The Age of Patent Trolls: Either attack or hide!

Consider a hypothetical situation where the MD of ‘Techomigo’, a budding small software-technology company, receives a notice of infringement one fine afternoon and wonders what could be its cause since his company wasn’t involved in any technology-‘borrow or steal’ business. The notice demands an exorbitant amount for settling the matter or else threatens with a lawsuit. Or take another situation where ‘Extremesoft’, the leading software company of the world participates in a rat-race of the sorts of a ‘patent-auction’ to get hold of a huge patent portfolio.

If we proceed to go into the roots of both the matters, they lead to the looming clouds of ‘patent trolls’. Yes, a ‘patent troll’, as it is now commonly known, is anuncomplimentary term employedfor an entity that amasses patent rights, but not by way of grants from patent office, and enforces them against the alleged infringers in a fashion which is believed to be unduly aggressive, uncompromising and threatful, while the sad entity itself keeps no intention to manufacture or commercialize the patented invention itself.

In simple words, these trolls are companies who acquire patents by of buying them from the inventors directly. But they do not commercialize the technology on their own, do not take the requisite steps to make the invention benefit the needy, rather they use it as a blackmailing tool to coerce others in the field to either buy it from them or face the brunt of an infringement lawsuit.

Recently, ‘American Life’[1]published a complete program how these patent trolls act as patent extortionists. They almost busted a troll-racket operating in the form a company known as ‘Intellectual Ventures’ working in tandem with roughly other 1300 sham-show-companies. Their motto, as they put it is simple- to encourage invention by supporting inventors. They say other companies steal the inventions from the inventors who are their employees. So, ‘Intellectual Ventures’ instead buys the inventions from the inventors, and make other companies pay for it. Had it been so simple, there would not have been a call for this article either. ‘Intellectual Ventures’ apparently owns about 35,000 patents, which it sells and resells to it’s show companies who have fake offices, which either cannot be located, or if can be, then all buyers and sellers of those patents can be traced to a single office in East Texas. The reason? Because apparently they found the courts there to be particularly ‘Plaintiff-friendly’, in case they proceeded to file random suits against other companies.

Now, here’s a catch. Some may rightfully argue that it isn’t illegal for a patent owner to protect its monopoly. It isn’t illegal for a person to be an owner of a large number of patents either, more so, since the law does not prescribe an upper limit upon the number of patents that an entity can hold.  But at the same time it is not proper or legal that a patent owner does not ‘work’ or practice the invention for which it holds/ owns the patent. To tackle issue of obtaining a license from a non–practicing patentee, compulsory patent licensing may be a viable, or probably the only, solution. Compulsory patent licensing may be particularly suitable for hold-ups or for those who seek to extort a royalty once there is a successful commercial product.

Another related issue is that some people allege that most of these patents which these trolls hold are actually not even patentable, i.e. they do not even comply with the patentability requirements. Some people say that almost 30% of U.S. patents are over things which are already known or over which there are similar patents.

Another problem that comes up is that U.S. law and laws in many other countries of the world initially did not consider a ‘software’ to be patentable in the first place since it was rather a subject matter of copyright law. There were certain Federal Court decisions, which changed the course of the subject and thereafter the Patent Office also started to grant patents over ‘software’ inventions.

In the light of these facts, where the Patent Office lets operate a sweepstake of patents and the government not stepping in with a strict compulsory licensing policy, it is rather difficult to bring a check on the trolls or the non-practicing entities (NPEs) holding patents. The regime is so terrifying that even the biggest companies are not untouched by it. Therefore, you even saw a Microsoft, Apple or Google vying for a bunch of patent portfolio for billions of dollars in the Nortel patent auction. The aim of these biggies might not be to operate a troll, rather it is merely a defending act to save themselves from the threats of one.

And the other smaller entities, could well, wait for the Patent Office, the government and other law enforcement agencies to take the trolls to task. Until then, they could hide and seek from the patent-troll-arsenal!