Patent Troll Panel at Yale Law School

Guest post by Lisa Larrimore Ouellette, Postdoctoral Associate in Law and Thomson Reuters Fellow, Yale Law School Information Society Project

Last month I moderated a panel discussion hosted by the Information Society Project at Yale Law School on what are variously (and ambiguously) called patent-assertion entities (PAEs), non-practicing entities (NPEs), or patent trolls (video here). These entities have attracted significant recent attention: they are the target of a GAO report required by the AIA (now nearly eight months overdue), a DOJ/FTC workshop (which may lead to subpoenas), and the proposed SHIELD Act (mandating fee-shifting for some losing NPEs). But several panelists at Yale argued that this focus on trolls is misplaced.

Professor Michael Risch (Villanova), described his finding in Patent Troll Myths that the patents enforced by trolls look “basically like the patents you see in the rest of the world.” NPEs drive up product costs by suing operating companies over what are sometimes weak patents—but so do operating companies, and if this a problem, any solution should target both. He said his views are nicely illustrated by the case of Innovatio targeting thousands of Wi-Fi end users:

My first thought upon hearing about these folks was “the gall of these people, to think that they invented wireless LANs.” [But] it turns out they got all their patents from Broadcom. You know what? Broadcom did invent wireless LANs, along with a bunch of other people … It’s unclear whether [Innovatio is] doing bad things by going after these end users, I don’t know. But the question I have is, would it be so much better if Broadcom were doing this? I don’t think so. … A lot of [NPE] patents come from people who have spent money developing them, real research dollars, which is the exact kind of thing we have patents for. … We have to do something about the behavior, and not the owner.

Christina Mulligan (Yale ISP Fellow, starting as a professor this fall at Georgia Law) countered that extreme trolling behavior—in which the patent is simply hidden “in a submarine-like way” until an operating company independently invents and commercializes—is necessarily harmful because society gains nothing from the patent. This problem could be alleviated with an independent invention defense, or with solutions more directly targeting trolls (including private solutions such as Colleen Chien’s proposed patent litigation insurance for small companies, which Mulligan thinks might “starve the [troll] beast”). Professor Tun-Jen Chiang (George Mason) agreed that trolls often assert normatively unjustified patents, and noted that the same problem can exist when an operating company holds the patent. The problem of legally valid but negative-net-welfare patents is not an NPE problem—it is a systemic problem. NPEs simply make enforcement of such patents more effective, but “if we are going to a bad destination I don’t want to get there faster.” And even though the problem is broader than NPEs, in the absence of real patent reform, a narrower solution that targets NPEs might be “a second-best solution.”

Manny Schecter (IBM Chief Patent Counsel) disagreed, arguing that reforms that target particular business strategies (or particular technologies) are a mistake. But that doesn’t mean that NPEs are not causing an enormous shift in the patent landscape. IBM has been the top annual US patentee for the past 20 years and licenses its IP “to the tune of a billion dollars a year,” but it has only brought litigation to enforce its patents “once or twice a decade.” NPEs are now driving a “dramatic increase” in the amount of patent litigation (most of which does not affect IBM because it is no longer in the consumer electronics space). This isn’t necessarily bad, but it is definitely changing the dynamic—because legal departments are “overwhelmed,” NPEs “can impede the ability of the genuine competitors from enforcing their patents.” Still, an independent invention defense like Mulligan suggests would be a “mistake” because it would create an incentive to not look at patents and to reinvent the wheel. “Some of the academics here will say, ‘Well, studies show people don’t look at patents to figure out what others are doing.’ … Don’t believe it.” [Note from Lisa: I agree!] Instead of focusing on NPEs, “to the extent we can do anything to improve the patent system’s certainty and clarity, we should be doing that … Removing some of those uncertainties from the system will in turn take away a tool that is in fact sometimes leveraged in the very types of litigation we are talking about here.”

Nathan Kelley (PTO Deputy Solicitor) described two such PTO initiatives to improve the patent system’s clarity: First, improving ownership information in PTO databases from the current “antiquated system of recording” so that people know who owns patents throughout their lifecycle and “who is the controlling entity behind accusations of infringement.” Second, working during prosecution to make sure claims have “understandable scope,” which is “particularly problematic when it comes to functional claiming … a problem that arises more frequently—I think it’s fair to say—in the NPE world and the software world.” He specifically mentioned Mark Lemley’s work on how § 112(f) needs to be applied more rigorously, and said they are working on having examiners specify on the record whether they think claims trigger § 112(f) or not. But he agreed that specifically targeting NPEs is a mistake:

We have history in our country of making our patent laws technology neutral, and maybe even business-model neutral as well. And to extent that we want to step away from that, and start to make laws that discriminate either on technology or on the business entity asserting the rights, we’re going to cause some problems, and we’re going to some extent devalue patents that already are there. … If we tip the balance against patentees, inevitably we are going to lower the incentive factor. And whether that’s a good thing or not I guess is something we’ll continue to debate.

The debate about patent trolls thus really seems to be a debate about the patent system. None of the panelists seemed to believe that patent assertion by NPEs is per se a problem—if there is a problem, it is that normatively unjustified patents are disproportionately asserted by trolls (though trolls also assert “good” patents, and “bad” patents do not exclusively belong to trolls). How you feel about trolls will depend on how prevalent you think those “bad” patents are—where “bad” means that the patent has negative net social welfare, even though it might be completely legally valid—a question that is frustratingly hard to resolve empirically. In the meantime, the best we might be able to do is improve patent clarity and certainty, a goal that is hard to argue against (though some have tried). Unfortunately, given current divisions on the Federal Circuit, improving clarity is sometimes easier said than done.

58 thoughts on “Patent Troll Panel at Yale Law School

  1. “trolls, none of which are sufficiently capitalized to pay defendants’ legal fees”

    So when you change the law to loser-pays, include provisions requiring an escrowed bond or insurance or some such.

  2. “Loser pays” would have absolutely no effect on trolls, none of which are sufficiently capitalized to pay defendants’ legal fees (or usually even their own).

  3. Because sueing people makes money? Seems like a great target for reform.

    So … should we reform all lawsuits because the vast majority are for money? Your brain works in funny ways.

  4. Speaking of admissions, did you ever admit that you made up that nonsense about “your counsel” using mail room staff to screen registered letters addressed to him

    Asperger’s popping up again?

  5. If you can identify a “real problem” with a “loser pays” system other than the self-serving “loser pays makes my patent less valuable,” do let everybody know.

    If a loser pays system was so great, why hasn’t it been adopted for the US judicial system lock, stock, and barrel?

  6. Is there any evidence for this? A loser pays system disincentivizes going to trial with a weak patent

    This is because you don’t understand that there are a LOT of strong patents out there. These are patents none of us ever hear about because no one fights them. That being said, as an owner of one of these patents, you still have to face litigation costs if you want to maximize the value of your patents. Therefore, there is an incentive to settle. However, if you are going to be made whole if you win by litigation, then you have no real reason to settle.

    As you stated, litigation is nothing more than the failure to reach an agreement. That happens when one or more parties over-value their position. When that happens, you cannot get a settlement that both sides can work with. This also means is that patents that get litigated are more likely to be weaker patents because the defendant believes they are less valuable than what the patent holder believes the patent to be worth.

    In short, under the current system, whatever patents that do get taken to litigation (on the whole) will be weaker patents. Not always, but on the whole. In a loser pays system, the holders of strong patents have no reason not to take a defendant all the way to trial. Therefore, a lower pays system disincentivizes settlement – particularly as to strong patents.

  7. Just because they call it “reform” doesn’t mean it is.

    These are mere dissemblings by huge multinational thieves and their paid puppets -some in Congress, the White House and elsewhere in the federal government. They have already damaged the US patent system so that property rights are teetering on lawlessness. Simply put, their intent is to legalize theft -to twist and weaken the patent system so it can only be used by them and no one else. Then they can steal at will and destroy their small competitors AND WITH THEM THE JOBS THEY WOULD HAVE CREATED. Meanwhile, the huge multinationals ship more and more US jobs overseas.

    Do you know how to make a Stradivarius violin? Neither does anyone else. Why? There was no protection for creations in his day so he like everyone else protected their creations by keeping them secret. Civilization has lost countless creations and discoveries over the ages for the same reason. Think we should get rid of patents? Think again…or just think.

    Most important for many is what the patent system does for the US economy. Our founders: Jefferson, Franklin, Madison and others felt so strongly about the rights of inventors that they included inventors rights to their creations and discoveries in the Constitution. They understood the trade off. Inventors are given a limited monopoly and in turn society gets the benefits of their inventions (telephone, computer, airplane, automobile, lighting, etc) into perpetuity and the jobs the commercialization of those inventions bring. For 200 years the patent system has not only fueled the US economy, but the world’s. If we weaken the patent system we force inventors underground like Stradivarius and in turn weaken our economy and job creation. Worse yet, we destroy the American dream -the ability to prosper from our ingenuity for the benefit of our children and communities. Who knows who the next Alexander Graham Bell will be. It could be your son or daughter. It could be you. To kill or weaken the patent system is to kill their futures.

    For the truth, please see link to truereform.piausa.org
    link to facebook.com
    link to piausa.wordpress.com
    link to hoover.org
    link to cpip.gmu.edu

  8. We already have a loser pay system on the books. Rule 68. I think we should expect more from the patent bar, as you are all caught up on the shield act – and you already have a system right in front of your nose.

  9. I haven’t read Lemley’s “paper” on functional claiming yet, but I am sure if I do I will find a gross misrepresentation.

    The sad thing is that you other academics are worried about covering yourself and not enforcing ethic rules.

  10. I guess the suggestion that that would somehow improve the process is funny. I guess I just needed some assurance that it was laughable in and of itself.

  11. Already did, according to the article you linked.
    Sad circumstances, but it seems like she made the best choice for her.

  12. who are these so-called NPEs?

    Universities are probably the biggest

    People at universities invent stuff, much of which is actually reduced to practice. I’m sure there are exceptions in the usual “technology” areas where such exceptions are rampant. In any event, Universities are generally very different types of organizations from the typical patent accumulate/assert type troll (although the trolls love to pretend otherwise).

    No one wants to refuse a license and take on Big Blue.

    I’ll take on Big Blue anytime they want to assert one of their p.o.s. “method of figuring out who gets to go the bathroom on a plane” patents against me or anybody else.

    The NPEs that supposedly cause trouble, the so-called “trolls”, are those too small to be feared.

    “Nothing to see here! Move right along!”

  13. Makes you wonder why none of these things were captured in the emphasis that masqueraded as the AIA…

  14. “I used to think that people who said this wore tinfoil hats…”

    Me too. But then he started responding to my posts by addressing me by the first name in my e-mail address and I can only conclude that he has access to that info.

    Like I said in a previous thread, I don’t think MM IS Dennis, as some have speculated, but it’s clear to me that MM is a plant, a shill, a whatever you want to call him.

  15. I used to think that people who said this wore tinfoil hats, but the more time I waste trying to find some actual substantive comments the more I believe you are correct.

    The frequency of his posts are what does it for me. I’d imagine his posts account for 20% of the comments on any particular thread, and really don’t do much other than attack others.

    If that’s not the case, then I think he needs to rethink what he’s trying to accomplish, unless he enjoys annoying everyone and not contributing much substance.

  16. Would it kill you to watch the whole thing before calling me a parasite? At least then you would have full information.

    Also, I wish I were a parasite…at least then I would make some money.

  17. Isn’t that a joke in and of itself already?

    A defendant proving that they DIDN’T see something? 1. Yeah, right. 2. Proving a negative?

  18. “MM will never give up. He outlasted the queen of troll killers. In fact, there is talk that MM is actually a bot with a patent pending. I think MM is guilty of just about everything you accuse him of anon, but he doesn’t give up.”

    MM has some connection to this site. How else would he know the first name in my e-mail address?

    The fact that MM is clearly a shill for Dennis’s site has apparently not affected this site’s popularity, or Dennis’s credibility.

    That’s unfortunate.

  19. The key is to have better examination of software/business method claims including a better library of prior art, a better classification system of the prior art and better trained examiners in these technologies. This will make it less likely that marginal patents will be issued.

  20. And who are these so-called NPEs?

    Universities are probably the biggest in terms of number of patents in play, but with small budgets the effort focusses more on licensing rather than litigation.

    And what about IBM itself? Sure they make stuff, but how many of the 6000+ patents granted to IBM each year do they actually practice? They may not actually sue very many companies, but they don’t have to. No one wants to refuse a license and take on Big Blue. I’d bet licensing is very lucrative for IBM and the other large patentowners.

    The NPEs that supposedly cause trouble, the so-called “trolls”, are those too small to be feared.

  21. other than the self-serving ‘loser pays makes my patent less valuable,’

    Actually – quite the opposite. A loser pays makes patents MORE valuable.

    Of course, I don’t expect you to realize that you have sh0t yourself in the foot yet again…

  22. NWPA,

    Malcolm serves a purpose, but just not the one he thinks.

    Every post of his that buries his own agenda in the filth and muck he loves is a lovely example of how correct the exact opposite views are.

    If he were to actually give up, his ‘side’ would gain a tremendous advantage.

  23. Im surprised that you didn’t make a bad joke about the suggested “independent invention defense.”

  24. I know I am not one to talk, but man you guys have to stop filling these threads up with bickering.

    MM will never give up. He outlasted the queen of troll killers. In fact, there is talk that MM is actually a bot with a patent pending. I think MM is guilty of just about everything you accuse him of anon, but he doesn’t give up.

    I’ve seen this MM go on and on for years. In fact, if you look at the record, I am the one that started calling him MM.

  25. Risch NPEs drive up product costs by suing operating companies over what are sometimes weak patents—but so do operating companies

    Sure, but in the typical case the “operating company” is making or developing a product covered by its patent and is engaged in the ordinary course of competing with another manufacturer.

    Who are NPEs competing with? Other than driving up product costs, how does the public benefit from encouraging non-productive paper pushers to amass patents and leverage the masses of patents to sue any member of the public who is perceived to have deep enough pockets to cough up some settlement money?

    It’s unclear whether [Innovatio is] doing bad things by going after these end users, I don’t know. But the question I have is, would it be so much better if Broadcom were doing this? I don’t think so. …

    I can’t tell from the ellipses what was left out. Is he admitting that it would be better if Broadcom were “doing this”, just not “so much better” that we should worry about it? Is Risch unable to identify a meaningful distinction between a shadowy group of lawyers harassing people and a publicly traded company harassing people? If so, it’s more clear than ever that Risch is little more than a parasite on the belly of the NPE sharks. I guess somebody has to defend them although it’d be more interesting to find a really slimy NPE and just let it speak for itself.

  26. Risch NPEs drive up product costs by suing operating companies over what are sometimes weak patents—but so do operating companies

    Sure, but in the typical case the “operating company” is making or developing a product covered by its patent and is engaged in the ordinary course of competing with another manufacturer.

    Who are NPEs competing with? Other than driving up product costs, how does the public benefit from encouraging non-productive paper pushers to amass patents and leverage the masses of patents to sue any member of the public who is perceived to have deep enough pockets to cough up some settlement money?

    It’s unclear whether [Innovatio is] doing bad things by going after these end users, I don’t know. But the question I have is, would it be so much better if Broadcom were doing this? I don’t think so. …

    I can’t tell from the ellipses what was left out. Is Risch unable to identify a meaningful distinction between a shadowy group of lawyers harassing people and a publicly traded company harassing people? If so, it’s more clear than ever that Risch is little more than a parasite on the belly of the NPE sharks. I guess somebody has to defend them although it’d be more interesting to find a really slimy NPE and just let it speak for itself.

  27. Risch NPEs drive up product costs by suing operating companies over what are sometimes weak patents—but so do operating companies

    Sure, but in the typical case the “operating company” is making or developing a product covered by its patent and is engaged in the ordinary course of competing with another manufacturer.

    Who are NPEs competing with? Other than driving up product costs, how does the public benefit from encouraging non-productive paper pushers to amass patents and leverage the masses of patents to sue any member of the public who is perceived to have deep enough pockets to cough up some settlement money?

    It’s unclear whether [Innovatio is] doing bad things by going after these end users, I don’t know. But the question I have is, would it be so much better if Broadcom were doing this? I don’t think so. …

    I can’t tell from the ellipses what was left out. Is Risch unable to identify a meaningful distinction between a shadowy group of lawyers harassing people and a publicly traded company harassing people? If so, it’s more clear than ever that Risch is little more than a parasite on the belly of the NPE sharks. I guess somebody has to defend them although it’d be more interesting to find a really sc–my NPE and just let it speak for itself.

  28. Risch NPEs drive up product costs by suing operating companies over what are sometimes weak patents—but so do operating companies

    Sure, but in the typical case the “operating company” is making or developing a product covered by its patent and is engaged in the ordinary course of competing with another manufacturer.

    Who are NPEs competing with? Other than driving up product costs, how does the public benefit from encouraging non-productive paper pushers to amass patents and leverage the masses of patents to sue any member of the public who is perceived to have deep enough pockets to cough up some settlement money?

    It’s unclear whether [Innovatio is] doing bad things by going after these end users, I don’t know. But the question I have is, would it be so much better if Broadcom were doing this? I don’t think so. …

    I can’t tell from the ellipses what was left out. Is Risch unable to identify a meaningful distinction between a shadowy group of lawyers harassing people and a publicly traded company harassing people? If so, it’s more clear than ever that Risch is little more than a parasite on the belly of the NPE sharks. I guess somebody has to defend them although it’d be more interesting to find a really sc-mmy NPE and just let it speak for itself.

  29. did you ever admit that you made up that nonsense about

    You want him to admit he made stuff up? You obviously don’t understand the trolling law in this area.

  30. Trollboy: we have archived your own admissions as to controlling law.

    Right. And they “destroy my agenda”. Or something.

    Speaking of admissions, did you ever admit that you made up that nonsense about “your counsel” using mail room staff to screen registered letters addressed to him, whereby the staff throws them away if the staff deems them to contain “prior art”? Did you ever ask Gene Quinn about that strategy? I notice lately that you pretend that you’ve “answered” the question and identified an actual law firm that uses the practice. Did anyone else see that or is Trollboy just being Trollboy?

  31. A loser pays system disincentivizes settlement.

    Is there any evidence for this? A loser pays system disincentivizes going to trial with a weak patent. Defendants may be less likely to settle for larger amounts of money but they are not going to be more interested in spending time in court that could be spent elsewhere (an NPE, of course, has nothing better to do with its time — how wonderful!).

    Litigation is nothing more than the failure to reach an agreement. On average, the additional wrinkle that “losers pay” is not going to make it more difficult to reach an agreement. It’s just another piece of data to work with.

    what happens when some claims are infringed (or not) and some claims are deemed invalid (or not)? How do you divvy up the fees if both sides “win” at least in part?

    Courts deal with such calculations all the time in other complex cases.

    If you can identify a “real problem” with a “loser pays” system other than the self-serving “loser pays makes my patent less valuable,” do let everybody know.

  32. P.S. Why not give a small entity or micro-entity fee break in the high PTO fees for inter partes or covered business method post grant reviews, and ex parte reexaminations, to small companies sued on such patents?

  33. A loser pays system disincentivizes settlement.

    Also, what happens when some claims are infringed (or not) and some claims are deemed invalid (or not)? How do you divvy up the fees if both sides “win” at least in part?

  34. Didn’t any of these academics discuss the troll defenses already available after the AIA, namely timely Board APJ inter partes or covered business method post grant reviews, or ex parte reexamination, for claims that ARE clearly invalid?
    I doubt if small business patent litigation insurance will be practical for any kind of full patent litigation defense, but it could be for the above proceedings, where the cost exposure is relatively much smaller and reasonably calcuated in advance.
    As to certain particular trolls that only attack large numbers of very small companies offering “settlements” too small to financially justify contesting the patent, way below litigation costs, D.C. judges themselves should be addressing that, and I understand that some have. Also, the large company suppliers of the allegedly patented software they were sold should get more involved.

  35. Nathan Kelley: We have history in our country of making our patent laws technology neutral,

    This is false, of course. The law is historically applied differently to different technologies and completely different sets of rules have arisen at the PTO around different technologies. Not surprising that someone from the PTO would fail to recognize this fact.

    maybe even business-model neutral as well.

    Wrong again. There are lots of patent laws/rules that favor certain businesses over others, particularly when it comes to fees.

    If we tip the balance against patentees, inevitably we are going to lower the incentive factor. And whether that’s a good thing or not I guess is something we’ll continue to debate.

    Because if we take a favorite toy of the top one percent and make it a bit harder harder to obtain use use, they’ll stop “creating jobs” for all the lazy non-innovative moochers.

    whether that’s a good thing or not I guess is something we’ll continue to debate.

    But in the meantime, let’s just keep the grant spigot turned up to 11. Those invalid claims that were granted in the 90s are a thing of the past, after all.

  36. Trollboy: You keep on missing the big picture.

    Right. If you want to see the “big picture”, Ned, you can only talk about “controlling law” and only Humpty knows what that is.

  37. these overly broad and ambigiously claimed patents from the 90’s are invalidated or expiring this “problem” will run its course.

    Wrong planet.

    Where do the softie woftie patentistas get their talking points?

  38. Manny Schecter (IBM Chief Patent Counsel) disagreed, arguing that reforms that target particular business strategies

    Reforms that target particular business strategies like … the business of sueing people for the sake of sueing them? Because sueing people makes money? Seems like a great target for reform.

    There’s nothing unusual about laws that target undesirable “business strategies”. There are many such laws. There have always been such laws. There will always need to be such laws because there will always be people (lawyers inevitably among them) looking for an easy way to make a buck by shoveling paper in other people’s faces.

  39. And as these overly broad and ambigiously claimed patents from the 90’s are invalidated or expiring, this “problem” will run its course.

    There’s no need to permanently muck the law to solve a temporary problem.

  40. Once again Ned you choose to follow an agenda that ignores the 1952 act and the Congress decision to reign in the rampant anti-patent activism that characterized the Supreme Court. You keep on missing the big picture.

  41. If one is going to talk about real solutions that are really going to help, we need to talk about functional claims, claims that claim the novel features functionally. The most important problem with such functional claims is their apparent scope coupled with the vagueness of what they cover. Such claims are inherently indefinite.

    Halliburton recognized the problem in held that combination claims functional at the point of novelty were invalid. The Supreme Court had earlier held that article claims (Wabash Appliance) and composition claims (Perkins Glue) claimed functionally were also invalid. Halliburton merely extended those previous holdings to combination claims.

    In hindsight, it was a tremendous mistake to ennact section 112, paragraph 6 now 112 (f). We should consider its repeal, with Congress specifically stating that claims functional at the point of novelty are invalid.

    Of course, such a statute should not apply retroactively.

  42. I would say that the solution is “loser pays”, but that would render problematic a potential defense strategy in those end-user Innovatio lawsuits: stipulating to infringement and then paying the minimal damages that Innovatio should actually be awarded, far less than the settlements they’re asking and far less than the time they put into the case – a strategy that could probably even be handled pro se with a little bit of guidance.

Comments are closed.