A patent troll is an individual or business entity that willfully files — or purchases — patents for the sole purpose of keeping others from using them.
The more polite terms are non-practicing entity (NPE), which is a company that exists to hoard patents, and patent monetization entity (PME), which is usually a lawfirm that seeks to protect patents for NPEs.
Either way, these people are trolls and they’re clogging up legitimate legal channels for patent protection among individuals and businesses that need it. These trolls have such a hold on the legal system that it ends up lengthening the patent-obtainment process — and by proxy, makes the entire process more expensive for everyone.
Patent trolling is specific. For example, when Apple patented a bendy iPhone, they intended to use that patent in the future, but even if they end up not using it, they still filed the patent with the intention to innovate, not to sit on it. On the other hand, patent trolls obtain patents to sue, not to use.
And this is a big problem for all of us.
The Birth of a New Industry
In the United States alone, over half of all patent-related cases are filed by trolls with the sole intention of gaining monetary judgments for patents that they intend to never use. In fact, many companies build up — or purchase the rights to — many patents just to hold them in the hopes that someone infringes on them (or approaches them for lucrative licensing deals).
According to a study published by UC Hastings, 56-percent of all patent-related lawsuits were filed by patent monetization entities. At the same time, these non-practicing entities have made three times as much as legitimate companies — all while never producing products and never offering services. Instead, these companies fleeced legitimate individuals and businesses out of $8.5 million per judgment on average.
Patent trolling is now a business.
The thing is, patent trolls don’t even have to get their cases heard in court to make huge profits. The business model actually seeks monetary settlements out of court, hoping that most companies will forego the option of length and expensive legal battles.
Knowing this, patent trolls often seek smaller amounts of money (between $10,000 and $1,000,000) in order to avoid these court cases. After careful analyses of risks and rewards, as well as the costs of fighting such cases, many legitimate companies pay asking price — even when they know these suits are frivolous — rather than risk years in court and millions in legal fees.
Never has there been a better time than now to learn how to perform a patent search.
3 Famous Examples of Patent Trolling
I could easily fill a book with frivolous patent lawsuits. But since we’re working within the confines of a word count, here are just a few examples of cases that garnered media attention over the past few years.
IPCom v. Apple
IPCom operates as a patent monetization entity, which is an NPE that seeks to aggressively defend patents. These entities often have portfolios of hundreds, and even thousands, of patents owned by the entity itself or by represented clients.
The case came about in 2014. IPCom brought forth a suit against Apple claiming willful infringement on multiple patents. The patent technology itself pertained to a term you’ve heard thrown around a lot in recent years: “fast lanes.” These fast lanes gave certain operators priority access to networks, even when these networks were already overcrowded. IPCom argued that Apple was using this technology in willful defiance of German patent law.
What made this case notable was that IPCom owned the patent to this technology, but this patent was a standards essential patent (SEP). Such patents require owners to license the technology to competitors under terms that are deemed fair, reasonable, and non-discriminatory. Apple argued that this wasn’t the case with IPCom.
Ultimately, the courts sided with Apple and the case was dismissed.
Rotatable Technologies v. Rackspace
Rotatable Technologies owned a patent relating to screen orientation in computing devices. Essentially, the patent covered the auto-rotation of your screen when you turn the device.
Rackspace argued that they didn’t willfully infringe on the patent because the technology they used to create their cloud mobile applications wasn’t actually their own. They argued that, through use of Apple’s libraries and Android’s open source software, this functionality wasn’t theirs. Rather, it was a standard process on the devices for which they programmed their applications.
Sensing that Rackspace wasn’t going to back down, Rotatable Technologies offered to settle the case for $75,000. Rackspace refused. The case ended with a judgment in Rackspace’s favor, as well as a judge invalidating the original patent belonging to Rotatable Technologies.
Sadly, not all cases end in favor of the good guys. In fact, most don’t. For example…
Smartflash v. Apple
Smartflash is an NPE that held three patents to digital rights management and other inventions related to data storage and payment systems on mobile devices. They argued that Apple infringed on these patents by using their technology in both the iTunes Store and the App Store.
Smartflash sought a judgment for $852 million in damages while Apple argued that the judgment should be for no more than $4.5 million.
The judge sided with Smartflash and awarded a judgment of $533 million against Apple in favor of a company that never intended to use or improve upon its patent.
Bottom Line: Patent Trolls Are Wicked
In a semi-famous op-ed in the Wall Street Journal, journalists Stephen Haber and Ross Levine penned a piece titled, “The Myth of the Wicked Patent Troll”. It’s an op-ed so they can say whatever they like, but there is no myth: patent trolls are indeed wicked.
In fact, both The White House and Congress have completed studies in recent years showing that patent trolling does indeed stifle innovation. Because ligitation against patent trolls is often length and expensive, the entire process is a major roadblock towards future technological breakthroughs.
For smaller businesses, patent-related court cases could bankrupt them even if they win. Add to that the appeals process, the mountain of legal fees, the paperwork, and the stall procedures that keep them from going to market, and you’ll see why many companies are more than willing to settle with these patent trolls.
It’s legal extortion and the extortionists are profiting billions while legitimate technological advances grind to a halt under the watchful eye of our judicial system. And until we can find a better way to approach patent law, these trolls will be here to stay.
What do you think fixes the patent troll crisis we currently find ourselves in? Sound off in the comments below.