PatentShield helps startups fight patent litigation in return for equity
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I think a better defense mechanism would be a legal defense fund that would force the trolls to make their case at trial, to go through discovery, to bring expert witnesses.
Because the law firms that represent them work on contingency, this would effectively cut into the potential licensing fees, and make trolling less profitable (and less likely).
Also, a lot of trolls extract patent licensing fees out of startups for patents that should have never been granted, and that deserve to be invalidated (e.g with prior art), but the process of getting a patent thrown out is expensive, so having a fund would greatly help.
The other strategy that could work is to get all the startups that get sued by a troll for a specific infringement and make a sort of "reverse class action" - making it possible for the startups to re-use the same lines of argument, evidence, etc in their cases.
This kind of arrangement is not useful for countering NPEs because NPEs are non-practicing by definition. Since they are non-practicing, you can't countersue for infringement.
Your note about cooperation between potential defendants is spot-on. The difficulty is in getting them to cooperate. Accused infringers are likely to be competitors who may not be inclined to cooperate. Further, it is to the advantage of each to simply license the patent and wait for another accused infringer to do the work to invalidate the patent, at which point they can all stop paying license fees. (A classic "free rider" problem.)
By the way, a company can buy patent infringement insurance that will pay for litigation or settlement costs, but it isn't clear that it is worth the premium.
It is also conceivable that it would be in the fund's interest to defend all lawsuits. That would provide the largest deterrent, since the lion's share of today's suits are without merit, and the cost of defense would be considered the operating cost of the fund.
What the trolls exploit is the assymetry between a defendant without resources and their own resources which are solely dedicated to this.
Without all the licensing fees that startups pay to settle the alleged infringement the business model for trolls would stop working.
Doesn't this depend on what "without merit" means? It seems unlikely they are "without merit" in the legal sense, since then they would be thrown out at the first hearing.
If you mean they are from patent trolls aka non-practicing entities, then it seems wrong too. I see coverage of tens of cases by NPEs per year, but the entire patent law-suite field must be much bigger than that.
There are probably better sources than this PWC report[1], but it identifies 477 out of 2281 (ie, 21%) cases since 1996 in the districts where NPEs file cases involving NPEs. Their definition of NPE includes universities though, which I don't think is what people generally think of when they think of "patent trolls".
If "without merit" means that they almost always lose, then this doesn't seem right either. The success rate for patent cases varies, but seems around 25-35%. That's far from "lion's share without merit"
[1] https://www.pwc.com/us/en/forensic-services/publications/ass...
Ars: https://arstechnica.com/tech-policy/2016/01/despite-law-chan...
Original statistic: https://www.unifiedpatents.com/news/2016/5/30/2015-patent-di...
The total number of cases seems to line up between the two reports (5700 in 2015, not including PTAB).
But only 2281 cases involving NPEs were decided between 1996 and 2015[1]. If 66% are filed by NPEs, then this should be much more. Unless the vast majority are dropped I guess?
[1] https://www.pwc.com/us/en/forensic-services/publications/ass..., page 16
In all patent troll cases I've seen, a patent exists, and the defendant is actually infringing the patent. So there is some merit to the lawsuit.
The problem is that the "inventions" in the patents:
* are not novel, or
* are not non-obvious, or
* have not been described in sufficient detail to replicate without further research, or
* a combination of all of the above for various claims in the patent.
so the patent should never have been issued in the first place. But invalidating the patent in court is a tedious and expensive process. You need many expert witnesses debating what is novel, what is non-obvious, and what is sufficiently detailed, it's not something a judge can decide in 10 minutes.
All that is required is a big enough defense fund that acts as a true deterrent.
Mind you, if the startup loses it doesn't mean that it would not be responsible for the payout - but at least the startup wouldn't fold simply because the costs of defending itself are out of reach.
In fact, the best outcome for Google would be if nobody ever got sued. (That's also the best outcome for the companies but there is no way of knowing if they would have gotten sued had they not paid their protection fee.)
It seems to me that if the equity turns out to be worth a lot, then the value of the protection is greater as well - the potential losses are likely to pretty closely track the company's value.
I see this as somebody inside google trying to do a oldschool google win-win (provide better results - make healthy profits).
As long as the equity stake is reasonable this sounds like a great deal. To me this isn't the mafia but the security company teaming up with you.
Seems like a giant win for everyone but the trolls,
The difference is that you aren't paying your fire insurance premiums with partial ownership of your house.
This is a new line of B2B rent seeking. It is not a not for profit foundation endowed with the patent portfolio and funds sufficient to operate off investment returns. It's a tax on the startup ecosystem.
Thing is, the joke's on us if most NPEs turn out to actually be fronts for Mob operations.
Either way, I'm calling this strategy the Joe Pesci defense.
You send email with attachments? Over the internet? Patented.
You send video? Over the internet? Patented.
There's so many utterly trash patents of the form "X but on the internet" or "X but on mobile phones" that these trolls will try and enforce.
First, this only provides access to the patent portfolio. It doesn't pay the (considerable) litigation bills.
Second, this portfolio is already available. If Alice sues Bob, Bob can negotiate just in time with Intertrust or IBM or ... for access to a defensive/offensive portfolio. This acquisition of patents during litigation is common practice.
Third, just as Intertrust is going to do their due diligence on you, you are taking a risk that their portfolio is a good match for your risk. You need to do your due diligence on them and on their portfolio.
I might go for this, but it would be at a pretty low percentage, like less than a percent.
patent laws are so broken that patent trolls are everywhere suing startups to get $ from them.
google now has a business that can directly benefit from such increasing number of patent trolls.
sounds not very inspiring to me.
who is always on the losing side? average small companies. who is screwing the economy & innovation and show no sign of change? governments who refuse to actually reform such a 100+ years old broken system.
For example, they may bring out their patents to force a lower valuation when acquiring companies.
They keep attributing patents that are obvious and meaningless.
If you analyze the life of important inventors and innovators of the 20th century, there has always been some patent pain involved that is not in the interest of the "greater good".
The reason America didn't have a significant air force for WW1 compared to other powers was in part due to the legal battles between Wright and Curtiss. The government intervened in the patent driven battle so planes could mass produced and used in the war effort.
Then, the inventor of the TV (Farnsworth) got sued by radio manufacturers and could never actually profit from his creation.
Then, many patents get extended for excessive periods of time to prevent things becoming public domain (e.g: Disney).
I think the most simple, and best, reform for /patents/ is elimination.
While I'm on the subject, returning to the 15 year copyright and 15 more IF you pay a lot to renew sounds like a good starting point for that discussion.
Trademarks should have something similar (a slowly rising fee over time) but be allowed to exist as long as that fee is paid; that's a consumer protection mechanism.
I have no idea why you have a problem with trademarks. Why should a small family business be paying increasing fees to continue to operate as "Sanford and Son"? Or do you think I should be able to call my product "Heinz Ketchup" because they have had the name long enough?
But that's in 'the real world' and not software, which is an even more ridiculous situation.
Google has purchased an incredible number of patents, and is now leveraging them for profit. They are not in a morally higher ground than Intellectual Ventures if they continue with this service.
The copyleft equivalent would be to patent your work, but license it to anyone, provided they use the same license for any derivative patents. I think such a scheme might lead to interesting results if some important innovation ends up locked into copyleft, similar to the Linux kernel.
First-to-file resolves priority when it comes to undisclosed inventions. Two inventors A and B both invent some new invention and both go to patent it. Whoever is first wins. Two inventors come up with the same invention all the time. The first-to-file rule makes it easier to resolve conflicts than examining evidence of who invented first, and it encourages speedy filing by preventing an inventor from secretly exploiting an invention and then filing when another inventor appears.
By the way, anyone can look at the published patent applications (which are published usually 18 months after filing) and can submit information that they believe would be relevant to the examiner in determining if the invention is patentable. It's called a Pre-issuance Submission. [0]
[0] http://www.klemchuk.com/339-preissuance-patent-submissions-a....
It says if you use our patents, you must open up your own patents to be used in the same way.
yet another sign that patent systems need reform.