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September 05, 2012

New York Times and Friends Take on Fight with Patent Troll

By Peter Bernstein, Senior Editor

In case you missed it, there was an interesting piece on Crain’s New York Business website a few days ago that highlights the fact that the U.S. is in desperate need of patent reform as witnessed by of all entities The New York Times (NYT aka “The Times”) taking up the fight against patent trolls. This hopefully causes the policy makers to take notice and act.

Take that! Helferich Patent Licensing

Crain’s did a fine job detailing what it going on here. Summing up quickly, NYT is leading the defense by a diverse group of companies that use text messaging capabilities that allows for embedding Web links in such messages on mobile phones. The group feels the technology should be free. However, inventor Richard Helferich was given a U.S. method patent for the technology in question back in 1997. In fact, he was granted several patents on the method. Long story short, with patent in hand he had the right to pursue those he felt infringed on his intellectual property (IP) and he has done so with gusto.

Since 2008, Helferich Patent Licensing (HPL), has filed 23 suits against some very high profile companies. You can do o the math here. HPL targets a possible infringer and asks them to make a one-time settlement fee of $750,000. This may seem large, but in the patent wars, unfortunately, it is a paltry sum. Attorney fees and the opportunity costs of contentious and lengthy litigation, along with the risks of losing, mean most companies would rather pay to play instead of fight. It is estimated that roughly 100 companies have caved to HPL.

NYT has put its foot down and said enough is enough. The article quotes Times' general counsel, Kenneth Richieri, as saying, "In some ways, it's a tax for being on the Internet…Millions and millions of dollars collectively is going out of the pockets of people who earned it to people who, in my opinion, didn't do anything."

The rock and the hard place

The rest of the Crain’s account is chock full of interesting information. It lays out the substantial virtues of having a system in place to protect innovators from not being compensated for the use of their intellectual property, but the conundrum of what to do about companies whose only business seems to be in extracting fees for things they never have and do not intend to commercialize themselves, i.e., entities that collectively are called “patent tolls.”    

The U.S. Patent and Trademark Office (USPTO) issued around 245,000 patents in 2011. However, the question is how many of those warranted the full protection they were afforded? Plus, how do we keep people from gaming the system? 

The HPL case is interesting on several fronts. On one hand, NYT and friends have picked a target that may not fit the perfect definition a troll since while HPL is a licensing company it appears that  Mr. Helferich has made some efforts in the past to monetize his patent grants via product realization on other fronts if not this precise one. Albeit, he seems much better in his role as a troll. In addition, even if he did nothing more than troll, that activity is perfectly legal. Patent holders, including those with method patents are under no obligation to actually make what they propose.  

That said, HPL seems worth pursuing for purely financial reasons. There is evidence that Intel (News - Alert) has a claim for having prior art in regards to the specific IP being disputed. A ruling against HPL would mean if anyone’s IP had been infringed it was Intel’s. This no doubt would create an entirely different legal scenario for all involved including Intel.

This is a non-trivial matter since as anyone who has been following the Facebook (News - Alert) problems since the IPO and the questions surrounding its ability to monetize its substantial presence and the preponderance of use of the social network on mobile devices, knows that embedding links where needed on mobile messages is critical to making money. Intel, hypothetically, as an arms dealer to the industry one would think would be more likely to put this IP in the commons free of charge rather than antagonize an entire ecosystem over something that for them is pocket change.   

Another thing to consider here is the valid point that it is difficult to devise an IP protection system that is perfect. What really is the difference between a company sitting on a large treasure trove of intellectual property that it never productized and is now looking to monetize via an auction versus the activities of a troll. While not an advocate of this line of thought, it can be argued that trolls serve a useful purpose by exposing IP to the market that might not otherwise have gotten industry attention as a result of some company’s benign neglect or a decision to forego the realization process.   

Why all of this is a constant bone of contention is because, as the Crain’s piece points out, the IP experts in the legal profession seems to be profiting quite nicely from all of the litigation to the detriment of companies and ultimately consumers. Think about the fact that the costs of this activity is in the tens of billions of dollars worldwide. There is little argument, even amongst combatants that it is a bad use of time and capital.

Back to “The Times”

Pardon the digression. The NYT battle as a standalone topic has some niceties that should note be over-looked. As the Crain’s article points out they are going after HPL on two fronts: at the USPTO and in the courts.

The USPTO has been hit with numerous NYT complaints since late last year saying the government issued the patents incorrectly. The article says a few of the complaints have initially been found in the Times' favor and HPL is appealing.  

The Times is in the U.S. District Court in Chicago arguing HPL already receives licensing fees from cell phone manufacturers and should not be allowed to double dip and charge content providers.

The Times heads a group that includes CBS Corp., Comcast (News - Alert) Corp.'s TV channels Bravo and G4 and J.C. Penney Co., all of who have been sued by HPL. While filed separately the group is sharing resources in going after HPL

If it appears that I have a rooting interesting in all of this I actually do. Whether it be Google (News - Alert) v. Oracle, Apple v. Samsung or NTY v. HPL, the current patent process is clearly broken and we are all the worse for it because of delayed innovation, lack of access potentially to useful products and higher prices. There is a lot that needs to be mixed here, and the recent patent reforms, some of which do not go into effect until next year, may have made filing easier and have prevented the egregious practice of trolls going after multiple infringers with a single filing, but that only reduces a little time and some court costs while at least giving real trolls some pause as to how they wish to proceed — not too much since a win with one company would only encourage them. 

What this case does shine light on is the need for policy-makers to figure out how to efficiently and cost-effectively force the USPTO to defend its previous actions in the granting of patents, particularly those that have languished without what development by the grantees. In addition, given the speed at which innovation takes place and market positions can change, there also needs to be a way to greatly accelerate the challenge process in court. This would include making it legally easier to strike down poor patents, and throttle back skilled attorneys from elongating cases merely for the sake of advantaging clients at critical market junctures.

These cases tend to take over a year to litigate. Trolls have time on their side which is literally what they bank on. Fortunately, NYT has the time and resources to fight. It is always problematic to predict the outcome of litigation, hence, all we can do now is wait. No matter the outcome these actions are going to send a message. It will be fascinating to see what it turns out to be.   

Want to learn more about patents in the telecom industry? Then be sure to attend Synopsis Under IP/Patents Telecom Sourcing Conference (SUITS), collocated with ITEXPO West 2012 taking place Oct. 2-5, in Austin, TX.   Stay in touch with everything happening at SUITS. Follow us on Twitter.

Edited by Brooke Neuman
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