tag:theconversation.com,2011:/us/topics/patent-trolls-5862/articlesPatent trolls – The Conversation2015-09-16T10:32:35Ztag:theconversation.com,2011:article/452592015-09-16T10:32:35Z2015-09-16T10:32:35ZHow innovation-killing trolls toppled the patent process<figure><img src="https://images.theconversation.com/files/94912/original/image-20150915-29639-1yg4t3u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It's a visual metaphor...</span> <span class="attribution"><a class="source" href="http://www.stockmonkeys.com">StockMonkeys.com</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Nearly everyone who isn’t a lawyer agrees: intellectual property law is a mess. And the monopolies granted by patent and copyright law have begun to hamper the very innovation they were designed to encourage. </p>
<p>The <a href="http://www.uspto.gov">US Patent and Trademark Office</a> (PTO) provides a limited monopoly for a patent holder, allowing them to exclusively benefit from their invention for a given period of time. This creates the incentive for others to create and innovate, instead of simply copying. However, today it seems patents don’t benefit innovators but instead only lawyers. The same is increasingly true for expressions protected under copyright, which often acts as a barrier for small artists and as a bludgeon wielded by big content companies.</p>
<p>Securing a patent isn’t easy or cheap, and since the mid-1960s only <a href="http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm">half of applicants</a> have had their patents granted. Last year the total number of US patents granted was 326,033. Of these an estimated 3%-5% will be profitable, since a hypothetical monopoly on a market that doesn’t exist isn’t worth anything. </p>
<p>Leave it to lawyers, however, to find a way to make money from nothing: witness the rise of the “patent troll.”</p>
<h2>Money for old paper</h2>
<p>The PTO collects its fees whether or not a patented invention succeeds, and other lawyers get paid in the process. The 300,000 patents granted in the US in 2014 that are expected to never profit the inventor have generated around US$300 million in fees – money that’s part of what I call the intellectual property-industrial complex. </p>
<p>Patents are now not an asset to innovation and industry so much as they have become an industry in themselves.</p>
<p>Patents without a market to exploit are little more than worthless pieces of paper. But given a suitably large and broad collection of nonprofitable patents, at some point someone else will succeed by developing a similar idea to one of these patents. By buying and bundling together a <a href="http://www.cnet.com/news/inside-intellectual-ventures-the-most-hated-company-in-tech">patent portfolio</a> and arming oneself with lawyers threatening to sue for patent infringement, such a portfolio becomes a formidable tool. </p>
<p>There are companies, such as <a href="http://arstechnica.com/tech-policy/2011/10/worlds-leading-patent-troll-sues-motorola/">Intellectual Ventures</a> and <a href="http://www.slate.com/articles/business/the_dismal_science/2012/04/patent_trolls_how_they_stifle_innovation_.html">Acacia Research</a>, that accumulate patents, build large portfolios, and then wait and seek out those they can accuse of infringing “their” patents. Who wins? Who profits? Not innovation.</p>
<h2>Trolls under the bridge</h2>
<p>Armed with such a portfolio, patent trolls can use the threat of legal action and the ability to extract settlements from patent “infringers,” stifling innovators in the process. They are the troll under the bridge, charging those who wish to cross. Recent government studies revealed firms spend a staggering <a href="https://hbr.org/2014/07/the-evidence-is-in-patent-trolls-do-hurt-innovation">$30 billion</a> defending cases brought by trolls, which disproportionately affect smaller, more innovative firms. </p>
<p>A notable example among thousands was the attempt by notorious patent troll Lodsys to extract <a href="https://gigaom.com/2013/09/25/patent-troll-lodsys-demands-5000-from-martha-stewart-that-was-a-bad-idea/">$5,000 from Martha Stewart</a> for allegedly infringing a patent that was part of its portfolio involving e-magazine software. Having enraged a media mogul, Lodsys has since had to defended itself from countersuits challenging the validity of their patents. </p>
<p>Such patents have at times been so vague as to claim a monopoly over all processes involving “in-app purchasing,” the process of <a href="http://blogmaverick.com/2014/01/28/so-i-got-sued-by-a-patent-troll-who-thinks-they-own-downloading-movies-only-before-they-are-released-in-theaters-over-cellular/">downloading movies on a phone</a> via the internet, or Amazon’s notorious <a href="http://worldwide.espacenet.com/publicationDetails/biblio?CC=US&NR=5960411&KC=&FT=E&locale=en_EP">patent</a> for <a href="http://www.theregister.co.uk/2011/07/07/european_patent_office_says_amazon_oneclick_payment_too_obvious_to_patent/">one-click-ordering</a> – dismissed in the UK as “too obvious to patent.”</p>
<h2>Aesthetic expression suffers</h2>
<p>Copyright has also become mostly of benefit to large businesses and copyright lawyers. Copyright is relatively easy and cheap to assert, but for most artists they are not the primary, nor a reliable, source of revenue. For authors who manage to find a publisher for their book, the returns for all but the most famous are <a href="http://www.huffingtonpost.com/bj-gallagher/book-publishing_b_1394159.html">scant</a>. Publishers keep most of the money, and content is traded much like dead patents, which may reap rewards for content providers in the future but yield small returns for non-blockbuster authors in the near term. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/91041/original/image-20150806-5236-yl154d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/91041/original/image-20150806-5236-yl154d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=498&fit=crop&dpr=1 600w, https://images.theconversation.com/files/91041/original/image-20150806-5236-yl154d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=498&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/91041/original/image-20150806-5236-yl154d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=498&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/91041/original/image-20150806-5236-yl154d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=625&fit=crop&dpr=1 754w, https://images.theconversation.com/files/91041/original/image-20150806-5236-yl154d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=625&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/91041/original/image-20150806-5236-yl154d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=625&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">By avoiding costly legal monopolies, some artists work outside the copyright system.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/coldstorage/3168759426/">ColdStorage/flickr</a></span>
</figcaption>
</figure>
<p>Artists and authors are beginning to realize the scam and, liberated by new technologies, are taking matters into their own hands by becoming their own marketers and producers. <a href="http://www.hughhowey.com/the-state-of-self-publishing/">Hugh Howey</a>, Mark Dawson and others have successfully self-published bestselling novels and taken home most of their own profits. The low price points for their works (because they can cut out middlemen) also mean more people can afford to buy them. </p>
<p>Publishers and producers are fighting to hold onto their old systems, vigorously pursuing <a href="http://artlawjournal.com/mickey-mouse-keeps-changing-copyright-law/">more draconian</a> copyright laws and terms. The current negotiations about the <a href="https://www.eff.org/issues/tpp">Trans-Pacific Partnership</a> are an example, and show how the big content delivery corporations, and not artists, have the ears of policymakers. These corporations are eager to extend monopolies over aesthetic expressions throughout the world. None of this will <a href="https://theconversation.com/why-cash-and-copyright-are-bad-news-for-creativity-34696">increase creativity</a>.</p>
<h2>Give innovators a break</h2>
<p>Along with copyright, there is growing <a href="http://creativecommons.org/weblog/entry/18426">evidence</a> that patent practices are undermining the very purpose of the intellectual property laws and <a href="https://hbr.org/2014/07/the-evidence-is-in-patent-trolls-do-hurt-innovation">costing the economy</a> hundreds of millions of dollars. This <a href="http://www.fool.com/investing/general/2015/08/12/the-companies-sued-the-most-over-patents-in-2015.aspx">past year</a> may be the <a href="http://unifiedpatents.com/1st-half-2015-patent-dispute-report/">worst yet for the costs of patent trolls</a>.</p>
<p>Without <a href="https://theconversation.com/a-quick-fix-solution-for-patent-trolls-probably-wont-work-18819">significant reform</a> to our intellectual property laws, money that ought to be going into innovation and creativity will be hoarded to defend against potential lawsuits, and capital that ought to go to inventors and artists will be siphoned off to litigators and trolls. </p>
<p>The intellectual property-industrial complex is lobbying hard against reform. The proposed reforms currently stalled in the US Congress are quite mild and mostly involve fee-shifting, so that there would be less of an incentive to use patent suits to harass smaller organizations. </p>
<p>To truly fix this problem, we need to take a step back and tackle the environment that allows trolls to prosper off the truly creative and innovative among us.</p><img src="https://counter.theconversation.com/content/45259/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Koepsell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Intellectual property laws, 19th-century legislation struggling for relevance in the 21st century, are well overdue for reform.David Koepsell, Adjunct Associate Professor, University at BuffaloLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/444992015-07-30T19:45:43Z2015-07-30T19:45:43ZGive existing reforms a chance to kill patent trolls<figure><img src="https://images.theconversation.com/files/89998/original/image-20150728-7671-cn596v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Watch out for trolls squatting on patents.</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Troll_Warning.jpg">Gil</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Two hundred twenty-five years ago, on July 31 1790, the first patent was issued in the United States. It covered a method of making a fertilizer ingredient, <a href="http://www.uspto.gov/about-us/news-updates/first-us-patent-issued-today-1790">potash.</a></p>
<p>How times have changed! Over <a href="http://www.uspto.gov/web/offices/ac/ido/oeip/taf/issuyear.htm">eight million patents</a> later, we’ve moved from fertilizer to a revolution in genetics and digital technologies. Thousands of patents have been issued on computer software and methods of doing business. </p>
<p>Patents are supposed to encourage such dramatic innovation by providing inventors a limited period of time where they can exclude others from using their invention. Nevertheless, the law can struggle to keep up with new technologies. Software and business-method patents have created strain on the way our patent system operates. In particular, these patents have been frequently used by what critics have dubbed the “patent troll.” </p>
<h2>Patent trolling for profit</h2>
<p>What exactly are “patent trolls?” Their less pejorative appellation is Patent Assertion Entities (PAEs). PAEs generally are business entities that have only one asset, a patent. Typically they buy these patents from small inventors or bankrupt companies. PAEs don’t manufacture anything. Their entire business model is to threaten to sue people for patent infringement in hopes of getting licensing fees for the patent. </p>
<p>The PAE model is effective. Patent litigation is expensive for companies, costing <a href="http://www.patentinsurance.com/custdocs/2013aipla%20survey.pdf">potentially millions of dollars</a>. Once sued by a PAE, many companies prefer to settle to avoid the cost, regardless of the merits of the case. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/89999/original/image-20150728-7641-1xyqwnp.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/89999/original/image-20150728-7641-1xyqwnp.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/89999/original/image-20150728-7641-1xyqwnp.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/89999/original/image-20150728-7641-1xyqwnp.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/89999/original/image-20150728-7641-1xyqwnp.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/89999/original/image-20150728-7641-1xyqwnp.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/89999/original/image-20150728-7641-1xyqwnp.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/89999/original/image-20150728-7641-1xyqwnp.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Patents are meant to foster innovation by protecting inventions.</span>
</figcaption>
</figure>
<p>PAEs, on the other hand, have few litigation expenses. Their only asset is the patent, and often their lawyers take the case on a contingency fee basis, so the lawyer gets paid only if and when the money comes in. Settle the case, then move on to the next target.</p>
<p>A popular statistic thrown around is that <a href="https://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf">60% of United States patent lawsuits filed in 2013 were brought by PAEs</a>, leading many to view PAEs as parasites. </p>
<p>Congress has reacted, with <a href="https://www.congress.gov/bill/114th-congress/house-bill/9">patent reform legislation</a> on the verge of passing. The legislation is targeted at trolls and contains myriad provisions: creating standards for pleading a case far beyond other forms of litigation, making the loser pay in patent litigation and limiting discovery until the court has interpreted what the patent covers. There seems to be much enthusiasm for such reform, with reform bills making it out of committee in both the <a href="http://www.washingtontimes.com/news/2015/jun/11/house-committee-approves-patent-reform-innovation-/">House</a> and the <a href="http://thehill.com/policy/technology/244039-senate-panel-moves-patent-bill-to-the-floor">Senate</a> in a surprising show of bipartisanship. </p>
<p>Except, we don’t need it, at least not yet.</p>
<h2>Legal changes already under way</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/89996/original/image-20150728-13725-tg9wug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/89996/original/image-20150728-13725-tg9wug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/89996/original/image-20150728-13725-tg9wug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/89996/original/image-20150728-13725-tg9wug.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/89996/original/image-20150728-13725-tg9wug.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/89996/original/image-20150728-13725-tg9wug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/89996/original/image-20150728-13725-tg9wug.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/89996/original/image-20150728-13725-tg9wug.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Campaigns are under way to annihilate the trolls.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/hershco/13242953903">Hershco</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>The patent system is already in the throes of dramatic change, the impact of which we are only now beginning to feel. </p>
<p>Even in the two years since that 60% statistic, we’ve seen a sea change in patent law. To alter the patent landscape yet again risks undermining the value of all patents, not just the PAEs’. The proposed reforms are intended to chill abusive PAE activity, but they would have the same impact on small inventors and universities, who are also entities that don’t manufacture anything. Yet we would not consider them “trolls.” </p>
<p>The changes that have already taken place came from both Congress and the courts. </p>
<p>The Supreme Court, in particular, decided numerous cases in 2014 that could alter dramatically the ability of PAEs to operate. The court made it easier, for example, to <a href="http://www.supremecourt.gov/opinions/13pdf/12-1184_gdhl.pdf">force PAEs to pay their opponents’ attorney fees</a> when the PAE loses, making trolls’ suits riskier and potentially less profitable. </p>
<p>Most importantly, the Supreme Court’s decision in <a href="http://www.supremecourt.gov/opinions/13pdf/13-298_7lh8.pdf">Alice Corporation v CLS Bank</a> has dramatically altered the law governing which types of inventions are eligible for patent protection. </p>
<p>Alice invalidated a particular business method – a way to reduce the risk in a financial transaction of one party not carrying through on the agreement. The Supreme Court concluded that the method was merely an “abstract idea.” The patent in essence claimed the idea of avoiding these risks and merely used conventional computer technology to achieve it. According to the Supreme Court, that is not enough to constitute a patentable invention.</p>
<p>The Supreme Court’s decision has created a flood of other decisions invalidating patents on similar inventions, along with those relating to computer software, because courts view them as merely abstract ideas that are being implemented through routine mechanisms. The US Court of Appeals for the Federal Circuit – the court hearing all patent appeals across the country – <a href="http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/13-1505.Opinion.12-3-2014.1.PDF">has found only one patent valid</a> on these grounds in the post-Alice world, invalidating <a href="http://www.law360.com/articles/662776/a-look-at-everything-the-fed-circ-has-said-about-alice">numerous others</a>. These are the areas in which PAEs often operate, and many of their patents are now likely dead.</p>
<p>For its part, Congress substantially reworked the patent system in 2011 when it passed the America Invents Act (<a href="http://www.aipla.org/advocacy/congress/aia/Pages/The-Act.aspx">AIA</a>). </p>
<p>Among other changes, the AIA created new procedures at the United States Patent and Trademark Office (<a href="http://www.uspto.gov">USPTO</a>) that provide alternatives for challenging patents that are faster and cheaper than litigation. </p>
<p>In particular, the AIA created the “Covered Business Method” (<a href="http://www.uspto.gov/patents-application-process/appealing-patent-decisions/trials/transitional-program-covered-business">CBM</a>) procedure that targets business-method patents, the favorite playground of PAEs. </p>
<h2>Changes need time to percolate through the system</h2>
<p>The CBM procedure began in September 2012. These proceedings can take some time, so we are only now beginning to see the fruits of this and other new procedures at the USPTO. Indeed, the Federal Circuit just decided its <a href="http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/14-1194.Opinion.7-8-2015.1.PDF">very first appeal</a> from a CBM proceeding on July 9.</p>
<p>While these proceedings are proving to be <a href="http://www.law360.com/articles/581512/trends-from-2-years-of-aia-post-grant-proceedings">popular with parties seeking to challenge patents</a>, the cases are only now making their way through the USPTO and on to the Federal Circuit. Many uncertainties remain about their impact, but all signs suggest these proceedings are meeting, if not exceeding, expectations as a cheaper alternative to challenge bad patents, including those in the hands of PAEs.</p>
<p>As a result of these legislative and judicial actions, the patent system is already in a state of flux, and much of the change is directed to PAE abuses. So why mess with things now? </p>
<p>Of course, when litigants abuse the patent system, it is costly to everyone, and undoubtedly some PAEs <em>are</em> abusing the system. But Congress should be sure that new reforms don’t do more harm than good. Further congressional action now of the wrong kind could reduce the value of patents if it makes it too costly or risky to enforce legitimate patents. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/89995/original/image-20150728-7626-v4nemr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/89995/original/image-20150728-7626-v4nemr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/89995/original/image-20150728-7626-v4nemr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=402&fit=crop&dpr=1 600w, https://images.theconversation.com/files/89995/original/image-20150728-7626-v4nemr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=402&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/89995/original/image-20150728-7626-v4nemr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=402&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/89995/original/image-20150728-7626-v4nemr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=505&fit=crop&dpr=1 754w, https://images.theconversation.com/files/89995/original/image-20150728-7626-v4nemr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=505&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/89995/original/image-20150728-7626-v4nemr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=505&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Be careful where you steer the car….</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/tamaleaver/6288497038">Tama Leaver</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>One of the first things we are taught in drivers’ education is that over-correcting the steering wheel can actually be worse than merely staying the course. Congress’ well-meaning legislative proposals run the risk of acting prematurely and over-correcting the patent system, potentially driving it off the road.</p><img src="https://counter.theconversation.com/content/44499/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Timothy Holbrook does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Nobody loves patent trolls. But new legislation in Congress aimed at the trolls isn’t necessary, since the effects of recent patent reforms are only starting to be felt.Timothy Holbrook, Professor of Law, Emory UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/290482014-07-13T19:51:34Z2014-07-13T19:51:34ZLOT network: how Google and friends aim to block patent trolls<figure><img src="https://images.theconversation.com/files/53604/original/3nb9p6gx-1405054720.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Patent trolls ... halt!</span> <span class="attribution"><a class="source" href="http://www.flickr.com/photos/rpenalozan/5842530609">Rafael Peñaloza</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Google, Canon and other information technology corporations last week announced they’re banding together in an attempt to fix an allegedly broken patent system and squash the wave of <a href="https://theconversation.com/a-quick-fix-solution-for-patent-trolls-probably-wont-work-18819">patent trolls</a> and privateers crippling innovation.</p>
<p>The License on Transfer (<a href="http://www.lotnet.com/">LOT</a>) Network <a href="http://www.lotnet.com/learn-more/news-events.cfm?nid=Asana%2C%20Canon%2C%20Dropbox%2C%20Google%2C%20Newegg%20and%20SAP%20Announce%20Formation%20of%20New%20Cooperative%20Patent-Licensing%20Agreement">describes itself</a> as “a new kind of royalty-free cross-license meant to address these growing systemic problems”. </p>
<p>In principle it could involve IT start-ups, universities and bodies such as CSIRO that we expect to gain revenue by actively commercialising creativity. </p>
<p>The LOT Network’s current participants “own almost 300,000 patent assets, generate more than US$117 billion in revenue and employ more than 310,000 people”, albeit many of those people are in China rather than Silicon Valley, Sydney or London.</p>
<p>A Google spokesperson characterises the LOT Network – entities that have agreed to cooperate with each other – as “a sort of arms control for the patent world”:</p>
<blockquote>
<p>By working together, we can cut down on patent litigation, allowing us to focus instead on building great products.</p>
</blockquote>
<p>But how exactly will patent trolls and privateers really be affected by this move?</p>
<h2>The problem at hand</h2>
<p><a href="https://theconversation.com/ip-patents-copyright-you-5421">Patent law</a> gives inventors and investors a legally enforceable right to commercially exploit an invention – in essence, a new device or process. </p>
<p>That right can be licensed to another entity, with the rights owner for example authorising several manufacturers to concurrently use the owner’s patent in return for a royalty. The right lasts for a finite period of years and is meant to encourage creativity and investment in order to benefit society. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/qpn53WS8maQ?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">An introduction to patent law, if you prefer it in video form.</span></figcaption>
</figure>
<p>The balance between social goods and rewards to the investors and inventors remains contentious. Controversy around the <a href="http://www.equilibri.net/nuovo/articolo/high-price-drug-patents-australia-patent-law-pharmaceutical-drugs-and-trans-pacific-partner">Pharmaceutical Patents Review</a> in Australia suggests there <em>is</em> cause for concern. </p>
<p>There is also disagreement about whether some patented innovation is truly <a href="https://theconversation.com/everything-but-the-squeal-researchers-steak-claim-with-beef-patent-13398">original</a> (and thus appropriately protected) and about the impact of large-scale litigation such as the “<a href="https://theconversation.com/apple-google-and-samsung-is-it-peacetime-in-the-patent-wars-26949">patent war</a>” between Apple and Samsung.</p>
<p>Recently we have seen the much-hyped (and less understood) <a href="http://www.teslamotors.com/blog/all-our-patent-are-belong-you">announcement</a> by CEO Elon Musk at Tesla – the electric car company – about patent licencing:</p>
<blockquote>
<p>We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position</p>
</blockquote>
<p>Rather than exemplary philanthropy that announcement can be seen as an indication that Tesla plans to exploit its rights on a selective basis. Nice media release; not the end of patent law or an intellectual property nirvana. </p>
<h2>Back to LOT</h2>
<p>The LOT agreement isn’t designed to eradicate patents or lawyers. It operates on the basis that inventors, such as Google, can continue to gain patents covering their innovation. </p>
<p>That is unsurprising, given that the real value of many corporations lies in trade marks and patents rather than in factories or offices. (Much manufacturing in the IT sector, after all, is done by agents such as <a href="http://www.foxconn.com/">Foxconn</a> rather than directly by rights owners.)</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/53605/original/cy6thyss-1405054996.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/53605/original/cy6thyss-1405054996.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/53605/original/cy6thyss-1405054996.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=336&fit=crop&dpr=1 600w, https://images.theconversation.com/files/53605/original/cy6thyss-1405054996.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=336&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/53605/original/cy6thyss-1405054996.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=336&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/53605/original/cy6thyss-1405054996.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=423&fit=crop&dpr=1 754w, https://images.theconversation.com/files/53605/original/cy6thyss-1405054996.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=423&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/53605/original/cy6thyss-1405054996.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=423&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="http://www.flickr.com/photos/mwiththeat/5562687410">Matt Wakeman/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Having gained a patent, each LOT entity can licence its invention to other entities within the group. Each entity retains the right to enforce the patent so long as it retains ownership. It can assign a value to the patent in its corporate accounts. It is not forced to licence or gift the innovation to a competitor. </p>
<p>But if the patent is sold to an entity outside the group, the members of the group gain a royalty-free license to use the patent. </p>
<p>The expectation is that the LOT Network agreement will accordingly prevent mischievous litigation by what are characterised as patent trolls or patent privateers, such as entities that critics claim engage in a form of extortion over supposed or substantive rights, but do not engage in innovation themselves. </p>
<p>In essence, there will be little point in buying a LOT patent in order to improperly assert rights through threats of litigation against members of the group. The buyer could of course litigate against infringement of the patent by an entity outside the group, so the LOT Network is not a comprehensive fix.</p>
<p>International patent lawyers, academics and investors will be checking the fine print in what is otherwise a positive development. There are carve-outs to “preserve a patent portfolio’s value”, including provisions regarding some takeovers and other deals affecting control of an entity within the group. </p>
<p>We might wonder whether competition watchdogs will also be watching LOT, which, as in some cross-licensing arrangements over the past 120 years, has the potential to be anti-competitive if you are outside the LOT club or one of the smaller entities dealing with a giant such as Google.</p><img src="https://counter.theconversation.com/content/29048/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Baer Arnold does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Google, Canon and other information technology corporations last week announced they’re banding together in an attempt to fix an allegedly broken patent system and squash the wave of patent trolls and…Bruce Baer Arnold, Assistant Professor, School of Law, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/212962013-12-10T15:10:22Z2013-12-10T15:10:22ZTinkering with the law won’t stop patent trolls<figure><img src="https://images.theconversation.com/files/37349/original/t5kkmpgc-1386680750.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Grubby, mean and out for your ideas. Patent trolls are on the prowl.</span> <span class="attribution"><span class="source">kewl</span></span></figcaption></figure><p>For a country that has long been a staunch defender of intellectual property rights, the US has struggled in recent years to get to grips with the menace of a new breed of patent holders, pejoratively known as patent trolls.</p>
<p>While patent protection is based on the understanding that it spurs innovation and economic growth; these patent holders do not manufacture products or supply services, but exploit the weakness in the patent system to earn their living by instigating patent disputes. </p>
<p>Now the US House of Representatives has voted in a bill that, it hopes, will stop these trolls in their tracks. But the <a href="http://beta.congress.gov/bill/113th/house-bill/2639">Innovation Act</a>, which has just been agreed in the House and will now head to the Senate, fails to address some of the fundamental flaws in the patent system. It tackles some real concerns but fails to strike at the heart of the problem. </p>
<h2>The trouble with trolls</h2>
<p>Patent trolls are accused of frustrating innovation by behaving like fairytale trolls that lurk under bridges to prey on unsuspecting travellers as they approach. They lie in wait, holding onto patents until an innovator has sunk enormous costs in designing, developing and commercialising an innovative product. The troll then jumps from under the bridge to claim their right over the patent and negotiate patent licensing agreements with the innovator at costs that can be far beyond the actual value of the patent.</p>
<p>Trolls also appear to be owners of broad and vague patents – the scope and validity of which is uncertain. Trolls exploit this vagueness by “fishing” for potential infringers who may be using technology in their commercialised product that may have tenuous links to the patent.</p>
<h2>A good start</h2>
<p>The Innovation Act takes steps towards streamlining procedures for lawsuits to make it transparent, discourage the filing of vague and frivolous suits and in the process, make trolling behaviour financially burdensome. </p>
<p>The bill requires lawsuits to include specific details of the patents that are supposedly being infringed and an explanation of how the defendant’s product or services infringes the claim. It also encourages transparency by requiring patent holders to disclose information on everyone that has a financial interest in the patent. </p>
<p>The bill attempts to create a default position where the plaintiff will pay reasonable legal fees to the defendant if they fail to make a case against them. This would act as a disincentive to anyone seeking to pursue a case just for the sake of it. It also seeks to reduce the defendant’s costs by cutting back on the amount of documentation they have to produce at the earlier stages of a lawsuit. A defendant will only have to produce “discovery” documents only after the boundaries of the claim has been clearly established.</p>
<h2>Missing the mark</h2>
<p>Despite overwhelming bipartisan support for the bill, small and medium-sized companies have been divided in their responses to the provisions in the bill. Critics argue that it was <a href="http://www.nsba.biz/?p=7232">rushed through Congress too quickly</a> and that the definition of patent trolls is yet to be settled.</p>
<p>Until we decide <a href="http://research-information.bristol.ac.uk/en/publications/patent-trolls-in-thickets-who-is-fishing-under-the-bridge(12d53a2c-aa62-46fb-9085-5ca2bc0d5d7a).html">what a troll actually is</a>, it will be impossible to decisively legislate against their menace.</p>
<p>This bill has been adopted very quickly and has the potential to adversely affect genuine patent holders through the very provisions that are meant to help them. Abuse of the patent system is not exclusively adopted by non-producers of patents and is widespread within the system due to its inherent weakness. There is no clear definition that enables us to confidently identify the “bad” troll because the current definition can easily be extended to include all non-producing patent holders seeking to assert their rights. </p>
<p>Patent holders have no legal requirement to use their patents, so allowing non-producing patent owners to be treated differently is discriminatory. Patent holders may not have commercialised their patents for genuine reasons. For example, this may be due to lack of resources needed to commercialise their product or have access to the complementary technologies needed to make it work on the market.</p>
<p>The bill merely makes it difficult for small and mid-size innovators to have access to remedies for infringement. Any patent holder not using or working their patent is at risk of having weak remedies against infringement at a time when there is no legal requirement to work the patent. </p>
<p>The bill reinforces measures adopted by the <a href="https://www.govtrack.us/congress/bills/112/hr1249/text">America Invents Act 2011</a> and the <a href="http://www.whitehouse.gov/the-press-office/2013/06/04/fact-sheet-white-house-task-force-high-tech-patent-issues">White House Executive Orders</a> that attempts to deal with patent trolls. Even the US Supreme Court has taken note of the troll phenomenon in the <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1022057">2006 case involving internet auction site eBay</a>. Here, it was stated that there is no presumption of an automatic injunction against an infringer even if they are found to have wilfully infringed valid patents of a non-producing firm. </p>
<p>There is not enough reliable empirical evidence to suggest the problem of patent trolling is so widespread as to necessitate another legislation that has the potential to make it difficult for small and mid-size patent holders from enforcing their rights.</p>
<p>The Innovation Act has some benefits, such as making litigation more transparent. It could even reduce the number of lawsuits being filed over patents, but ultimately it seeks to treat symptoms rather than strike at the root of the problem. As long as low quality patents continue to pervade through a patent system that is characterised by glitches and a lack of clarity, the trolls will continue to lurk under their bridges.</p>
<p>The “bad” troll has yet a lot to gain from their broad and vague patents. They are likely to simply shift their business models and adapt their methods to suit the new field of play. A better approach would be to redefine the principles relating to “working” a patent and, more importantly, to begin to purge broad and vague patents that do not deserve patent protection.</p><img src="https://counter.theconversation.com/content/21296/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sujitha Subramanian does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>For a country that has long been a staunch defender of intellectual property rights, the US has struggled in recent years to get to grips with the menace of a new breed of patent holders, pejoratively…Sujitha Subramanian, Lecturer in Law, University of BristolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/188192013-10-25T03:27:31Z2013-10-25T03:27:31ZA quick-fix solution for patent ‘trolls’ probably won’t work<figure><img src="https://images.theconversation.com/files/33774/original/3zs8z7vs-1382673016.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A new US proposal aimed at combating patent trolls is not likely to be effective</span> </figcaption></figure><p>In the US this week <a href="http://www.smh.com.au/it-pro/business-it/us-congress-to-consider-law-against-patent-trolls-20131024-hv280.html">there’s been another outbreak</a> of proposals to fix the “patent troll” problem. </p>
<p>A new bill from Representative Bob Goodlatte suggests changing the nation’s patent law to punish trolling or increase the resources of the USPTO (the patent registrar). </p>
<p>These proposals aren’t an effective solution, given the disagreement and general lack of consensus within the business community about what constitutes “trolling”. Instead, the proposals are likely to further complicate the law and add to the workload of US courts in interpreting that law.</p>
<p>Earlier in the year, New Zealand took a stab at combating excessive patent disputes surrounding software.</p>
<p>Their <a href="http://www.legislation.govt.nz/act/public/2013/0068/latest/whole.html?search=ts_act%40bill%40regulation%40deemedreg_patents_resel_25_a&p=1#DLM1419046">Patent Bill</a> received royal assent and is coming into effect. The legislation is attracting international attention, and some raised eyebrows, after <a href="http://au.ibtimes.com/articles/502780/20130901/new-zealand-parliament-bans-software-patent-information.htm">claims</a> that software patents would soon become a relic of the past. The reality is a little more complicated and a lot more interesting.</p>
<p>Patent law provides the holder with exclusive rights to exploit or use an innovation in any way they see fit. Those rights typically last for twenty years and are legally enforceable. They concern a specific “invention” – which might be a device or an original process – rather than a scientific discovery or what is deemed to be “obvious”. </p>
<p>In essence, <a href="http://www.ipaustralia.gov.au/get-the-right-ip/patents/">patent law</a> provides an incentive for creativity and investment. It is a central but controversial <a href="http://oami.europa.eu/ows/rw/resource/documents/observatory/IPR/joint_report_epo_ohim.pdf">feature</a> of the information economy. Some critics, for example, <a href="http://www.wired.com/insights/2013/07/patent-law-broken-abused-to-stifle-innovation/">argue</a> that patent protection, which often results in a short term monopoly that can be exploited by patent holders, stifles innovation. Other critics claim that protection is simply unnecessary, with manufacturers usually relying more heavily on exemplary service and rapid product redesign.</p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/32528/original/2bpxcswf-1381107440.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/32528/original/2bpxcswf-1381107440.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/32528/original/2bpxcswf-1381107440.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/32528/original/2bpxcswf-1381107440.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/32528/original/2bpxcswf-1381107440.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/32528/original/2bpxcswf-1381107440.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/32528/original/2bpxcswf-1381107440.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">When it comes to patent legislation, a quick-fix isn’t necessarily the best option.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<p>Advocates of <a href="http://www.acip.gov.au/reviews/all-reviews/review-innovation-patent-system/">protection</a> on the other hand <a href="http://www.law.unimelb.edu.au/melbourne-law-school/news-and-events/watch-online/francis-gurry">argue</a> patent law provides an incentive for the investment required for the development of <a href="http://www.ipaustralia.gov.au/pdfs/Draft_Report_PharmaReview.pdf">pharmaceuticals</a> and other products that are socially beneficial but involve substantial infrastructure and years of work.</p>
<p>One court famously <a href="http://www.nzlii.org/nz/cases/NZCA/1983/24.pdf">commented</a> that “Patent law is a rather artificial, highly complex and somewhat refined subject”. It is however an area of law that has been used by innovators in the development of products that range from zippers and children's’ toys to 3D printers, surgical stents, mobile phones, ABS brakes and Viagra.</p>
<p>So, this begs the question: is software – machine-readable instructions for the operation of a device – an invention?</p>
<p>Patent legislation in <a href="http://www.austlii.edu.au/au/legis/cth/consol_act/pa1990109/">Australia</a>, Canada, the US, Europe and elsewhere typically does not specifically refer to software. However, our courts and patent registrars – the government bodies administering the patent system – have broadly accepted that software can be patented. Protection under that law specifically relates to the novel way of doing things rather than any specific code.</p>
<p>The emphasis on novelty means that individuals and organisations seeking protection for software face difficulties, because most software builds on previous products and thus is not sufficiently innovative. Software is thus comparable to scientific research, where most researchers are standing on the shoulders of giants and truly epochal breakthroughs are rare.</p>
<p>In Australia, consistent with the High Court’s interpretation of “invention” in the 1959 <em>NRDC v Commissioner of Patents</em> <a href="http://www.austlii.edu.au/au/cases/cth/HCA/1959/67.html">judgment</a>, software can be patented. That protection applies regardless of whether the software is freestanding or <a href="http://www.computer.org/csdl/mags/so/2009/03/mso2009030014.html">embedded</a> in a device via a computer chip – for example in office machines, cars and “smart” domestic appliances.</p>
<p>New Zealand has headed in a different direction, one that will presumably result in trade disputes with partners such as the US.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/32535/original/7ny3thxx-1381109884.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/32535/original/7ny3thxx-1381109884.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=425&fit=crop&dpr=1 600w, https://images.theconversation.com/files/32535/original/7ny3thxx-1381109884.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=425&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/32535/original/7ny3thxx-1381109884.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=425&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/32535/original/7ny3thxx-1381109884.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=534&fit=crop&dpr=1 754w, https://images.theconversation.com/files/32535/original/7ny3thxx-1381109884.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=534&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/32535/original/7ny3thxx-1381109884.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=534&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">New Zealand’s new patent legislation is out of step with the rest of the world.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<p>The new legislation is unique as it provides protection for “embedded” software, but excludes other software. Instructions that are not embedded - not specific to the particular device and not found on a chip - will not be protectable under patent law. They thus will <em>not</em> be subject to claims of patent infringement. </p>
<p>This type of software will still be protected under <a href="http://www.copyright.org.au/find-an-answer/browse-by-what-you-do/software-developers/">copyright</a> law. However, that law provides weaker protection than patents because copyright deals with expression rather than functionality. Essentially, if you rewrite the code you are no longer infringing the copyright.</p>
<p>This new legislation is a conundrum. It comes at a time when Australia and New Zealand are standardising their intellectual property regimes to strengthen the bi-national Trans Tasman Market, including standardisation of patent practice. The law means that what is able to be protected in Australia, is not able to be protected in the Land of the Long White Cloud. </p>
<p>Despite this, we are not likely to see software developers fleeing across the Tasman to Australia. Some will stay at home and register their innovative software developments in Australia, the US and other patent-friendly jurisdictions. Some will continue to embrace <a href="https://theconversation.com/open-source-ditching-patents-and-copyright-for-the-greater-good-5302">Open Source</a>, emphasising low cost or customisation for niche markets. </p>
<p>New Zealand’s exceptionalism in patent law takes it out of step with its trading partners, most of whom are strengthening rather than weakening patent protection. The benefits of the legislation for consumers and software developers are unclear. It is likely we will see a u-turn as NZ politicians recognise that global competiveness involves more than agriculture and tourism.</p>
<p>The global struggle surrounding patent disputes suggests Australia should be wary of calls for quick-fixes. A real solution is going to be much more complicated than the elimination of non-embedded software patents or special anti-troll provisions.</p><img src="https://counter.theconversation.com/content/18819/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Baer Arnold does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In the US this week there’s been another outbreak of proposals to fix the “patent troll” problem. A new bill from Representative Bob Goodlatte suggests changing the nation’s patent law to punish trolling…Bruce Baer Arnold, Assistant Professor, School of Law, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/150132013-06-12T03:59:48Z2013-06-12T03:59:48ZWill Obama’s moves to contain patent trolls be enough?<figure><img src="https://images.theconversation.com/files/25316/original/sjfpdqpp-1370919267.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The US is attempting to combat litigious patent trolls - but is the problem with the patent system itself?</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Patents may have once seemed like a good idea. At least it seemed that way to the Venetians, <a href="http://www.aspenpublishers.com/%5CAspenUI%5CSampleChaptersPDF%5C660.pdf">who in 1474 declared</a> the publication and protection of the “works and devices” of “men of great genius” would encourage others to apply their genius and ultimately benefit their society as a whole. </p>
<p>This noble idea may have had a place in the Italian Renaissance, but wind forward 539 years and we have a patent system infested with “<a href="https://en.wikipedia.org/wiki/Patent_troll">patent trolls</a>” and seemingly endless disputes between software and technology companies expending billions of dollars over ideas that involve neither genius nor benefit to society.</p>
<p>Far from its original ideals - and rarely living up to the rhetoric used to describe the ideas they contain - the patent has become a financial commodity in its own right, a legal weapon to block rivals or extort money from individuals and businesses that have no capacity to challenge their validity. Google’s purchase of Motorola for $12.5 billion was <a href="http://blogs.wsj.com/deals/2011/08/15/google-motorola-its-all-about-the-patents/">mostly</a> for its patents. Google intended to use the patents to defend Android against potential legal attacks from companies such as Apple.</p>
<p>Out of the current patent environment, companies like Personal Audio have emerged. Granted a <a href="https://www.eff.org/sites/default/files/us8112504.pdf">patent</a> that covers the process of podcasting audio, the company is a shell, effectively run by lawyers. The granted patent describes a process whereby “a host system organises and transmits program segments to client subscriber locations”. It is like many patents used by “patent trolls”, so broad as to be ridiculous in its claims.</p>
<p>However, that hasn’t stopped the company from using the patent to extract licenses from podcasters and <a href="http://www.radionz.co.nz/news/business/137188/cbs-and-nbc-being-sued-over-podcasting">companies like</a> the NBC and CBS. Personal Audio has <a href="http://www.bloomberg.com/news/2011-07-08/apple-told-to-pay-8-million-in-patent-trial-over-ipod-playlists.html?cmpid=yhoo">previously sued</a> Apple over the use of playlists in iTunes and had won $8 million in penalties, and so the potential gains are enormous.</p>
<p>In another case, a patent troll issued <a href="http://www.guardian.co.uk/technology/2013/jun/05/obama-patent-trolls">license claims</a> of between $900 and $1,200 per employee, on companies using networked document scanners.</p>
<p>Recognising the problem, US President Barack Obama has <a href="http://www.guardian.co.uk/technology/2013/jun/05/obama-patent-trolls">announced</a> reforms to the US patent system to combat the dramatic rise in legal claims from Non-Practising Entities (NPEs). Although the measures will go part-way to making it more difficult for NPEs to litigate over patent claims, they do not address the fundamental issue of whether the patents should have been granted in the first place and the testing of their validity in a court of law.</p>
<p>In fact, there are those who argue that we would be better off without a patent system at all. Some research using a computer simulation has <a href="http://phys.org/news167929968.html">found</a> no benefit from the patent system on increasing levels of innovation or wealth. In another <a href="http://www.voxeu.org/article/do-patent-rights-impede-follow-innovation">study</a> researchers found further evidence that invalidated patents led to increased levels of innovations compared to those that were upheld, especially in the areas of computers and technology.</p>
<p>Looking at software patents in particular, it is easy to see why they may not be a spur for innovation. Claims by Apple, for example, that its user interface design feature “slide to unlock” cost <a href="http://www.nytimes.com/2012/10/08/technology/patent-wars-among-tech-giants-can-stifle-competition.html?pagewanted=all">millions to develop</a> is clearly absurd. Likewise, visual interface effects like bounce-back on tables.</p>
<p>Unfortunately, the situation with patents is almost impossible to resolve. The power of patents resides only with those companies with the resources to enforce their claims via the courts. Patents themselves are expensive to file, especially if they are filed in jurisdictions around the world, and so filing a patent for defensive purposes is again only an option if you are a company that can afford it. Certainly the most that can be hoped for is fundamental reform of the system, particularly in the US. The US Federal Trade Commission has <a href="http://www.ftc.gov/opa/2003/10/cpreport.shtm">recommended</a> measures that allow for patents to be challenged without resort to the courts, especially in the area of providing that the invention was not original and that prior art existed.</p>
<p>Further complicating the whole issue of patent reform is the still entrenched view that patents can represent true innovation and genius in the original sense. This is presumably the idea behind the use of patents by the Australian Research Council as an indicator of research impact. The ARC has used patents as one of the measures of research impact in their ERA research assessment exercises conducted in 2010 and 2012. Interestingly though, the number of patents involved is quite small. In the six years between 2006-2012 Australian universities <a href="http://www.arc.gov.au/pdf/era12/report_2012/ARC_ERA12_Section1_page10to24.pdf">registered</a> 781 patents. This compares to the University of California who in 2011 alone <a href="http://www.universityworldnews.com/article.php?story=20120309132555536">published</a> 277 patents.</p>
<p>Following on from this is the controversial patent case involving the CSIRO. Commentators accused the CSIRO of being a patent troll where it successfully <a href="http://delimiter.com.au/2012/04/12/is-the-csiro-a-patent-troll-us-debate-turns-feral/">sued technology</a> companies over its patent covering elements of the 802.11 wireless network standard. This was <a href="http://en.wikipedia.org/wiki/Commonwealth_Scientific_and_Industrial_Research_Organisation#802.11_patent">estimated</a> to have made the CSIRO $430 million. Although it was never involved in the production of any equipment that implemented this standard, one could possibly argue that CSIRO had engaged in research that led to the patent, thus creating true innovation.</p><img src="https://counter.theconversation.com/content/15013/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Glance does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Patents may have once seemed like a good idea. At least it seemed that way to the Venetians, who in 1474 declared the publication and protection of the “works and devices” of “men of great genius” would…David Glance, Director, Centre for Software Practice, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.