Patent trolls
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Patent trolls Patent trolls Document Transcript

  • Jan Softa at Somerco 24/11/2013 Enhance the competitiveness of EC member states Part 14 – Patent trolls Abstract It is important to separate those who buy patent portfolios out of a strategic interest to add on protection to their product portfolios and those who have as their business idea to buy patents, but have no products to offer in their company. The latter often called patent trolls. President Obama has accused tech industry patent trolls of trying to "hijack somebody's idea and see if they can extort some money out of them". In order to combat the misuse of patents by especially patent trolls both new legal measurers has to be implemented and financial resources has to be allocated. Background Helping geniuses! Our slogan sums up whom Somerco aims to help. Somerco are a company that target to help researchers and innovators so that these geniuses can create prosperity and jobs in society. This paper is an odyssey in the realities companies has to deal with when it concerns patent trolls and the measures discussed and taken by governments to tackle these problems. Introduction It is important to separate those who buy patent portfolios out of a strategic interest to add on protection to their product portfolios and those who have as their business idea to buy patents, but have no products to offer in their company. The University of California's Prof Robin Feldman, one of the authors of a major study into patent litigation has studied the latter group and she says: "The majority of patent lawsuits today are filed by entities that don't make any products, in other words in your terminology by patent trolls." "Their business model is based on extracting money from those who do make products."1 In US, patent trolls have become an increasing problem for all type companies – SMEs up to companies in the size of Google. "Our research has shown that in just five years the United States patent system has been turned on its head," says Feldman.2 In Europe, patent trolls are not as common as in US even if they are active here as well. Many patents are national but a fair share of patents is international. In pharmacy, software and hardware much patents are international. Therefore, it is likely that not only European patent trolls but also those from US will operate the same way here too in a near future. Examples In the first category, those who buy patents of strategic interest like the consortium Rockstar Bidco who include Apple, Ericsson, RIM, Microsoft and Sony. 1 2 Patent trolls: Tracking down the litigious invention owners. http://www.bbc.co.uk/news/technology-23673383 Patent trolls: Tracking down the litigious invention owners. http://www.bbc.co.uk/news/technology-23673383
  • Jan Softa at Somerco 24/11/2013 In 2011, when Canada-based telecom Nortel sold its biggest asset a portfolio of more than 6,000 patents covering 4G wireless innovations and a range of technologies. Google also bid for the patents, but lost out to Rockstar against their bid for $4.5 billion.3 The second category are those who are earning money by licence fees that other companies has to pay, which is in their legal right to do. The patent these patent trolls holds are sometimes vaguely defined and give room for interpretation. This manoeuvre room is often used to ask large companies and SMEs to pay a licence fee or face a potential lawsuit. Even if it is unclear if the companies should pay a licence fee or settle the issue at all with the patent trolls it is a costly procedure to hire IP-lawyers to check if there is any validity to their claims. The licence fee patent trolls can be anything from $100 per employee and upwards. An example on how patent trolls operate. "There are a couple of different trolls who claim that they invented the technology behind wi-fi," […] " and they are suing all kinds of companies, bars, hotels, restaurants. Anyone who offers wi-fi, they are saying you owe them money." And another extreme example concern scanning documents "They claim that anyone who uses a scanner to scan documents, email the documents, owes them a royalty of $1,000 [£645] per employee."[4] There are plenty of examples like this that companies in US have to deal with. Most of the examples on how patent trolls operate are more difficult to decide whether there are any legal claims to ask for a licence fee or not. In these cases, the advice of patent attorney’s is necessary. For all companies, claims for licence fees by patent trolls have become an unwelcome economic burden. Company’s financial resources for expansion decreases and it becomes less resources to R & D. Especially, for SMEs it can mean new recruitments have to be put on hold or some of its new products have to be developed at a slower phase or put on hold.4 "Patent trolls are probably the single most common policy and legal problem our companies deal with," said Nick Grossman of Union Square Ventures, a firm whose more famous bets include investments in Twitter and Etsy. "Almost every time, it's a huge burden in terms of time and costs, totally unrelated from the actual work of building start-ups. It's a constant drag on our companies."5 Many times, if the companies do not dispute their claims and pay a licence fee or settle, suddenly many new patent trolls emerge to ask them to pay other licence fees for other vaguely defined patents. Suggested measures Patent trolls are in particular active in US. Large companies like Google who spends “tens of millions” of dollars on a phalanx of in-house attorneys to defend itself against patent trolls, 3 Patent war goes nuclear: Microsoft, Apple-owned“Rockstar”sues Google. http://arstechnica.com/techpolicy/2013/10/patent-war-goes-nuclear-microsoft-apple-owned-rockstar-sues-google/ 4 Patent trolls: Tracking down the litigious invention owners. http://www.bbc.co.uk/news/technology-23673383 5 Prominent VCs join the fight in Congress to stop patent trolls http://arstechnica.com/techpolicy/2013/11/prominent-vcs-join-the-fight-to-stop-patent-trolls-in-congress/
  • Jan Softa at Somerco 24/11/2013 according to Tarrant has just as venture capitalists and SMEs put the problem on the political agenda and several measures has been suggested by the US administration.6 President Obama has accused tech industry patent trolls of trying to "hijack somebody's idea and see if they can extort some money out of them". To tackle the problem he has called on Congress to introduce steps designed to discourage the firms from suing. The measures include:     Requiring the parties who send demands to disclose who ultimately owns the patents, so they cannot hide behind shell companies. Make the demand letters public and searchable. Make it easier for the courts to make the losing party pay for the winner's legal fees. Offer better legal protection to purchasers of off-the-shelf products to safeguard them against the risk of being sued for the manufacturer's patent infringement. In addition the president announced steps he was taking that were within his powers. These include:   The US Patent Office will require patent applicants and owners to provide updates on who owns what if they come to the organisation with a dispute. The aim is to help defendants know more about who they are facing and the connections that exist between the various trolls. Patent examiners are receiving extra training to try to minimise the risk of overly broad claims being approved.7 From the senate Two leading U.S. senators recently introduced a bill to make it harder for "patent trolls" to file frivolous infringement lawsuits. That bill requires companies to provide specific details on what patent is infringed when they file a lawsuit, and also to specify how it is used. It also requires judges hearing patent cases to award fees to the winner in an infringement lawsuit, unless the judge decides that the loser's position was "substantially justified" or some other circumstances exist. The White House urged Congress in June to take steps to curb abusive patent lawsuits. Other proposals are circulating on Capitol Hill, and the Federal Trade Commission is doing a study of PAEs.8 From the House of Representatives The SHIELD Act is a clever piece of legislation introduced by Rep. Peter DeFazio and Rep. Jason Chaffetz. The backronym stands for Saving High-Tech Innovators from Egregious Legal Disputes. Under the Act, if the patent troll loses in court because the patent is found to be invalid or there is no infringement, then it pays the other side’s costs and legal fees, which often stretch into the millions of dollars. This "fee shifting" system would empower innovators to fight back, while discouraging trolls from threatening lawsuits to start.9 6 Patent trolls take on Vermont businesses. http://tinyurl.com/p4p4yoh AND Top Venture Capitalists Demand Real Patent Reform, Put To Rest Myth That VCs Love Patents. http://tinyurl.com/q9tajzl 7 Patent trolls: Tracking down the litigious invention owners. http://www.bbc.co.uk/news/technology-23673383& FACT SHEET: White House Task Force on High-Tech Patent Issues http://www.whitehouse.gov/the-pressoffice/2013/06/04/fact-sheet-white-house-task-force-high-tech-patent-issues 8 U.S. Senate gets bill clamping down on 'patent trolls' http://www.reuters.com/article/2013/11/18/us-patentscongress-idUSBRE9AH19920131118 9 Patent trolls? http://www.ted.com/conversations/18940/patent_trolls.html
  • Jan Softa at Somerco 24/11/2013 Europe Reactions on a pan-European patent system The creation of a pan-European patent system will help spread abusive patent litigation to Europe and could lead to E.U.-wide sales bans on products, leading tech vendors have claimed. Tech giants including Apple, Google, Samsung, Microsoft, Cisco, HP, Yahoo, Intel and BlackBerry sent an open letter to European officials outlining their concerns about the formation of a new unified patent court system in the E.U.10 The EU’s proposal would create a unified patent court, replacing the current patchwork quilt of countries all with differing levels of experience handling patent-infringement claims. Another problem is the new system would split the question of whether infringement occurred from consideration of if the patent is even valid. While the procedure is common in German courts, the division on questions opens up “significant opportunities for abuse.” Others like IPNav has written that the proposed change in how Europe handles patent challenges is “a great benefit to innovators” and the new setup “is going to cut the cost of litigation down significantly.”11 How it will work in Europe While the unified system has been heralded as simplifying the patchwork of rules that currently exist across the single European market, vendors say it also brings the threat of a one-stop-shop for quick region-wide sales bans. And allowing cases to be split up, with the validity of a patent decided in one court while infringement issues are decided in another, can expose product vendors to penalties even before the patent in question is declared sound, they claim. The unified patent agreement allows the validity and the infringement questions to be decided in different courts in the same case. Splitting those decisions into separate cases is known as bifurcation. If this system was to be introduced for most of the European market, it could lead to quick E.U.wide injunctions, barring products from the European market, before any determination of whether the patent in question is actually valid, the companies said. In the case of bifurcation, the companies' argument is not good, said Willem Hoyng [cq], a member of the Preparatory Committee, in an email. Bifurcation can only do harm if, as in Germany, the invalidity court is slower than the infringement court, Hoyng said. "It is clear from the Rules of proceedings that should not happen in the new system," he added. And even if there are weak patents, they do not survive in a court of law manned by good judges, Hoyng wrote.12 My comments It is probably true that weak patents would not survive in court. However, for many SMEs it is not the issue. It is the economic burden that might not be rewarded until a few years later that it is the concern for SMEs, innovators, but also for large companies, universities and research institutes. For some companies, it means they have to withhold investments in new R & D, expansion plans and new recruitments. 10 Patent trolls will gain from a single European system, vendors warn. http://www.pcworld.com/article/2049520/patent-trolls-will-gain-from-a-single-european-system-vendors-warn.html AND Daily report: Tech Industry Warns Europe of Concerns on Patent Trolls http://bits.blogs.nytimes.com/2013/09/26/daily-report-tech-industry-warns-europe-of-concerns-on-patenttrolls/?_r=0 11 Apple and fellow tech titans expand fight against patent trolls to EU. http://www.idownloadblog.com/2013/09/27/apple-eu-patent-trolls/ 12 Patent trolls will gain from a single European system, vendors warn. http://www.pcworld.com/article/2049520/patent-trolls-will-gain-from-a-single-european-system-vendors-warn.html
  • Jan Softa at Somerco 24/11/2013 There are different paths to consider correcting the misuse of the patent system. Since many patents are international it is bound to be similarities in the application of laws and regulations between countries. Therefore, it is interesting to discuss measures taken by other countries. When it concerns US some measures has been presented above by the US President administration, other by representatives at the Senate and members of the House of Representatives. Also when it concern EU there are an on-going debate and development of new legislation that concern IP-rights that will be applicable in all EU states. The more harmonized and integrated EUs IP-regulations become, it is considered the more will patent trolls be active here. Several measures are discussed above. The most measures proposed above are legal. In US, the SHIELD act present how companies can be compensated financially if they win a case. This financial reward is a measure that comes afterwards. However, in one of my earlier papers entitled Dedicated tax to science I discuss how to get financial resources to IP-disputes for SMEs before for evaluation and for IP-disputes that end ups in court.13 As mentioned above, it is not that companies might be right in the future that is the major concern. It is the financial burden they carry meanwhile to dispute the claims for licence fees put on them that concern companies and especially SMEs. The extra financial burden inhibits the development of their companies. It is possible for countries in EU to give SMEs help by adopting a designated tax to science. This will increase the competitiveness of the EU-zone. When it concern the financial aspects of IP-disputes it would be most effective to adopt my suggestion that enable financial resources to SMEs to hire IP-lawyers and their investigators before trial in combination with the SHIELD act. The SHIELD act propose if the patent troll loses in court because the patent is found to be invalid or there is no infringement, then it pays the other side’s costs and legal fees, which in US often stretch into the millions of dollars. A thoughtful comment from a blog: “Make trademarks and intellectual property ownership a privilege instead of a right, meaning that if a company abuses the system for financial gain, then the patents or trademarks are revoked and the work is put in public domain.” Yours sincerely, Jan Softa - Somerco Research 13 EC member states competitiveness in R & D Part 1: Designated tax to science. http://tinyurl.com/n5qrhdl
  • Jan Softa at Somerco 24/11/2013 Proposals Enhance the competitiveness of EC member states Part 1 - Designated tax to science Enhance the competitiveness of EC member states Part 2 – Strategy to support the software industry Enhance the competitiveness of EC member states Part 3 – Actions to support women in ICT Enhance the competitiveness of EC member states Part 4 – Going abroad – Competitive assets Enhance the competitiveness of EC member states Part 5 – Business incubators, financial recycling and incentives into reward Enhance the competitiveness of EC member states Part 6 – Standardization as a tool to increase competitiveness Enhance the competitiveness of EC member states Part 7 – Different types of innovations Enhance the competitiveness of EC member states Part 8 – Open source from science to society Enhance the competitiveness of EC member states Part 9 – Crowd sourcing and crowd funding Enhance the competitiveness of EC member states Part 10 – Green VAT for business Enhance the competitiveness of EC member states Part 11 - Keep talents in Europe Enhance the competitiveness of EC member states Part 12 - Research leftovers Enhance the competitiveness of EC member states Part 13 - Science Parks (In progress) Enhance the competitiveness of EC member states Part 14 – Patent trolls Enhance the competitiveness of EC member states Part 15 – No title yet Enhance the competitiveness of EC member states Overview – Old and new key areas in order to increase the competitiveness of the industry (In progress) Input on threats against information society http://www.slideshare.net/SomercoResearch