If Patent Trolls Don’t Exist, Why Do We Need A Playbook To Defend Against Them?

I know, I know.  The Goodwin Proctor tome explicitly states that it’s a Tactical Guide to NPE litigation, be we all know they mean patent trolls.  Otherwise, they’d have just called it “Patent Litigation:  A Tactical Guide for Practitioners”.

Alas, they did not.  I know because I signed up for my copy of said book which arrived by Federal Express and nearly scared me to death because the dude rang my doorbell at 5:00 on an afternoon that I couldn’t remember having ordered anything.  First thing I noticed?  Y’all, this thing is huge.  Like, really big.  It’s about four inches thick and GBC-bound and could double as a kettle ball if I were at all interested in doing anything exercise-related right now.  I dove right into it because nothing says “Happy Hour!” like a Cuba Libre and a book on how to defend against the dark arts of patent trolls.  Am I right?  Of course, yes.

The fun begins on page one, as fun is wont to do, with the Alliteration Award for this sentence:

NPE Litigation is a controversial subject shrouded by shrill, simplistic sound-bites.

Ah, I love me some word-smithing.

The Guide, as it shall heretofore and thereafter be referred to as, starts with a definition of NPE that takes up about four pages.   Man, that’s a lot of words.   They talk on page two about R&D firms, which would include, in my opinion and as a result of technology transfer programs, Universities.  My notes in the margin read something to the effect of “it’s really who companies go after and how that helps define a patent troll, and it matters because the point of being an NPE is that you avoid the risk of counter-suits since you’re not actually manufacturing anything.”  I’m not sure they made that point anywhere and it’s a salient one.  There’s a reason some entities that hold patents are non-practicing, and the lack of counter-suit risk is it.  That’s a big thing and how come y’all didn’t harp on it like I’m doing?

Anyway, by the time we get to the section on Licensing/Litigation Techniques The Guide has started using the watered-down “patent troll” term known as the PAE, or Patent Assertion Entity because calling companies what they do is somehow…bad?  I dunno, but people who aren’t me don’t like to do it so they call them PAE’s.  I suppose if you’re going to do that, I’d like to see the middle word changed to Aggressive, rather than Assertion because trolls are aggressive.  They don’t pop out from under the bridge and say “I’d like some money, please, for my nefariously bogus patent over here if you don’t mind, please.”

No, they instead start out with a threatening letter (which you should totally track here if you get one!) and when that doesn’t work they get aggressive and sue you.  See?  PAE should equal Patent Aggressive Entity.  You’re welcome.

The Guide talks about how, when PAE suits are tried on the merits, our little aggressive friends have a pretty low win rate.  In my head when I read that I’m all “Merits?  What are those to a troll?”  They don’t care about the merits, because they don’t really ever intend to get to court.  They try their demand latter tactics first and when those don’t work they sue, all the while knowing that the likelihood of actually going to trial is slim because lawyers are risk-averse and would rather just pay up.  Merits?  Phpppppppft.

Uncle Eddie Phhhht

“And YOU…you’re going to jail!”
“Phpppppppft!”

One point The Guide made that I hadn’t really written about or explored in depth is the timing of troll/PAE lawsuits.  Typically, they wait until the technology (supposedly) covered by their (loosely constructed) patent is in full use and they can go after a lot of people, or a few big-named people for big money.  The Guide contrasts this with producing/practicing firms who tent to sue early in the patent term.  Great point!

On page four we get into something that really sticks in my craw, shell companies.  Dude, if you have to bury your acts deep in paperwork and incorporate in weird places and plan at any time in your future to use the phrase “I have no knowledge of that subsidiary’s actions” then listen up:  You’re doing something wrong.  If you’re not, why hide?  Don’t give me that malarkey about “tax advantages”.  Not buying it.  It’s to hide what you’re doing.  That’s why companies like Ericsson sell off patents to trolls.  When litigation hits the fan, the general populous isn’t likely to dig up the information on who really owns a patent. Ericsson maintains its reputation while still monetizing its patents.  It’s all kinds of slim shady and I don’t like it.

RealSlimShady

The Guide makes a really good point about shell companies which is this:  Because a shell company doesn’t bear the more recognizable name of its parent, by design, it may be assumed when you receive a demand letter (that you immediately go and enter into That Patent Tool) from one of these nobodies that there’s no teeth to it.  Well, there isn’t in a sense because a demand latter does not require any action at all.  DEMAND LETTERS ARE NOT EQUIVALENT TO LAWSUITS.  Nevertheless,

 If you receive a complaint from a company you have never heard of, or for which there is little public information, do not assume it does not have the resources required for patent litigation.

By ‘complaint’ they may mean an actual lawsuit, in which case yep.  That’s exactly right and a fantastic point.

As previously mentioned, The  Guide is a four-incher and therefore may engender more than one post…I haven’t even read the whole thing yet though in fairness to me, the last five sections are texts of the bills brought before Congress and/or Congressional record transcriptions so, you know, yawn.  But I bring it up now for three reasons:

  1. Goodwin Proctor seems to be going the way of Jones Day, who advertised that they can handle IV in patent litigation. The Guide is a marketing tool for Goodwin Proctor, and I think they’re smart to distribute it.
  2. There’s a great chart on page 16 about legislative initiatives. Concisely done.
  3. I’m not 100% sure I’m on board with their final definition of NPE by tying it to percentage of revenue earned. I don’t care how much revenue you earn from asserting your patents.  I care how and when and upon whom you assert because that’s what matters when defining trollish behavior.

When well respected and large firms start putting together playbooks like they’re NFL teams and advertise that they can beat IV at their own patent game, its further proof that patent trolling is a problem.  Frankly, I like that law firms are coming out with this kind of thing because as private entities, I think this is exactly where the problem needs to be solved.

And yes, I do see the irony that lawyers are saying they can solve a problem that they themselves started.  Not lost on me, folks.

JustSayin_small_New

IPTT

{Uncle Eddie phhtt found hereEminem pic found here.}

Wherein I Attempt To Define “Patent Troll” To Paul’s Satisfaction

There’s a gentleman who I “internet know” and we’ll call him Paul Morinville, mostly on account of that’s his name.  Paul is an inventor and holds at least one patent.  I do not have permission to share the exchanges we’ve had by email, and therefore I don’t feel comfortable getting into his whole story here.  I’ll leave that to you in the comments, Paul!

I can tell you that his concerns about patent trolls, which I’m fairly certain he believes do not even exist which is why there’s no formal definition that he will accept, stem from having his inventions used by big players in the market without regard to his actually having invented them.  From his perspective, Big Companies steal from inventors on a regular basis and therefore inventors need a way to go after them without being called patent trolls.  Even though no such thing exists.  According to him.

cover-your-ears-rapgenius

I get that, wrote about it, and didn’t bother printing t-shirts because is that even a thing anymore?  No one is arguing logically that small inventors need a way in the door to larger companies, or at least no one should be.  The Backgrounder has been a link on this blog since it began over three years ago, this is not news.  But you cannot say that because there is are legitimate businesses out there set up to help the little guy that some of those business aren’t started to help, oh, I dunno, themselves.  That’s what patent trolls are, and that’s part of what I would call an “official definition”.

Let’s not confuse “official definition” with “litmus test”.  I’ve talked with Lenny Kravets via twitter and we both agree that a single test does not exist to determine who is and is not a troll.  It would be super convenient if there were, but alas life is not that simple.  But I think that we can get pretty close to a definition of a patent troll that is acceptable to everyone, even Paul.

I’m going to give it a shot here, because that’s how I roll:

Patent Troll, n -

1/  A company or individual who, using patents that either never should have been issued or are broadly constructed (intentionally for the purpose of misuse, or as a result of poor USPTO patent examination practices), sends letters to various and sundry companies and/or individuals that simultaneously request license fees and threaten legal action if the recipient fails to respond correctly by paying up and who will, in the face of inaction by a demand letter recipient, actually file suit in Federal District Court, the District of East Texas being the most popular venue.

2/ A company set up to act as a cover for large corporations who try to breathe new life into older patents which they would ordinarily let expire but, as a result of greed and/or pressure from Wall Street, have decided are ripe for assertion or litigation.

3/ Intellectual Ventures

What do we think?

I believe the reason that inventors are all up in arms about patent reform is that they think it will hurt their ability to go after larger corporations that steal their stuff.  Pulling out my broken record here, I’ll say that I once again agree that any reform out of Congress is going to have it’s butt handed to it by the Law of Unintended Consequences faster than a Thanksgiving turkey disappears.  Capital Hill is not the place to solve this problem, the market is.

There’s a recent thread over on TechDirt about how the trial lawyers are the ones who got to Harry Reid and killed patent reform in the Senate last session.  If you don’t read the comments on sites like TechDirt and Huffington Post and Ars Technica, then you’re literally only getting 1/3 of the story.  That’s where I found these gems:

Ideas can be stolen?! What next, someone will steal my feelings?! I’ll never feel again! – by Bengie

and

1) Coming up with your own idea independently is not stealing. (Even if you were not the first to ever think of it.)

2) Ideas are a dime-a-dozen, as any VC will be happy to explain, and de minimis non curat lex. (The law does not concern itself with trifles.)

Implementation and execution are what have value. - by OldMugwump

Right and right.

Though I think my attempt above is rather valiant, probably the best definition of a patent troll is similar, as I’ve previously pointed out, to the definition of obscenity:

 I’ll know it when I see it.

Maybe by using the definition above or parts of it, we can come to some agreement? Because as much as Paul would like to assert that they don’t exist, covering your ears and closing your eyes doesn’t make it all go away, my friend.  Trolls are out there, most assuredly.

Even so, having said all that, the point I made in my previous post on a definition of patent troll is still my favorite:

The way you determine whether a company is a patent troll is not by a single definition, it’s by a pattern of behavior over time, by looking at the results of that behavior and ascertaining “Is this behavior that is good for American businesses or is this behavior that gets in the way of progress?”  In a lawsuit it’s the stage where you “prove up” your case.

So how do we do that with trolls?  I’ll tell you how: we enter demand letter data and over time, the question of what is a troll, never mind who is a troll, will all but answer itself.  We build a community around how these guys behave…what they ask for in settlements, what they demand in their initial leaflet drop from their G-5′s, how they handle their claims construction when things get to litigation, the list goes on.  By looking at behavior over time we will be able to tell which companies are the real villains, and which are just victims of circumstance.

JustSayin_small_New

IPTT

{Cool red-headed ear plug image found here.}

I Have It On Good Authority… #Anonymous

Remember when the FTC decided it was going to get all “gimme gimme gimme” with the information about the patent troll business model and possibly start subpoena-ing said information?  No?  Here’s a refresher.

Well low and behold, I get a tip from an anonymous source that a certain company received a request from an NPE to permit disclosure of a license agreement to the FTC.  We don’t know yet if it was the result of a subpoena but does that even matter because “Hello, shot across the bow.”

ShotAcrossTheBow

Turns out?  This original company was not the only one, either.  There are subsequent reports of a couple of other companies receiving something similar.

So is the FTC holding to its guns, so to speak, and going after the guys in the black hats?  Do we want them to?  I struggle with that because on the one hand, it’s a pain point for trolls to have to comply with their heavily detailed ask.  I have no shame in admitting that I like to see companies who inflict pain for no other reason than monetary gain suffer like a bald man in the hot sun with no hat.

But on the other hand, government involvement in business practices that are, right now, not illegal is kinda Big Brother-ish.

Either way, there are two important takeaways:

  1. Patents trolls are in the cross-hairs of more than one governmental agency and this, generally speaking, spells doom
  2. This news feels like the day I found out who the original troll tracker was or the day I found out about the results of the Nortel auction.  In a word? Significant.

JustSayin_small_New

 

IPTT

{Cool war shot image from here.}

Two Things About The NetApp Victory Over Acacia Media

Two things struck me immediately when I read Joe’s article over at Ars about the recent victory of NetApp over Acacia:

A.  Acacia Media is the country’s largest patent troll?  What?  When did they usurp the throne from my favorite CEO-turned-world-infamous-chef Nathan Mhyrvold, et al at Intellectual Ventures?

and it’s sometimes considered the largest “patent troll,” since its various subsidiaries have filed more patent lawsuits than any other single company.

How can they have more subsidiaries than IV?  Or rather, how can their fewer-than-IV-subsidiaries have filed more lawsuits than IV’s?  It’s possible and highly likely because Joe’s a very thorough guy and wouldn’t say that if it weren’t true.  It’s just surprising that I didn’t know that because I pride myself on knowing all the things about all the trolls.

Joe 1, Pride 0.

2.  Judge Gregory Sleet should get an award for nailing down the troll problem with a single paragraph.  I, of course, did it in 17 words but who’s counting?  Anyway, what he said regarding this case needs to be spliced up, put on a series of sandwich boards, and paraded in front of every Federal District Court every single day until it has been memorized by all of the judges and regurgitated verbatim every time a troll files a lawsuit:

The facts of this case demonstrate that Summit pursued an action against NetApp without any basis for infringement, delayed disclosing the existence of the Licensing Agreement for eighteen months, extracted settlements from co-defendants worth a fraction of what it would actually cost them to defend the lawsuit, and then voluntarily dismissed its claims with prejudice prior to the court issuing a ruling on the merits… The claims were frivolous—Microsoft’s initiator software [was] licensed, so no system employing it could infringe the asserted patents. Summit’s motivation was to extract quick settlements that were dwarfed by the costs to litigate. Summit was objectively unreasonable in bringing a lawsuit against NetApp mere months after executing the Licensing Agreement that effectively eliminated its theory of infringement. Finally, the court is convinced that an award of attorneys’ fees in this case is necessary to deter this sort of reckless and wasteful litigation in the future.

We have a winner, folks.

_38891263_bingo_b203

B-I-N-G-O!

 

Also, this quote here from Acacia subsidiary Summit’s “expert” is pretty telling:

Summit’s expert said that Microsoft users infringe the patents, but he couldn’t determine whether Linux or UNIX systems infringed because he “didn’t have time.”

Let’s run that through the Patent  Troll Translator™, shall we?

“Seriously?  You expect me to dig through and find out if these people have actually infringed?  Please.  Just pay up, dude, and it all goes away.”

One last thing that’s curious…the article states that RPX took licenses to the two patents in the suit (7,392,291 and 7,428,581) and that NetApp therefore (as an assumed subscriber of RPX’s) already had a license.  RPX purchased PriorSmart which sends out a daily recap of recently filed patent litigation.

I can’t find Summit or Acacia Media listed in any of their emails as having sued NetApp.

JustSayin_small_New

IPTT

{Shot of British bingo winner found here.}

Interview With An Inventor, Part IV

When last we left our inventor hero, he had answered all but two of my original 10 questions.  Question nine is really the heart of the matter to me in some ways.  As we all know, there’s not a definitive way to decide if a company is a patent troll, just like there’s no one right way to decide if an inventor is just out to stick it to the big guy or wants his just desserts for a lot of hard work.  This question helps with that.

And finally, I wanted to address all this governmental ballyhoo associated with patent troll legislation.  Not.a.fan.  But let’s see what our inventor says, shall we?

Here are the final two questions:

9.  How much time and effort do you put in to determining if infringement actually has taken place prior to filing suit/sending a demand letter? What resources do you use, meaning do you try and reverse-engineer products or technologies to see if competitors are infringing?  What’s your due diligence process, in other words?

10.  What are your feelings about the recent failure of the Senate to pass a patent reform bill? What would you like to see in a bill?

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9.  How much time and effort do you put in to determining if infringement actually has taken place prior to filing suit/sending a demand letter? What resources do you use, meaning do you try and reverse-engineer products or technologies to see if competitors are infringing?  What’s your due diligence process, in other words?

The standard for sending someone a letter vs starting a lawsuit against them is quite different.  In both instances however I make it a mission to make sure that I am extremely confident that the target is using the patent in question.  I think it kills your credibility when you make accusations that are not substantiated, or your proof looks very thin or unreliable. 

Furthermore I can tell you from extensive interactions that no reputable litigation attorney on the planet is going to help you with a case on contingency unless they are 100% sold in their own mind on the merits.  Patent cases are just too expensive to make mistakes so counsel (that I deal with anyway) tend to be very discriminating.  Again I’m sure there are people out there gaming the system but I think they are outliers and can be dealt with conventional bad faith rules/tools.

The cost of ascertaining may be simple in some cases where my patent covers something that I can readily buy and assess without too much effort. In some instances I cannot get access to a real product because it is only distributed through specific channels, or infringement is impossible to determine without “insider” information because the product is relatively opaque. So we have to rely on indirect information such as user guides, instruction manuals, and similar technical literature from the company.  Generally speaking though we try to directly analyze, test the item in question.  In some instances we have had to resort to an expert to fill in some gap in data that we can’t seem to solve in some other way.

Even when we do this, sometimes innocent mistakes do occur. We find that someone has stopped selling the product for example, or that the literature does not correctly describe their product/service.

IPTT Comments:  Your point about lack of reliable proof is a good one, and that’s one of the problems with demand letters v. actual suits.  Agree completely that the standards are different, and that’s what allows the trolls to troll.  Sending a demand letter, you’re not legally bound (currently) to provide much more than idle threats.  But what so many people don’t realize, and the trolls count on, is that you are not obligated to respond to a demand letter.  Instead, you should go look on That Patent Tool and see if anyone else has received a similar letter on the same or a similar patent and get in touch with them.  Shameless self-promotion, I HAZ IT.

10.  What are your feelings about the recent failure of the Senate to pass a patent reform bill? What would you like to see in a bill?

As you can imagine I am not terribly upset that the bill failed because I think it was overly partisan and biased heavily against small inventors.  What I would like to see is a return to the prior “rational” environment where technical and business persons would exchange information freely about patents, products, licensing demands, etc., over the course of several months without automatically triggering a lawsuit.    The worst decision – in terms of its impact in the the patent world – was the Medimmune decision, which handed a victory to large patent defense firms, because it meant that they were now able to file a lawsuit against the patent owner pretty much anytime the latter sent a letter that requested a serious discussion about taking a license.  This opinion absolutely destroyed all the typical pre-lawsuit discussions that used to occur between parties. Patent lawsuits were rare because the interested parties had all the time in the world to discuss/argue the merits of the patents, and only when that process failed did a lawsuit (sometimes) occur.

Nowadays patent owners know there is no point in sending a letter to a company, because some underemployed large firm attorney looking for another payday will immediately initiate a lawsuit in some remote region against that patent owner to try and gain an advantage.  As a result of course now patent owners simply file their own lawsuits first to preempt the defendants’ filings.  The patent world has become a sue first negotiate later atmosphere.  The Medimmune decision is effectively the patent litigators perpetual employment act.

Imagine what would happen now if they had passed the “patent owner pays” provision!  It would be like throwing gasoline on a fire because defense counsel would know not only can they start their own lawsuits, they are guaranteed payment at the end.

IMO any new bill should include a provision that substantially tightens the requirements for initiating and filing a declaratory judgement against the patent owner and thus eliminates the incentive to engage in lawsuits to settle disputes.  There should be a real and verifiable threat from the patent owner to imminently sue the company on a specific patent, product, etc. – in other words, use the same standard that is being proposed to be imposed on patent owners initiating an infringement lawsuit.  This is why I say the majority of the provisions are one-sided and do not account for protecting patent owner rights.

Court rooms, judges and jurors are inefficient mechanisms for resolving the merits of a dispute. They should literally be the forum of last resort and restoring the prior balance would eliminate 50% or more of all lawsuits.  You can compare the number of patent filings in 2005-2007 and then compare 2008-2010 and see readily what effect the Medimmune decision had on the patent world. It blew up everything.

*************************************

The patent world has become a sue first negotiate later atmosphere.  

and

The Medimmune decision is effectively the patent litigators perpetual employment act.

Those are gold quotes, my friend.  And both destined to become blog topics at some point.

Thank you a million times over to my favorite inventor for taking the time to answer these questions and provide insight into “the other side”.  I like getting a different perspective now and then, even if, and especially if, I don’t agree with all of it.   That’s how one grows and learns, by seeking out the opposite of what they think is true.

Man, I better think of something snarky and off-color here, that sentence up there was almost like I’m…human or something.  Blerg.

This concludes this series.  Next up will be Interview With a Patent Attorney, one from both sides.  I had hoped that we’d get a fisticuffs going when Article One Partners did something similar on a webinar a summer ago but alas, it didn’t come to fruition.  Maybe this time?  One can hope…

JustSayin_small_New

IPTT

Interview With An Inventor, Part III

Slight delay in publication of Parts III and IV, which is why I try never to set a public schedule for these things.  The minute I do?  The universe says, “Nope.  Not happening.”  *sigh*

But here we go, Part III of my Q&A with an inventor will cover these three questions:

6.  Do you acknowledge the existence of Patent Trolls? If so, which company would you name as an example?

7.  Outside of legislation, what do you think can be done to update the patent system so that it is more inventor-friendly? This can include adjustments at the Federal level to do with the USPTO, or things at the local level, like educational events for kids.

8.  Do you think that “loser pays”-type litigation rules will hurt the small inventor? If such rules were universally adopted in the US, do you think it would make you less likely to sue a potential infringer?

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6.  Do you acknowledge the existence of Patent Trolls? If so, which company would you name as an example?

What I do acknowledge is that like a lot of different businesses, there are a small number of folks who operate on the margins and try to exploit small businesses by confusing them as to their coverage of the patent, don’t do any real due diligence to see if the company is using the technology, make unrealistic royalty demands, etc., with no real intention of ever enforcing the patent because it would be economically unproductive.  The only company that I know of that *might* fit that bill is MPHJ, but even there I am not sure what option they have to try and monetize their invention other than mass mailing, because there are so many potential infringers of their system(s).   The reality is that sometimes the nature of your invention is such that the value lies in its use by small users; if there are a million small users, how do you go about collecting a $1 from each?  When you embark on that campaign it causes a visceral reaction because you are targeting the little guy, and you are perceived worse than if you had asked for $1m from one large company.

IPTT Comments:  This is not quite the Yes or No that I was going for here.  It seems a bit hedge-y to me, like it’s not possible at all that there are bad guys out there.  It doesn’t make you one of them, or weaken your own patent, to say that there are companies acting totally beyond the pale.  I understand that it’s difficult to take a completely consistent line on this.  Not with companies like MPHJ or Intellectual Ventures though, for example.  They are trolls, and to call them anything else is just….wrong.

7.  Outside of legislation, what do you think can be done to update the patent system so that it is more inventor-friendly? This can include adjustments at the Federal level to do with the USPTO, or things at the local level, like educational events for kids.

The most recent “improvements” to the USPTO site, again, are very one-dimensional and biased. It is full of “helpful” information on how to respond to patent owners who ask to be compensated for use of their inventions.  Yet there is nothing there that helps patent owners find out how to see if their invention is being used in the first place.  Again there is no balance in the current IP rights environment: everything is being rigged in a way to make it easier and easier for big companies to take inventions.

At the same time I think patent attorneys *could* do a lot more to educate the public and especially young people on the nature and merits of patents.  When I was a big firm years ago we did exactly that: I would visit high schools and give short talks on IP rights, and help kids see that their ideas could be valuable and protectable.

8.  Do you think that “loser pays”-type litigation rules will hurt the small inventor? If such rules were universally adopted in the US, do you think it would make you less likely to sue a potential infringer?

There is no question that a “loser-pays” system would intimidate most small inventors.  Under their proposal if Google the company loses a patent lawsuit, their maximum downside is they pay the inventor a small royalty, amounting to a fraction of a fraction of a percent of their daily revenues. But if the little guy loses, and is forced to pay their big firm attorney fees, that person may lose their house!  This is the type of stifling scare tactic the big companies want in place, and forms part of the multipronged attack I mentioned earlier: 1) don’t let small inventors get patents by making the PTO process difficult; 2) even if they do get a patent, make it easy to kill that patent at the PTAB with an IPR challenge; 3) even if the inventor succeeds on all of this, make it impossible to enforce the patent because few would be willing to take that kind of risk.

IPTT Comments:  I’m with you on this one.  The theory behind it is that companies will think twice before suing if they might have to pay the full costs.  The problem is that litigation is always always always a risk.  You can have the most air-tight case in the world and you then you go and get some dufus on your jury who skews the whole thing.  To make anyone bear the full burden of Joey Bag-o-donuts being on the jury is completely unfair.  And here’s where I get email from all the Europeans who remind me that they’ve had this provision since Queen Elizabeth was knee-high to a grasshopper and then I have to respond with things like “Yeah, but there’s no way to count the cost of lost revenue for people who had a great invention and a solid patent but not the bankroll to try to enforce and and also?  We wrote a really badass Declaration of Independence and I’m reminded of that every time each of my kids has to memorize the first two paragraphs of it so you can just take your stupid little loser-pays rule and stuff it in your musket.”

Or something like that.

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Part IV goes up later this week…y’all come back now!

JustSayin_small_New

IPTT

Interview With An Inventor, Part II

On this fair Monday morning, let’s continue our Interview with an Inventor, started last week here with Part I.  My goal in these questions was to divine how much time this particular inventor put into actually trying to get his product out there and if litigation was part of the strategy from the outset, if at all, or if it was something that ended up being a necessity because of the 400 lb gorilla companies that are (theoretically) preventing new entrants into the marketplace.

In this part, we’ll cover the next three question in the 10-question series:

3.  How have you approached the “big players” in your industry to attempt to get them to license your patent? What resistance were you met with, and how have you overcome it?

4.  What is the biggest barrier for small inventors to overcome when trying to approach the “big players” in their market?

5.  For you and your product/patent specifically, what is the single most troublesome thing about current patent reform legislation?

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3.  How have you approached the “big players” in your industry to attempt to get them to license your patent? What resistance were you met with, and how have you overcome it?

I have had extensive engagements with big companies, about a number of my patents, most of it negative unfortunately. Despite the fact that I have extensive technical educational background (a BS in EE from Caltech) and industry experience (I worked at IBM and two startups) one still universally gets the NIH response from companies.  

Let me give you an example.  In one instance a friend of mine knew the founder of the company.  He got us in touch with inhouse counsel, who proceeded to tell us he did not want to see any due diligence or evidence materials that would explain the utility of the patents, either by way of their current or future business.  This was rather amazing to me, since I asked them how I was going to demonstrate the value of the patents if they were not going to consider what materials we had prepared to show …exactly that.  This is an example of the corporate “blinders” I mentioned before.  Inhouse attorneys are taught to avoid looking at anything, or commenting on anything that relates to third party patents. This pretty much means there is no opportunity for a reasoned discussion.

Finally we reached a compromise where we agreed we would at least TALK to outside counsel on the phone to explain the relevance of the patents.  This of course was rather inefficient, awkward, etc., and prevented any meaningful assessment on their part.  We also agreed not to initiate any lawsuit during a limited grace period, all of which was fine by us.  

Despite all these handicaps this company did in fact make an offer on my portfolio. For reasons that are too numerous to list here (but I posted about it online) negotiations broke down.  Sometime after the grace period expired, I sent them a polite letter explaining to them in detail now why the patents had value – an opportunity they prevented me from doing before.  They then proceeded to try and kill my patent filings in the PTO as some kind of preemptive strike or payback.  Unbelievably they “manufactured” prior art to make it look to the PTO that they had already come up with my idea before me.  This was pointed out to the PTO after I discovered it but it was not until years later that they admitted the charade. The whole affair was just appalling to me to see what lengths they would go to not only denigrate my work.

Since that time I have had an occasion to send a number of other companies what I consider fairly friendly letters inviting them to take licenses on technologies I have invented.   In almost every instance they don’t even bother to acknowledge your letter.

This is why so many small inventors seek other channels, such as through brokers, to help monetize their assets. They have neither the connections nor the muscle to get the attention of large players, who can simply ignore you until you find someone willing to represent you in a lawsuit.

4.  What is the biggest barrier for small inventors to overcome when trying to approach the “big players” in their market?

Access.  It is almost impossible, unless you know someone in the company with authority directly, to get any attention whatsoever.  If you send them a letter inviting discussions it will be ignored 99% of the time.  To some extent this behavior is a legacy of older, now defunct case law which made it prohibitive to talk to inventors, because that could expose the company potentially to a charge of “wilfull” infringement later. This created a corporate mindset that pretty much shut down any exposure to third  party ideas, no matter how useful they might be, out of fear of being called out later for having “infected” the company with an outside “virus” if you will.  Engineers in fact were routinely told (in earlier days at least) NOT to read patents of any kind, again out of fear of being “contaminated” with third party ideas.

IPTT Comments:  So this is very interesting to me. I do understand the idea of not wanting to talk to inventors because what if someone at your company actually had the same idea?  What if that idea was just a slight tweak and Mr. Big Company had actually filed a similar patent that was still pending…you don’t want to open yourself up to trouble in the form of treble damages for willful infringement if you talk to a sole inventor.  So this makes sense.  But as our inventor acknowledged and as I mentioned in my backgrounder , agent or broker companies exist to help the smaller player get in the door.  I wonder if inventors don’t want to take that route because they lose a percentage to the brokerage firm?  Does it give an inventor less street cred if they have to use a broker vs. get in the door on their own?  Not judging, just asking.

Which, by the way, I realize those brokerage firms are NPEs.  Yeah, I get it.  But let’s keep it real here:  a company that can knock on Mr. Big Company’s doors and help you get in is not the same as an Intellectual Ventures or IP Navigation who actively seek out nebulous patents and set about suing the world over them.  No, there are decent NPEs out there who serve just the type of purpose our inventor would need them for.  Like the patent Shark Tank, if you will.

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5.  For you and your product/patent specifically, what is the single most troublesome thing about current patent reform legislation?

As I see current legislative efforts, they are mostly driven by an anti-patent rights bias, and therefore are almost exclusively are directed to reducing inventor/patent owner rights.  There is not a single provision in any of the proposals that makes even an attempt at balancing interests.  [In my opinion], the current (now tabled) legislation was crafted and sponsored almost entirely by large corporate interests who simply don’t want to respect or compensate small inventors for their technical contributions.  Consequently every provision is intended either to make it harder for the small guy to get a patent, to make it easier to kill that patent even if it is granted, or to make it impossible for that person to enforce it. Every aspect of the bill is engineered to facilitate what I would call “economic infringement” meaning, rigging the game to make it easier for big companies to simply take/infringe patents with the knowledge that their maximum downside is less than the economic advantage they derive from using the invention.

IPTT Comments:  I’m on record many, many times agreeing that legislation is not the way to curb patent trolling.  It’s right there in the name of the offender: “troll”.  It may slow them down temporarily, but overall, anyone called a “troll” is going to come back swinging a few months or years later with a whole new set of workarounds.  It’s impossible to stay fully head of them with laws.

That said, I don’t agree that the current legislative attempts were crafted solely to keep Big Companies from paying small inventors.  I think, rather, that they are attempts by politicians to seem relevant because patent trolling all of a sudden came into vogue.  Cool people like me have been following the problem for many, many years.  So, nice try crashing the party, Congresspeople.

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Because that’s a lot of words already I think we’ll stop here and pick up next time.  Look for the remaining parts Wednesday and Friday of this week!

JustSayin_small

IPTT

{Cool shot of Congress found here.}