"...patent trolls — also known as non-practicing entities because they simply stockpile patents without making anything with them..."
I never liked that definition. It sounds like ordinary specialization in an economy, to me.
"The latest effort would have required the loser in a lawsuit to cover the winner's legal fees and for NPEs to state more clearly what was being infringed at the outset."
Now we're talking: address the real problem. The real problem is not NPEs; the real problem is that they can impose huge costs on others at little cost to themselves, which sets them up perfectly for an extortion-like racket.
> It sounds like ordinary specialization in an economy, to me.
It also runs counter to the purpose of patents: patents are originally a time-limited and governmentally defended monopoly on an invention to encourage its full publication[0] and ultimately the progress and improvement of society as a whole[1].
When entities can exist to do nothing but defend such monopoly against independent reinventions the incentives are completely out of phase with the original purpose: patents assumed the invention (and its trade) is the important object, not the monopoly itself.
[0] rather than trade secrets, espionage and other such focus on anything but progressing
[1] not only because the invention is available at all but because once the monopoly runs out it becomes a new baseline[2] for further invention
[2] in that it's free, it is possible to license the invention to build upon it during the monopoly phase, but I think it reasonable to assume increased activity once the invention becomes literally free for all
This is why it seems to me that the core problem with the current patent system is that it's too cheap to obtain and hold large patent portfolios.
There's an analogy here to land ownership. Land is a public good. It is owned collectively by the nation-state that contains it, and the people rent exclusive rights over parcels of land. I'm talking here about the difference between allodial title (typically owned by the state) and fee simple title (owned by individuals). We do this so that the owners have an incentive to use and improve it, and everyone benefits when it owned by the people who can best do so.
Patents are similar in many ways, since inventions are also a public good. That's why patents exist in the first place: to promote the advance of our technology for the benefit of all, by granting exclusive rights to the use of a technology. And, like land, you want patents to be owned by the people who can best use it.However, in order for the system to work, there needs to be a cost to holding rights to the property to encourage people to sell the rights to someone else. With land, this is property tax; land owners have to pay a percentage of the land's value each year for the continued right to use the land exclusively.
We need a property tax for patents. Patents should have an assessed market value, and a patent owner should have to pay a percentage of that value yearly as 'rent' on the exclusive use of the invention. If they no longer feel that it's worthwhile to pay that tax for the benefit they get from holding the patent, then they can sell it to another party. It could be (and probably should be) a closed system, where all taxes collected should be put into a fund that the government uses to buy patents itself. When it does so, the patent gets returned to the public domain, and anyone can use it from then on. In that way, you may be able to get rid of patent term lengths.
IMHO, that doesn't address the real problem, of patents that shouldn't have been granted (because anyone faced with the same problem does the same thing without being helped by the patent description).
In fact, it makes that problem worse, because the assessed or hypothetical market value of the obvious, or "too old" invention is much higher. For example, what happens if someone is (by foolishness) granted a patent on fire or the wheel? They'd pay a higher tax, but be entitled to a much bigger "extortion" from the economy. So it would "turbocharge" the incentive to slip undeserved patents through.
IMHO, the real problem goes away when patents only go to legitimate "oh my word I wouldn't have thought of that in a thousand years" innovations, at which point it would be much harder to say, "why should anyone have to pay to use that?"
Sure, but legislation that throws out 99% of existing patents will never fly because legitimate businesses who have spent billions of dollars on them. The only possible political solution is to filter out trolls.
Would it be technically possible in the USA to create a special jurisdiction for patents?
That could prevent a number of the current problems: certain states particularly kind with patent suits, some judges ignoring higher courts resolution...
Taxing patents might pay for some of the costs of better oversight on the part of the patent office and deter some frivolous patents, but it would make the litigation and troll problem worse, by orders of magnitude. Suddenly the incentives to extort every possible violator of a patent get bigger because patents are expensive to hold onto.
Companies in the business of making stuff and very seldom suing their competitors or even considering asking for licensing fees would suddenly find high quality "defensive" patents on their technology result in a bigger tax bill.
Enter the troll, willing to take the patent and its associated tax bill off their hands for a nominal fee (perhaps then getting its taxable value reassessed based on its diminished market value) and then setting to work threatening litigation against everyone else in the industry. If they win enough settlements their patent might get reassessed at a higher value for a bigger tax bill, but they're still raking in plenty of cash on top, and able to source better patents from people that would never have considered selling their patents.
Sure, the government could buy up unwanted patents and release into the public domain indiscriminately (in which case they'll end up subsidising patent creation) or they could buy up unwanted patents discriminately... i.e. at the behest of industries most adept at lobbying, but if patent offices can't even consistently make good decisions on whether companies should be issued with patents, the last thing I'd give them is a budget to buy back the ones that might have been mistakes.
How do you consider the investment costs involved in developing a patent?
This is where things get challenging. The software industry could probably get along without patents altogether. The pharma industry, on the other hand, absolutely depends upon them. When a new drug is discovered and patented (which is part of the problem - drugs are discovered, not invented, which makes patenting seem a bit odd in the first place) the drug company has a 25-year window of time to develop it. This is actually a tight deadline as studies take a long time and often can face major back-to-square-one setbacks in the form of unexpected complications. All of this costs millions upon millions of dollars.
Now obviously drug companies would be willing to pay a handsome sum to keep ahold of their patents. But if you tax based on value, the value of a proven drug patent would be obscene, and that would cut deeply into the payoff for these pharma companies.
There is a major difference between land and patents, though. With land, it's clear which land I am on at any given moment, and I understand that there might be an owner. With patents, it's not clear at all that I'm infringing on something someone somewhere declared, and someone somewhere granted, perhaps erroneously. So that introduces a cost which outweighs the benefit in fast-moving industries, in my opinion. The cost is borne in lawsuits and out-of-court settlements.
Exactly. And this is why all property must be taxed on a periodic basis. There should always be an incentive and pressure on asset holders to put their assets to work.
What makes sense would be to tax based on its usage of a limited space. Land is exceptionally limited, especially in urban environments, so taxing its use makes sense.
The space of inventions is also obviously limited, since it's often extremely challenging to work around a technical patent.
But is music a limited space? Prose? Software? In those cases it seems like the benefits of a "property tax on copyright" would be minimal.
> Land is exceptionally limited, especially in urban environments
Which basically emphasizes that while the space is limited inherently, the key part is that the subspace that is in particular demand at any given time (the place where people want it, and which is therefore as densely populated as it will support) is particularly limited.
> But is music a limited space? Prose? Software?
Even if the overall space of each isn't particularly limited, the subspace that is in demand at any given time is particularly limited.
There wouldn't be value to copyrights on these things in the first place if that wasn't the case -- there would be no value in excluding people from the particular niche you develop if there were an infinite array of equally-easy-to-develop, equally-valuable niches within the same space available. The entire value proposition of copyright is the same limited-space proposition that you say makes taxation make sense.
I think it's always important to keep the original goal of patents in mind. A monopoly on an invention isn't a basic human right. It's a right we as a society have determined is worth giving out only because it creates a net win for society by encouraging invention. If patents no longer achieve that goal, or if they are causing more negative than positive impact, there's no universal law of humanity that says we need to keep patents around at all.
>It also runs counter to the purpose of patents: patents are originally a time-limited and governmentally defended monopoly on an invention to encourage its full publication[0] and ultimately the progress and improvement of society as a whole
I don't see how that's counter at all. If you accept that the inventor has a right to that temporary monopoly, how could you not accept that they have the right to sell it, in return for the present value of the innovation, to someone else?
You would need to make some argument about how the mere fact of a non-inventor holding it, even after buying it from the inventor, and doing the exact things an optimally informed inventor would do, defeats the goals you outline, and you haven't done so. (I really can't imagine what such an argument would look like, either.)
You're absolutely correct that litigation over trivial, independently-reinvented stuff does run contrary to the purpose of patents, but that's a separate issue from whether inventors should be able to transfer the rights to a litigation specialist -- not every inventor is good in the courtroom, nor should we expect them to be.
Let me try: selling it does nothing to promote its development and deployment. In fact just the opposite, especially when sold to a 'litigation specialist'.
It promotes development to the extent that the people being prosecuted
a) really infringe on the patent, and
b) would not have known to use the insights of the patent but for it having been published
This is because such people break the "good" kind of monopolies we want from the patent system. To the extent that the above isn't true, it reduces to the issue of "crappy patents being granted", not a problem with litigation specialists per se.
This sort of discussion reminds me of the hypothetical: an alien race, passively observing the earth, notices people frantically shopping in December, and also celebrating Christmas at the end of the month. They thus conclude that the shopping caused Christmas to happen. Obviously they get the causation wrong: anticipation of Christmas caused the shopping to happen.
Now, when discussing NPE's, people say something along the lines of: "they can't create any value, because any invention they buy already exists." Obviously this is fallacious: the anticipation of selling a patent portfolio, to an NPE or some other party, can cause people to engage in expensive R&D. Indeed, all contractual and property rights operate in this way. Litigation might come after a transaction goes sideways, but anticipation of having the option to litigate allows transactions to occur that would not otherwise occur.
NB: The above should not be taken as an argument that the value created by the existence of NPE's outweighs the costs imposed by troll suits.
Yes, I've posted to this effect several times on HN, and the point generally encounters a fair amount of disagreement. I'm glad to see your post at the top of this page.
All trolls are NPEs, probably, but not all NPEs are trolls. Universities and independent inventors are generally NPEs, but AFAIK rarely engage in trolling behavior. The paradigmatic troll, I think, is the company suing people for infringing its scan-to-email patent. What we have here is (a) a patent that never should have been issued [0]; (b) an NPE suing defenseless small companies (c) whom it has no direct evidence are infringing. That, to me, is trolling.
[0] I long for a ruling from the Supreme Court that makes the obviousness test meaningful again, since the Federal Circuit has so thoroughly gutted it. They had a perfect setup in Alice, but blew it, in my opinion, by making the patentable subject matter test the basis of their ruling (which I think will fail to give the lower courts any guidance they can understand). I would rather they had said that simply computerizing an existing manual process is, in 2014, thoroughly and unarguably obvious.
> All trolls are NPEs, probably, but not all NPEs are trolls.
I'd disagree with the characterization that all trolls are NPEs, as well. A company that technically produces a product implementing a patent, but nonetheless engages in trollish tactics (e.g. barratrous lawsuits inviting quick settlements for just under the cost to litigate; scattershot lawsuits against large portions of an industry; or in general tactics that stifle innovation and suppress development activities) still qualifies as a troll.
And on the other hand, I wouldn't give universities and similar organizations a free pass to being patent-fueled leeches.
Then again, I'm not convinced that there's such a thing as a legitimate patent lawsuit, either.
> A company that technically produces a product implementing a patent, but nonetheless engages in trollish tactics still qualifies as a troll.
That's certainly possible in principle, but it would be pretty stupid. One big advantage an NPE has in litigation is that it can't effectively be counter-sued: it has no business against which an injunction can be issued, and (if set up as a shell company, as trolls generally are) it has no assets that can be levied against. Furthermore, since it's not operating a business, it is exceedingly unlikely to be (even arguably) infringing any patents owned by its victims.
For a company producing a product to expose itself to the risk of countersuit by trolling would be idiotic, particularly as it's completely unnecessary -- all it has to do is spin off a shell company.
Also, all modern patent systems are intrinsically based on this reality, to the extent that we have a problem with maintaining a high bar on obviousness. Today, patentability is based on how much an invention differs from the prior art, which is based on the premise that all new innovations are built on top of previous ones but we still want to reward "worthy" inventions. Unfortunately, obviousness is so hard to quantify without subjectiveness and hindsight bias that the commonly adopted objective measure of "worth", is the delta from the prior art. You find a delta the examiner cannot refute with prior art, you get a patent.
Sure, but there is a definite directionality to the overall idea flow here versus money flow. The ideas tend to flow from academia or R&D shops while most of the money flows to companies that take those ideas and build consumer products with them.
Those are two very different things. And most of those R&D shops are attached to companies capable of doing something with the research.
> while most of the money flows to companies that take those ideas and build consumer products with them
If you're looking to come up with ideas and make money from them, as opposed to publishing them for general benefit, academia is the wrong place to do that. Universities aren't necessarily patent trolls, but university IP licensing departments are. (In any case, universities that make claims over the innovations of their students and faculty are broken to begin with, and I wouldn't blame a university for researchers who go off and create entities to license their own inventions that the university doesn't own.)
> Those are two very different things. And most of those R&D shops are attached to companies capable of doing something with the research.
They're often similarly positioned vis-à-vis the patent system. E.g. even with patent protection, SRI got a pretty short end of the stick relative to Apple despite doing much of the real innovation behind Siri.
> If you're looking to come up with ideas and make money from them, as opposed to publishing them for general benefit, academia is the wrong place to do that.
Maybe there would be more innovation if that weren't the case. In any case, I find it hard to fault universities for deciding they don't want to do free R&D for industry.
You probably disagree with this, but the platonic ideal of the patent system, for many contemporary proponents, is enabling a world where everyone who participates in the incremental process of innovation can get compensated for their contribution, instead of a windfall going to whoever takes the last step, or more typically, takes a proven idea and throws UX engineers and a big sales team at it.
> You probably disagree with this, but the platonic ideal of the patent system, for many contemporary proponents, is enabling a world where everyone who participates in the incremental process of innovation can get compensated for their contribution, instead of a windfall going to whoever takes the last step, or more typically, takes a proven idea and throws UX engineers and a big sales team at it.
I agree that that's the platonic ideal of the patent system. (Though I'd note that its documented motivation is not to reward innovation per se, but to encourage the production and most importantly publication of it; reward is a means, not an end, and I think that's a critical distinction.) I also believe, and I hope you'd agree, that the reality of the patent system does not come anywhere close to that "ideal". Furthermore, I believe the harm and limitation to innovation far outstrips the encouragement, especially in tech.
I'm not going to comment on the more challenging issue of how to fund innovation in fields like medicine. However, at least in the tech industry, if the patent system evaporated tomorrow, the world wouldn't end, no company or product we actually cared about would go away, on balance we'd be better off.
I agree the system doesn't live up to the ideal, mainly because efficient patent markets don't exist. I don't agree we'd necessarily be better off without it in "tech." Product companies would be better off, certainly. R&D companies and universities, probably not.
I disagree that good products don't go away. What does the world look like where there is no SRI to do the hard part of Siri, just companies like Apple sitting around waiting for something they can package up and sell? What does the world look like without ARM? What does the world look like when Qualcomm spends a lot less money on R&D because competitors can easily use the results by reverse-engineering their firmware? What does the world look like when the ITC never happened, and Chinese firms contained to engage in flooding the international market with copies of American router designs?
I mean, I don't have to mention all these things. Just look at the lobbying materials of tech companies in the 1990's. The tech industry had a huge hand in creating the patent regime that exists today, just as Microsoft and Adobe did in creating the copyright regime we have.
> And most of those R&D shops are attached to companies capable of doing something with the research.
This is false to a surprising degree. Consider that the vast majority of the semiconductor industry cannot "do something with their research". ARM is the oft-repeated example, but what is missed is that they are the norm, not the exception. Consider that the semiconductor industry has thousands of firms and only a handful of fab companies. Without the fabs, these semiconductor companies can do literally nothing, and worse, some fabs like Intel are direct competitors.
I think it's a bad definition too. But the problem is mostly unique to NPEs. There are definitely some NPEs that I wouldn't call a troll, like universities and R&D firms.
I think I could even support a patent monetization entity as long as it relied on legitimate patents and went after legitimate infringers.
The issue is few, if any, NPEs actually do that. They resort to extortion-like demand letters or use hopelessly weak patents.
Chart 1 of the WaPo article is a bit misleading. The America Invents Act, passed in 2011, limited the circumstances under which multiple defendants could be joined in the same suit. So what might have been one suit with three defendants pre-AIA might be three suits, each with one defendant now. If you look at Chart 1-2 of the RPX study, on page 10, you can see that the total number of defendants peaked in 2011. The same trend holds when looking at NPE cases only (Chart 4-5 of the RPX report). Chart 10 is also interesting, which shows the number of campaigns (suits related to single patent or set of patents), down since peaking in 2011.
The other change that receives less attention is the Medimmune v Genentech case in 2007, which changed the playing field such that it forced many potential licensors to initiate a lawsuit to avoid getting preemptively sued for declaratory judgement:
http://digitalcommons.pepperdine.edu/cgi/viewcontent.cgi?art...
This decision also correlates with another jump in lawsuits in 2007 found by other studies. Not sure why this dataset does not reflect that jump.
Also, I'm very curious about the PWC result that patent troll litigation awards are rising. I've followed a bunch of NPE cases (many of which have been discussed here), and I consistently find that trolls get much lower awards than they seek. Case in point, the TQP vs NewEgg trial where, even though they won, they got only half of the damages they sought. And that's at the higher end... From hearsay, some attorneys claim the average is around 10% of the damages sought.
What I'm finding is that accusing the plaintiff of being a "troll", regardless of whether that accusation has merit, has an automatic impact on the damages received, if at all the plaintiff prevails.
But then most of the cases I've followed have been in ED Texas. Maybe the higher awards come from other districts, e.g. Delaware?
The original point of patents is to provide protection to inventors and give them a head start in implementing their inventions. A company which hold patents without implementing them is basically not following the spirit of the law. Hence, there should be a drastic "countdown" to a patent viability, which would be dispelled by a producing a viable, marketed application of that patent. I would suggest a 6 months timeframe, non renewable. For software patents, given the very abstract nature of the invention, 3 months should be enough, and the patent lifetime itself should not exceed 3 years - 12 times the countdown to market (3 years is already quite long in the software industry, although not in the law one). This should be retroactive. Note that I'd rather see the concept of software patents completely invalidated, but I understand that the issue is quite complex.
Oh, and what should be done in the case of patent transfers? Should the new holder be subjected to that countdown as well? What if the products tied to a patent is eol'ed? Should the countdown be restarted? I do think so. It's all about the practical side of things.
"The original point of patents is to provide protection to inventors and give them a head start in implementing their inventions"
Not really true; the original point of patents (in the US, anyway) in the minds of Jefferson and others who (in some cases begrudgingly) defined them was to enhance the amount common, public knowledge by enticing inventors to publicly document their inventions rather than hold them as trade secrets. The "protection" and "head start" bits are really the payment made in return for that public documentation, but not the actual reason for the system to exist. The idea that patents exist to protect "the little guy" is a modern idea, ironically invented and propagated primarily by big corporations and "big law".
This makes most modern software patents (which are routinely violated by people reinventing fairly trivial systems even when having no prior knowledge of the existing patent implementations) all the more ridiculous.
A company which hold patents without implementing them is basically not following the spirit of the law.
Playing Devil's advocate, what about a company like ARM, which designs and patents new CPU designs and then licenses them to others? We can't claim their patents aren't implemented. Should they be forced to make the CPUs themselves?
And if not, what would prevent NPEs from licensing to one small company and then suing everyone else?
Actually you raise a good point. ARM has been always doing that though, they built their own cpus when they started, iirc. That would have large consequences on their current business model, it's true.
> And if not, what would prevent NPEs from licensing to one small company and then suing everyone else?
It's already happening. When one of those company win a lawsuit, it is usually followed by them selling a license to whomever they sued...
Which is the lesser evil? Forcing patent holders into producing practical implementation of their patents, or allowing NPEs to exist?
I guess my idea doesn't really hold waters. Most probably smarter people already have thought about that possibility and saw the issues you hinted at. Oh well.
Who actually produces it (you or a partner) is, at least in my mind, neither here nor there. A huge chunk of manufacturing is outsourced/subcontracted these days anyway, so it's pretty difficult to say who is the actual manufacturer of a product anyway.
The key question for me is the motivation for the patent - did you come up with some novel idea in order to get it manufactured (and are using patent protection primarily to stop someone ripping off your invention), or did you come up with (or buy) an idea and patent it purely in the hope that some other company independently comes up with the same idea and you can then sue them for patent infringement?
Not sure - maybe by showing a company that is manufacturing your patented product under licence, or at least by showing your attempts to find a company to do this.
Several people on this thread correctly diagnose the problem is not NPEs but "it's too cheap to obtain and hold large patent portfolios."
Once a patent is awarded ANY application that references other patents should be able to re-open examination of those patents if the applicant can show evidence of the existence of prior art or articulate a reason for obviousness or other reason for invalidation. Patent examiners should get bonuses for passing patents that stand up to such scrutiny and get decreases in bonus if they let through patents that are subsequently invalidated.
There should also be a bounty for invalidating patents through an administrative process, not requiring litigation.
Is it technically correct to say that frivolous patent lawsuits "drag the economy"?
Ignoring for a moment the moral issue, if such phenomenon causes a (relatively) large amount of money to flow from (software) companies to "patent trolling" ones, isn't it still positive for the economy?
This is a much weaker claim than the broken window fallacy, though. The parent comment addresses something that is left unsaid in the broken window fallacy — that even if it isn't objectively better for the money to go to a window-maker, it might not be worse either. It's possible that the chain of events is ultimately neutral for the system as a whole.
One could make the argument that it's taking money from productive entities who would put it into R&D or future production and giving it to non-productive entities who will just use the money to sit on the patents and potentially sue more people.
Why? Where's the benefit for the economy? If somehow the patent trolls reinject the benefits they make (ie what they obtain from the law suit minus the lawyers/legal fees) in the economy, perhaps we could say it's maybe a positive outcome, but there are no garantee that the infringing company would not have done so. So where is the benefit for the economy?
In economic terms, this is not a transaction (both parties agree to exchange things for their mutual benefit) which is usually considered positive. It's closer to rent-seeking, which is usually considered neutral to negative.
It depends how you measure. The transfer of license money is good for GDP. But if the money is going to people who just keep it instead of investing in something, then it will "drag the economy".
I never liked that definition. It sounds like ordinary specialization in an economy, to me.
"The latest effort would have required the loser in a lawsuit to cover the winner's legal fees and for NPEs to state more clearly what was being infringed at the outset."
Now we're talking: address the real problem. The real problem is not NPEs; the real problem is that they can impose huge costs on others at little cost to themselves, which sets them up perfectly for an extortion-like racket.