Brian Dodson
Sep 19, 2011

It's not the trolls — it's the system!

The latest patent troll case exploded into the U.S. District Court of Delaware earlier this month when Boadin Technology, L.L.C., filed an infringement suit against Bloomberg, Dow Jones & Company, the New York Times, CNBC, Fox News, Gannett, and Marketwatch. After filing, Boadin announced offering at auction (through ICAP Patent Brokerage) a covenant not to sue for infringement of these patents and others in their portfolio. This is a bit different from a license to practice the invention but has largely the same effect.

The patents concern autocompleting a user’s computer entry. This is basically old technology, known to most of us in terms of instantaneous spelling checkers or in filling fields in forms. The new twist, which was found to have patentable novelty by the Examiner, is that once you choose the proper target, a substitute string of characters is used as input to the computer program — in the examples in the applications, the stock symbol of a company is automatically substituted for the company name.

The inventor of these patents is Gal Arav, the founder of InstantBull and Newsflashr. Unlike in many “patent troll” situations, Arav is using his patented methods on the InstantBull site. It is not known if he is part of the Boadin lawsuit.

Let’s look at what patent trolls actually do but pretend they are real estate investors. Judy buys a plot of land with no intention of using it, solely as an investment. She wakes up one morning to find a new Qmart store built upon her land. (I am told there are actually several companies named Qmart. I am not referring to any present or past user of the name. It is intended to be a fictional company.)

In this situation, Qmart is the disseisor, a term used to refer to the party who dispossesses the true owner of the property. As Judy immediately objects to this unapproved use of her land, Qmart cannot establish adverse possession of the land. In these circumstances, Judy should be able to file and win a suit alleging civil trespass and successfully obtain an order to have the offending structure removed from her land. In the end, Judy will probably agree to accept a handsome price for her land rather than demolish the building. However, she is unlikely to settle for the original fair market value, as included in the package she sells is the power to have a $20 million building destroyed! She walks away a happy woman.

Very few people would be troubled by the outcome in the scenario outlined above. Judy’s ability to use and/or dispose of her property has been, through no fault of her own, removed, and she should get it back or be compensated for her loss. She decides, as would many people, to set a very large price because the land (and the building) is now worth a great deal to Qmart.

Now let’s go back to patent trolls. Steve buys all rights to a patent as an investment. He doesn’t intend to use the patent (or maybe he does), but he believes that others are or soon will be infringing the patent and, as a result, it will become quite valuable.

One day he finds that Qmart is making an infringing product. He may ask Qmart to purchase a license, or he may file an infringement suit in Federal District Court. In dull and boring language, Steve tells the court, “I have a valid monopoly on this invention, and Qmart is using it without my permission.” If the court decides that the patent is valid, that Steve acquired it properly, and that Qmart is, in fact, infringing, damages will be awarded to Steve according to the provisions of 35 U.S.C. §284:

35 U.S.C. 284 Damages
Upon finding for the claimant the court shall award the claimant damages . . . in no event less than a reasonable royalty for the use made of the invention, together with interest and costs as fixed by the court.
. . . the court may increase the damages up to three times the amount found or assessed . . .

Steve walks away a happy man. His actions have all been legal and without evil intent.

The fundamental distinction between patents and land ownership lies in their legal foundations. The rights of a landowner are largely based on concepts of English common law. The rights to an invention are laid out in the U.S. Constitution, Article I, Section 8:

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

The issue, then, is whether the purpose laid out by the founding fathers is being effectively fulfilled. There is a growing feeling that to be effective in implementing this purpose, there must be some mechanism introduced to force a patent owner to issue licenses for the practice of their inventions. In this way, they argue, the “progress of science and useful arts” would best be insured — new inventions would be freely used in commerce and research, and inventors would be properly compensated for their “respective Writings and Discoveries.”  It has even been suggested that in today’s scientific and commercial environment, the present system is wholly unconstitutional, although the question does not seem to have reached the Supreme Court.

As always, the devil is in the details. How does one best require a patent owner to grant licenses to others? Should this be required only if there are uses for the patent he is not pursuing? Or should it be required in all circumstances? Is the owner required to grant one forced license or rather to grant a license to everyone who wants to practice the invention? Should a license grant be forced to the patent owner’s biggest competitor? How should the license fees or royalties be set? The same for all or dependent on entity size or on the amount of business done? Are fees set by a court or in some other manner?  Are fees for a license set by an initial case to be applied to all future licenses, without consideration for an increase (or decrease) in value due to some other invention or development? Or does each case require a de novo determination of compensation by a court? If the owner (or the infringer) disagrees with the court’s judgment, can the decision be appealed? How is all this to be accomplished in a short length of time — a practice clearly required by the constitutional provisions?

There are endless questions, each being based on some form or other of perceived unfairness. In the end, we will never achieve an entirely fair situation. The best we can hope for is fairness modified solely with the intent of carrying out the constitutional imperative.