Bill would force patent trolls to pay defendants' legal bills
arstechnica.com
arstechnica.com
Patent trolls by definition have no assets (technically they're NPE or non-practicing entities). This means that if they lose big, they'll simply declare bankruptcy and move on.
The real problem--still--is software patents shouldn't exist at all.
If a single device (eg a smartphone) potentially infringes on thousands of patents then you've gone well beyond the intent or usefulness of the patent system.
If this were going to do anything at all, any entity that files a patent violation suit should be required to establish a bond (set by the court) to cover defendants' reasonable fees before the suit can even go to discovery.
The maths of patent trolling is simple:
- filing suits, issuing C&Ds, etc = $X million
- potential payoff for settlement or successful litigation = $YYY million
- probability of winning = Z%
If Y x Z > X then it's worthwhile suing. Filing a bond with the court then change sthis to Y x Z > X + B.
This process needs to be encouraged and expanded in order to dull the impact of software patents. So really there needs to be just as much criticism of Google and Samsung (FRAND abusers) as the patent trolls.
There are LOTS of ways to unlock a phone. Including the way every phone was doing before the iPhone i.e. holding down a button. Likewise for click to upgrade and most of the other design and UI related patents.
So you see now why Google and Samsung are just as much of a problem as patent trolls ?
As a matter of pure legal hackery, I suppose it is impressive that Apple's lawyers have found a way around the previous "look and feel" lawsuit, but the rest of us should realize that an old dog is up to the same old tricks.
"This means that if they lose big, they'll simply declare bankruptcy and move on."
I may not know exactly how patent trolls work, so apologies if this is a dumb question; If they declare bankruptcy, won't they have to then sell the patent(s) that they own (their assets)? Is there a way patent trolls can get around having to do this if they lose?
For comparison: in the UK, it's not uncommon for suppliers to require a director of a new llc to sign for the goods guaranteeing payment if the llc can't make the payments. I imagine this is mostly for fraud-prevention purposes, but it seems to be the best model to follow here.
Not all patent trolls are tiny. Some of the most dangerous are huge, for example Intellectual Ventures. Bankrupting them would be a big win.
> The real problem--still--is software patents shouldn't exist at all.
Agreed.
IV scare the shit out of me.
It's a legal "obscurity amplifier" - setting up these structures is relatively cheap and easy ($1K/year/shell, so $20K/year or so if you're not versed in the processes; IV can probably do that for a quarter of the price).
Piercing this structure is likely to cost >$100K and perhaps even >$500K - you have to file for piercing in each jurisdiction independently, and you cannot file in one jurisdiction until you've been granted in the previous one -- you don't even know which jurisdiction it is going to be!
This law just forces them to be more careful with creating a new company for every lawsuit. A slight increase in their cost of operations perhaps but nothing much beyond what they are currently doing.
This means that a troll would lose the set of patents every time they lost a case. Unless they were willing to outbid the winning party to recover the patents from the shell, in which case the winning party would recover their legal fees.
So it's not pointless. It does increase risk for trolls. Although I do agree that much larger reform would be better. And requiring the posting of a bond is a fantastic idea.
I'd imagine that those rights would just be tied up so they weren't transferable (so if the company did go under they would no longer be an asset) and that this structure would become the norm.
What you'd need to do is have the suing company stump up the money in advance into some sort of escrow account (or some other mechanism for proving they can pay).
I think it's probably dealing with the wrong problem which is the need for more fundamental reform of IP law.
The patent that, by definition, was just invalidated or neutered in the defendants victory? Why would the trolls care about that?
Patent trolls basically just throw legal shit against a wall and see what sticks. If nothing sticks it does not cost them anything. This bill would increase the risk to the troll. There is now cost associate with the non-sticky legal shit (so to speak).
1. When sued, a defendant has the right to request a review of the patents, which would automatically stay all proceedings until the review is finished. Only upheld patents could then be litigated and if all patents were overturned, then the plaintiff would have to pay all court costs.
2. Patents holders who sue but do not actually manufacture anything should be awarded reduced damages.
1. A defendant can request reexamination of the patent by the USPTO. There are pros and cons to doing so. [1]
[EDIT: If a defendant requests reexamination at an early-enough stage in the lawsuit, the judge is likely to grant a request to stay the lawsuit until the reexamination proceedings are finished. If the defendant waits too long, though, the judge might think the defendant is gaming the system to try to delay the trial, in which case the judge likely will deny a request for a stay.]
2. A patent holder that actually makes and sells something can recover the profits it would have earned if it had made the infringing sales. To do so it has prove some things it doesn't have to prove to recover a reasonable royalty. A troll can't do this because it didn't have the capacity to meet an existing demand at the time of the infringing sales. [2]
[1] http://en.wikipedia.org/wiki/Reexamination
[2] http://www.finnegan.com/resources/articles/articlesdetail.as...
That would kill the asset-free trolls instantly because without an engineering staff and a product they can't very well be building anything that uses their "property", can they?
Also puts old and new patents on equal footing.
Where is property taxed like that?
Car licenses in many places are also essentially a property tax of 1% of the car value, or so.
This is one aspect that I see missing from this. The mere threat to sue over a patent can force a small company to settle or to even close-shop completely. Sure, if the small company wins, they'll get their legal fees back, but when would that be?? a good few months of time, energy, lack of sleep, and huge legal bills until the end of the process, and that's only IF they win.
I would far rather have the lion's share of the risk be assigned to the plaintiff.
Yeah, that's what the ABA says. But in the real world you're going to get stuck with an impossible bill anyway when the deep pocketed people you sue start filing countersuits.
That way if company A spends $10 million on the case and loses, the winner can recoup say $8 million.
But if Person A spends $50k on a case and loses, the winner can only recoup $40k.
My take is that they shouldn't be abolished. But they should be restricted. Say, 3 years. Maybe 5.
Software has short development cycles and version iterations. Three years gives a company a year to bring a product to market, and 2 years of patent protection after that.
This isn't perfect I'm sure and there are probably more optimal time frames than 3 years. But I like the idea that if I come up with a truly novel invention in code, I'll be granted a patent and a couple years at market before the clones emerge.
That fact alone makes the lag between work being done and a patent available to sue far too long.
So wouldn't reducing length just worsen the problem by shifting even more power into the hand of incumbents who can afford to refill "different" patents more often than startups? Trolls would just use newer crap patents anyway.
There are a lot of patent trolls outside software. Being against software patents and being against patent trolls are different issues with different solutions. I reject that dispensing with patents altogether is the best choice.
`If you take somebody to court and you lose the case then you pick up the cost of the defence and courts time.`
That is what is needed, something simple and fair that covers this and other area's instead of one law for a specific area which will then need another law for another area and in essence complicate things by having many laws covering one simple thing.
Keep It Simple Stupid is a such a great old software term, that applies to so many things, including this.
Or: "IBM just screwed me over, but if I sue there's a chance I'll lose, and the penalty for losing is orders of magnitude greater than I could possibly afford. Guess IBM gets to keep screwing me over."
"IBM is suing me using twenty overly broad patents, most of which don't even apply. I'm pretty sure I can win in court, but it doesn't matter because the legal costs will bankrupt my company long before I can get a final decision. May as well sell out for pennies on the dollar - it's my only choice."
The amount of times I've seen breaches of e.g. open source licenses dwarfs the number of patent cases I've seen. Generally, the creator has no recourse, because they can't prove it most of the time (closed-source product), nor can they afford the court costs if they wanted to, so it just slides. Sometimes changes are made (e.g. GPL-using code open-sourced), but often they aren't, and it's largely because the offended party is small and can't properly defend themselves, so it isn't worth it.
A patent troll could lose without the patent being invalidated. It could be that the patent is enforceable, but not in this particular case (a case where a jury finds the defendant wasn't actually infringing).
We've seen patent trolls go after victims with nebulous claims that might not win in court even though the patent wasn't likely to be invalidated.
This may prevent those situations because if they lose and they have to hand over the patent, it deprives them of future extortion money.
It may at the least limit the scope of companies they go after to actual likely infringers.
In other words: just because we're defining "software patent" doesn't necessarily mean software patents are necessarily legal.
It's basically a temporary fix.
So, making patents not transferable only adds a step or two depending on how complex the law is.
The general intention is that a company can not own a patent which it does not have a vested interest in acting on, how that is defined could be an entire thread of its own.