Can You Beat Patent Trolls By Using The Same Techniques That Make Them So Successful?
from the interim-solution dept
Law professor Colleen Chien has been doing some good work lately in trying to address the problem of patent trolling. She's now written up an interesting article for Forbes, in which she notes that the system clearly needs to be fixed, but in the meantime, wonders if there's a way to use the very aspects of what makes patent trolling profitable to defeat patent trolls. The full article is worth reading, in that it lays out the basic structure and economics of why patent trolling is such a profitable business. But the real question is if the same factors that work for patent trolls can be made to work in the other way:- Trolls succeed because their lawyers only get paid when the patent holder wins. Under the traditional billing model, defense lawyers get paid no matter what. What about tying defense payments to the successful and low-cost resolution of cases? Success payments, outcome-based billing and other forms of “contingency defense” give the main source of transaction costs – lawyers – incentives to reduce them.
- Trolls also succeed by capturing economies of scale. Purchase, assert, repeat. In contrast, few lawyers specialize exclusively in defensive tactics like invalidation, reexamination and joint defense. Expertise that is developed within a firm is guarded as proprietary. But defensive tasks like prior art searching could become cheaper and more reliable if done on a larger scale. Firms with expertise dealing with certain patent assertion entities or certain venues better understand what is needed to efficiently dispose of a suit.
- When trolls show up now, companies fold individually because its easier to do than fight collectively. But the gains from collaboration can be substantial, and would be even more so if approaches were standardized and made more efficient.
- The greatest advantage trolls have is their ability to focus exclusively on assertion. A lack of customers, partners and operations endow trolls with a freedom to litigate not enjoyed by practicing companies. The makers and users of technology should consider doing the same and investing in their own non-practicing entity – a nonprofit. While on a day-to-day level, companies need to resolve disputes and move on, a more long-term and sustained focus could yield longer-term payoffs. Trolling is a big enough issue that diverse stakeholders including small and large companies, across sectors, should be able to find common ground.
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Filed Under: defense, patent trolls, patents
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Success
Unfortunately those large companies are stakeholders in the present method of defense against this type of suit and the odds are against it happening.
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Lawyers keeping fellow lawyers in business.
They're just generating more work for themselves and their fellow lawyers. Obviously it would help if all the firms getting sued had the appropriated patent licensing in place when they go about designing the product (it's hard to believe they don't KNOW these patents exist), but because lawyers are so inefficient, accept no liability and are such extortionist, it's probably cheaper for the firms targeted by trolls to get shaken down once in a while rather than to pay a law firm to do an exhaustive patent search and deal with licensing negotiations with potential competitors.
It's not trolls or the patent system that is the barrier to business innovation, it's the ridiculous cost of lawyers that are a barrier to efficient use of the patent system!
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Therefore, if some enthusiasts (of which there are none here, surely...) were to work up a lexicon of logic-based cases and support it with the appropriate case-precedents, victims would have a library of pre-built defenses and would then only have to pay much-reduced costs of presenting a pre-built case, or it would be even easier to get some lawyers to operate under a fee-for-actual defense.
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Short answer: No, EVIL has all the advantages.
Anyway, I'm only going to pick at one point here: "defensive tasks like prior art searching" -- reason that never happens is (as almost stated above) that lawyers don't like to share their "work", or use that of others, because means less income for them.
@M.ce: be careful not to hit "submit" before fin
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Completely off topic, but...
Had to fix that.
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Re: Completely off topic, but...
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Maybe the first company to see another group of people gang up on them may be Apple.
They got their injunction against Samsung and now are going after others like Motorola.
And they problably will need to sue the press to since they are talking to Samsung to produce tablets so they can give those away.
Quote:
Source: http://edition.cnn.com/2011/TECH/gaming.gadgets/08/09/tribune.tablet/index.html
Not to mention Apple also pissed Amazon.
http://arstechnica.com/tech-policy/news/2011/08/class-action-suit-targets-apple-and-five-pu blishers-for-price-fixing.ars
So you got HTC, Samsung, Motorola, Google, News services and Amazon, they all could come together and hit Apple hard.
Motorola is trying to invalidate patents that are being used against HTC, then you got others withe very big patent portfolios that could may well do the same thing.
Will that happen?
I don't think so and the why is simple, like Quark's brother Rom said in Deep Space Nine on the episode he was trying to make a "U-U-U-ni-on" the Ferengi don't want to stop the exploitation they want to become the exploiters.
Firms don't want to change the patents they want to be the ones holding those patents, they don't want to make the sword shorter, they want it to be bigger, they just don't like when the other one is the one that holds it.
Creating a system that could melt away their swords is not something they probably want to do so.
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Judgment Proof
Because the trolls are judgment proof, they can engage in the most outrageous behavior with no risk to themselves. They have the perfect structure to engage in legalized extortion. The only true fix is to change the law.
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Re: Judgment Proof
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Re: Re: Judgment Proof
An alternative is to shift the cost to society, rather than to innocent defendants. Have the Court perform a review for frivolousness, a prior art search, and other tests before the case is accepted for filing. Only cases that looked like they were likely to succeed on the merits would get in the door.
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Part of this is already being done
See: http://www.trolltracker.org/2011/08/10/fark-farks-a-troll/
Rather than contingency defense, because no self-respecting Managing Partner is going to allow his firm to do that, talk collaborative defense. Multi-defendant cases are rampant and increasing...they may make strange bedfellows, but getting opposing companies to enter into a joint defense agreement and use economies will help. Find best-of-breed attorneys and get them to find the best strategy for each troll.
Someone may already be dong this, as well...
Just sayin'
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loser pays
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Re: loser pays
* NOTE - This does not mean the English Rule is bad, or that it should be abolished. In the small group of cases where the plaintiff is somewhere between impecunious and wealthy, it may have some effect. And in any event, it decreases the pain for some litigants some of the time, and that is worth something.
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Now where is my 44 magnum?
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Way off
* Success payments
In fact, many defense teams earn kickers for many milestones: dismissal, summary judgment, invalidity, etc. It's true that most defense teams still bill hourly but the reason is simple: it's usually cheaper than the contingency fee system since valuing the successful defense of a suit is tougher than claiming 30-45% of a damages award or settlement.
Simple question: what's the contingency fee for defending a suit like a Lodsys case?
* Economies of scale
This is absurd. Sure you can staff a specialty firm. You could staff hundreds of prior art searchers with relevant technical expertise, etc. But that's cost and overhead not necessary for every patent infringement case.
Trolls have the "economies of scale" advantage because they have 1 patent and dozens of targets. The type of information they need to gather is limited.
Moreover, many IP firms have lots of internal expertise already from patent attorneys to patent agents and engineers. In those firms, there are people with lots of experience with reexamination.
The truth is, it is cheaper, more efficient and more effective to OUTSOURCE tasks like prior art searching. This is already the tactic.
In addition, savvy defendants know to hire IP firms with relevant experience in venues like TXED and CAND and DED.
*When trolls show up now, companies fold individually because its easier to do than fight collectively.
Joint defense groups are common. They are common in many patent infringement cases. The benefits are obvious, including, sharing the cost of invalidity searches and claim construction.
They're also problematic. Apart from a couple of the core legal issues (invalidity and claim construction), the parties often share no other common information and are reticent to share things about their non-infringement positions with other defendants since they are often competitors.
Moreover, joint defense groups are prone to free rider problems and, inversely, drafting by committee.
* The last point
I'm not sure I understand the last point.
But, I'd argue that the greatest advantage "trolls" have is not focus, but information asymmetry. Trolls have no "history", they have no "records", they have no "business interest", etc. This makes discovery cheap and easy. Compare this to the large corporations that they're suing that will expend huge amounts of money on responding to discovery issues: document production, etc.
I think this professor needs to go back to the drawing board.
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Patent MAD
A modest proposal: Have somebody "patent" a business method for the "efficient collection of patent fees" (based upon the business model that trolls currently use). Describe it all in the patent application (i.e., bundling broad patents together from diverse sources, creating shell corporations, writing demand letters for settlement, collecting money from the company which allegedly "infringed", etc.). Then license non-exlcusive rights to this patent to any legitimate (non-patent troll) business who wants to use it for a nominal sum of one-cent.
Once you have done that and have a patent monopoly granted on this business method, any time a patent troll tries to sue a legitimate company for infringement, the legitimate company would not only have its traditional set of defenses, but could then counter-sue the troll for infringing its patent on the trolling business method (and demand a settlement sum equal to or greater than the sum the troll is demanding).
In other words, the very act of patent trolling would then become an act of patent infringement.
In the absence of Congressional action to fix this problem, setting up an automatic system of Mutually Assured Destruction seems like an alternative that must be considered.
Anyone want to help get this started? Perhaps we could use a Kickstarter.com campaign to raise money for the attorney and filing fees.
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Pantent that!
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Re: Pantent that!
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realistic?
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