
US patent lawsuits now dominated by 'trolls' - kjhughes
http://www.reuters.com/article/2012/12/10/patents-usa-lawsuits-idUSL1E8NA55M20121210
======
jivatmanx
The only saving grace of the patent system has been that when a legitimate
company launches a patent lawsuit, it's possible to retaliate, so there is the
possibility that the tech giants would realize that futility of the war, and
settle/call truces.

That doesn't work with trolls.

~~~
jcromartie
I never realized that before: since the trolls don't _make_ anything, they
could _never infringe_. Wow.

Shouldn't there be a requirement to have an actual stake (i.e. sales lost) in
order to file a lawsuit?

~~~
jfc
There is the legal concept of standing, in which a plaintiff has to
demonstrate sufficient harm to bring a lawsuit. Don't know what the "trolls"
are doing to meet this requirement.

<http://en.wikipedia.org/wiki/Standing_%28law%29>

*Not legal advice, or any type of advice.

~~~
dangrossman
The harm is straightforward -- the lost patent licensing fees the infringer
would have had to pay to use the patented invention. An inventor who has no
money to take his invention to market licensing it to someone that does is
part of how the patent system is supposed to work, so the fact that trolls
also don't take their own inventions to market isn't anomalous in that regard.

~~~
jivatmanx
There can't lost sales unless you were also selling the patented item.

Not even if it occurred during the lag time of you bringing it to market. (If
this ever actually happened without corporate spying and intentional
infringement, than the patent was clearly too obvious)

~~~
dangrossman
Nobody suggested there were lost sales.

~~~
jivatmanx
Than there was no harm, because a lost sale is the only harm there could be.

(Or more accurately, the value of the patent as a % of the cost of an item
sold)

~~~
dangrossman
This is the comment thread of an article about how non-practicing entities now
make up the majority of patent infringement cases in court. You're asserting
that every single one of them is represented by a law firm which is making up
a nonexistent class of damages, and every judge who has awarded damages to a
non-praticing entity in the past made a mistake in doing so.

That's not right, obviously. Title 35 of the United States Code states that
"the court shall award the claimant damages adequate to compensate for the
infringement, but in no event less than a reasonable royalty for the use made
of the invention by the infringer". Thus the basis of the damages is unpaid
royalties for licensing the patent, not lost sales. The court may award
damages for lost sales or anything else it considers "adequate to compensate
for the infringement", but the ONE statutory-defined harm is the one you're
saying doesn't exist.

~~~
jivatmanx
>(The value of the patent as a % of the cost of an item sold) = Royalty

Lost Sale if the patent constitutes the entire value of the item,
theoretically possible in something like software.

------
rayiner
This article defines "troll" far too broadly, in including any non-practicing
entity. The whole point of turning something into a property right is to be
able to trade it, and have the new owners enforce the original rights. It's
conceptually no different than someone who buys a farm, doesn't plant anything
on it, but sues people who trespass through it. The law doesn't require you to
do anything with your property rights.

There are practical reasons for this. My law school alma mater, Northwestern,
developed and patented the drug that became Lyrica. They sold the patent
rights for about $700 million. Northwestern was not going into the
prescription drug business. That would be utterly ridiculous. Treating patents
as a property right allowed them to take the invention and "exit" by selling
it to someone else. All research universities use this technique heavily:
Stanford, MIT, etc.

Now, you may not agree that propertization is the right tool for inventions,
but the fact remains that when you're discussing a property right it's
irrelevant what someone trying to enforce that property right otherwise does
with the property.

IMO, "trolling" should be limited to those who assert frivolous or weak
patents to get quick settlements, not people who try to enforce legitimate
patents. This is completely orthogonal to what sort of bar you think there
should be for legitimate patents, or whether there should even be patents, by
the way.

~~~
btilly
_This article defines "troll" far too broadly, in including any non-practicing
entity._

Did you get past the first paragraph?

The phrase that I saw used in the actual article itself, rather than the
leader, was "patent-assertion entities" which is to say companies whose
primary line of business is suing for patent rights.

That said, some of them are suing on behalf of entities like your law school
alma mater. But the entities doing the suing have no other business.

~~~
rayiner
Generally, "non practicing entity" means companies whose primary line of
business is suing for patent rights.

What does it matter whether the entities doing the suing have no other
business? Say I buy a really popular strip of land near the beach and don't do
anything with it. Say that attracts a lot of tourists who picnic on it
illegaly. Is it illegitimate for me to sue them for trespass? Say I sell off
the right to sue for trespass to a non-practicing entity. Is that
illegitimate?

Now, you may disagree with the nature and scope of the rights. You might say--
people shouldn't be able to buy land by the beach--that belongs to the public
(and that is the law in some places). But once you have a valid property
right, it's not illegitimate to sue for real infringements of that property
right, and it's not illegitimate to split up the "bundle of sticks" that makes
up your property right and sell someone nothing more than the right to sue for
infringements and keep any damages. That's just how property rights work in
general.

~~~
gazrogers
What if I buy all the land around your house and sue you every time you cross
through it to go to the shops or take your kids to school? Would you consider
that fair?

~~~
liuliu
You are falling into the trap. Intellectual inventions simply shouldn't have
full property right.

~~~
rayiner
If you accept that patents should fully be property, as the current law does,
then lawsuits by non-practicing entities are not a sign of a problem with the
system. Lawsuits are just one of the ways to enforce and monetize property
rights.

Now, you may think that intellectual inventions shouldn't be the subject of
property rights. That's an entirely defensible position, but it's also a
totally separate issue.

~~~
btilly
Wow, you take a biased view of this subject. You're right that IF you accept
patents as full property, THEN this is not a problem. But that is an if that
many here - including myself - are not inclined to grant. And if you DON'T
grant it, then this is very much not fine.

You acknowledge this, sort of, but only when using the loaded language
_intellectual inventions_ to describe patents. This deliberately ignores the
fact that a major complaint about the current patent system is the
proliferation of patents which claim "invention" status to things that should
not be called inventions.

You then go on to call the question of whether patents should be property a
totally separate issue. I agree that it is totally separate from the line of
argument that you want to pursue. But, given the opinions of most people on
this site, it is actually the central issue. Your sophistry about property
laws is actually the side issue that should be ignored in favor of what is
really important.

The key question is this, is the rapid proliferation of lawsuits from non-
practicing entities a problem? In fact evidence suggests that the companies
being sued are generally ones that are creating real innovation, economic
development, and jobs. The companies doing most of the suing are creating a
tax on innovation. If you look at who is paying the costs, and who is
capturing the profits, by and large the patent system is failing to
incentivize actual innovation, and is rewarding useless legal activity.

When you look at it in this light, the activity of the non-practicing entities
is absolutely the greatest source of the gap between what the patent system
theoretically should be doing, and what it actually is doing. Therefore the
rapid proliferation of lawsuits by non-practicing entities is direct evidence
that our bad patent system is rapidly becoming worse.

Now, like a good lawyer, I expect you to take apart and criticize everything
that I've said. After all you're paid to come to the conclusion you've decided
in advance to, rather than to find the correct answer. Truth, for a lawyer in
an argument, is merely one source of rhetorical ammunition. I admit it. I am
not a lawyer. In a war of words, you'll win.

But I honestly believe that the ideas that I am putting forth are correct. And
the ideas that you are putting forth are dangerous ideas that currently cost
our economy tens of billions per year. Furthermore those costs are rapidly
mounting. For decades now, Silicon Valley has been the world capital for tech
startups. Some day, hopefully a long time from now, this will end and Silicon
Valley will pass into history. But it could end much sooner, and worsening
patent laws are on the short list of things that could end it quickly.

~~~
rayiner
I'm not taking a biased view at all. I'm accepting a premise on its face, then
laying out an argument for why if you accept that premise, then NPE lawsuits
are not by themselves a sign of any problem with the system. I'm not taking a
position as to the underlying premise, other than to assert that it is the
premise underlying the existing law.

Also, I should note that I'm not a patent lawyer. I'm not paid to come to any
conclusions on this issue. I have a somewhat more pro-patent outlook than many
on HN, but I think it's one that reflects the prevailing view among engineers
who have more traditional backgrounds (mine is in defense/wireless
communications).

~~~
btilly
The thing is that the premise that you are accepting, which does underly
existing law, is there because of the triumph of an extreme position. (A
triumph caused in part because of the creation of the United States Court of
Appeals for the Federal Circuit.) Therefore accepting that premise is not a
neutral position.

As for patents and engineers, I think it is likely that opinions differ. And
one of the causes of that difference is that in software it is easy for random
non-technical types to create broad patents with little merit by slapping
"web" on top of obvious generic ideas. By contrast in hardware, patents are
more likely to come from actual devices created by actual engineers, and
therefore you tend to have fewer of the truly egregious patent abuses that
outrage people on the software side.

------
arbuge
Absent _meaningful_ patent reform (don't hold your breath on that one), what
might be needed here is for some enterprising patent lawyers to band together
and form a troll insurance company offering protection against these scammers.

Somewhat like malpractice insurance for doctors, although the analogy is not
precise - the malefactors would be the plaintiffs in these cases, not the
defendants.

~~~
DannyBee
I'm confused how this would be effective.

1\. Insurance works because the risk of X happening to individuals in a group
of insured people is low individually, even if over the entire population it
isn't. This ensures the number of actual payouts are low. Here, the risk of
troll lawsuits happening to all insured companies is high. Thus, you'd have to
pay out to almost everyone.

2\. Insurance also only works (for the insurer, anyway) if the premiums cover
the payouts. Given the typical award is tens of millions or hundreds of
millions, you'd need both lots of companies, and very high premiums.

To cover a single $100 million award, you'd need 10k companies to pay 10k each
in premiums. If 100 million gets awarded against each of 5 companies in the
lawsuit, now it's 50k premium per 10k companies.

ISTM it quickly becomes infeasible as long as damages are so high.

Note: General types of lawsuit insurance are already available, but they
exclude patent infringement. Patent infringement/litigation insurance is
_also_ already available, but it's expensive as hell, per the above.

~~~
arbuge
Although certainly crippling to a startup, damages are usually not that high
in absolute terms unless it's the likes of Samsung being sued. If memory
serves me right, according to a recent article on HN, they're on the order of
~$1m for small-medium businesses and $7m for larger businesses.

------
smsm42
This has to be expected, it's like saying "most of the debt collection is done
by debt collection companies". Of course, that's the point of having debt
collection companies. If there's a profitable activity - like suing for
patents - there would be people who specialize on it, in order to make it more
efficient. Now, useful distinction would be if the lawsuits brought on behalf
of third-party clients or the PAE is the sole beneficiary, but this situation
is impossible to distinguish from actual practicing entity just selling the
rights to sue to PAE in order to not bother with it anymore, while keeping the
benefits of the temporary monopoly.

------
shawn-butler
If an "article" that is clearly flamebait has as its subject an academic study
or paper and does not include a link or reference to that paper or one can not
be provided,

then

Please do not submit the link. My opinion only.

~~~
smsm42
Here is the list of publications by Colleen Chien:

[http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=3620...](http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=362060)

Not sure which paper the article talks about, by dates I assume it could be
this one: <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2146251>

~~~
shawn-butler
Thanks. I couldn't tell either. That's why I made the comment.

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belorn
With European Union patent, wonder if Europe will end up the same problem. A
special "court" of appeal and a system immune to the European Court of Justice
and sound very similar to the US system.

~~~
drucken
The EU will end up with almost exactly the same problem - just at a slower
pace.

The only difference after 1-Jan-2014 will be the lack of "legal arbitrage"
across states which makes a mockery of many laws in the US.

But legal arbitrage is trivially damaging compared to the new EU Unified
Patent court ruled by patent law experts (which creates an incentive to expand
their powers), the ability to file software/mathematical patents and the
faster Unified Patent application process.

------
michaelochurch
Unfair. Some of us have the discipline to keep our trolling and our patent
suits separate.

------
bretthardin
In other news, water is wet.

