A big thank you to all of you who are thinking about this issue and posting your ideas. There is no one right way to fix the patent troll problem, but hopefully Congress will figure out that this is a serious problem for tech companies and will do something.
There is a long history here. These terrible software patents have been around a good while now, and they have been a curse on Internet companies for over a decade. The "America Invents Act" which passed about a year ago was the culmination of a lengthy process which started with the proposed Patent Reform Act of 2005. It went nowhere, nor did the later iterations in 2007, 2009 etc. These earlier bills definitely targeted patent trolls, but did not pass because of significant opposition by a coalition of interests that did not (and do not) want to accept the changes necessary to hammer the patent trolls. Take a look at the organizations against and for at the wikepedia entry for the Patent Reform Act of 2009 and you will see what I mean.
Now, those opponents are still powerful; therefore to pass any legislation a bill will need to be acceptable to most of them. That means any bill that passes will not be ideal. My goal is to try to get a bill that at least levels the playing field and puts plaintiffs in a position where they have economic risk. The status quo is simply untenable and it is getting worse.
Many of the comments here correctly point out flaws in the SHIELD Act. We will try hard to convince the sponsors to correct these flaws to ensure the bill has teeth. However we must not lose sight of the real issue, namely whether the bill can get out of committee and receive a majority of the House and 60 Senators. It will be hard, and it will take a lot of public support. Please write Congressmen DeFazio and Chaffetz, as well as your own Members of Congress and give them your point view. They will pay attention. If they do not hear from thousands of people, nothing will change.
The tone of the article -- specifically focusing on patent trolls being problematic, but less focus on the other systemic problems with the patent system -- made me wonder if they were just going after the cases that annoy them.
What about legitimate inventors, rather than patent trolls? There is a large element of uncertainty in any patent suit that has a trial by jury, and it is not at all uncommon for clearly legitimate patents to be found invalid by the jury.
The SHIELD Act sounds like it would make it effectively impossible for any small inventor who is not wealthy to sue a large infringer, because the risk of total ruin would be too high.
The way to address the patent troll problem is to address the ACTUAL cause of the problem (standards for issuing patents are too lax).
What's to stop patent trolls from forming a corporation with no assets, suing people, and then declaring bankruptcy if they lose their case? They could forfeit their patents, but it would be worthless anyway if they lost the case.
Hollywood has precisely this model, setting up a corporation for each film made that somehow always ends up making a big loss, all the while paying massive fees to studios setting it up in the first place.
One thing we can be sure of is that patent trolls will adjust their business models and practise far quicker than Congress does anything.
The correct fix is to stop granting so many patents. Each one granted should answer yes to "would this have taken about 20 years or more to happen otherwise". They could also have special patent courts which could ensure consistency in the actual "justice" that is happening.
The SHIELD Act is a great step, but I wonder how this will fare against the patent troll practice of setting up separate legal entities specifically for litigating individual patents? If they lose, they declare bankruptcy and move on to the next shell corporation.
PG had a modest proposal to deal with the problem - name and shame lawyers who work for trolls, create a blacklist and refuse to deal with those lawyers. Trolls don't care about their reputation, but lawyers do. If we as an industry come together on this one the trolls will have no one to do the dirty work for them.
That's a dangerous place to go. Next there will be a call to name and shame lawyers who defend accused corporate polluters. After that, lawyers who defend alleged child molesters. Then, alleged murderers. Lather, rinse, repeat until we end up with a hopelessly-politicized legal profession.
Plus, it's not clear why a patent lawyer might stay up at night worrying about his reputation with someone like myself who is almost violently opposed to patents. It's not as if I was thinking of hiring him to sue somebody.
I've posted this a few times on HN. The solution to this problem is, in my humble opinion, very simple. Rather than presenting a divided community to trolls, we have to present a united front. This would come in the form of a legal support organization that would be 100% dedicated to fighting trolls on behalf of it's members.
Call it insurance, if you will. Member companies would pay a monthly or yearly membership fee. In exchange for this the organization would evaluate any and all patent lawsuits and consider them for representation. It's stated mission would be to defend members from trolls.
Well, for starters, imagine a legal organization with hundreds of
millions of dollars in the bank. How many trolls would dare risk going up against them?
Second, I am not a lawyer, but I imagine that there would be a way for this organization to also create a cross-licensing ecosystem for member companies. Maybe this is ridiculous. I don't know. Imagine that every patent of every member company becomes an automatic IP license --only for the purpose of patent defense-- for all members. This means that for my annual fee I could have a virtual shield consisting of tens of thousands, if not hundreds of thousands of patents protecting me.
How much is that worth? Any company doing anything at all that is not trivial should easily be able to afford a $10K per year fee. larger companies could do a lot more. Smaller ones less. It is not hard to imagine raising tens of millions of dollars per year and even reaching a hundred million. With careful management this organization could easily amass a billion dollars in the bank over a number of years.
This would effectively destroy the troll business without legislation and it would probably do wonders towards decimating bullshit software patents (or bullshit patents in general).
RPX Corporation was created to be the white knight that you describe. It is a for-profit company with a $600M mkt cap. Kleiner, CRV and Index invested significant capital in it (I believe Kleiner incubated it).
Basically, your company pays a % of revenues to be part of their patent protection scheme. They get to license your patents, which they allow other members to use. They purchase patents outright as well (though haven't been able to compete with bids from Apple, Google, Microsoft and the like).
From their website: "Our pioneering approach combines principal capital, deep patent expertise, and client contributions to generate enhanced patent buying power to manage patent risks and ongoing costs. By acquiring potential problem patents, we significantly reduce patent assertions directed at our client network. We will never assert or litigate the patents in our portfolio."
This doesn't solve the problem of large companies litigating frivolous patent claims, though it does fight against patent trolls.
Read their FAQ. They are also willing to sell patents, under a deal that indemnifies all current (but not future) members.
They already use this threat as a reason to sign up now instead of later.
The path from their current position to monetizing themselves off of patent trolls is very short. They have an incentive not to walk this path too obviously - right now they are acquiring patents at fire sale prices - but the temptation is always there.
Disclaimer I had a previous employer take out 3 patents in my name. Those patents have wound up in RPX's portfolio. I am not happy about this fact.
I was rather fascinated by Myhrvold, and the IV gang a few years back. The promise of a "pure invention" company where hundreds of scientists were toiling away on big ideas, creating a true innovation market, seemed rather exciting.
This was after all the guy that founded Microsoft Research, which unlike most of MS, has produced some rather interesting and innovative tech.
The reality though is they seem to spend way more time buying up cheap patents and then sending out "an offer you can't refuse" to hundreds of companies, hoping they will invest.
Which ultimately amounts to a smart, sophisticated patent troll. A super-troll if you will :p
Furthermore they were in the habit of outsourcing the muscle to 3rd parties that do most of the dirty work like suing, so their reputation comes across more noble, at least on the surface of things.
It's not like they are all bad, and comprised solely of attorneys. They really did invent some stuff, like the tech behind TerraPower a traveling wave nuclear reactor.
The trouble with IV is that suffers from bi-polar disorder. On the one hand they want to invent stuff, but yet suing everyone else and generally being shitty is what pays the bills.
>"Litigation is a huge failure," Myhrvold says. It's "a disastrous way of monetizing patents." (2006) 
Then in 2010 they filed the first lawsuits directly.
An Intellectual Ventures spokesperson added that the company expects people to use the “patent troll” term, but “this is simply our company protecting its assets.” 
Yep. One of the co-founders is a former lawyer who in fact coined the term "patent troll". Now they are world leader in patent trolling. "If you can't beat `em, ..."
It's great lesson in copouts. Instead of using your resources (e.g. a former Microsoft CTO's intelligence and amassed wealth) to fix a problem, you take the easy way out and exploit the broken system. What a tremendous success story.
> Well, for starters, imagine a legal organization with hundreds of millions of dollars in the bank. How many trolls would dare risk going up against them?
Uniloc have gone up against Microsoft in an 8 year case. That's pretty significant.
The Wikipedia entry for patent troll mentions a few companies, and who they went up against. (Techsearch vs Intel; Forgent Networks against 60 companies using JPEG (collecting over $100million from 30 of those companies before prior art made the patents invalid); RIM paid $625million (Canadian or US?) to NTP inc; MercExchange vs Ebay with damages at $30million but some secret deal worked out later.
It feels like these people won't care about the legal fund.
It is not ridiculous. But it does not solve the problem. It plays right into the problem. What you are describing is already done, and has been done for many years, in one form or another, between corporations e.g. in the semiconductor industry with patent pools and cross-licensing; but it is not a matter of discussion in web forums. The reason why this stuff is now discussed in web forums is because this sort of protectionist racket is now reaching beyond a circumspect group of companies and is touching the free software world.
The solution as any informed but objective observer can tell you lies in taking away the power to sue - the junk patents which give people the right to sue for frivolous i.e. overly broad patent claims - and taking away the financial incentives - high fees by patent offices, high fees by patent lawyers and even the court fees - one could imagine E.D. Texas must thankful for all the patent troll business all stemming from the issuance of junk software patents. Stop issuing these junk patents. We deliberately opened the door for these in the not too distant past and we can also close it.
Needless to say, there is a fair bit of capital moving through the business method patent racket. That's why it's difficult to shut it down. We need to have junk software patent trolling declared as a class of white collar crime and then get some Giuliani-style prosecutors to come in and clean this mess up. I'm joking but you get the idea. It's not easy to stop this machine.
Creating another protectionist "insurance" scheme is not the answer. The perceived need for something like that is a symptom of the problem itself. The risk should not exist to begin with.
As others mentioned, this has been attempted in various ways, but not really succeeded. Perhaps it could though if done properly. I am skeptical though and think something else is needed.
First is some form of legal ju-jitsu. If you are sued by a patent troll, you need to make it so they have no chance of stopping your business. One possibility is to dissolve and reform your company in some manner, perhaps moving it to another jurisdiction in the process.
This would at minimum cause a lot more work for trolls. It also causes hassle for you, but perhaps a business model could be built around this - imagine if your small startup could be legally dissolved and recreated, with all current legal structure in places like equity, somewhere else, perhaps as a division of a larger company. With the option to reform as an independent company whenever you want. Just moving around would make troll's lives much harder, and this could be much cheaper than fighting in the courts.
Another interesting idea is, as mentioned by others, that you can be sued for patent infringement even for products you use but didn't make. Everyone uses Windows or OS X, and they surely infringe many (ridiculous) patents, so even patent trolls are vulnerable to this. Microsoft and Apple do provide protection though, so this might be problematic.
If the patent troll doesn't produce anything, you have no power against them. They don't care if you own a million patents yourself, they can still sue you for infringement of their one patent with no fear of repercussions.
Patent infringement isn't restricted to manufacture: "Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent."
On the upside, you can scarcely breath without infringing a patent these days. I doubt a patent troll can operate in a non-infringing manner should a sufficiently large portion of the patent-holding community decide to get pissed off at it.
Problem is that the trolls also have few or no assets, other than their portfolios, that is.
My suggestion would be to have all members agree in advance to submit disputes between members to binding arbitration.
I would also suggest it should be the stated policy of the organization not to defer at all to the PTO on the question of patent validity. Everyone should expect that the arbiters would consider most issued patents (at least, most issued software patents) to fail the obviousness test.
The fundamental problem is that it assumes that all patents are invalid, and that no legitimate grievance can exist over the companies' intellectual property. While this may be a popular opinion on HN, I doubt many actual companies are going to be willing to sign away their right to sue when another member company brazenly steals their work.
The problem is that each patent, by definition, is unique in its coverage. Hundreds of thousands of patents is worthless if a troll has valid patent claims that read on your business. Also, massive amounts of legal firepower don't always help, as others have pointed out -- trolls are experts in exploiting moral hazard, compartmentalizing their business venture down to the single patent, such that if they find themselves on the losing end of a legal battle, they just fold up shop and move on to the next.
There is a stereotype that all patent trolls use a flimsy set of claims to coax hapless defendants into settling, rather than face years in court. Not true -- sometimes trolls have shockingly applicable claims, and go after the big game head on -- Apple, Microsoft, Google.
Your second part unfortunately doesn't work at all against trolls. A non-practicing entity - a company that does nothing except hold IP for the purpose of suit, but doesn't produce anything - can't violate your patents, and so can't be countersued using your own patent portfolio.
That's why patent trolling is particularly pernicious. Their entire purpose is simply to slow innovation and get rich doing it. Period.
My understanding of the term 'patent troll' is that it only applies to companies that own but do not actually use their patents to bring things to market themselves. Thus, the companies you mention don't qualify. Not to say that what those companies do is all peaches and cream but it's not patent trolling.
Patent trolls aren't the problem. The problem is that it's a profitable business model to have an idea, patent it, and then sit on it waiting for somebody to accidentally recreate it.
The reason this is a profitable business model is because too many obvious patents are granted. If granted patents were truly non-obvious, the likelihood of accidental infringement should be exceedingly low.
Patent trolls are merely a symptom of this issue. Hurting trolls does little to attack the wider problem.
The SHIELD Act does not strike me as the most effective way to attack this problem.
Presumably there are legitimate innovators who will not be as quick at execution as incumbent competitors. They may leverage themselves highly in order to try to scale up production, and afterwards will have scarce resources to hire legal representation.
Depending how open and shut the case looks, representation may take them on as clients anyway. This act would marginally decrease the likelihood that they would, whether it decreases it too little or too much is a legitimate concern.
Other industries than software are far more capital intensive. For instance most new drugs are not developed at the same companies that are the best at synthesizing compounds at scale and have the best distribution networks. However, investors assume the risk of funding expensive research, specifically because they know that in the rare case that it is successful, the large companies will buy the property rather than simply make it themselves.
The SHIELD Act could very well create a different model where all drug research had to take place under the umbrella of larger corporations that could fund expensive legal fights on short notice.
There is an overwhelming presumption that intellectual property is a sham in the software industry. Perhaps, software patents (and patents of business practices) generally slow progress more than they reward innovation. However, I don't understand how skepticism about the role of intellectual property protections has turned into uncritical acceptance that it only causes harm.
There is no need for elaborate laws to address the issue of patents for software and business methods. Nor a lawyer witch hunt. Nor some giant protection scheme like those mentioned in other comments.
The Constitution grants Congress the power to regulate patents. Everybody interested in solving this problem should ignore the half measures and demand the elimination of software and business method patents entirely. Other solutions will undoubtedly be gamed and the problem will persist.
It would seem like there could be legislation that says if you are not actively developing a product from a patent then you can't sue. I'm sure there's too much legal BS involving what "active" means, but it would seem like there must be some way to have a law that limits lawsuits to those people who are actually using their patent to create something.
Having the loser pay I think would also be a good step, however it probably would affect honest innovators when they're victims of patent infringement. Because it would be a huge risk to protect your patent. I know the argument against that is just get rid of patents, but I don't think that's realistically going to happen.
I can see why it's a tricky issue to legislate but it's so frustrating that seemingly nothing is being done.
This isn't going to work, the majority of trolls are NPE's and can simply declare bankruptcy. How many defaults on payments are we going to have before lawyers simply refuse to act as defence?
I think we should require half of the money spent on legal teams for lawsuits to go to paying for the other party's legal expenses. I think this would reduce frivolous lawsuits because, whereas now the wealthiest party always wins, if the defendant/plaintiff has equal support the legally correct party might win.
> This bill would require plaintiffs to pay defendants’ legal costs if the suit is unsuccessful. Under current law, the patent trolls don’t have any meaningful risk in bringing litigation. The defendants, on the other hand, are subjected to enormous legal expenses and discovery costs. The SHIELD Act is designed to level the playing field and take away the trolls’ unfair advantage. We encourage all of our customers, partners, open source collaborators and friends to support Reps. DeFazio and Chaffetz in their effort to discourage these abusive patent troll lawsuits.
Contact your elected officials and make them understand why it's critical they support SHIELD.
There's no perfect answer to this particular situation. If you make losing plaintiffs pay, you basically give large companies free license to misuse the intellectual property of small companies. "Loser pays" is proposed in many different contexts (e.g. tort litigation) and has been rejected for the same reasons. In the US, we perceive it to be more fair for defendants to have to deal with litigation costs than to stifle meritorious litigation against deep-pocketed defendants. It's a trade-off.
That America does not have a "Loser Pays" legal system is completely terrifying. British law, which is followed in various forms by many countries, imposes severe penalties on those that lose cases. The risk for a plaintiff is significant and the damages done to a victim of wrongful prosecution while not negligible are at least off-set by the fees paid by the loser instead of the losing party being able to walk away without obligation.
The American system isn't "terrifying" it's just different. You can't look at the European system without understanding that a lawsuit means a lot more in Europe than it does here. Many of the things that Europe does through administrative processes, the US does through litigation. It's easy to fixate on the costs of litigation, but realize that other systems don't necessarily eliminate those costs, but move them around by organizing things differently.
If a suit is truly meritless, it will be dismissed very early in the litigation process (summary judgment) before costs have piled up. The American legal system tries very hard to be "lazy" (in the CS sense), backloading costs as much as possible. Yes, it can cost millions of dollars to defend a suit at trial, but if a suit has made it that far it means that it was not a meritless suit. Why should the loser pay if he brings a meritorious case in good faith? Remember, in the US a lawsuit is usually the process through which the facts underlying a dispute are discovered. It often happens that someone legitimately thinks he has been wronged, but the process of litigation uncovers facts that show otherwise.
Loser pays systems chill litigation against big corporations. People focus on the situations in which they perceive there to be too much litigation, but in many areas there is not enough litigation. Litigation is the process through which citizens force corporations to fix unsafe products or clean up polluted land and water. Individuals are already at a huge disadvantage in these situations, and the threat of a corporation running up the bill in a loser pays system would do great injustice. Europe gets away with it because it has far more active government oversight and prosecution of such things.
I don't know if you sleep on a mattress filled with hundred dollar bills, but even engaging a lawyer to fend of a possible lawsuit can cost thousands with costs escalating quickly from there if you need to do more prep-work before you even show up at court.
Even getting a case dismissed can cost a small firm more money than it can afford. A fifty thousand dollar dent in the cash-flow of a small business is not an easy thing to weather. Good luck collecting on damages from a wrongful suit, too.
You say it chills litigation against big corporations? It tempers it. Where you cite examples of lawsuits against companies promoting the greater good, I see ambulance chasers trying to siphon extraordinary class-action settlements. Very little of that money goes towards consumers and instead of making companies more responsible it simply paralyzes them with paranoia.
It may sound rather peculiar, but in some countries the government plays the role of advocate for the voters. It doesn't necessitate suing anyone and everyone to send a message. Too many things that used to be taken for granted have been completely eliminated because one individual decided to press ahead with a lawsuit over something that, in many cases, was either a random act of bad luck or a case of irresponsible behavior that can be blamed on another on a technicality.
> You say it chills litigation against big corporations? It tempers it. Where you cite examples of lawsuits against companies promoting the greater good, I see ambulance chasers trying to siphon extraordinary class-action settlements.
Read up on the economics of externalities. In the US, the legal system is pretty much the only thing we have to deal with companies trying to externalize costs. And the amount of these externalized costs is huge. $500 billion or so for the coal industry alone (http://wvgazette.com/static/coal%20tattoo/HarvardCoalReportS...).
The narrative popularized by corporate America is the ambulance chasers just looking for a quick settlement, and while that no doubt exist the truth is that lawyers are the only thing that stand between the big corporations and everyone else.
Here's how it's done, in simple terms. This is not some new thing. IBM was doing this before there was a Microsoft and before there was a WWW.
If you amass enough vague patents, any one of which on its own isn't worth the paper it's printed on, then automagically they no longer remain worthless. Suddenly you have something valuable: a patent portfolio! This is because it costs a significant sum to pay someone (e.g. a patent attorney) to go through your wonderful portfolio of junk and determine which ones are worthless. And that is in turn because patent law firms charge very high fees to do that work. And that is in turn because not every lawyer is permitted to become a patent lawyer - so there's only a limited number of patent lawyers - hence they have less competition to drive prices down. The uncertain validity of a bundle of patent claims that I can allege others are infringing is the value. Threat == value.
Therefore if I have several hundred vague patents of which a definitely large proportion are worthless and I sue you alleging you have infringed a significant number of them, you are screwed. Because it is going to cost you a lot of time and money to have someone go through each and every claim and convince me you are not infringing. So you just concede it's not worth it to fight me and my deep portfolio of junk software patents. And we start negotiations. Needless to say everyone at the negotiating table is not going to be in a happy mood going into this given that we had to start the whole process off with threatened or actual litigation. This is "business", American-style. A model for the world to follow.
Perhaps someone could patent the business method of patent trolling. Then sue the trolls for patent infringement.
I suppose this is wishful thinking. No doubt some patent troll company has already patented the idea of suing patent troll companies, and will sue you for infringing their patent if you try to sue them.
Personally I think it would be best to just abolish the entire patent (and copyright) system. But I know how impossibly unlikely that is.
Notice that there is nothing in this blog post that indicates how vigorously they will fight the lawsuit and certainly no bravodo type language. Only essentially a call to action "We encourage all of our customers, partners, open source collaborators and friends to support Reps. DeFazio and Chaffetz in their effort to discourage these abusive patent troll lawsuits."
I takes this as potentially meaning that they might very well settle this out of court w/o paying -or- they are planning some other atypical legal action and don't want to telegraph anything. Even if they get this dismissed because of the github assumption that doesn't prevent it from being refiled correctly I believe.
The key is making congressmen pay attention to this is to translate it into words they can understand. Money. All the techno babble about who own's what and morality and fairness is like telling a dog to eat vegetables.
When patent trolls sue organizations for infringing on their patents with no intention of innovating, it creates less GDP which means less revenues for the big corporations which pay the most taxes, less taxes means less happy bottom feeder voters, which means you don't get re elected. When they get that through their heads, legislation will happen to fix the "injustice".