Friday 21 February 2014

A Sensible Approach to the "Patent Troll" Debate in the US

Professor Timothy Holbrook of Emory University Law School has written a very sensible Op-ed titled, "Not all patent trolls are demons," that is published by CNN, here, in light of the "shotgun approach" to fixing the "Patent Troll" issue by the United States Patent and Trademark Office (USPTO), Congress, and the US courts.  Indeed, on February 20, 2014, the White House announced three new executive actions: 1) crowd sourcing prior art with the USPTO; 2) more robust technical training at the USPTO; and 3) pro bono and pro se assistance coordinated through the USPTO.  (Although I do think all three of these actions are wise.)  Professor Holbrook states:

What is lost in this mudslinging is that much of what PAEs do is laudable — paying inventors. Patents don't grow on trees. Someone came up with the invention and incurred considerable expense to obtain the patent. Many inventors can't bring their invention to market themselves, however, so selling the patent may be the only way for them to make money. By buying these patents, PAEs compensate inventors, one of patent law's objectives.  

Patents give their owners the right to seek compensation for unauthorized uses of the invention, so there is nothing wrong with a PAE enforcing a valid patent.

The key word, though, is valid. Problems arise when PAEs sue on improperly issued patents, ones that never should have gotten out of the US Patent and Trademark Office.

For example, many patents on software and business methods -- areas where PAEs often operate -- are not sufficiently different from earlier technology to justify the patent, or are too vague to discern what they legitimately cover. Even though companies can knock these patents out in court, most parties settle. But, if they aren't legitimate patents, why do parties settle? Simple: to avoid the expense.

According to a 2013 American Intellectual Property Law Association survey, median litigation costs are $3.3 million when $10 million to $25 million is at stake. Discovery -- the process of looking for evidence relevant to the case --is responsible for much of the expense. Defendants must wade through voluminous records and e-mails to find anything relevant to the case. For a case worth $10 million to $25 million, the survey estimates that the median cost through discovery in defending a PAE suit is $1.5 million.

A PAE doesn't face these expenses. Discovery is easy for it because all it has is the patent. Plus, its lawyers usually take these cases on contingency, taking a percentage of whatever money they bring in, so there are no upfront attorney costs. When manufacturing companies face these costs, many simply settle, leaving the invalid patent in place.

But these are not troll problems; they are litigation and patent quality issues. Scapegoating trolls risks disrupting the useful compensatory purpose they serve and may cause unintended consequences in non-troll litigation.

Professor Holbrook is not supportive of some of the legislative proposals; however, he does seem to think the President’s recent executive actions are solid.  Do you agree? 

No comments: