8 ms·

US patent lawsuits now dominated by 'trolls'

46 points by kjhughes 14y ago

arbuge 14y ago
Absent meaningful patent reform (don't hold your breath on that one), what might be needed here is for some enterprising patent lawyers to band together and form a troll insurance company offering protection against these scammers. Somewhat like malpractice insurance for doctors, although the analogy is not precise - the malefactors would be the plaintiffs in these cases, not the defendants.
- DannyBee 14y ago
  I'm confused how this would be effective. 1. Insurance works because the risk of X happening to individuals in a group of insured people is low individually, even if over the entire population it isn't. This ensures the number of actual payouts are low. Here, the risk of troll lawsuits happening to all insured companies is high. Thus, you'd have to pay out to almost everyone. 2. Insurance also only works (for the insurer, anyway) if the premiums cover the payouts. Given the typical award is tens of millions or hundreds of millions, you'd need both lots of companies, and very high premiums. To cover a single $100 million award, you'd need 10k companies to pay 10k each in premiums. If 100 million gets awarded against each of 5 companies in the lawsuit, now it's 50k premium per 10k companies. ISTM it quickly becomes infeasible as long as damages are so high. Note: General types of lawsuit insurance are already available, but they exclude patent infringement. Patent infringement/litigation insurance is also already available, but it's expensive as hell, per the above.
  - arbuge 14y ago
    Although certainly crippling to a startup, damages are usually not that high in absolute terms unless it's the likes of Samsung being sued. If memory serves me right, according to a recent article on HN, they're on the order of ~$1m for small-medium businesses and $7m for larger businesses.
jivatmanx 14y ago
The only saving grace of the patent system has been that when a legitimate company launches a patent lawsuit, it's possible to retaliate, so there is the possibility that the tech giants would realize that futility of the war, and settle/call truces. That doesn't work with trolls.
- pdwetz 14y ago
  I wish I had a link handy, but the massive lawsuits firing back and forth between phone tech companies (apple, google, samsung, etc.) would argue against the Mutually Assured Destruction cold war theory for patents.
  - jivatmanx 14y ago
    I think that Apple/Google/Samsung each still think that they can somehow "Win" the patent war. It should eventually become blindingly obvious to all of them that they can't.
    - belorn 14y ago
      Once rolling, there is no stop to the war until there is a winner declared by media.
      - ihsw 14y ago
        The article states that Samsung lost a lawsuit in the US against Apple, however it fails to mention other high-profile results of Apple v. Samsung legal rulings -- namely where Apple had to publicly apologize in the UK and issue a prominently-featured statement as such on their UK website. Other nations have ruled in favor of Apple, and vice versa, which further adds to the confusion of who is a victor.
  - jlgreco 14y ago
    The real problem here starts when the big guys realize they are all untouchable, and start fighting proxy patent wars with each other by brutalizing small defenseless companies.
belorn 14y ago
With European Union patent, wonder if Europe will end up the same problem. A special "court" of appeal and a system immune to the European Court of Justice and sound very similar to the US system.
- drucken 14y ago
  The EU will end up with almost exactly the same problem - just at a slower pace. The only difference after 1-Jan-2014 will be the lack of "legal arbitrage" across states which makes a mockery of many laws in the US. But legal arbitrage is trivially damaging compared to the new EU Unified Patent court ruled by patent law experts (which creates an incentive to expand their powers), the ability to file software/mathematical patents and the faster Unified Patent application process.
rayiner 14y ago
This article defines "troll" far too broadly, in including any non-practicing entity. The whole point of turning something into a property right is to be able to trade it, and have the new owners enforce the original rights. It's conceptually no different than someone who buys a farm, doesn't plant anything on it, but sues people who trespass through it. The law doesn't require you to do anything with your property rights. There are practical reasons for this. My law school alma mater, Northwestern, developed and patented the drug that became Lyrica. They sold the patent rights for about $700 million. Northwestern was not going into the prescription drug business. That would be utterly ridiculous. Treating patents as a property right allowed them to take the invention and "exit" by selling it to someone else. All research universities use this technique heavily: Stanford, MIT, etc. Now, you may not agree that propertization is the right tool for inventions, but the fact remains that when you're discussing a property right it's irrelevant what someone trying to enforce that property right otherwise does with the property. IMO, "trolling" should be limited to those who assert frivolous or weak patents to get quick settlements, not people who try to enforce legitimate patents. This is completely orthogonal to what sort of bar you think there should be for legitimate patents, or whether there should even be patents, by the way.
- btilly 14y ago
  This article defines "troll" far too broadly, in including any non-practicing entity. Did you get past the first paragraph? The phrase that I saw used in the actual article itself, rather than the leader, was "patent-assertion entities" which is to say companies whose primary line of business is suing for patent rights. That said, some of them are suing on behalf of entities like your law school alma mater. But the entities doing the suing have no other business.
  - rayiner 14y ago
    Generally, "non practicing entity" means companies whose primary line of business is suing for patent rights. What does it matter whether the entities doing the suing have no other business? Say I buy a really popular strip of land near the beach and don't do anything with it. Say that attracts a lot of tourists who picnic on it illegaly. Is it illegitimate for me to sue them for trespass? Say I sell off the right to sue for trespass to a non-practicing entity. Is that illegitimate? Now, you may disagree with the nature and scope of the rights. You might say--people shouldn't be able to buy land by the beach--that belongs to the public (and that is the law in some places). But once you have a valid property right, it's not illegitimate to sue for real infringements of that property right, and it's not illegitimate to split up the "bundle of sticks" that makes up your property right and sell someone nothing more than the right to sue for infringements and keep any damages. That's just how property rights work in general.
bretthardin 14y ago
In other news, water is wet.
michaelochurch 14y ago
Unfair. Some of us have the discipline to keep our trolling and our patent suits separate.
shawn-butler 14y ago
If an "article" that is clearly flamebait has as its subject an academic study or paper and does not include a link or reference to that paper or one can not be provided, then Please do not submit the link. My opinion only.
- smsm42 14y ago
  Here is the list of publications by Colleen Chien: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=362060 http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=3620... Not sure which paper the article talks about, by dates I assume it could be this one: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2146251 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2146251
  - shawn-butler 14y ago
    Thanks. I couldn't tell either. That's why I made the comment.
smsm42 14y ago
This has to be expected, it's like saying "most of the debt collection is done by debt collection companies". Of course, that's the point of having debt collection companies. If there's a profitable activity - like suing for patents - there would be people who specialize on it, in order to make it more efficient. Now, useful distinction would be if the lawsuits brought on behalf of third-party clients or the PAE is the sole beneficiary, but this situation is impossible to distinguish from actual practicing entity just selling the rights to sue to PAE in order to not bother with it anymore, while keeping the benefits of the temporary monopoly.

46 points by kjhughes 14y ago

Absent meaningful patent reform (don't hold your breath on that one), what might be needed here is for some enterprising patent lawyers to band together and form a troll insurance company offering protection against these scammers. Somewhat like malpractice insurance for doctors, although the analogy is not precise - the malefactors would be the plaintiffs in these cases, not the defendants.

DannyBee 14y ago
I'm confused how this would be effective. 1. Insurance works because the risk of X happening to individuals in a group of insured people is low individually, even if over the entire population it isn't. This ensures the number of actual payouts are low. Here, the risk of troll lawsuits happening to all insured companies is high. Thus, you'd have to pay out to almost everyone. 2. Insurance also only works (for the insurer, anyway) if the premiums cover the payouts. Given the typical award is tens of millions or hundreds of millions, you'd need both lots of companies, and very high premiums. To cover a single $100 million award, you'd need 10k companies to pay 10k each in premiums. If 100 million gets awarded against each of 5 companies in the lawsuit, now it's 50k premium per 10k companies. ISTM it quickly becomes infeasible as long as damages are so high. Note: General types of lawsuit insurance are already available, but they exclude patent infringement. Patent infringement/litigation insurance is also already available, but it's expensive as hell, per the above.
- arbuge 14y ago
  Although certainly crippling to a startup, damages are usually not that high in absolute terms unless it's the likes of Samsung being sued. If memory serves me right, according to a recent article on HN, they're on the order of ~$1m for small-medium businesses and $7m for larger businesses.

jivatmanx 14y ago

The only saving grace of the patent system has been that when a legitimate company launches a patent lawsuit, it's possible to retaliate, so there is the possibility that the tech giants would realize that futility of the war, and settle/call truces. That doesn't work with trolls.

pdwetz 14y ago
I wish I had a link handy, but the massive lawsuits firing back and forth between phone tech companies (apple, google, samsung, etc.) would argue against the Mutually Assured Destruction cold war theory for patents.
- jivatmanx 14y ago
  I think that Apple/Google/Samsung each still think that they can somehow "Win" the patent war. It should eventually become blindingly obvious to all of them that they can't.
  - belorn 14y ago
    Once rolling, there is no stop to the war until there is a winner declared by media.
    - ihsw 14y ago
      The article states that Samsung lost a lawsuit in the US against Apple, however it fails to mention other high-profile results of Apple v. Samsung legal rulings -- namely where Apple had to publicly apologize in the UK and issue a prominently-featured statement as such on their UK website. Other nations have ruled in favor of Apple, and vice versa, which further adds to the confusion of who is a victor.
- jlgreco 14y ago
  The real problem here starts when the big guys realize they are all untouchable, and start fighting proxy patent wars with each other by brutalizing small defenseless companies.

belorn 14y ago

With European Union patent, wonder if Europe will end up the same problem. A special "court" of appeal and a system immune to the European Court of Justice and sound very similar to the US system.

drucken 14y ago
The EU will end up with almost exactly the same problem - just at a slower pace. The only difference after 1-Jan-2014 will be the lack of "legal arbitrage" across states which makes a mockery of many laws in the US. But legal arbitrage is trivially damaging compared to the new EU Unified Patent court ruled by patent law experts (which creates an incentive to expand their powers), the ability to file software/mathematical patents and the faster Unified Patent application process.

rayiner 14y ago

This article defines "troll" far too broadly, in including any non-practicing entity. The whole point of turning something into a property right is to be able to trade it, and have the new owners enforce the original rights. It's conceptually no different than someone who buys a farm, doesn't plant anything on it, but sues people who trespass through it. The law doesn't require you to do anything with your property rights. There are practical reasons for this. My law school alma mater, Northwestern, developed and patented the drug that became Lyrica. They sold the patent rights for about $700 million. Northwestern was not going into the prescription drug business. That would be utterly ridiculous. Treating patents as a property right allowed them to take the invention and "exit" by selling it to someone else. All research universities use this technique heavily: Stanford, MIT, etc. Now, you may not agree that propertization is the right tool for inventions, but the fact remains that when you're discussing a property right it's irrelevant what someone trying to enforce that property right otherwise does with the property. IMO, "trolling" should be limited to those who assert frivolous or weak patents to get quick settlements, not people who try to enforce legitimate patents. This is completely orthogonal to what sort of bar you think there should be for legitimate patents, or whether there should even be patents, by the way.

btilly 14y ago
This article defines "troll" far too broadly, in including any non-practicing entity. Did you get past the first paragraph? The phrase that I saw used in the actual article itself, rather than the leader, was "patent-assertion entities" which is to say companies whose primary line of business is suing for patent rights. That said, some of them are suing on behalf of entities like your law school alma mater. But the entities doing the suing have no other business.
- rayiner 14y ago
  Generally, "non practicing entity" means companies whose primary line of business is suing for patent rights. What does it matter whether the entities doing the suing have no other business? Say I buy a really popular strip of land near the beach and don't do anything with it. Say that attracts a lot of tourists who picnic on it illegaly. Is it illegitimate for me to sue them for trespass? Say I sell off the right to sue for trespass to a non-practicing entity. Is that illegitimate? Now, you may disagree with the nature and scope of the rights. You might say--people shouldn't be able to buy land by the beach--that belongs to the public (and that is the law in some places). But once you have a valid property right, it's not illegitimate to sue for real infringements of that property right, and it's not illegitimate to split up the "bundle of sticks" that makes up your property right and sell someone nothing more than the right to sue for infringements and keep any damages. That's just how property rights work in general.

bretthardin 14y ago

In other news, water is wet.

michaelochurch 14y ago

Unfair. Some of us have the discipline to keep our trolling and our patent suits separate.

shawn-butler 14y ago

If an "article" that is clearly flamebait has as its subject an academic study or paper and does not include a link or reference to that paper or one can not be provided, then Please do not submit the link. My opinion only.

smsm42 14y ago
Here is the list of publications by Colleen Chien: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=362060 http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=3620... Not sure which paper the article talks about, by dates I assume it could be this one: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2146251 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2146251
- shawn-butler 14y ago
  Thanks. I couldn't tell either. That's why I made the comment.

smsm42 14y ago

This has to be expected, it's like saying "most of the debt collection is done by debt collection companies". Of course, that's the point of having debt collection companies. If there's a profitable activity - like suing for patents - there would be people who specialize on it, in order to make it more efficient. Now, useful distinction would be if the lawsuits brought on behalf of third-party clients or the PAE is the sole beneficiary, but this situation is impossible to distinguish from actual practicing entity just selling the rights to sue to PAE in order to not bother with it anymore, while keeping the benefits of the temporary monopoly.