Before we start analyzing the litigation record, readers deserve to understand a bit more about how I’m looking at these things.
Today, let’s look at how to identify a patent troll. We’ll look at my own definition of patent troll, why you should care about trolls (even if you don’t work in the tech or legal fields), and I’ll debate some common opposing views.
First, what is a patent troll?
In my view, a patent troll is a person or company that makes money chiefly from accusing others of patent infringement.
A second but just as important question: Why should I care?
It matters because every week, patent trolls demand money from other people. Often, the targets have never even heard of the patent troll—often an anonymous LLC—that’s coming forward and seeking payment. Some of the trolls’ demands are directed at big companies, but plenty of them are directed at small companies and even individuals. The public perception of patent cases is that they’re lawsuits about “copying,” but that just isn’t true.
This behavior is profoundly unethical, and perfectly legal. And just about every time, it works. The patent trolls get paid, and the victim walks away with frustration, confusion, and a lighter wallet. Their targets lose money because they have to pay lawyers to defend themselves, and quite often they have to pay settlements to avoid drawn-out litigation and even more legal fees. Sometimes, they pay a lot of money.
But here’s the thing: the trolls’ targets aren’t the only losers. We all lose to patent trolls. We lose because this costly game drains away billions of dollars that would otherwise be used to create jobs and build companies. That money gets siphoned off, mostly, to investors and lawyers who are already well-off by any reasonable standard.
And we lose because in a larger sense, patent trolls are telling lies, and getting away with it. They’re telling an untrue story about how and why new inventions happen (about “innovation,” that overused buzzword.) Sometimes the “invention” really isn’t an invention at all. Other times, they’re just taking advantage of the fact that U.S. patent law allows them to wildly exaggerate the value of a very specific and tiny step forward. Unfortunately, these lies are egregious, and widespread, and staggeringly successful.
We’re not living in an era where lies are easily flushed out of our body politic. That’s become painfully obvious in recent years. But I can at least observe what’s going on and write about it, and hope that will make some small dent in the world.
The Patent-ic Dialogues
Back to my definition of patent troll, which again is a person or company that makes money chiefly from accusing others of patent infringement. This view is my own, and I’ve developed it over the years. As I said in my introductory letter from last week, I’m not a lawyer—just a concerned citizen.
Of course there’s no “official” definition, and other people, including many people I respect, have different views about what constitutes a patent troll. Let’s take a look at some alternate views, presented here by my imaginary friend, a Patent-Loving Guy.
Patent-Loving Guy: I think of “patent troll” lawsuits as involving low-quality patents. And gosh darn it Joe, some patents are just really good! The inventor should get a monetary reward for these high-quality patents.
I’m not sure the difference between a “high quality” and “low quality” patent matters much. I’m concerned with how the patent is used. A “high quality” patent is often just one that holds up in court and makes the owner money. If a company makes most of its money from accusing others of patent infringement, I’m still putting them on the troll list.
Let’s imagine a hypothetical company — I’ll call it Amazing Innovations LLC. Amazing Innovations buys a patent, then sues 50 companies over some basic Internet technology—like say, putting maps on a website. The target companies haven’t heard of the troll, and haven’t heard of the patent. They either invented their online maps themselves, or more likely, acquired them from a company that makes map software, like Google or Mapbox.
If Amazing Innovations didn’t really invent a novel technology for putting maps online, then a lot of people might say the patent is “low quality” and it’s a shame that they were able to file 50 lawsuits over it and get paid. And I agree. As I said, I think that’s bad and harmful behavior.
Now let’s say Amazing Innovations was an incredible Internet pioneer and its patent describes a real invention it created. When a jury evaluates it, they find it valid and infringed. A lot of people would say that’s a “good quality” patent. And in some sense, I can’t disagree—the patent has done its job as a legal instrument.
But I still think that’s bad. The company is making money from lawsuits, not from any products or services.
Finally, it’s almost never true that the trolls were once great inventors. Federal courts are a rarified and controlled environment, and even patents validated by judges and juries often wouldn’t hold up if experts debated them in an open and public forum.
Patent-Loving Guy: But what if the infringer copied the patent owners?
In tech patent cases, actual copying is extremely rare. In fact, it almost never happens. Patent owners don’t have to prove copying, and don’t even have to allege copying, to win their case. The patent holder just has to show that you’re trespassing on their “territory,” as defined in the patent, and they win.
In the rare cases where patent owners have evidence of copying, they have a strong incentive to put it on the record in their court papers. It will help them win and get more money. The reason copying allegations are extremely scarce in the litigation record is simple: there is no copying! There’s a widespread public belief that companies frequently copy technology from others, but it’s a myth. At least, we can say there’s very little evidence for it.
Patent-Loving Guy: Joe, I get that you don’t like people who buy up patents and then use them to sue. But surely in cases where the patent is still owned by the named inventor on the patent, you won’t call that person a “patent troll.”
Back to the Amazing Innovations example. Let’s say they didn’t buy patents and the owners are the original, named inventors. Once, they ran a real company called AmazingTech. It made amazing stuff for a few years, but in the end, like many small businesses, AmazingTech couldn’t quite make it. The owners were left with nothing but patents. They moved the patents into Amazing Innovations LLC, and are now making a bunch of money (possibly more than AmazingTech ever made) suing 50 Internet companies.
For the victims of Amazing Innovations LLC, and for the public, the results are the same. 50 companies spend money on lawyers just because they do Basic Internet Things, and a lot of them are going to have to pay off Amazing Innovations just to limit mounting legal costs. My position, as you know, is: That Is Bad.
By the way, when the “classic” patent trolls (purchasers of patents) actually go to trial, you can be darn sure the original inventor is going to be there. There’s often a revenue split between a patent owner and a patent monetization company. In other cases, named inventors might get paid fees (like, hundreds of dollars per hour) as a litigation consultant to the trolling company.
Patent-Loving Guy: Damn Joe, you really hate inventors!
I think inventors are awesome, and they’re everywhere. Humans are inventive people. We invent stuff all the time. But inventors aren’t just people who are named on patents. Inventors who own patents represent a small proportion of overall human inventiveness. As for the tiny group of inventors who seem to be highly lawyered up and constantly threatening other people—I would say their inventions warrant increased scrutiny, let’s put it that way.
Patent-Loving Guy: Well, some companies have great inventions and work hard, but it just doesn’t work out. What’s wrong with letting them recoup some of their R&D investment by monetizing their patents?
Well, instead of “monetizing your patents,” how about just getting a real job? That’s what most of us have to do. I’ve invested time and money in things that haven’t worked out. Lots of people have, especially people who try to start businesses.
If a company makes its money off threatening people over patents, that’s a problem for me. Most folks who want a return on their investment have to produce a product or service that someone else want—not just threaten others. I like how Techdirt editor Mike Masnick phrased it, when he interviewed a different patent-loving guy some years ago: a business relationship built at the end of a pointy stick isn’t much of a relationship.
The non-practicing entities may well have invented good things in the past, and they might do something great and innovative in the future. But honestly… So what? We’ve all done good things in the past. Maybe they rescued a puppy in the past. Maybe they’ll save another puppy tomorrow. That’s nice and I commend them for it. But right now, they’re using a pointy stick to demand money. I’m not cool with that.
Patent-Loving Guy: So basically any company that gets a few patents, finds infringement, and files lawsuits against the infringers—you’re going to call them a troll. You just hate patents and Patent-Loving Guys like me.
Well, remember my definition. The troll “makes money chiefly from accusing others.” An operating company that files one lawsuit against a competitor, or even several, won’t fall into that category.
And look, lots of operating companies file patent lawsuits that are bad and anti-competitive! Just because they’re not a “patent troll,” it doesn’t mean they’re outstanding corporate citizens. I wasn’t a fan of Amazon’s “one-click” patent, I wasn’t a fan of Apple’s patent lawsuit against Samsung, and I’m not a fan of Oracle suing Google (that case did involve a patent in its original form). I’m not a fan of IBM’s heavy-handed patent licensing regime. So I’ll be looking at big tech lawsuits in this newsletter, too.
But operating companies are at least trying to please their customers and participate in the economy to make most of their cash. And if they sue someone over patents, they can often be sued back in a retaliation lawsuit. So there are different incentives.
I’m not saying trolls are the only problem with our patent system, by any means. But they are kind of a perfect distillation of what’s wrong. Trolls are the 200-proof version of patent corruption.
Patent-Loving Guy: OK, so what are you saying? If I make 51% of my money from patent licensing, then I’m a “troll?”
Look, I admit there’s some gray area. But yeah, if an operating company makes say 30% of its money from patent litigation, and 70% of its money selling services or stuff, then it probably shouldn’t be called a troll. That’s why I had to put “chiefly” in my definition.
But I have to tell you, this is very rare. That’s why, as you will see reading this newsletter, the litigation record is chock full of patent troll cases, but has relatively few cases between true competitors. When you see a company start to lean heavily on patent accusations, it’s often because its products aren’t exactly thriving. (Ahem, Blackberry.)
And look, this “chiefly”thing works both ways. I can’t prove with total certainty that trolls are making all 100% of their cash from patents. I can only go off what I see in the public record. Maybe the owner of Amazing Innovations LLC makes $900,000 a year licensing patents and $200 of his money selling poetry (patent limericks, probably). I mean, that seems like a patent troll to me. But I’m sure he’ll email me demanding to be called a poet.
Patent-Loving Guy: Look, Joe, some people are great at inventing but not executing. Licensing patents is a way for an inventor to do what they do best—invent—while others build the product.
Joe: OK, great. I’m not starting a newsletter about those people, unless they go around demanding money from other people. In your magical world of peaceful patent licensors, my newsletter will quickly run out of things to cover.
Patent-Loving Guy: So by your definition, Thomas Edison would be a patent troll!
It’s honestly weird that you and your buddies keep bringing up Thomas Edison, and equating him to anonymous patent-owning shell companies like Amazing Innovations LLC. Have you heard about that New York power company that’s known as Consolidated Edison? Yes, Edison had patent disputes and sued people over them. And all that fighting over currents got pretty nasty, so maybe the guy was a jerk. I don’t know, I wasn’t there. But he operated quite a bit in the actual marketplace, so he doesn’t fit my definition of a patent troll, or any definition I’ve heard of.
Patent-Loving Guy: Universities sue over patents too. Are they patent trolls?
No. Back to the definition, universities don’t make most of their money accusing others of patent infringement. But as with the other non-troll patent litigants I mention above, I think some university behavior around patents has become extremely problematic and requires scrutiny.
Patent-Loving Guy: Look, lawyers demand money from other people all the time. They’re representing clients who have experienced injury and need compensation. Maybe you just don’t like lawyers.
Nice try, but no. I don’t have a general problem with lawyers or lawsuits or plaintiffs. Many small patent plaintiffs hire attorneys on a contingent-fee model. Not only do I not have a problem with that fee model, I think it’s beneficial. Contingent-fee lawyers provide valuable legal services to people who wouldn’t otherwise get them.
I just have a specific problem with people filing lawsuits or making threats over patent infringement, especially when they do it over and over again. If you want to go through every type of litigation, I could add that I also find defamation lawsuits and certain other SLAPP-y legal claims to be 99% bullshit, but I’m not going to get into that here.
Okay! That’s all for this week. I’m looking forward to digging into some actual cases, and we will get to that, but I wanted to write my views on some of the basics first. Today was about definitions—the next letter will be about tactics. It will cover the techniques I use to identify a patent troll, and will include a fun example.
Photo: Fremont Troll / Roshan Vyas