A Relatively Balanced Look at Patent Trolls

Last time I did something like this I stirred reader ire, but here I go again. The New York Times has a story up this week about Erich Spangenberg and his "patent assertion entity" called IPNav. The story tries to be fair to all parties and comes across highlighting most of the difficulty in dealing with these situations.

David Segal acknowledges that these trolls have problems: they assert crap patents against people who should never have to deal with them in the first place. They use tactics that can be reprehensible to even downright illegal, and sometimes get slapped with fines by judges for doing so. They keep large chunks of settlement monies for themselves, and often pursue litigate-first-and-only-settle-as-part-of-litigation pressure strategies. Sometimes they appear to be trying to "double dip" by settling over one patent only to turn around and re-litigate over related patents.

But at the same time, they can be reasonable and back down if shown that their patent doesn't apply. They also do research and investigate the validity of patents they are asserting and as Segal points out there are quite reasonable differences over the validity and scope of patents at issue. They do get billions of dollars flowing to inventors who otherwise would have nothing. They are often sought out by companies or other IP holders who have been unsuccessful at monetizing the fruits of lots of hard work, and they help those hard workers get something.

The contradiction can be all the more striking when the same entity - in this IPNav - exhibits both good and bad behaviors. Attempts to ban PAEs or shield against their worst behaviors need to be realistic and handle the bad behaviors without crippling good actors.

Rather than just continuing to beat my "stop issuing crap patents" drum I thought I'd offer an example from my own time at university to illustrate the problem. At Hypothetical U, Professor P conducts research in her lab. Her research is funded by Corporation C, a common occurrence at universities these days. Federal funding only goes so far and companies are often interested in basic research they don't have facilities to conduct themselves. Her research bears fruit and several patents are filed. C, as the research sponsor, gets a free license to these patents. But because H.U and P are socially minded people that license is non-exclusive. Any other company that wants to commercialize this innovation can do so by licensing these patents.

One day, H.U. is made aware that Other Company is making products that appear to infringe these patents. Part of the agreement between C and H.U. is that H.U. has to enforce the patent licensing deal, so H.U. hires lawyers - a PAE in our new parlance - to do just that. H.U. is not in the business of commercializing IP and making products and never should be. But they are in the inventing-new-stuff field and the costs for that need to be covered, which licensing fees help to do.

So as much as I support proposals to knock out abusive trolls, I also think that H.U.'s model is real and valuable and any proposal has to be shaped in such a way that it doesn't knock them out as well.