In Defence of Trolls.

Maura O’Malley at Informa informs us:

I am writing an article on patent trolls and was wondering if anyone had any suggestions on who I could talk to? Are they universally a bad thing?

This is my response, which is only slightly tongue in cheek:

Most definitely not! Essentially trolls facilitate technology transfer and compensation for inventors. What the troll (better TTF – Technology Transfer Facilitator, or to be neutral – NPE Non Practising Entity) does is to buy a patent from a company that does not have the a need for the technology they developed, and looks for potential licensees to license the technology to. The inventing entity gets funds that enable them to do more inventing or whatever else they like, and the potential licensees simply pay for services that they use.

Trolls thus oil the wheels of the economy. There are a number of additional parties that benefit, such as lawyers and court employees. Tech transfer companies of universities are basically trolls as well.

The problem is one of the system. In the US, a patentee can obtain an injunction against an infringing manufacturer where the patented aspect of the device is relatively minor. Additionally, due to discovery and disposition that are not available/required in other jurisdictions to the same extent, the cost of litigation in the US is very high. Finally, the awards issued by juries is too high.

In consequence of all of the above, NPEs can threaten companies and obtain too high royalties and possibly royalties where there is no real infringement.

Manufacturing entities don’t like trolls as they see them as parasites. The same charge can be labeled at bankers, management consultants, university academics, and others. The serfs also objected to paying taxes to the lord of the manor, but probably received some benefits such as arbitration and keeping the peace when the manor born served as a magistrate, and security which has a value.

It could be that manufacturing entities targeted by trolls were remiss in conducting freedom-to-operate searches, but these are notoriously difficult to do. The NPE provides this service for its victims.

The problem is not the trolls but the cost of litigation in the US. Essentially it is the patent litigator that is largely responsible for the huge cost of litigation.

In any wealth distribution economic model the licensing makes sense. The possibility to go to court to force a potential licensee to engage in negotiation is essential, as are injunctions or the infringer may simply ignore requests that a license be obtained.

 If the potential licensee is unwilling to take out a license or a cost cannot be negotiated between the parties without court intervention, then going through the courts makes sense.

The underlying logic of the patent system is that the inventor can obtain a patent that provides a limited monopoly in return for his teaching his invention.

The failure of the system is in the courts. I realize that many of my clients will not agree; particularly those hit with litigation from an NPE. I suggest that they note that their circumstances may by affecting their objectivity.



Categories: infringement, Intellectual Property, NPE, trolls, Uncategorized

2 replies

  1. The recent Intellectual Ventures suits present just one example showing that the NPE (“patent troll”) business model is fast becoming dominant in the world of IP. Thomas Edison held over 1,000 patents, but practiced none of them. He invented, which is what he did best, and let others manufacture products from his inventions. If an inventor cannot sue for patent infringement and recover damages, they why should anyone invent anything? Only vigorous patent enforcement rewards inventors for their inventions and incentivizes others to invent.

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  1. General Global Week in Review 10 January 2011 from IP Think Tank

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