The U.S. Constitution states that “Congress shall have power…To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” This statement is the basis of our patent system. However, in recent years, the patent system of the United States of America has been used by parties colloquially referred to as “patent trolls” to launch hostile litigation against businesses large and small based upon dubious motivations. Many now believe that the patent system has been co-opted by self-interested actors and is no longer serving to promote the progress of science and useful arts, but to launch hostile litigation that only serves to harm other businesses. A system designed to promote progress of science and useful arts is increasingly being used to prevent such progress. In some cases the patent trolls are targeting innocent businesses with limited resources, hoping to intimidate their victims into handing over fees rather than spend precious resources fighting the troll in court. In other cases, sophisticated companies employ highly skilled lawyers and engineers to engage in corporate warfare against their competitors. Two major events in the past few months highlight the issues associated with the patent system and the ongoing push for patent reform: the passing of the Innovation Act in the US House of Representatives, and the massive litigation launched against Google and other Android developers by Rockstar Bidco, a consortium holding the coveted Nortel patents owned by Apple, Microsoft, RIM, Ericsson, and Sony.
Patent Reform in Washington DC
Dysfunction in the US patent system has gotten so bad that politicians are feeling compelled to act. In December of 2013, the House of Representatives passed the Innovation Act with large majorities of both parties backing it. The Innovation Act, sponsored by Rep. Bob Goodlattee (R-Va.), includes a number of important provisions designed to improve the current system.
One of the types of patent trolls are bottom feeder entities that sue hundreds or thousands of small businesses for allegedly infringing on a patent — for example, suing coffee shop owners who offer Wifi to customers. This behavior is hurtful to small business owners and the health of the economy. The Innovation Act will allow technology companies to fight the lawsuit on behalf of the end users of their products, so the patent trolls will have to face much more formidable entities who have the proper resources to defend against the frivolous litigation.
Moving the Discovery Phase of Litigation Process
One of the most costly elements of the current patent litigation system is the discovery process, which can require defendants to expend exorbitant costs surfacing millions documents in order to build a case. The Innovation Act moves this phase of the litigation process until after the court addresses the legal questions surrounding the patent claim, so that defendants may not have to take on the expense of going through the discovery process to fight off a frivolous lawsuit.
The Innovation Act will require plaintiffs that lose their patent litigation to pay the fees of the defendant. Victims of unjust patent litigation will be able to more easily recover from the costs inflicted upon them by patent trolls. Furthermore, as a way of addressing the fact that often patent trolls are acting on behalf of other entities, if the patent troll is unable to pay the fees, a judge may require that other parties with a financial stake in the plaintiff’s lawsuit pay the fee.
In some cases, the patent troll that files the patent litigation against others is being controlled by other entities. The Innovation Act will require the patent plaintiff to disclose the names of all other entities with financial interests in the patent that is being litigated. Perhaps patent owners who are using their patents not to build useful products but to attack others may be less inclined to do so if their actions have a greater chance of being linked to them and potentially damaging their reputations.
Increased Specificity of How Patent was Infringed
The current system allows patent owners to file litigation against other parties based on vague justifications. The Innovation Act will require plaintiffs to describe in greater detail how their patent was infringed upon.
The Innovation Act has been supported by the tech industry, which may be indicative of how the bill is targeted much more powerfully against bottom-feeder patent trolls than sophisticated patent trolls. Opponents of the Innovation Act include the biotechnology and pharmaceutical industries and patent lawyers. The Innovation Act has not yet moved through the Senate, so in the meantime the White House is working to advance patent reform measures on its own. The administration will work with the private sector to provide better technical training to patent examiners and to make available more “prior art.” “Prior art” is a term that describes all publicly available information that is relevant to determining a patent’s originality. This should help the Patent and Trademark Office determine whether or not a patent idea is original, because if a patent idea has been described in prior art the patent no longer has a claim to originality.
While the provisions of the Innovation Act, if passed, will help alleviate some of the issues caused by bottom-feeder patent trolls, it does not address all of the dysfunction of the current system. The warping of the patent system from a way to protect the intellectual property of inventors who want to bring a product to market to a battleground of corporate warfare is still a large issue. Patent trolls work to acquire broad patents that arguably should not have been granted in the first place, and use them to launch sophisticated attacks against technology companies. Patent reform advocates believe that the US still needs to find a way to efficiently invalidate low-quality patents. One policy that has been proposed in the Covered Business Method program, which is supported by Google but opposed by Microsoft and IBM. Aspects of this problem are illustrated by the case of Rockstar and Google.
Rockstar, Google, and the Patent Wars
On the other end of patent trolling are that larger companies that use patents as ammunition against competitors. This most noticeably happened during the bidding war with Nortel Networks, a Canadian telecommunications company that filed for bankruptcy in 2011. After Nortel went under there was some 6,000 patents up for grabs, which sparked the bidding wars between Google and Rockstar Consortium, which is comprised of Apple, Microsoft, BlackBerry, Ericsson, and Sony. Rockstar outbid Google and bought the patents for $4.5 billion and have used the patents as leverage to extract royalties and file patent disputes with various other companies. Rockstar went on to file lawsuits against Google and other companies, such as HTC, Huawei, and Samsung for infringements in smartphone technology. Most recently Rockstar also set it sights on cable companies that use Cisco products that fall under Rockstar’s patents.
Whether Rockstar’s disputes are legitimate or not are not the real issue but the kind of power that it gives them over other companies. The bid for these patents was a bid for power. A power that allows its owners to accuse and dispute any similarities in technologies, and try to extract royalties from companies that use said technologies. A power that allows one company to significantly stifle any new developments in their products and allow an unfair advantage. As Uncle Ben said to Peter Parker (Spiderman), “With great power comes great responsibility.” Rockstar could learn from this because their use of Nortel’s patents and patent law could cause problems for many startups. These startups could easily be hit with a lawsuit for patent infringement from any of the Rockstar companies. A lawsuit that they are most likely doomed to lose against Rockstar’s army of lawyers. This and other patent ownership laws could be stifling to innovation and growth for many budding companies. The Innovation Act is just one small step in eliminating patent trolling but it is far from resolving the larger problems that give the bigger guys more power.
Lee, Timothy B. 2013. “Patent reform bill passes the house 325 to 91. Here’s what you need to know.” The Washington Post, December 5. http://www.washingtonpost.com/blogs/the-switch/wp/2013/12/05/the-house-votes-on-patent-reform-today-heres-what-you-need-to-know/
H.R. 3309–113th Congress: Innovation Act. (2013). In www.GovTrack.us. Retrieved March 4, 2014 from http://govtrack.us/congress/bills/113/hr3309
Byers, Alex and Mershon, Erin. 2014. “White House pushes forward with patent reforms.” Politico, February 2014. http://www.politico.com/story/2014/02/patent-reforms-white-house-103696.html
Kerr, Dara. 2013. “Google, Samsung, and more sued over Rockstar’s patents.” CNET, October 2013. http://news.cnet.com/8301-1023_3-57610349-93/google-samsung-and-more-sued-over-rockstars-patents/
Musil, Steven. 2013. “Apple, RIM in group buying Nortel patents for $4.5B.” CNET, June 2011. http://news.cnet.com/8301-1001_3-20075977-92/apple-rim-in-group-buying-nortel-patents-for-$4.5b/
Mullin, Joe. 2014. “Cisco moves to fend off Rockstar patent assault on its customers.” Ars Technica, February 2014. http://arstechnica.com/tech-policy/2014/02/cisco-moves-to-fend-off-rockstar-patent-assault-on-its-customers/