Trolling For Patent Heroes

I take back everything I said about Patent Trolls (can I still call them that?). It turns out that they are actually saints whose only mission is to see that inventors get just reward for their inventiveness.

So sayeth Christopher Mims (“a journalist who covers technology and science for just about everybody”) in “Are ‘Patent Trolls’ the Secret Heroes of the Tech World?”. He’s spot on with some of his points

The … more vexing problem is that even if [a company] gets a patent on its technology, no big company even has to pay it a licensing fee. That’s because the bigger company can just bury the little one in patent litigation – outspending the small fry in the courtroom and tying up licensing fees for a decade.

 and

That’s a flaw in the patent system, argues [Ted] Shelton, because the technology world moves so quickly that by the time a patent is issued, the technology it covers could already be on its way out.

So far, so good. And he also makes the point that once smaller companies have been granted the necessary patent(s), the cost of litigation is often too great for these companies to afford.

Enter the ‘Patent Trolls’, who will selflessly come to the company’s rescue and litigate on their behalf. Now obviously there is money in this, but I wonder how much of it actually makes it into the pockets of the inventor.

I’m not so thrilled with Patent Trolls.

It may be a fine line between someone with the intellectual capacity to describe their invention and the technical inability to produce it, and those who have absolutely no technical means, or will, to bring the invention to fruition, yet want to prosecute others for not being as quick to paper as they were, or those from whom they bought the patent.

 Prosecuting patents is not a cheap business. Estimates range wildly from $250,000 all the way up to $10,000,000, but most of the estimates fall in the $2-3 Million range. Not exactly ‘out-of-pocket’. There is also the success factor: 75%. AGAINST.

If you’re in the troll business you would need to invest $8-12 million on average to achieve one success. Obviously you would need to recoup your investment, so you would want to have first claim from the proceeds of litigation, and even make some money. Let’s say that you’ve decided that 100% is the proper multiple considering the risk profile of these cases (I don’t know if the litigation costs cited also include for the provision of counter suits or being assessed legal fees to be paid to the defendant in the event of a loss, but beware). Ideally you would be swinging away on cases where there would be at least $25 million in potential damages. That’s a big number. Again, how much of this would the inventor see?

There are many flaws in the patent ecosystem from the amount of time it takes for an examiner to review the patent application through the expenses of litigation. Patent reform is certainly in order, so that inventors (who should also need to prove that they can build their thing, not just describe it, and intend to commercialise it) will benefit and receive appropriate protections. Things move quickly in the software world, and by the time the inventor receives a patent their technology may already be obsolete. Software – and high-tech – patents should get a Fast Track at the USPTO. A business plan that is based on patent then litigate (with OPM*) is not a good business plan. Trolls are in business because they are in business for themselves, not out of altruism.

*Other People’s Money

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One thought on “Trolling For Patent Heroes

  1. I am the President of Fifth Generation Computer Corp. a small business founded in 1984, specializing in building parallel processing systems for government and industry. We own three US patents. Over the past twenty years, we entered into separate agreements with two large companies in order to move our inventions into the marketplace. In both instances, we ultimately had to sue the large company for infringement and contract claims in order to protect our rights to the technology. We reached a confidential settlement in the first case.
    The second lawsuit is ongoing after eight years of negotiation. I believe it is possible for a small company to defend its patent rights without having to sell its patents to a Troll.

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