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A simple no-brainer approach to patent trolls (42floors.com)
90 points by jaf12duke on Nov 1, 2013 | hide | past | favorite | 38 comments

The idea is maybe clever, but it has at least 2 major downfalls.


The system is gamable by the trolls. Hurricanes don't care if you're insured, but trolls have an interest in taking troll insurance down. The way insurance works means that if you have a statistically unlikely run of bad luck, you could topple the whole insurance enterprise and leave those who thought they were covered out in the cold.

If I were a troll, I'd get together with other trolls and coordinate enough legal pressure that it was impossible to go to court on all the pending cases at once.


Having insurance like this legitimizes the whole trolling issue, instead of fixing the systemic issues that cause it in the first place. You might think that doesn't matter since we can't really fix the trolling issue, but we can (maybe) create insurance to route around the problem. But here's why it actually does matter: if the troll insurance works and isn't killed by my point #1, then we've actually created a lobbying group with a vested interest in keeping trolling alive. In other words, the organization we created to protect us, if it actually works, will have strong incentive to work against our long term best interests by allying themselves with the trolls they are supposed to be protecting us against.

We'd essentially be creating a protection racket to extort /ourselves/.

Can't see this working.

> then we've actually created a lobbying group with a vested interest in keeping trolling alive

That was my first thought when reading this article. It's a shame that lobby groups can petition for outcomes that are worse for everybody but their broken business model - where profits are the only virtue worth considering.

Lobby groups for keeping marijuana illegal[0] perfectly describe this.

Google, Microsoft, Apple, Samsung, and any other big tech-player need to band together, form a lobby group, and destroy software patents. It should be in their best interests considering all the patent litigation that goes on among them.

[0] http://www.republicreport.org/2012/marijuana-lobby-illegal/

> Google, Microsoft, Apple, Samsung, and any other big tech-player need to band together...

But they won't - Microsoft and Apple are patent trolls themselves, now, and it won't be long until Google and Samsung join them.

It works like this. Startups have no patents, but as they grow and succeed they accumulate them. Eventually they get lazy and start to rely on their IP for income, rather than continuing to develop valuable new markets.

Microsoft is a great example of this arc, making more money licencing unspeakable patents to Android than they do from Windows Phone. Apple are going that way - their heyday is over and patents are becoming more important to them. Google is currently not over the hump yet, but give them ten years.

Ignoring adverse selection, having insurance means "There is someone with a shitton of money and lawyers ready to go toe to toe". This means there are better targets. Much like a home security system: easy enough to circumvent, but easier to just move to the next house.

Of course, if all of those who sign up are willfully infringing legitimate(ish) patents, the calculus changes a bit. Perhaps the insurance company would insure against particular patents?

I agree with 2, but 1 doesn't make much sense to me. Normally, trolls don't want to go to court. In fact, if they know you're taking it to court (and they believe you), they often drop the case. Just publicly saying that you're 100% committed to fighting any trolls will probably reduce the amount you attract.

Odds are, trolls would only coordinate as a last ditch effort. And if that happens, patent troll insurance would be so popular there would be other services that would offer this, making it harder for them to take it down.

Both of these points are predicated on the patent insurance program becoming successful first. At which point, people will try to stop it or it will become seamingly unstoppable.

I would be okay with those problems compared to my current risks.

I'm not an actuary so I probably can't accurately attest to this, but I would think it would still be a feasible approach. If an insurance agency were to accept the risk, they would have to do their homework and have their lawyers and agents dig through the intellectual property of their clients and do their own determination at the risk of legal troubles and charge the client(s) a fee which yielded profit over a span of time where the mean loss was less than the income.

I'm not an actuary - but I've worked on valuation software for actuaries.

I think one key problem around insuring these risks is that it'd be difficult to price and value. To price/value you need to understand the cashflows for the insurance product in terms of premiums and payouts. Life, Health and General insurance all have analytical methods that rely on historical data to determine the likely-hood of a payout. For this type of insurance there isn't the same level of historical data.

Also, the regulatory regime for insurance companies is moving towards a risk/shock based approach - this is the case in Europe (or will be eventually), with the ROW expected by the industry to follow similar approaches. So for an insurance product such as this, an insurer would probably need to understand what happens if the level of payout incidence is stressed (say doubled) - given that the incidence of payout isn't well understood and the liability when you do payout is likely to be quite high, would result in what the market would probably consider to be an expensive product.

Maybe there is a a way to avoid the protection racket issue by a setting up the insurance organization as a self-governing non-profit. By self-governing I mean anyone who pays into the organization can submit proposals for cases that should receive it's funding and vote proposals up or down. The top X proposals would be funded. Perhaps votes could be weighted in proportion to the amount the member pays into the organization.

You can already buy general legal insurance so why would not be sufficient ?

My understanding is that patent trolls persist with bogus patents because it's not in any one firms interest to challenge them. When it's a central insurance company taking the risk, they have much more incentive to do damage to the trolls. This is a good feature of this scheme.

The protection racket shape of this whole thing is a bit worrying though.

One of the more interesting things I read in Derek Sivers' book was about the mob. A cab driver he was chatting with indicated that the mob system was easier to work with than the government that replaced it when the city legitimized. You paid people for nothing more than keeping them off your back, sure, but you had someone to turn to if you got leaned on by someone else, in a town filled with assholes willing to break your arm on a pretext.

The mob had no incentive to shut commerce down, only to extract a rent. It was pretty straightforward, you set up shop in a certain part of town, and you knew the mob controlling that area would be around to "welcome" you. Paying them off is a cost of doing business. They have to be reasonable because if you get shut down, they won't get paid.

Compare that to the environment we have here. Trolls have no interest in keeping you around, and there's no way to work them into a business plan. The only thing you can do is set up shop and pray.

Personally, I'd rather deal with the mob.

What if the insurance only covered court costs. If you lose, you have to pay the patent troll. It sounds bad, but trolls would then face a furious fight every time.

Then the insurance have an incentive to pick for you a lawyer who loses fast.

This idea already exists. RPX Corp. Costs a fortune though! Can be 6 figures a month...

RPX Corporation (RPXC-NASDAQ).

I didn't know they existed. Apparently they have a whole program for this: http://www.rpxcorp.com/rpx-npe-litigation-insurance

Patent Litigation Insurance™, a new product from Intellectual Ventures®.

You can't take Lloyds of London down so easily. That's where you should start shopping for a policy, because the dealers at Lloyds are ultimately the ones who set the prices for any insurance anywhere in the world.

How about insurance that contractually requires me to never settle and pays for me to fight until the patent is declared invalid? That way I look like the worst possible troll target.

I for one would say the no brainer solution would be to abolish patents. I know blah blah medical research, years investment blah blah, but after the investment is made back, it is abused again. And shit like Monsanto. Abolishment would be best imho. But as that's not in the cards, the next simple thing would be; if you (the company the patent belongs to, bought or created; not a partial parent owner, not some entity you have shares in; no, the physical company) are not actively creating, selling and marketing a product(s) the patent(s) are about, you cannot attack companies who are. If the 'enemy' openly started selling/marketing/producing with the product before you did, you are just out of luck; even if you create it after that you cannot sue. This is easy to check and follow up; there will be thousands/millions traces of actual sold and delivered product to end clients on tax papers, logistics papers, manufacturing papers etc which proves who was first.

So if you had the patent, which was supposed to be original in the first place, then, because it was so 'original' (saying 'original' because at least in case of software it just never is and many(most) hardware cases aren't either) you could've easily been the first to exploit it right? If not; sorry for you, your patent lands in /dev/null. Will never happen but seems to be a logical and solid way of doing this.

Oh yes, and make the patent related to the investment used to come to it; you have to provide paper trail what 'enormous and painful investments in time and money' you did to get to that 'one click payment idea'; you can only sue others until your company made that investment back times X (X=10 or whatever), not after that.

Patents are a good idea for rewarding people with original ideas. If they were required to stay with the original owner and weren't transferrable, this would be a different (and similarly problematic issue), but as patents have value and are transferrable, they will be bought and sold as investments by various people/corporations/whatever.

In theory patents are maybe a good idea because it provides exclusive rights to "own" an idea for enough time to extract value out of it by selling a product or service around it (if you so choose). You could argue that software patents lasting 20 years is "too long" for technology. You could also argue that patents aren't worldwide enforceable so, you need to get one everywhere, or basically you can't enforce it.

I don't really know that you can "fix" patents without throwing them away and rethinking them, but on a system as large and impactful as patents, the repercussions might be a lot worse than the problems we have now.

I have been wondering about possibility of another approach, which is limited to B2Cs. Since I am not a lawyer, I do not know if this can actually work.

Instead of manufacturing or selling the product directly, you open-source the design while maintaining the copyrights (or even patents-coverage if needed) over it. You now do contract manufacturing of the design for the buyer and set up the legal agreements / EULAs accordingly. While it is the buyer now who has the risk of being sued, the troll I assume is unlikely to go after every small individual customer.

You maintain the copyrights (or patents) on your design just to prevent your competitors from freely copying it, though you promise not to sue the buyer himself for this IP as usual in the agreements.

Does anyone around here think this is correct / feasible? Any lawyers here?

From my layman's understanding, this doesn't work. Just because you are building something as a work-for-hire doesn't immunize you from being sued, if you are violating someone else's patents in the process. You can have a contract with the buyer that says that the indemnify you in the event of a suit, but the way that works is that you still get sued and then you can go after the buyer to cover your costs when you lose or settle.

Again, not a lawyer, but this is my understanding.

This is probably not a good idea, but what happens if the "badge" on the site is simply a link to a binding contract that forces the company to always fight patent lawsuits in court? No insurance or anything, a simple way of signalling that they will go to court no matter what.

(I believe there's a legal construct where a company can sign a binding contract with itself, overseen by a notary or something like that)

Now we replaced the rational actor the trolls faced, with an irrational one - the company simply can't settle, this is going to court no matter what. Trolls no longer have an incentive to sue such companies, though if they do, the company is in big trouble (though, possibly not forced to shut down).

How about a "white-hat" troll? Get a bunch of patents, and threaten small players: you either join us, paying for insurance and lobbying OR we try and sue you.

An alternative would be for a bunch of like minded companies to band together and form an alliance. If one of them gets trolled, the others contribute to their defence. "One for all, all for one." You'd want to trust your allies, or put some limits in place to keep flagrant patent breaches outside the agreement.

Don't some insurance companies already do legal expenses insurance?

It's a great idea, but it faces the small problem of solving nothing if all the participants get trolled, which they likely will.

Something like malpractice insurance I guess. It'd create an interesting dynamic between trolls and troll insurance policy providers.

You'd have the insurance providers lobbying to reduce patent trolling, just as trolls will be lobbying to allow for more.

The thing about this, is that instead of just the latter, we'd have both sides. If anyone wants to make this happen I'm on board.

Yeah, the insurance business is so sensible and orderly, adding that to the mix would surely make everything ok.

Is this not exactly what Intellectual Ventures offers?

personally I think the only way of stopping the trolls is to insist that the only litigant who has standing to bring suit on a patent is someone who:

a. Has the relevant patent

b. Is producing a product based on that patent which would be harmed by the alleged infringement

This would continue to protect actual inventors who actually make something (and the drug companies for whom the patent system really does work) but stop the trolls.

As a rule, insurance doesn't insure against Armageddon. This would be like trying to get Geico to cover a top fuel dragster.

This would be like selling car insurance to demolition derby drivers. It would never, ever be profitable.

the guys at fightthetroll.com are also doing something along these lines

A simple no-brainer approach to patent trolls: bit.ly/18Loez4

Great idea. Fight capitalist excess with capitalism.

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