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Comment by cletus | Hacker News Reader

This is a largely pointless gesture.

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.

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The company may be able to collect ownership of the patent from the shell company as payment to cover the legal fees.

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.

Unfortunately this just moves the nuclear weapons around. We really need disarmament.

Not necessarily. Some of the companies are structured such that they don't own the patent, just certain rights to it. Basically they sue on behalf of someone else which both reduces the risk and also allows the patent owner to claim that they're not the one behind the suit.

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).

Shouldn't this loophole be closed? Something like: only allow the exclusive owner of a patent to sue potential infringers. That isn't enough to make shell companies a losing proposition, though, because they still contain the risk of losing a suit. I prefer the bond idea, it is a simple and more direct route to making NPEs liable for their actions.

Something along those lines might be an improvement but then you have the issue of a parent company in the US not being able to assign those rights to a European based subsidiary to defend them there.

I think it's probably dealing with the wrong problem which is the need for more fundamental reform of IP law.

I'm quite sure they thought of this and will address it in some way.

> "The company may be able to collect ownership of the patent from the shell company as payment to cover the legal fees."

The patent that, by definition, was just invalidated or neutered in the defendants victory? Why would the trolls care about that?

> 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.

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.

I was under the impression Intellectual Ventures doesn't bring patent suits themselves, but has quasi-independent shell corporations do the dirty work? In any case, I'm sure a team of IP lawyers would be able to set something like that up to protect the mothership.

In which case you'd have to pierce the corporate veil.

IV scare the shit out of me.

It's much worse than you'd think. I don't have proof or specific details, but I've heard from someone in the know that it is common for IV to set up a chain of 20-or-so companies, owning each other, transferring property, etc -- and all in different jurisdictions (counties, states, contries!).

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!

[edited typo]

"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?

Losing the suit would provide evidence to potential acquirers that the patents are worthless.

Those that were used in the lawsuit, yes, but they'd probably have other patents as well, and there would be no reason to consider them worthless.

Most patent trolls such as Intellectual Ventures set up a shell company for each lawsuit, essentially (or group of lawsuits if they're targetting multiple companies) so they only really have the patents used in the case they'd be losing to sell.

The flip side of this is that even if we decide to no longer issue software patents today, we still have 20 years of software patent lawsuits (I'm assuming that invalidating all current software patents would be too difficult), and so methods for mitigating the harm that comes from software patent trolling are welcome.

Exempt patent troll legal fees from limited liability protection--make it so you can go directly after the shareholders.

This, I LIKE. It's definitely a band-aid, but what a band-aid!

To enforce it properly, it would be best to require one or more directors to provide guarantees for the money that would potentially be owed.

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.

While I agree with you that the real issue here is that software patents should not exist in the first and that this bill actually gives some legitimacy to them (by explicitly naming them), this is still a good thing (IMHO).

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).

What is actually happening to the patent itself? Are the "trolls" just licensing the patent or do they have to have full ownership of it? If the later were true and they could actually loose the patent to the trial winner the situation would get more interesting.

Not really. If they lose the case then in 90% of the cases it means the patent is worthless. So it would not make a big difference if they lost patents which anyway would be worthless.

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.

Isn't their warchest of patents an asset? They may have patents that are valued in the millions. I don't think you can simply declare bankruptcy.

Every patent (or group if necessary) is owned by a separate legal entity, so most at risk is the patent(s) involved in the lawsuit.

A smartphone doesn't infringe on thousands of patents because we have standards in place for 3G, WiFi, Bluetooth, H.264 etc which you can license affordably under FRAND terms. This process was what made software patents manageable.

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.

Unfortunately we don't have standards in place for "click to upgrade" or "slide to unlock" and potentially thousands of other tiny patents that cover the minutia of operating systems and software. Why does it matter that you can use Bluetooth if you can't do anything with it?

There is only ONE way to implement Bluetooth and meet the standard.

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 ?

I see you forgot to include Apple in this.

That's about as reasonable as saying there are LOTS of ways to show multiple applications on a screen, Microsoft (and HP) shouldn't have used overlapping windows (and so on).

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.

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