
Patent Troll Lodsys Settles for Nothing to Avoid Trial - alxndr
https://www.eff.org/deeplinks/2013/10/patent-troll-lodsys-settles-nothing-avoid-trial
======
linuxhansl
Isn't it nice to be patent troll in the US.

You can threaten 1000's of entities with legal action to extort money, since
just defending against the allegation is very expensive. Then when a few of
those threats don't stick, all you have to do is "settle for nothing" to avoid
an actual trial. Nice.

The patent trolls are just a symptom, the legal system is the problem.

You leave a legal loophole and you'll find some parasitic scum that will
exploit it. Personally I find it hard to believe that the people running these
companies can sleep at night... But that is a different story.

~~~
Garbage
It's one of those rare times, when I feel great that I am living in India. ;)

~~~
pm90
Instead of Patent Trolls, you have an apathetic business environment,
crumbling infrastructure and no copyright protection at all. You just traded
one set of problems for another one

------
DanBC
England has some useful things that the US should consider.

i) loser pays costs.

ii) if Ann is offered £X out of court, but declines it, and the case goes to
court and she's awarded £Y then she has to pay costs if £Y is less than £X.

iii) Costs are controlled.

There are considerable problems with the English legal system, and many people
are not able to seek justice through the court system. But this kind of thing
would probably prevent some of the abuses of the US system.

i)
([http://www.legislation.gov.uk/ukdsi/2013/9780111533291/conte...](http://www.legislation.gov.uk/ukdsi/2013/9780111533291/contents))
([http://www.justice.gov.uk/civil-justice-
reforms](http://www.justice.gov.uk/civil-justice-reforms))
([http://www.justice.gov.uk/legal-
aid/funding](http://www.justice.gov.uk/legal-aid/funding))
([http://www.justice.gov.uk/legal-aid/areas-of-
work/civil/high...](http://www.justice.gov.uk/legal-aid/areas-of-
work/civil/high-cost-cases))

ii) There was a case some years ago where two women (sisters?) were accused of
swapping eggs. They were accused of taking cheap eggs out of the carton and
putting expensive eggs in. They were offered a lot of money, but "wanted their
day in court", and although the court said they didn't swap eggs the court
offered a smaller amount in damages, which got wiped out by the costs they had
to pay.

This is the kind of thing that I find tricky to web search for. It seems like
it should be easy - ["legal case" "eggs"] and then various supermarket names.
I should try limiting the date range to before 2005. But if anyone has any
tips about how to better search for it I'd be grateful. (Of course, Usenet
news probably has some discussion about it, but Google is sub-optimal for
searching their Usenet archive. It's a great shame.)

~~~
radley
Won't matter: a shell company can dissolve and not pay anything if they lose.

~~~
loup-vaillant
What about holding the stakeholders personally responsible? Could it be done
without too much side effects?

~~~
phildini
As soon as stakeholders are personally responsible, you suddenly have no
protection afforded by the corporation.

"That's Great!" you might say. "Now everyone will make more careful
decisions."

Except what will actually happen is people will stop forming companies, since
they will be completely liable for things outside their control, like the bad
decisions of others or stock market crashes or the weather.

The US corporation system is by no means perfect, but the protection it allows
people who are actually trying to create things (read: not patent trolls)
really does foster innovation a lot of the time.

~~~
rayiner
I've always thought the justification for corporate limited liability was even
flimsier than the justification for patent protection. At least with the
latter you can point to economic theory and say that patents address free
rider problems. What economic theory justifies corporate limited liability?
Why should anyone be insulated from any liability incurred by their profit-
making activities?

~~~
arjunnarayan
Because without limited liability there is a MUCH smaller incentive to start a
company. There are plenty of good intros as to how the invention of limited
liability really was the beginning of modern economic takeoff. I recommend
Ascent of Money" by Niall Ferguson for a good intro.

~~~
rayiner
Sure, but why is that smaller incentive not the right amount of incentive? You
can create incentives for a lot of things, but generally those are
distortionary. What economic justification is there for the idea that there
needs to be a bigger incentive than the market provides?

~~~
arjunnarayan
That's an empirical question, and deserves an empirical treatment. I cannot do
that in a comment. Luckily, this question has been thoroughly investigated for
almost two centuries. If you want a serious treatment, you might look to:

[http://www.jstor.org/stable/825483?seq=2](http://www.jstor.org/stable/825483?seq=2)
[http://heinonline.org/HOL/Page?handle=hein.journals/uclr52&d...](http://heinonline.org/HOL/Page?handle=hein.journals/uclr52&div=10&g_sent=1&collection=journals#103)

But if you want a more casual treatment that explains it (and all the
associated issues like why bonds and stocks and debt contracts even exist), I
really recommend The Ascent of Money by Niall Ferguson.

------
abcd_f

      *Joint* motion to settle (with) attorney fees are 
      to be borne by the party that incurred them.
    

Good for Kaspersky, but effectively Lodsys collected payments on this
particular patent from 54 out of 55 companies and then Kaspersky let them keep
the patent in exchange for leaving them alone. Not sure if this is worthy of
celebration at all.

~~~
rurounijones
Quite, celebration would have been Kapersky forcing it to trial and leaving
lodsys a smoking hole in the ground.

~~~
jeremiep
Even then, the shell company would just dissolve leaving the parent company
unaffected.

~~~
andreasvc
The patent in question could be invalidated, and in the future patent trolls
might be a little more careful what suits to file lest they lose their patent.

------
coldcode
Settling for nothing should be held against them in a future case. It's clear
the value of their property is zero.

~~~
mokus
It should also be used against them in a criminal case for extortion /
protection-racketeering.

------
drewcrawford
If you live in the US, there is a lot of important patent reform legislation
being drafted in committee right now, and reform has a lot of support
(including from traditional archenemies like the MPAA). Somebody motivated me
earlier today to write my congressman about it, and so should you. Remember,
constituents who don't complain, don't exist.

The letter I'm drafting is sort of Texas-specific, but you are welcome to
adapt it to your state. If so please post a link so others on HN can benefit.

[https://www.dropbox.com/s/xkeb6qlnpnkjntn/patent_letter.pdf](https://www.dropbox.com/s/xkeb6qlnpnkjntn/patent_letter.pdf)

~~~
hrasyid
who is "Trenz Pruca"?

~~~
Hontano
The fictitious placeholder in Pages templates:
[https://www.apple.com/iwork/pages/images/overlay_template_07...](https://www.apple.com/iwork/pages/images/overlay_template_07_20090106.png)

------
OrwellianChild
I'd like to see a settlement negotiation swing the other way. Someone like
Kaspersky Lab with solid footing insists that Lodsys pay _them_ to avoid
trial. How much is Lodsys willing to pay to prevent the public exposure and
invalidation of their patents?

~~~
foxylad
Yeah, but by definition you'd never hear about it - Lodsys would have to
insist on complete secrecy.

~~~
OrwellianChild
Often, that is the case, though there is a lot of scrutiny on the patent
trolls these days. We're also seeing great shifts in transparency on the part
of the people held up by these IP bandits. Witness The Oatmeal vs. FunnyJunk:
[http://en.wikipedia.org/wiki/The_Oatmeal_and_FunnyJunk_legal...](http://en.wikipedia.org/wiki/The_Oatmeal_and_FunnyJunk_legal_dispute)

Some companies are crusading not just to defend their IP position, but to
actively attempt to change the law so that these things can't happen again.
Newegg is a prime example: [http://arstechnica.com/tech-policy/2013/05/newegg-
nukes-corp...](http://arstechnica.com/tech-policy/2013/05/newegg-nukes-
corporate-troll-alcatel-in-third-patent-appeal-win-this-year/)

"There are strategies I think would be really neat and effective that I
literally can't execute. I can't make good law because I don't have any
appellate cases left. They [the trolls] are dismissing cases against us before
any dispositive motions." -Lee Cheng, Newegg's chief legal officer

------
ajb
So, the problem is that when you settle you give away your right to get your
money back if the patent it later invalidated. This makes for a perverse
incentive.

I wonder if there is some way of credibly signalling that you won't settle,
even if you don't have the money for a lawsuit. Can you _give away_ your right
to settle? IE, could we set up some organisation whereby you give them the
right to veto any settlement you make to a patent troll? And that organisation
then insists on a clause whereby any settlement can be undone if the patent is
later invalidated.

Of course, the troll would probably insist on getting more money, but even if
they do, if the patent is invalid you stand a good chance of get it back.

There's probably a flaw in the above scheme somewhere, but surely there's some
way of doing this...

------
bradly
I wonder if at some point it makes sense for someone like Kaspersky to ask the
judge to deny the motion to dismiss by Lodsys and force a trial on them. IANAL
but I don't think a judge has to dismiss even if the prosecution asks for a
motion to dismiss.

------
kamjam
Linked from the original article is a case of a judge ruling patent
exhaustion[1]:

 _Helferich 's patents cover the delivery of content (alerts with a hyperlink)
to a cell phone._

The issue is not with cases like this, the issue is with bullshit patent being
granted in the first place. They need to get rid of software patents, and
wishy washy crap about how X could do Y if only we had money to build it
rather than just dream it up. Invent something, build it and then let it be
patentable.

[1] [https://www.eff.org/deeplinks/2013/08/judge-sticks-end-
users...](https://www.eff.org/deeplinks/2013/08/judge-sticks-end-users-rules-
against-text-message-troll)

------
clarky07
What kind of max damages are possible in an IP case like this?

------
kokey
It sounds like if it's a matter of spending about $1mil to fight a troll in
court and get the patent invalidated, the victims might do better by pooling
the money they would have spent on settlement together on the first case to go
to court and get the claims invalidated.

------
throwawaykf
I doubt this really say as much about the merits of Lodsys' case as the EFF
proclaims. This is simply an economic decision. As I'll explain below, I think
they have a relatively strong case. But going to trial is expensive for both
sides, and I think Lodsys simply sees insufficient margins in seeing it
through. The problem, as the article says, is that even getting to the stage
where you can call their bluff like this is extremely expensive, and
statistically very few defendants will take it this far. So for the few folks
who do stick it out this far, Lodsys can simply drop out and still stay way
ahead of the game.

As to why I think their case is somewhat stronger than the usual troll:
Firstly, it's patents partially survived Google's supposedly "devastating" re-
examination request. Although the process is still ongoing, the claims that
survived are golden. Those now have an "enhanced presumption of validity",
which means if asserted at trial, the defendants would be wise to seek
stronger alternate defenses besides invalidity.

Secondly, and speaking of alternate defenses: patent exhaustion. Exhaustion is
triggered on first authorized sale [1]. I really cannot (and neither can the
EFF) comment on this since all the relevant terms on which Apple, Google etc.
have a license are secret. Further, since Apple was not allowed to intervene,
it seems even less likely a defense.

Thirdly, the claims are "vague" only if you decide not to put much effort into
understanding how they work. Much like non-lispers complaining about
parentheses. I have seen vague claims, and these are downright straightforward
in comparison, despite what the EFF's out of context snippets may imply. Also,
mentioning fax machines is a non sequitur. If the main function of fax
machines in this patent was to act as network components, by the Doctrine of
Equivalents [2] they are functionally equivalent to the Internet of today.
Heck, it could be carrier pigeons and still be valid. This is not an abuse of
the system, and if you want to make it so, you'd need a lot more reform than
is likely to happen.

I cannot comment on the quality (novelty, non-obviousness, etc.) of the claims
since I have difficulty evaluating them in context of the state of the art in
~1992, to which these patents claim priority.

(IANAL. Which may also be why I think one solution to this problem is a
drastic lowering of attorney fees :-P)

[1]
[http://en.wikipedia.org/wiki/Exhaustion_doctrine](http://en.wikipedia.org/wiki/Exhaustion_doctrine)

[2]
[http://en.wikipedia.org/wiki/Doctrine_of_equivalents](http://en.wikipedia.org/wiki/Doctrine_of_equivalents)

~~~
mbreese
> This is simply an economic decision

Right. Lodsys thought that it was too risky for them, so they chose to drop
the case. The amount that Lodsys would have gotten from licensing fees would
have been more than the amount that it cost to bring the case to trial. So the
only reason they would have to dismiss the case would be that they were
worried that their patents were at risk. (Note: the risk could have been
small, but still enough to worry them.)

They have no incentive to drop a case this far into it. Future targets now
know that they just have to keep the case going and eventually Lodsys could
just drop it.

~~~
throwawaykf
_> They have no incentive to drop a case this far into it._

If you think of their model as an exercise in gambling, they do have an
incentive. Jury trials for patent cases are notoriously hard to predict, and
they risked a very real, non-zero chance of reaching a decision that, even if
it didn't kill their patents, could cripple their campaign, say, something
like "Patents are valid, but iOS apps don't infringe."

(Note that jury verdicts in patent cases seldom seem to have much to do with
the technical merits of the case.)

So their potential outcomes were:

A. Drop case: continue settling with small entities for Y revenue going
forward with estimated revenue R.

B. Favorable decision with X in damages: nice bonus to go along with contiuing
revenue R.

C. Unfavorable decision: 0 damages as well as very likely loss of continuing
revenue R.

Say the outcome has probabilities P(A), P(B) and P(C). They likely just
assumed some values for these probabilities (actually, lots of empirical data
out there these days, and P(B) is quite low)and X and R, and ran the numbers,
and they got an expected result that wasn't too favorable. So they chose to
minimize their risks, along with the associated rewards.

 _> Future targets now know that they just have to keep the case going and
eventually Lodsys could just drop it._

Right, but the catch is that for most defendants it's too expensive to even
just keep going on. And that's why they'll keep suing left and right and
dismissing if anybody gets too close to trial. I don't know if there's any way
to stop this campaign unless they slip up.

(PS, I was mistaken about the Apple situation. Apple could not intervene
because Lodsys settled the cases it was trying to intervene on -- essentially
a tactical retreat like this one -- so it doesn't really speak to the
exhaustion defense as such.)

------
ethanazir
Evidence the patent system is functioning properly.

