FTC Puts Patent Trolls on Notice

Direct link to the FTC report that anigbrowl posted: http://www.ftc.gov/os/2011/03/110307patentreport.pdf

This report constitutes a policy statement that is heartening to those seeking reform of patent abuses in that its recommendations might prove influential with the USPTO (which is at the front lines of dealing with such practical issues as how to deal with indefinite claims), with courts (which ultimately interpret challenged claims in the context of infringement fights), or with Congress (which ultimately sets standards in this area). Among its several recommendations, the report calls out the activities of "patent assertion" entities (i.e., trolls) for the adverse effects their activities have on innovation. The long-term hope is that such a report, in so persuasively highlighting the problems caused by trolling activities, will influence the USPTO, the courts, and the Congress to implement real reforms to curb the abuses.

The immediate impact on any party that is highly litigious in this area (troll or not) will be negligible, in my view. The courts will apply existing law to the pending fights and will decide the cases one way or the other without regard to longer-term policy principles. This does not mean that aggressive litigants will always win (Blackboard didn't) but it does mean they will pose difficult problems for those who have to endure their bullying tactics.

Still, it is nice to see some of the major problems truly identified and dealt with in a sharp way, as this report does. A real surprise, coming from the FTC.

No idea, but it'd be nice for the onus to be on the patent holder to prove something was copied.

That's why you date and initial every page in your lab notebook. Don't have a lab notebook you say? That counts you out.

My untutored impression is that their business model is more about licensing than litigation, though of course the threat of the latter affects the price negotiable for the former.

But it might not be a negative; one thing that really impressed me about the FTC report was in chapter 7 where they take an example case and examine different approaches to calculating damages. Although I'm not a lawyer or economist, I am very interested in this branch of legal theory and this seems to reflect many of the ideas that have influenced the law of antitrust and property damages in recent years.

Up to now the prevailing approach to estimating damages has been set by a case known as Georgia Pacific, where the plaintiff offers evidence about 15 different economic and legal factors of economic loss. That's fair on one level, but the problem is that the jury gets overwhelmed and tends to award enough damages to compensate for multiple injuries, not all of which necessarily happened - thus huge awards followed by expensive appeals and so on and on. The FTC report seems to favor a much more methodical approach to calculating the true economic costs of patent infringement, without worrying so much about questions of fault during this process. An economic idea known as the Coase theorem (basically) says that whether A pays B not to do something, or B does something and has to pay damages to A afterwards, the total economic costs tend to be the same in both cases, and suggests objective methods for working out what those costs are. Then the verdict is just a matter of apportioning them appropriately.

Of course I am drastically oversimplifying here. But the basic idea is to make patent litigation less of a morality play and more of a problem-solving exercise, in which the public's interest is considered along with those of the parties at suit. Although this may seem cold and mechanical, 'justice is the tolerable accommodation of the conflicting interests of society.' Addressing these problems systematically usually leads fairer results, and more predictable ones too - a big plus for any business.

The recommendations in this report are just recommendations, but they're so comprehensive and well-presented that they may be adopted and refined into a standard very quickly. Everyone is sick of the current situation and patents don't mix well with politics, so a consensus is distinctly possible.

I don't have a good sense of Myrvhold's overall stance or intention, but I was dismayed to find Neal Stephenson heavily involved in IV. Perhaps only to cure my cognitive dissonance, it occurred to me recently that perhaps IV is performing a grand reductio ad absurdum attack on software patents.

i.e. accumulate a patent army and then declare total economic war, forcing USPTO / FTC to intervene and prevent abuse

This whole situation reminds me a bit of the content farming issue with Google. Most patent farms are manifestly bad. The whole model is ripe for abuse. But there is still an extent to which some of the players contribute.

In the extraordinarily unlikely event that the patent system is reformed in the near future, it seems likely that IV in particular wouldn't have much trouble pivoting. Unlike the bona fide trolls, which are boiler room IP arbitrage operations, IV is staffed with actual smart people; whatever the new bar became for defensibility, you'd figure they'd clear it.

As for right now, I just remind myself that while the term of a new patent may seem like a lifetime, it is actually far shorter than that, and to the extent that patents incentivize people to populate the marketplace with viable implementable new ideas, shops like IV are probably a good thing.