Patent Trolling
Non-practicing entities (NPEs) are the more formal names for patent trolls, companies who's incomes rely solely on licensing and litigation from patents; these companies "often [have] no hand in creating" the patents they own. Appearances of patent trolls seems to be becoming ever more ubiquitous in today's tech news. Not surprisingly, this is due to the sudden increase of patent trolling companies. In fact, according to a recent study by Robin Feldman, a law professor and patent-law expert, the number of patent troll companies has doubled in the last five years and as a result, the percentages of patent suits making to the courts has increased from "22% in 2007 to 40% in 2011." This jump is phenomenal and demonstrates the power these newly formed companies have on the industry and market. Although the general public views patent trolling negatively, Nathan Myhrvold of Intellectual Ventures, a very well know "patent trolling" company, defends the system by saying that the market is "immature" and that "enforcing patents is no more wrong than investing in preferred stock." Nathan continues to defend this practice of business by suggesting that this is simply a capitalistic system in which "people compete" and are driven by the "set of incentives that go around patents." Even though Nathan makes some reasonably valid points, I think that the patent trolling is an inherently unethical and counter-progressive business practice. Even Apple's CEO, Tim Cook, says that patents are "a pain in the ass and it's overhead," agree that the system is broken.
Consumers, innovators, and even the government are angered by the deliberate misuse of the patent system by patent trolls. These companies play an unfair game that benefit no one but themselves: they increase prices of consumer products through licensing and settlements, they hinder innovation, and threaten the integrity of our patent system. Last year, the America Invents Act was passed that opened over 500 patent suits to investigation and added new rules, among them included making it more difficult for "patent monitizers to file complaints against several defendants at once." Many attempts have been made slow the patent trolling business, and one recent attempt aims to improve the patent system as a whole. This new attempt uses crowdsourcing and will the topic of next week's blog post.
What are you opinions on patent trolls? Do you think they are justified? Do you agree with Nathan Myhrovld's views?
Sources
I'm glad you picked up on this after we chatted.
ReplyDeleteThe patent system in the U.S. is completely screwed up. Steve Capps, a good friend, could give me some good insight on this. Especially in the software industry, it's ridiculous how broad patents are. Just take a minute to read the abstract for this one: http://www.google.com/patents/US5666502. Isn't it crazy how that *idea* is now part of almost every browser, email client, search bar, etc. out there?
IV says, "Oh, I have an idea for a patent, let's climb Mount Everest." That's not innovation. Only real engineers actually reach the top. Developing a product from the idea to the store shelf is not only a great experience, but the ideas you along the way are often much better than the original concept.
This is the WSJ article that came out after IV started suing in court. It's scary and DEATHLY for our industry.
http://online.wsj.com/article/SB10001424052748703493504576007444122372926.html
-Catalin
I agree with the gist of what you are saying, namely that the phenomenon termed "patent trolling" is really an abuse of the patent system. Patents exist to incentivize innovation, protect innovators and inventors, and reward human ingenuity. Firms that do not actually produce patents, exploit the legal framework, harass, harangue, and frivolously sue others act unethically and stifle progress. Perhaps these firms very well demonstrate how the law often struggles to keep up with quickly changing realities of society - especially in the realm of technology. The existence of these firms perhaps also speaks to the litigiousness of contemporary American society.
ReplyDeleteI would just add - as an admitted side-note - that, Mr. Cook's statement notwithstanding, Apple may not be the outstanding example of a company that refrains from frivolously suing competitors and exploiting the law to further its own goals. But other than that, I agree completely Brian that patent trolls speak to the fact that there is something fundamentally flawed about current patent practices.