnny Depp would have to star in the Lone Ranger over one hundred times a year for 25 years—that’s a horrifying amount!” Oliver quipped.

The troll’s M.O. is simple: it mounts an expensive patent infringement suit that can cost $2 to $5 million to defend against—leading many firms to simply settle for six figures instead. In fact, 90 percent of patent suits are settled. And two-thirds of those patent suits are bought by trolls.

According to the Harvard Law Review, the frivolous lawsuits most certainly hurt innovation and the greater economy. “These costs fall disproportionately on innovative firms: the more R&D a firm performs, the more likely it is to be sued for patent infringement, all else equal,” HBR noted. “The biggest impact is on small startup firms--most patent trolls target firms selling less than $100 million a year.”

How did we get to this point? It’s a problem borne of the early days of software innovation. For the U.S. Patent Office to award a patent, the technology needs to be shown to be new, useful and non-obvious. But during periods of overwhelming change, the office gets overwhelmed. It happened with the railroads at the turn of the 19th century, and it happened with software. In many cases, patents for software were so broad and vague that they may give someone the ability to claim ownership for inventions that they never dreamed of at the time.

For instance, a patent troll called Unilock holds a patent for a technology upon which all Android (News - Alert) apps are based.

“You don’t even have to make something to be targeted—you just have to use it,” Oliver noted, citing the case of a company that helps people with disabilities find work. A patent troll sued the small company for $1,000 for each employee that uses a certain printer’s scan to email function. As Oliver said, these are people who will have a parking space next to Satan when the time comes.

But it gets more ludicrous: Companies like Apple, Samsung (News - Alert) and Microsoft have found themselves in court in Marshall, in East Texas, population 24,000. In fact, a full quarter of patent suits are filed there, and “it’s not because people are inventing like meth addicts in a Home Depot aisle,” as Oliver put it. It’s because of how friendly the court is there to plaintiffs.

Companies have taken to public relations to try to woo Marshallians back to their corners. Samsung for instance has almost a million dollars on community projects there, like an ice skating rink right in front of the courthouse.

But patent troll suits are having a chilling effect of a very different sort when it comes to technology development and R&D funding. One survey of software startups found that 41 percent reported “significant operational impacts” from patent troll lawsuits, causing them to exit business lines or change strategy. Another survey of venture capitalists found that 74 percent had companies that experienced “significant impacts” from patent demands.

Further, Catherine Tucker, a researcher at MIT (News - Alert), estimated that lawsuits from frequent litigators (largely patent trolls) were responsible for a decline of $22 billion in venture investing over a five-year period. That represents a 14 percent decline.




Edited by Maurice Nagle

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