
PatentShield helps startups fight patent litigation in return for equity - shard
https://techcrunch.com/2017/04/25/googles-and-intertrusts-new-patentshield-helps-startups-fight-patent-litigation-in-return-for-equity/
======
samaparicio
A lot of startups get sued by Non Practicing Entities (trolls) that have no
operating business to speak of. That provides the slimmest counterattack
surface - so not sure how useful it is to have a portfolio to hit back.

I think a better defense mechanism would be a legal defense fund that would
force the trolls to make their case at trial, to go through discovery, to
bring expert witnesses.

Because the law firms that represent them work on contingency, this would
effectively cut into the potential licensing fees, and make trolling less
profitable (and less likely).

Also, a lot of trolls extract patent licensing fees out of startups for
patents that should have never been granted, and that deserve to be
invalidated (e.g with prior art), but the process of getting a patent thrown
out is expensive, so having a fund would greatly help.

The other strategy that could work is to get all the startups that get sued by
a troll for a specific infringement and make a sort of "reverse class action"
\- making it possible for the startups to re-use the same lines of argument,
evidence, etc in their cases.

~~~
jshmrsn
Let's say I pay into this fund, then I get sued for patent infringement. How
does the fund decide whether this lawsuit is trolling or legitimate? Or would
the fund pay for all patent lawsuits?

~~~
samaparicio
There are several ways of reaching a distributed consensus about that, like
proof of stake.

It is also conceivable that it would be in the fund's interest to defend all
lawsuits. That would provide the largest deterrent, since the lion's share of
today's suits are without merit, and the cost of defense would be considered
the operating cost of the fund.

What the trolls exploit is the assymetry between a defendant without resources
and their own resources which are solely dedicated to this.

Without all the licensing fees that startups pay to settle the alleged
infringement the business model for trolls would stop working.

~~~
nl
_That would provide the largest deterrent, since the lion 's share of today's
suits are without merit_

Doesn't this depend on what "without merit" means? It seems unlikely they are
"without merit" in the legal sense, since then they would be thrown out at the
first hearing.

If you mean they are from patent trolls aka non-practicing entities, then it
seems wrong too. I see coverage of tens of cases by NPEs per year, but the
entire patent law-suite field must be much bigger than that.

There are probably better sources than this PWC report[1], but it identifies
477 out of 2281 (ie, 21%) cases _since 1996_ in the districts where NPEs file
cases involving NPEs. Their definition of NPE includes universities though,
which I don't think is what people generally think of when they think of
"patent trolls".

If "without merit" means that they almost always lose, then this doesn't seem
right either. The success rate for patent cases varies, but seems around
25-35%. That's far from "lion's share without merit"

[1] [https://www.pwc.com/us/en/forensic-
services/publications/ass...](https://www.pwc.com/us/en/forensic-
services/publications/assets/2016-pwc-patent-litigation-study.pdf)

~~~
parhurs
Ars Technica reported last year that in 2015 over two thirds of patent
lawsuits were filed by trolls and that of all patent lawsuits, 44% were filed
in the Eastern District of Texas (where few others than trolls would be filing
suits). The report says that although the numbers are up, the trolls' business
might be down.

Ars: [https://arstechnica.com/tech-policy/2016/01/despite-law-
chan...](https://arstechnica.com/tech-policy/2016/01/despite-law-
changes-2015-saw-a-heap-of-patent-troll-lawsuits/)

Original statistic:
[https://www.unifiedpatents.com/news/2016/5/30/2015-patent-
di...](https://www.unifiedpatents.com/news/2016/5/30/2015-patent-dispute-
report)

~~~
nl
This is strange.

The total number of cases seems to line up between the two reports (5700 in
2015, not including PTAB).

But only 2281 cases involving NPEs were decided between 1996 and 2015[1]. If
66% are filed by NPEs, then this should be much more. Unless the vast majority
are dropped I guess?

[1] [https://www.pwc.com/us/en/forensic-
services/publications/ass...](https://www.pwc.com/us/en/forensic-
services/publications/assets/2016-pwc-patent-litigation-study.pdf), page 16

~~~
esquivalience
Yes. Cases issued will not correspond to cases decided, since many cases
settle. And there is a long time-lag from starting a case to ending it with a
judgment.

------
jacquesm
Google is taking a leaf out of the Mafia playbook here. Classy. Nice start-up
you have there. Would be a shame if one of these pesky trolls sued you. But if
you join our organization as a partner you will be protected.

~~~
jezclaremurugan
I think there is a distinction here - the Mafia protects people from itself -
but Google doesn't itself sue startups.

~~~
jacquesm
But the upside is similar: If nobody sues Google still has the equity and
Google needs the trolls to stay around to make sure people will buy into this
program.

~~~
caf
Sure, but that's exactly the case with commercial fire insurance versus actual
protection rackets too.

~~~
jacquesm
Commercial fire insurance does not typically take equity in the places they
insure.

~~~
caf
Does payment in the form of equity rather than cash affect the incentives in a
negative way? It's not enough to call out a distinction: how does it make a
difference? If anything, the equity should mean that Google's incentives are
_more_ closely aligned with the startup's than the fire insurer's are with the
insured.

~~~
jacquesm
Yes, because obviously if that equity turns out to be worth a very large
amount of money and the company is never sued Google is not going to turn
around and say 'oh, sorry for this vastly disproportionate payment, here is
your repayment'.

In fact, the best outcome for Google would be if nobody ever got sued. (That's
_also_ the best outcome for the companies but there is no way of knowing if
they would have gotten sued had they not paid their protection fee.)

~~~
caf
How is that different to _" You paid an awful lot of fire insurance premiums
over the years but never had a fire"_? The insurance company certainly isn't
giving you a refund either.

It seems to me that if the equity turns out to be worth a lot, then the value
of the protection is greater as well - the potential losses are likely to
pretty closely track the company's value.

~~~
reitanqild
Supporting you here:

I see this as somebody inside google trying to do a oldschool google win-win
(provide better results - make healthy profits).

As long as the equity stake is reasonable this sounds like a great deal. To me
this isn't the mafia but the security company teaming up with you.

Seems like a giant win for everyone but the trolls,

------
CalChris
So basically you give up an unstated x% _ahead of time_ for access to
Google+Intertrust's portfolio. A few thoughts.

First, this only provides access to the patent portfolio. It doesn't pay the
(considerable) litigation bills.

Second, this portfolio is already available. If Alice sues Bob, Bob can
negotiate _just in time_ with Intertrust or IBM or ... for access to a
defensive/offensive portfolio. This acquisition of patents during litigation
is common practice.

Third, just as Intertrust is going to do their due diligence on you, you are
taking a risk that their portfolio is a good match for your risk. You need to
do your due diligence on them and on their portfolio.

I might go for this, but it would be at a pretty low percentage, like less
than a percent.

------
dis-sys
so..

patent laws are so broken that patent trolls are everywhere suing startups to
get $ from them.

google now has a business that can directly benefit from such increasing
number of patent trolls.

sounds not very inspiring to me.

who is always on the losing side? average small companies. who is screwing the
economy & innovation and show no sign of change? governments who refuse to
actually reform such a 100+ years old broken system.

~~~
DaiPlusPlus
This service is _not_ for defending against non-practicing entities - but to
defend against patent suits from large enterprises that the startups might be
competing against (e.g. Microsoft, Facebook, Samsung, etc) - not that
Microsoft et al. engage in that kind of warfare against small-fry, but it's
plausible.

~~~
pnw_hazor
IBM, Microsoft, et al. certainly throw their patent portfolio weight at small
companies when it suits them.

For example, they may bring out their patents to force a lower valuation when
acquiring companies.

------
partycoder
Patent law needs reform.

If you analyze the life of important inventors and innovators of the 20th
century, there has always been some patent pain involved that is not in the
interest of the "greater good".

The reason America didn't have a significant air force for WW1 compared to
other powers was in part due to the legal battles between Wright and Curtiss.
The government intervened in the patent driven battle so planes could mass
produced and used in the war effort.

Then, the inventor of the TV (Farnsworth) got sued by radio manufacturers and
could never actually profit from his creation.

Then, many patents get extended for excessive periods of time to prevent
things becoming public domain (e.g: Disney).

~~~
mjevans
I can't even recall a single time when patents have helped 'the little guy'.
The only case that I can think of offhand involve manufacturers holding out
until the patent expires, even if it is a decrease in public safety.

I think the most simple, and best, reform for /patents/ is elimination.

While I'm on the subject, returning to the 15 year copyright and 15 more IF
you pay a lot to renew sounds like a good starting point for that discussion.

Trademarks should have something similar (a slowly rising fee over time) but
be allowed to exist as long as that fee is paid; that's a consumer protection
mechanism.

~~~
Ensorceled
Patents are still important to protect and reward research costs, elimination
would destroy the pharma industry overnight for instance.

I have no idea why you have a problem with trademarks. Why should a small
family business be paying increasing fees to continue to operate as "Sanford
and Son"? Or do you think I should be able to call my product "Heinz Ketchup"
because they have had the name long enough?

------
harry8
This just makes me feel sick. There's no pretence that it's anything other
than a protection racket.

------
joelthelion
When you need this I think we can safely say the patent system is broken
beyond repair. This is basically extortion (note that I'm not blaming
Google!).

~~~
ocdtrekkie
Why are you not blaming Google? If Google was not trying to extort patents for
profit, they could permit everyone free access to their patents. They have
chosen not to do so. (Their patent pledge includes a tiny portion of their
patents which are not substantial in any common patent litigation. Now we know
why.)

Google has purchased an incredible number of patents, and is now leveraging
them for profit. They are not in a morally higher ground than Intellectual
Ventures if they continue with this service.

------
cakeface
This sounds totally like a squeeze. Google is telling startups "Cut us in if
you want to play in this game." I like that they're cutting the lawyers out of
the picture though. Instead of waiting till the company gets big, suing, and
then getting their take they can now just collect up front and save time and
lawyer fees.

------
EGreg
Why don't we have something like the open source movement in drugs? Using
PATENTLEFT. All those possible inventions for the long tail if people were
allowed to build on top of existing discoveries.

~~~
bdowling
It's unnecessary. If you want to prevent something from being patented, just
disclose it in a publication. That publication will bar anyone else from
patenting your invention. As long as you don't patent it yourself, it will
become dedicated to the public.

~~~
Nomentatus
Not true anymore, unless that publication reaches the vast majority of
practioners so that it has clearly become part of the normal state of the art
(recent court decision) - something very difficult for a private citizen to
accomplish. Mere publication to establish priority doesn't matter because
priority doesn't matter, being first to the patent office matters; so big
companies can legally steal your ideas now. Even if you've published them, in
most cases. They make large donations to Congresspeople - you don't.

~~~
bdowling
OK, what I wrote wasn't quite true. The information needs to be published in a
way that it is sufficiently accessible to those interested in the art. It
needs to be available to the public and indexed somehow. The standard is very
low though. If it's on the internet and can be found by a search query for the
topic, that's probably sufficient.

First-to-file resolves priority when it comes to undisclosed inventions. Two
inventors A and B both invent some new invention and both go to patent it.
Whoever is first wins. Two inventors come up with the same invention all the
time. The first-to-file rule makes it easier to resolve conflicts than
examining evidence of who invented first, and it encourages speedy filing by
preventing an inventor from secretly exploiting an invention and then filing
when another inventor appears.

By the way, anyone can look at the published patent applications (which are
published usually 18 months after filing) and can submit information that they
believe would be relevant to the examiner in determining if the invention is
patentable. It's called a Pre-issuance Submission. [0]

[0] [http://www.klemchuk.com/339-preissuance-patent-
submissions-a...](http://www.klemchuk.com/339-preissuance-patent-submissions-
a-new-way-to-participate-in-patent-prosecution/).

~~~
Nomentatus
Sadly a recent judgement, rendered well after the date of your link, seems to
have jumped the publication requirements way, way up - to my shock and dismay.
I regret I don't seem to have the link handy. I've tried submitting a pre-
issuance submission of sorts to the USPTO recently and just got back an
instruction on how to begin legal proceedings, at my own expense, the
submission itself was discarded as far as I could tell.

------
Hydraulix989
So now I can blatantly disregard, copy, and infringe upon on any patents I
want while building my startup, simply by paying the price of giving a small
amount of equity to Google?

~~~
jlebrech
you can purposefully become a patent-troll-troll and try to lure trolls to sue
you but you've found a loophole in your product and it doesn't even exist
anyway.

------
anon374939
Its always nice when the private sector figures out a way to solve a problem
that should be solved by government, but government is incapable or unwilling
to do so.

~~~
greglindahl
It doesn't solve the problem of getting sued by a troll -- what patent are you
going to use to counter-sue a business that doesn't have any business?

~~~
pnw_hazor
There is some good news though. Recent court cases (Alice, etc.) are really
cramping the trolls' style. Intellectual Ventures and the like are backing
away from the troll model because their crappy software patents are getting
invalidated in court left and right.

------
wheelerwj
if this is truly the state of software development, we should all just give up
now. this might be the worlds worst idea.

------
jheriko
this is really confusing. i can't quite tell if this is a good or a bad thing.

yet another sign that patent systems need reform.

------
aanm1988
Gonna go ahead and (once again) be the naysayer when it comes to google. This
just makes google a very effective new form of patent troll.

