“Get off of my … patent?”

November 13, 2007 by Dan Hartrell

A patent is a bundle of exclusive rights. This allows an inventor to make, use, and sell a novel invention, without the threat of competition. It may seem odd, then, to acquire a patent without any intention of using or making that patented invention. But a new breed of company, the conspicuously named “patent troll”, is doing business without products or customers. They only need to acquire a patent, usually from a bankrupt company.

Patent trolls benefit from the unpredictable nature of patent disputes. Patents utilize broad language to maximize their power, often resulting in ambiguity and thus lengthy lawsuits. Even a vague patent with questionable scope or validity can raise a real risk to a potential infringer. Between legal costs, the delays to normal business operations, and the risk of being ordered to pay the patent troll, many producers choose to settle with patent trolls for a small fee. Some don’t even have a choice but to settle, since they cannot afford the legal costs. Patent trolls are smart to watch for these vulnerable companies to score easy settlements.

Last year, the US Supreme Court attempted to resolve this problem in eBay Inc v. MercExchange. The concurring opinion of Justice Kennedy suggested that injunctive relief should be less available if a patent holder is not producing or selling patented subject matter. This would reduce the magnitude of the threat associated with patent trolls, thus limiting their bargaining power in settlement negotiations.

An alternative solution would weed out patent trolls at the complaint stage. The legislature could act to deny relief to patent holders who fail meet some minimum standard of behavior. This would shorten frivolous claims and reduce legal costs. However, the objectionable behavior remains unclear. If the patent trolling operations of MercExchange were absorbed into those of an otherwise productive company, would their behavior be acceptable? Indeed, targeting any patent holder without actual products or customers would just encourage a larger company to absorb a patent troll for their own benefit. The undesirable behavior would persist, and it would become more difficult to separate a case of patent trolling from a company merely enforcing an unused patent.

The undesirable activity must be specific. The purpose of the patent system must be explained before accusing someone of perverting that purpose. Perhaps the patent system is meant to discourage inventions from going unused. But targeting disuse would force patent holders to act upon every patent in their possession. This would be an economic disaster for many companies (let alone universities). Alternatively, a patent may reflect a person’s moral right to the fruits of their creation. However, restricting patent rights to creators would deprive rights to anyone who acquires patents for licensing purposes. It is difficult to separate trolling from other acceptable patent strategies.

Ethics aside, patent trolls are doing nothing illegal. A patent troll might liken their business to that of a non-occupying landowner who extracts tolls from passersby and occupiers. The social utility of holding unoccupied real estate may not be as plain as that of building a house, but it is a staple of our property system. This property system has been proven successful for land and goods, hence why intellectual property holders hope for similar rights. Proponents of the current intellectual property regime have adamantly stated, “Ownership is ownership is ownership”.

However, a patent owner is not a landowner. A patent does not have the clear boundaries of a piece of land, and patent trolls exploit this key difference. They do not need actual infringement to extract profit. Their business model, at its worst, is to threaten lawsuits of questionable merit to obtain settlements that might not be justified.

In time, the lawsuits may stop automatically. What should potential infringers do about patent trolls? To quote Judge Ralph Guy from Bridgeport Music v Dimension Films on copyright trolls: “get a license”. However, even if large companies can adapt to such fees, this exacerbates the inaccessibility of the patent process for smaller businesses and individuals.

Neutralizing patent trolls should be tied to broader patent reform. Reducing trivial patents would relieve some of the burden. Insisting on greater clarity in patent construction would improve certainty of outcome, reducing frivolous lawsuits. Patent offices also need more personnel of a high skill level. However, the actual ideas for reform remain to be seen. Perhaps more importantly, the political will is not present. A troll hunt sounds easy. But targeting the system that rewards trolls is much more complicated.