Who Talked About The Law Of Unintended Consequences? Oh Yeah, Me.

Last Wednesday I had the honor of speaking (via Skype) at the Nordic IPR conference in Stockholm, Sweden. The title of my presentation was “Non-Practicing Entities and You: How To Define and Defend Against The Dark Arts”, which means that at any moment now J.K. Rowling will beat down my door, copyright infringement lawsuit in hand and I will be forced to charm her into not only not suing me for the use of her cool phrase but also persuade her to give me an autograph so that my kids will love me because y’all? I am totally not above bribing my offspring.

Wait, what was I saying?

Right, the presentation.  One of the points that I made was that there are a lot of different legislative solutions floating around in the US in an attempt to curb and/or eradicate the scourge of the Patent Troll.  Lest the EU fall victim to the same idea that the government is the best way to solve this issue (it isn’t), I wanted to point out one of the main reasons why:  The Law of Unintended Consequences.

Fresh off that opportunity, I read this article over yonder at Bloomberg and was so frightened that I had to actually cover my eyes for parts of it and read through my hands, similar to the way I watched Jurassic Park all those years ago because velociraptors.  {shudder} 

Sam-Neill-encounters-velo-001 IP Troll Tracker

MY WORST NIGHTMARE. (after patent trolls, obviously)


This is the part I’m talking about:

Taking advantage of new rules created by Congress three years ago, hedge funds have increasingly been filing challenges to pharmaceutical patents. Some may be angling for payouts to drop their claims, while others are shorting the stock, betting that the manufacturers’ shares will plummet.

Using the new Post Grant Review and Inter Partes Review procedures in the America Invents Act, hedge funds are extorting money from pharmaceutical companies by either filing or threatening to file for re-exam.  I’m no genius (I totally am) but I’m thinking that’s not quite what Smith and Leahy had in mind.  Looks like someone else thinks so too:

“When we developed these proceedings, we never thought people would use them this way, in an effort to move stock or as an investment vehicle,” said Bernard Knight, the former general counsel for the patent office, who was there when new rules for challenging patents were written.

This is the whole problem with making changes to laws to solve a very specific market problem. People/companies/lawyers will always find ways around whatever laws you put in their way.  Clearly, we can’t have no laws, that would be like living in back woods West Virginia.  (I can say that because I lived in West Virginia at one point time. That’s how that works, people.) The point though is that when you use the law to try and prevent one or two specific bad apples from playing the game, you end up with side effects that weren’t quite what you had in mind.  I mean, it’s right there in the article, for Pete’s sake:

The legislation had an unexpected consequence: Hedge funds, which didn’t have the right to challenge patents in court, now had a venue to bring such cases.


Yes, we have been through this before. With the AIA.


These hedge funds are going around the court system straight to the PTAB (Patent Trial and Appeals Board) and using that process to get better deals. That’s pretty sick and twisted, no?  Or, as Hans Sauer, deputy general counsel for the Biotechnology Industry Organization, put it, “illustrative of something that’s out of kilter”.

“Out of kilter”??  Oh Hans, you diplomat, you.

This is the point I’m trying to make about legislation designed solely, or so it seems, to prevent patent trolling.  One of the points that I made in my conference presentation was that trolls are shifty and will find their way around whatever crafty laws you’re crafty enough to create.  The Hedge Fund Gods are already doing it with the last round of “necessary changes to patent law”, the AIA.

For those of you drafting new legislation, I’d ask simply: do we want to go back to that well to have more water thrown in our faces?



{Scary dino pic found here. Slick beer/car chart found here.}


One thought on “Who Talked About The Law Of Unintended Consequences? Oh Yeah, Me.

  1. The focus needs to be on attorney conduct. The pursuit of weak cases should penalize the attorneys, not just their clients who can create shell companies to avoid such penalties. There needs to be an audit for settlements since they are the end point for the vast majority cases (at least 70% — the 90% number some quote is not correct since quite a few cases that don’t go to trial are dropped for technical reasons). If there is a doctrine of cumulative repetitive harm and if attorneys are held accountable with a point system, they can easily tell clients who wish to pursue weak cases that they cannot do so for fear of ultimately losing their license to practice law.

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