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Tinkering with the law won’t stop patent trolls

Grubby, mean and out for your ideas. Patent trolls are on the prowl. kewl

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.

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.

Now the US House of Representatives has voted in a bill that, it hopes, will stop these trolls in their tracks. But the Innovation Act, 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.

The trouble with trolls

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.

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.

A good start

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.

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.

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.

Missing the mark

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 rushed through Congress too quickly and that the definition of patent trolls is yet to be settled.

Until we decide what a troll actually is, it will be impossible to decisively legislate against their menace.

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.

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.

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.

The bill reinforces measures adopted by the America Invents Act 2011 and the White House Executive Orders that attempts to deal with patent trolls. Even the US Supreme Court has taken note of the troll phenomenon in the 2006 case involving internet auction site eBay. 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.

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.

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.

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.

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