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Patent trolls want $1,000 per employee for using scanners

arstechnica.com

235 pointsblackhole180 comments

I personally hope the patent law abuse gets to the point that it destroys the entire patent system. So go for it. Sue schools, the elderly, whatever.

And then what? We'll have nothing at all? I'm certainly not in favour of these patent trolls but you have to have a more nuanced approach to intellectual property than 'Burn down the House'

It's a balance between encouraging innovation by protecting intellectual property, and discouraging it because of patent abuse (etc).

Destroying the patent system completely would most certainly have a negative effect.

I'm beginning to believe that reforms are not possible and "burn down the house" may be the only option to escape the current mess. There are too many vested interests, and the problems are too abstract/complex for normal people to care (and put pressure on representatives). Even if the general populous put pressure on Congress to do something, Congress would pass some law that at best did nothing, and at worst went in the opposite direction, all while politicians proclaimed 'victory' in reforming the system, and the general populous settles down because 'something' happened, and the technicalities of why it's bad are too hard to understand in a 10 second sound-bite.

No, these trolls show that the entire basis for patents is absurd. The only difference between "patent trolling" and normal patent litigation is that they target individual users who are ignorant of the process. Big businesses have been doing this to each other for decades. Knowledge simply cannot and should not be owned.

From the sounds of it, and in reference to everyone using the term 'patent troll' here, I think this particular instance could be more appropriately labelled as 'patent scamming'.

> And then what? We'll have nothing at all?

No... and then we'll have legislators who are willing to improve the system.

> It's a balance between encouraging innovation by protecting intellectual property, and discouraging it because of patent abuse

I think that depends on what part of the patent system you are considering. In the world of medical devices, for instance, it is a balance between encouraging innovation and discouraging it. In the world of software patents I honestly do not think that there is anyone who is innovating because of patents (there ARE some who are making money off innovations they would create anyway), so there I do not feel that there is a balance: software patents only discourage innovation.

> Destroying the patent system completely would most certainly have a negative effect

Why are you so sure of this? Government granted monopoly is not the only incentive to create something, but there are definitely countless examples of how patents have been used to squash innovation and disruption.

I grant that patents have had some positive effects, but I would not assume they are net-positive. Also, they were primarily designed in a time when there were fewer ideas and getting things into production was much more expensive (this applies to physical things, let along software with zero marginal cost), and it was much easier for an incumbent to steal an idea and crush a startup simply by the barriers to entry to manufacturing and distribution. Since then lobbying efforts have only pushed intellectual property rights in one direction. Even medical research patents which are often held up as necessary create perverse incentives that tie up R&D dollars in unproven new drugs, and making arbitrary tweaks to existing newish medicines in order to secure patent protection, making research into natural or public domain compounds come to a standstill regardless of efficacy.

Obviously I'm biased since I work in software, but I think we'd be fine without patents. Trademark and copyright address much more important issues in my opinion.

Medical treatments, vaccines, and drugs cost enormous amounts of money to bring to market due to all the regulations and requirements we've created ensuring a pill is not fatal. Why would any company in their right mind develop any sort of drug if it cost $100m and anyone after them could take the idea free of cost?

Patents are good/needed to promote the quality of medicine. There they're good.

Actually many of these requirements were created so the cost of creating new drugs is sufficiently high to keep out new companies. The FDA is big pharmas moat.

You're just reciting the standard line which I already acknowledged in my comment. My point was that some of the most promising avenues of research are ignored because of the lack of patentability. How do you address that point?

Would they be addressed if patents didn't exist? I doubt it.

That's exactly GP's point: If you can't patent it, it won't get made.

Or we could take the money those pills cost, give it directly to researchers, and open source the results. Lower costs, same results, money left over for plenty of other things. I mean you do know the US has the worst cost/lifespan ratio of the western world, right?

I mean you do know the US has the worst cost/lifespan ratio of the western world, right?

Yup. It also invents the medicine.

I take it by your flippancy that you disagree. Am I correct in assuming that you mean to insinuate that removing the profit incentive for Big Pharma executives (cancel patents) without reducing the salaries of researchers (use the saved cost on research) would render the US incapable of inventing any medicine at all? Because I disagree with that.

Yes. Here's a quick reason why: http://news.ycombinator.com/item?id=5001897

You don't seem to understand where the money goes.

You wrote that because research costs money, nobody will fund it without patents, completely disregarding the argument that there are other ways to fund research.

I'm writing about what happens, not what I think should happen. I'm not going to try to defend the status quo. I'm for patent reform also. But I can see where some form of patents may be advantageous. But I'm trying to stay out of that discussion. There are people who know far more sides of the story than I do who are in a better position to suggest models of patent reform.

Are you saying that the US invents the medecine ? If yes, do you have any sources ? If no what are you saying ?

Yes, that's what I'm saying. I don't have time right now to compile the sources- but there have been exposèes on the subject of medicine invented in US sold to Canadian and European markets at gov't negotiated prices (and then black-market sold back to customers in the US at lower prices than available in the US).

As far as where the bulk of the research is done? Well, you can look that up yourself.

I would love to have your sources then because it sounds silly to me. But may may be you should define medecine first.

That is exactly what the drug companies say. That's funny at is as if you are just reciting back their propaganda.

It turns out a lot more money is spent on marketing and lobbying that is spent on research. Also a lot of cutting edge research is actually performed by public universities by professors on that state's (or NIH's) dime.

> Patents are good/needed to promote the quality of medicine. There they're good.

Well that really is the crux of the argument. I would argue that patents make the medicine worse. Medicine I also consider to be the health and well-being of citizens not profitability of drug companies. I can be convinced that the current patent system help the profitability of drug companies I am not sure if it help the sick people.

That is exactly what the drug companies say

Yeah, there's a reason for that.

It turns out a lot more money is spent on marketing and lobbying that is spent on research.

Don't confuse pharmaceutical companies with biotech companies.

Also a lot of cutting edge research is actually performed by public universities by professors on that state's (or NIH's) dime.

Often, the same researcher then spins out the company that tries to commercialize the research.

I can be convinced that the current patent system help the profitability of drug companies I am not sure if it help the sick people.

Without them you wouldn't have the medicine. Then that won't help the sick people. As it stands, there is a difference between the medicine that rich people can afford and that poor people can afford. That may be morally objectionable- and maybe we should fix it. But at least the medicine exists, and eventually it gets cheaper on average for everybody.

I am very much for patent reform, but we have to do it intelligently. Where patents help- keep them. Modify them maybe. Where they are despicable destroy them.

At least in some cases in medicine-- as in other high barrier-to-entry endeavors-- I am convinced they are useful. In other cases they are infuriating.

Without them you wouldn't have the medicine.

How do you prove that? I disagree. Here my statement: Without patents you would have cheaper medicine (but I cannot prove that either)

Not only would you not have the medicine, but you wouldn't have delivery vehicles (devices, forms) either. It's because USA and Europe require such substantial testing, at various stages, to prove (1) efficacy, and (2) safety. These are not binary-outcome experiments. They are expensive (gotta pay people to take your dope and you gotta pay - and train - docs to keep an eye on them. Remember- the outcomes are not binary).

Some percentage of your population aren't going to feel well while in the trial. Is is the fault of your medicine? You better be absolutely sure. Oh wait, you can't. Can you find anybody who might be able to help you decide?

So before VCs will give you $5M, they are going to be sure that Walmart can't knock off a copy once you have the proof. That's where the money goes, and why you won't get any unless you can arrange some exclusive sales.

And, like everything else, you have to make sure that there is a paying market (meaning docs will use it and insurers will pay for it).

>Often, the same researcher then spins out the company that tries to commercialize the research.

It seems to me that you imply that there is some added value from the commercialization. But commercialization does not cause added value in itself. Sometimes, commercialization just mean marketing and profit center.

However the real question is, what does commercialization of an already founded and paid invention has to do with patents. Why should research which is paid with tax money (through NIH) be patentable, and how does that benefit society?

There is often substantial risk turning a research result (molecule X inhibits virus Y) into a safe medicine. You have to do significant, expensive testing. That is where the money is spent because that is where commercialization fails.

Also, pharmaceutical drugs don't just pop out of Wonka-like machines in a manner similar to the Everlasting Gobstopper. The production process has to be efficient. Efficiency is a function of the cost to research, design, construct and operate the production facilities and QA, and the expected returns.

Well, if you want efficiency, thats were all the factories with generics lives. They use capitalism, that is competition to produce the best product for the lowest price.

As for testing (the above comment), thats where FDA approved monopolies comes in. FDA want to incentivize testing and producing of products, even once they fall out of patent protection, so FDA themselves gives out limited timed monopolies after a drug gone through all the testing. Thats a monopoly on top of regular patents for most drugs. FDA don't assume patents to cover the cost beyond the initial research. They consider that more incentives are needed, targeted for testing and producing of products.

I wasn't disagreeing with the poster above, I was adding additional insight into what it takes to initially commercialize a product (assuming the initial research was publicly funded).

Before a decision to produce can begin, there is additional R&D into: - scale production design and cost analysis - analysis of potential market size - risks and boundaries of treatment identified via clinical trials

If the potential market size and production costs work out to be marginally profitable (to be an attractive investment): - initial outlay of prototype production facilities - scale production and distribution processes (some drugs have limited shelf life or require special handling) - market building (disseminating information about the treatment to health providers, and tracking market penetration) to make sure the market potential is fully used

Production of generics is "efficient" because by the time generic production gets underway (at patent expiration), they can sell as an alternative to a pre-built market with processes already proven by years of practice.

What prevents generics to do cost analysis, market research, prototype production facilities, scale production and distribution processes, and market building? Isn't those step normal procedures for any commercial venture. To make the car an analogy, when producing a new car, a company need to do cost analysis to weighing materials, product facilities, prototype building. They also need to do market building to push their product in a market already buzzing with competition. They need to care about the distribution processes. They can't patent this, and even if they could, I doubt the car industry would be helped by it.

Generics, like any other form of commercial entities do prefer a pre-built market. This is same for everyone else too, as everyone is currently making the same pads, laptops, phones and mp3 players as last "hit product". This however doesn't mean that there aren't any new companies trying new things. Same goes for generics. The "putting a product into the market" is't someting patents are needed or even suggested to cover. Its the cost of the invention that is covered by the patents.

Patents cover the cost of inventing. The FDA granted monopoly covers the testing. Everything else rest onto the commercial entity to resolve. This is the order of things, through patents are so far not covering the cost of the invention, as that is taken care by tax dollars distributed to research by NIH.

Thus the logical thing to do is to either cut the budget of NIH and let "patents" take care of the inventing (as intended), or reconsider patents as funding for inventions.

Yes, in any normal commercial venture, those are the normal procedures for commercializing something, which are the investment. Re-reading back to the top of this thread, I see this spun out specifically from a one-liner about research by professors at public universities. The funding sources for professors at public universities is varied (depends on what funding they have managed to gather and what strings were attached, and what they were intended for), and the degree that the results of their research is clinically applicable also varies. A researcher may discover that a certain receptor on a cell's surface responds to a specific molecular structure, but this is far from being a treatment. Depending on who funded a particular research study, the results may be pre-assigned to a private entity, or may become public information. It all depends on how the research was commissioned. In any case, university researchers don't usually create new drugs, they discover relationships; they just don't typically have that mandate (as far as I am aware, which admittedly isn't that much).

Incidentally, patents are not to cover "invention" costs, they are so that inventors can get the rewards of invention while at the same time exposing their invention, rewards and costs are not the same thing. For drugs, public exposure is a necessity of the way we require FDA approval; since without such regulation, drug related litigation would ultimately end up in open court anyway to prove liability or negligence, it has been deemed a public good to do this public exposure prior to market introduction, and require a degree of pre-approval (that we assign directly to a government agency).

In the US of A, the FDA grants neither a monopoly, nor a patent. The FDA's purpose in new drug development is the declaratory judgment regarding the safety or applicability of a drug. It is perfectly possible to get a patent, but fail FDA approval. It is also possible that the process to produce a drug at scale is itself a novel application or invention and itself patentable (though that may also need FDA approval separately from the drug treatment).

It is perfectly possible to get a patent, but fail FDA approval.

I believe this happened to Eli Lilly yesterday. EDIT: Not sure it was Lilly- I heard the news on the radio this morning and I can't find the source on the news sites. Annoying.

and eventually it gets cheaper on average for everybody.

Sometimes cheap drugs get more expensive, so that's at least not a universal truth.

http://www.nytimes.com/2012/12/30/business/questcor-finds-pr...

> It turns out a lot more money is spent on marketing ...

The cost structure of marketing has diminishing returns with a very long tail. The first $100M might give $1B in revenue, the next $100M might give $400M, then $100M/$150M, then $100M/$105M, then $100M/$101M, and so forth.

The last $100M of the markeing budget only has a miniscule percentage profit, but a miniscule percentage is $1M. So it gets spent. So marketing budgets appear to be gigantic, but is is because most of the customers are marginal and barely need the product, not because R&D is being short-changed. In fact, this approach maximizes absolute R&D funding. Yes, R&D becomes a smaller slice of the pie, but this only matters to people who cannot do math.

I think you explain why it is smart to spend money on marketing. But really for medical use, I find that marketing can be dangerous. I mean creating a need for a drug? really?

Marketing + lobbying expenses are not mutually exclusive with research expenses. Companies maximize revenue, and to do that you need both marketing and research expenses. As it happens, throwing more money at research doesn't work (see Pfizer), and throwing more money at market often does.

Most of the money is spent on passing FDA approval and testing. Research is a small portion of the cost, you are correct there.

The real problem with patents is that they don't protect the idea, they put it in public and try to give a monopoly to a certain person or 'legal person'(corporation). The medical patents are designed to encourage disclosure so that the medicine can become widely available later. That is the real reason medical patents are beneficial to society. It's a deal that has to be made where both sides give a little and both sides gain a little. I know we haven't seen a lot of this in America lately, but it's compromise.

If you really want to keep something a secret, you don't patent it. I think the law should allow non-profits and things like universities and hospitals to violate patents and copyright for the public good. That would get rid of the "they aren't helping sick people" problem and still keep the profits for the drug companies.

By going through all the regulations and requirements, drug companies already receive by the FDA a limited monopoly on top of patents.

It should also be said that, around 95% of all medical research around life threatening conditions, and base theory, is already being payed by the government (a total of 1/3 of all medical research across all areas (human and pets)). If patents are so good and needed for the promotion of quality of medicine, why is then the US government today paying for most of it in direct funding, some 26.4 billions?

I think what you're really saying, in so many words, is that research in important medical treatments, vaccines and drugs shouldn't be left in the hands of drug companies at all. Maybe all basic research should be funded by the public and made freely available to all companies that want to utilize it. Sure, companies won't be able monopolize the cure for cancer, but who thinks that's a good outcome anyway? Let them compete on price and marketing the way they already do with aspirin.

And then we'll figure out what comes next. It's not obvious to me that a 15th-century approach is still the very best option in the coming age of the Internet. There's certainly an awful lot of innovation happening for which patents are irrelevant when they aren't inimical.

Whether or not the whole thing gets burned down, I think api is right that only a major crisis will get us the major changes we need.

And it's a shame EU just made it easier to get unitary EU patents in Europe now. Ugh.

you have to have a more nuanced approach to intellectual property than 'Burn down the House'

(Shrug) The house will either burn down, or it will fall apart due to shoddy construction. Better to get it over with sooner than later, so the land it stands on can be put to better use.

>>(Shrug) The house will either burn down, or it will fall apart due to shoddy construction.

It has helped to build the most powerful and most popular nation on the planet in the history of the planet.

Powerful and Popular? Oh I see you mean China! Patents don't mean too much there...

Yeah, but China achieved its success by ignoring other nations' intellectual property laws. That was hardly the case with the US.

(guffaw)

Post Hoc, meet Propter Hoc. You two have a lot to talk about.

Genocide and slavery also helped build the USA. Doesn't mean we shouldn't have stopped doing those things.

Patents are not related to human atrocities, it is truly sad that you made such a comparison.

I wonder what Edwin Armstrong would say about that?

The point isn't that patents are equivalent to genocide, it's that helping the USA become stronger doesn't automatically make something a good and moral thing that should be perpetuated.

Citation needed.

Even The Economist is now saying that the US patent system is hurting, not helping, progress: http://www.economist.com/node/18389167

A more nuanced approach would be to stop software patents and lawsuits brought on by non-practicing entities.

That way you don't have to pull the carpet from under drug companies and suchlike, or 'burn down the entire house'. Just the rotten parts of it.

> A more nuanced approach would be to stop software patents and lawsuits brought on by non-practicing entities.

ARM, MIPS, and many research universities would count as non-practicing entities. As they are, they only produce "intellectual property", and sell licenses to it to fund their operations. They would be forced to find an alternative business model. Universities have alternative funding sources, and they might not be affected too heavily.

Whether this is a good or a bad thing is open to debate, but it's clear to me that non-practicing entities that produce valuable results do exist.

Good point, and IANAL etc, but since we as humans can more or less clearly see the difference between patent trolls and such institutions, there has to be a way to encode those nuances in legalese.

But I guess the real problem isn't whether the patents usually involved will hold up in court, but the costs involved in setting up a defense and disproving the accusations.

> there has to be a way to encode those nuances in legalese.

How about: more than 50% of your employees are lawyers, or the lawyers in your organization make more than 50% of the money (to prevent a few lawyers from "hiring" a dozen or so highschoolers at minimum wage.

Patents should protect engineers, not lawyers.

The nuances are in the patents themselves. Are they non-trivial? Are they innovative? Did they require any significant amount of effort to come up with?

I'm of the opinion that two measures will help fix the patent system, and this applies to most fields.

First, the duration of patents needs to be cut. 5 or so years would probably suffice.

Second, there needs to be an incentivized prior art busting effort. Perhaps the party filing the patent could put $1000 or so into escrow for a 1 month waiting period, and if someone manages to find valid prior art, they get the money.

You know, escrow sounds like a great idea if it can reduce applications by the same amount it increases prior art submissions. It would make it harder for individuals, though.

From a lot of what I've read about different NPEs, it sounds like they're already on the cusp of being vulnerable to racketeering / fraud charges. It might not take that much to amend the existing laws to add some language about shell companies and patents that clarifies that this is illegal.

Another thing that could help a lot is minimizing the extent to which patents can be sold. One of the biggest problems with the patent system that I see is that someone can invent something that sounds worthless, sell the patent for $10,000, and then the company that buys the patent can rake in millions in royalties. In general no one should be making money hand over fist for things that they neither invented nor produce.

I agree with you on the first point, but completely disagree on the second. If the patent is valid to begin with, it doesn't really matter who owns it. It's true that a crap patent owned by a deep-pocketed litigant can be more dangerous than the same patent owned by a poor inventor. But the problem is the crap patent, not the deep pockets.

I really think it does matter who owns it. If most of the profit from patents is the result of speculation, I think the system is fundamentally failing to do the job of rewarding innovators. It doesn't matter if the patent is a good one - if it's primarily rewarding hedge fund managers with no interest in research, the incentives are screwed up.

Could have an accreditation process for non-practicing patent holding entities.

Or only make accreditation for those non-practicing entities that purchased the IP rather than inventing it.

The patent system is one of the two laws still in existence that since its creation during the 17th century, it still have not been updated to even 19th century government procedural style.

Around the 17th and early 18th century, laws was made to be simple. Process required to be made simple. If you stole a horse, you got the same jail time as every other horse thieves. Taxes was the exact same as for everyone (at least for the poor), and there was no books after books with exceptions, rules, and additional judgement calls needed to be made. Everything everyone needed to know about the government could be read in a rather tiny book, written almost like a novel.

But by the late 18th century, governments changed in a radical way in how it worked. Laws got complex. procedures was created to have someone who made a judgement call on goverment actions on however something benefited society or if it did more harm than good. They started to do cost-benefit analysis. One by one, all but two areas (copyright and patent), was changed in how they was issues, and how to balance the public good vs desired benefits.

But giving people 20 years government enforced monopolies has so far evaded any form of cost-benefit evaluations. In contrast, it has just been expanded to cover more and more, for a longer time, and for less money.

Destroying the patent system completely would force a cost-benefit analysis on the whole system of patents and how to maximalistly create incentives for inventions, without costing society more than it gets. Given that its the government that pay's for and enforces said monopolies, one might consider a cost-benefit analysis on the whole system a something that it should do.

The patent system is not for encouraging innovation, it is for encouraging people to share the secrets of their innovation. Without a patent system we would go back to the guild system of the middle ages, in other words, the protection of trade secrets.

You're right of course, we're much better off with a working patent system than with the system that came before it. However I'm personally not convinced that the patent system in its current form (at least in the US thought possibly in some other places too) is either working, or better for innovation than no system at all.

I disagree. Only inventions that need a lot of money to be"invented" need any form of legal protection. You'd have to prove that without patents the incentive for R&D would be diminished to the point where it would no longer take place.

Can we find some term that does cover all of the things that don't need patents. It's somewhere between software patents, and all patents except medical/drug patents. Much of what is inbetween those two should (or could if the abuse is lesser there and we want to move it over) be covered by copyright, trademarks, etc. Reasons not to include new loopholes, probably deliberately written, new international treaties to at least make it sensibly easy to cover all markets, many more.

I hope abuse of process requires bonds per lawsuit/legal communication. I want the prices of suing to go WAY up.

Why punish poor people?

As I understand it, under the U.S. legal system, poor people can't sustain the cost of litigation anyways (this might be a warped view from outside).

Under almost any system actually

Civil law / inquisitorial lawsuits are significantly cheaper, and legal costs are way cheaper outside the U.S.

The U.S. has the most lawyers in the world (it used to have more lawyers than the rest of the world COMBINED), the most expensive legal system, and the most lawsuits in the world. There are significant movements (including the U.S. Chamber of Commerce) for legal reform, and several studies stating those facts:

http://www.uschamber.com/legalreform

"America’s civil justice system is the world’s most expensive, with a direct cost in 2009 of $248.1 billion, or 1.74% of the U.S. GDP.

The tort cost per person was $808 in 2009, a sevenfold increase from 1950 when adjusted for inflation."

http://blogs.wsj.com/numbersguy/how-much-are-frivolous-lawsu...

http://www.towerswatson.com/assets/pdf/3424/Towers-Watson-To...

Spain, for example, offers free legal assistance for lawsuits over 900 euros (link below in english).

http://www.mjusticia.gob.es/cs/Satellite/en/1200666550200/Tr...

The average cost per lawsuit in the European Union (in legal fees, etc) is 3.000 euros (Madrid Mediators Association figure). A "standard" lawsuit costs about 10.000 euros (an example for suing a doctor for malpractice).

For comparison, in the U.S., "Ongoing expenses to prepare and mount a medical malpractice case average around $20,000 -$50,000, but in complicated situations it can be $50,000 -$100,000 "

http://personalfinance.costhelper.com/medical-malpractice-la...

Well you're a telling me that is very very expensive in the US and it's very expensive in europe.

Who can afford to potentially lost 10.000euros in a lawsuit ?

And in this thread we are talking about average Joe fighting against expert/rich companies.

Even if average Joe win the first time, the rich company can do another lawsuit right after and do it again and again until average Joe give up.

It's actually what happened to a friend. They don't care they just put you personal bankrupt. And even if it's not the money, it's a lot of stress and shit like this.

Yes, it's as you say, just a degree between "very very" expensive and "very" expensive - though at least there's the option of some free help in Spain and other countries.

I agree that big companies can do another lawsuit, and the stress and related complications is a huge factor as well :( .

I want legal reform for my country for different reasons (here lawsuits are a lot cheaper but stretch for a lifetime), but the U.S. seems to need a lot of reform as well.

This is indeed correct.

The only people they can afford are plaintiffs attorneys who take the cases on commission.

Not in all cases you wouldn't. Ideally we'd like the prices to go way up for these kinds of extortionists while remaining low for individuals who were actually wronged by a large corporation.

You abuse process -> You gain a bond requirement to do anything as a lawyer (Write correspondence, sue people, etc).

Sorry if that wasn't clear I meant "People who have abused process have to post bonds"

That would be a bad move. That way you're basically stopping average joe from enjoying the same privileges as large corporations.

Average joe doesn't have the same privileges as large corporations now.

In a corp vs average joe case, there's a huge inequality, where one of them faces bankruptcy and has to pay a way larger share of his income to sustain litigation, while corporations basically face no punishment (even large fines don't deter them).

Edit: in this case, over ONE MILLION dollars in costs for the lawsuit (and it doesn't sound like a big lawsuit). That's ridiculous.

I wasn't saying that. But that's no reason to actually make it worse.

That didn't help in the RIAA situation, they could have continued suing grammas and kids if they had wanted to with no legislative remedy in sight.

RIAA is involved in copyright protection, not patents.

Agreed. It does no one any good.

The article mentions that it is hard to invalidate patents with prior art and that the patent holders will say that it is a narrower scope than previous patents. If that is the case, I can't see how this isn't extortion. There is no way that these "companies" could know the kind of network that the companies they are sending letters to use. They may be just guessing that they are even using a scanner. They are just mass mailing threats and hoping for money back.

Also, how is it even legal to target the users of technology in a patent infringement case like this? Wouldn't the manufactures (of hardware AND software) be the ones that would need to license the patent, not end users? I get why you would target the end user but is that legal/valid?

I agree that it is extortion in spirit. But I wonder if patent trolls can be prosecuted on current extortion laws, as their defense would be "We're just trying to enforce our lawful patents." If prosecutors would not want to try, then I wonder how we could change extortion laws to include this practice.

I agree with you on what their defense would likely be. But with something like this, there is no real way of knowing for sure if companies are infringing on their patents without knowledge of their network and what devices they have. It is entirely possible that they sent this to companies who haven't used these features. The problem is that I can't see prosecutors taking these companies on. I would imagine that a Federal prosecutor would be the one taking them on, which to me, makes it even less likely that it will happen.

Agreed. Sending out these demand letters without a good faith belief of actual infringement, especially bulk-mail form, which could be considered as evidence of not taking reasonable care in preparation, should be considered extortion.

IANAL but one option might be a federal civil RICO suit, and see if the DoJ will get involved.

IANAL but wouldn't it be easier to convict on mail fraud first. Corporate "accounts receivable" type scams have been convicted before of mail fraud. The scammers send an invoice to a corporation, and if it looks routine, it gets paid without a second thought.

Sooner or later, some patent troll is going to be dumb enough to send out "Unpaid License Fee" letters and set a precedence on the extortion charge.

Getty Images has been doing this with stock photography license claims for years: http://www.extortionletterinfo.com/

Most important to keep in mind is that this activity is targeted toward businesses (and for that matter not exactly "mom" and "pop" types either). It's more difficult getting someone to prosecute this type of borderline activity against business then the same thing against individuals. Especially if they have a leg to stand on and are being operated by attorneys who know how to word things to avoid potential problems.

Strict legality and validity are irrelevant -- proving the legality and validity would be an expensive and time-consuming process for the targets of these claims and most lawyers would agree that settlement is always preferable.

9/10 someone may win the suit against a patent troll but the cost of proof ($$$$) is extremely bitter to taste.

Which is such a shame. Until that changes these patent trolls have no motivation to stop what they are doing.

It would help in cases like this if:

a.) the litigant was not allowed to dismiss the suit without the consent of the defendant, and

b.) there was some mechanism whereby anybody who was subsequently sued on the basis of the same basic claims of infringement of the same patent could use the result of the first case as part of their defense. (E.g., unless the original verdict was overturned on appeal, the plaintiff would have to make some new novel claims that were not part of the original case when suing their next victim.)

This would require changes to the law, but not nearly such drastic change as abolishing the patent system entirely (which I think is scheduled to happen right around the time the USA switches to the metric system).

I was the victim of a very similar shakedown tactic at the hands of DirecTV in 2002. They had hired (sorry, "successfully lobbied to obtain the services of") the US Marshals to raid some small companies that sold smart card programming gear. DirecTV then got their marshal pals to copy the companies' customer databases, and then systematically went after the end users, threatening to sue unless the users paid up $5k to 'settle'.

In my case, our company had indeed bought some smart card programming gear, but I was incensed and inclined to fight (as it sounds like the protagonist of this Ars story was). But the only "fight" we were able to effect was to have our lawyers write a letter (basically, "fuck you, we program smart cards, bring it on") to make them go away for us. They abandoned their threat to sue us, but this didn't affect any of the thousands of other people they were going after with the same exact scam.

Our patent system would be better if the law forced the litigant to a conclusion once a patent suit was brought, and also made it much harder to repeat the same shakedown once one victim had successfully fought it and won.

That's not to say it would fix the problem of patent trolls, but since it would weaken the patent itself (once somebody had the balls and money to fight a bullshit patent shakedown and win) we wouldn't have to give a shit how many shell companies Myrvhold and similar parasites have. (We'd only have to give a shit that they have millions of unique B.S. patents.)

Until the US courts have a loser pays (http://en.wikipedia.org/wiki/English_rule_(attorneys_fees)) system, this will never happen.

$1,000 per employee is the most bogus request I've ever heard in my life. Even if the concept were patentable, I'd say a reasonable demand would be $1 per Internet-capable scanner sold.

The patent trolls should really read Joel Spolsky's guide on pricing enterprise software. Saving $200,000 is worth hiring some lawyers to fuck you up. Saving $75 isn't.

The people behind these scams have to use legal services as well. They do have to pay in some way for each letter that goes out. There's definitely a "sweet-spot" in the pricing which maximizes the ratio of intake to expenditures. I would bet that they and other patent trolls have found that sweet spot long ago.

I was under the impression that some of these patent trolls are really just a collection of lawyers. If they're doing their own work, instead of getting an outside firm to do it, their costs should be much less.

I've long had the opinion that situations like this (as well as Intellectual Ventures) are the lawyerly version of hacking. They're just trying to find free lunches in the system the same way that MIT computer heads 50 years ago were trying to disable timeshare accounting for their usage.

Even so, if they hit up the victims for $100 instead of $10000, they'll need to send out far more letters, and deal with far more targets who simply ignore the letters. IANAL, but I believe it does cost money and time to actually file a lawsuit and/or compel the targets to do things like pay up under penalty of law.

Note that in the majority of cases, they don't file a lawsuit. Their business model almost certainly depends on that. You're right, of course, that their volume would have to increase, but I'm not ready to immediately dismiss the notion that their current tactic is not the most efficient.

By defining costs that way you do bring down the overhead, i.e. what they have to pay up-front, but not necessarily the actual costs.

If I am a lawyer doing my own patent trolling, and that takes up 10 hours of my time that I could otherwise have sold to someone for $x/hour, then $10x is a cost associated to the patent trolling, even if I didn't actually have to transfer that money to someone else.

IANAL, but I'd guess that the license pricing in their demand would play into the potential damages assessed by a suit later.

Once they admit that the patent is only worth $75 to a business, then how would they sue for $200,000 later?

Treble damages? $225?

I think the point Jon's making is that a business is a lot more likely to swallow a $75 fee than a $200,000 fee. If you hit me with a $200,000 licensing fee I'm a lot more likely to hire lawyers to retaliate and really make you work for it.

Oh, I get his point - but you can't forget that there would be two sides to that coin.

If I get hit with a $75 licensing fee, I throw it away knowing that the worst that can happen is that I'll owe $225 down the road.

The fee has to be small enough so that someone will pay it, yet big enough so that the victim company thinks you might sue them to collect it.

I would be surprised if the majority of people follow your example.

Sure, but now you're anchored [1] at $1000/per. Some fools might pay it, and many more will be relieved when the law firm offers to settle for something much lower. That lower amount being how much they were really intending to shake you down for all along.

http://en.wikipedia.org/wiki/Anchoring

I find it extremely dubious that you could actually infringe on a patent merely by using a consumer product. Disregarding this particular patent, is that sort of claim actually grounded in fact?

Well, if the product's manufacturer has licensed the patent, then the "exhaustion doctrine" generally keeps the patent holder from taking a second whack from people who bought it. That's what ordinarily shields end-users of consumer products from this kind of nonsense.

If the manufacturer hasn't licensed the product, though, the users may well be fair game, in the eyes of the law.

But end users generally don't know and have no way of knowing what technology is inside a product. That seems pretty sketchy. While it's true that unintentionally infringing on a patent is not an excuse, if I'm liable for someone else's infringing without my knowledge my potential liability is completely unlimited.

Whether it's grounded in fact has never been relevant because the in-court legal costs will far outweigh settlement -- that is the business model of patent trolling.

One simple reform to the patent system would be to force an automatic review of any patent involved in a lawsuit where the patent might be rendered invalid before the court needs to weigh in on the matter.

Right now the court needs to decide if the patent is enforceable, which seems like it's basically doing the job the patent issuing entity should've done in the first place.

Yes! I love this. If we can reduce the cost of defending these we would eliminate them without needing anything else.

> the only variations are the six-letter name of the shell company and the royalty demands

This sounds a lot like the automated, python-scripted corporations in Stross's Accelerando.

Would that make these literal shell companies?

Major root cause that could be fixed without hurting anyone other than patent trolls: the relatively anonymous registration of patents. If I'm being threatened with a lawsuit for patent infringement, how can I not find out the owners of the patents? That is crazy.

If you want to leverage a patent, you should have to be registered with the patent office so that you can be held accountable. Anyone using a patent for legit reasons wouldn't be hampered by this, but it would make hunting down patent trolls a whole lot easier.

Plus if these patents are so valuable, then it would be nice if their sale from one shell company to another had tax implications. Once a licensing campaign has been initiated for one shell company, that should put some idea of a value on the patent(s).

If you can be assessed taxes for options in a company that isn't public that you have no way to exercise, selling assets from one shell company to another should have tax implications as well.

Maybe that would limit the creation of mazes of ownership of these patent portfolios.

I really like the idea of relating the value of a patent to the registration cost. If the patent is giving you $10 million a year in income, you should have to pay more for that right than if it brings you $10,000 a year in income. At least then we would have a list of patent holders and how much they are making from licensing.

Presumably you're already paying taxes on the income.

If you're a landlord, you pay taxes on income and property. There's no reason to think that being subjected to taxation in one form exempts you from all others.

Absolutely agree. Patents grant you exclusive rights on public knowledge, much the same way a deed gives you exclusive rights to a piece of property. People are forced to pay property tax equivalent to its value for that exclusive right, patent holders should have to do the same.

Furthermore, valuing patents and taxing them accordingly help create a feedback loop that can help in determining reasonable licensing costs or damages for infringement.

But how would that work if you are some poor Joe Schmoe who discovers the next billion dollar idea? How does he manage to pay for the patent before going to market?

Perhaps a better option would be a hybrid of the current system and what you're proposing. Say, a flat fee for the first 2-5 years, and then an option to renew the patent through the current length of a patent (20 years, i think) for x% of the gross profit of the previous year due services/products covered by the patent.

He doesn't have to pay any tax before going to market - in the first year there is no revenue so the licensing is cheap. At subsequent intervals - say every 2 years - you report the revenue and pay your "intellectual property tax" based on the revenue over that period.

The registration costs would need to be non-trivial to discourage abuse, which would harm legitimate small-scale innovators. Also, who decides (or validates) the "worth" of a patent? We would be replacing one regulatory nightmare with another.

I think it would be awesome but it will never happen.

You claim a value for your patent. It is treated as property and subject to tax if transferred from one entity to the next. The catch is that you can only sue for a certain percent of the claimed value. You can change the claimed value of your patent, but then you must pay a tax as if that was earned income. You would have to be allowed to set your initial claimed value of the patent at whatever you wish. Kinda the same way that when you start a corporation you can decide how many shares you have (like 1.000 or 10,000 or 1,000,000). But once that is set you can't just change them around without registering the change with the state.

In theory it would punish people who transfer patents a lot, but have almost no affect on people who register or hold onto patents. Since trolls thrive on shell companies, it would be very expensive to constantly transfer high-value patents.

The value of the patent is your income stream from licensing that patent.

If 50 states can figure out how to track every single car in existence I think the federal government can keep track of patents. Especially because you already budget tens of thousands of dollars and hiring a lawyer to get a patent registration as is.

Agreed, and then any accusations of infringement that the patent holder makes must also be registered with the patent office, so that defendants can see who else is being extorted.

That'd be great. My proposed fix: substantial use. You can only file a patent lawsuit if you are actually using, in some non-trivial way, the technology described in the patent as part of a shipping product or service.

You also should have at least 10 employees. That should help eliminate the shell companies that like to troll.

In my experience, these places don't actually make any money, so fear not. I did some database consulting work for a company that was in a similar business a few years back. They wound up shutting down after about six weeks because no one bothered paying them. Out of more than $12 million in demands, they received less than $4,000 after sending their first batch. That was when they decided to shut down. I suspect something similar will happen with these guys and anyone that follows them.

Why the heck aren't the hardware manufacturers stepping up on this one? Why should I pay HP/Xerox/Canon/Ricoh thousands for using their manufactured hardware when it does not cover the ability to use it?

I realize being a hacker news reader/tech person means I would know better, but wouldn't some of these people think to themselves "Why isn't this cost included into the hardware?". And why aren't the manufacturers that profit from this type of hardware stepping up as it has the chance to discourage people from buying their stuff.

Maybe I should do an AMA on my work for a patent attorney. It would get boring because his MO seems to be to only sue companies that negotiate license deals in "bad faith", and nowhere near the frivolous action seen in here. Most of his work is in filing patents.

The last conversation we had was actually about supporting the EFF, so I'm sure that is quite telling to what direction we're heading.

It strikes me that one root cause of the patent troll problem, besides unscrupulous trolls and their evil lawyers, is idiot patent examiners who would allow patenting the process of drinking a cup of coffee of morning if there was no prior art on file on the subject.

It all comes down to incentives. Good patent lawyers know they can make big bucks working in private practice (possibly for trolls), whilst mediocre ones happy with a government salary go ... where else? ... the USPTO.

Do you have any facts to back this up? The one patent examiner I know is very smart. But he's also part of a rigid system with very clear criteria.

If there's a problem, I suspect it's a systemic problem.

Could someone (or has someone already tried to) patent the process of patent trolling? I know that such a patent shouldn't be granted because the idea obviously isn't original but it seems as though there are so many bogus patents sneaking through the cracks that it could be possible. It would be nice if there was someone you could call to troll the trolls.

Strangely Halliburton seems to have done this:

http://blogs.wsj.com/law/2008/11/12/halliburton-patenting-pa...

What did happen to this application? Accepted or dismissed?

Surely there's been prior art.

Simple patent sending paper-based communication that is enveloped in a paper casing.

ObUserfriendly: http://ars.userfriendly.org/cartoons/?id=20030301

Now we know the format of the letters I'm waiting for anonymous to send a bunch of letters to every member of US legislature.

Actually, it should be sent to their re-election campaign committees; legislators themselves are considered members of the government, and would not be considered businesses in their own right. Whereas their campaign comittees are heavily regulated businesses that get lots of financial scrutiny and are very short of cash usually.

Although that is a dangerous precedent to set; once you start using that sort of tactic, it will become yet another way for big business to lock out candidates they don't like and would have an overall chilling effect on participation in the political process.

This is just disgusting. Well, here's their contact, facebook, and twitter information if anyone wants to get in touch with them for services! Contact: http://www.hkw-law.com/contact Facebook: http://www.facebook.com/hkwlaw Twitter: https://twitter.com/atllawfirm

We got hit with one of these letters. I read through it and it was clear that we weren't actually infringing -- it only applied to the use of distribution to employees via the scanner. Luckily that functionality is pretty much impossible to make work on the Brother MFC that we have. We had our lawyer send back a note saying that we weren't infringing and that was the end of it. My guess is that showing that you are actually paying attention and have a competent attorney is a good way to avoid getting victimized (at least some of the time).

I'm not fully certain and I would love some verification/counter-argument, but wouldn't the new Public Use Anywhere in the World aspect invalidate atleast some of the garbage patents like the one discussed in the article? http://www.forbes.com/sites/forbesleadershipforum/2012/11/15...

Not really. The difficulty of invalidating the patent isn't the real barrier to standing up to these sorts of legal threats. The real barrier is that whether you win or not, it costs $100,000 or more to be sued in a patent lawsuit.

Here are your choices:

(A) Pay up. The extorting patentholder charges you $80,000.

(B) Hire a lawyer to defend you in court. The lawyer charges you $100,000. You also might lose and have to pay damages.

(C) Defend yourself in court without a specialist patent lawyer. Unless you ARE a specialist patent lawyer, you are guaranteed to lose. Pay triple damages plus lawyer fees -- actually, just pay everything you own and go live on the street.

Which would you choose?

And note that C is only an option if you are being sued as an individual, if you are being sued as a corporate entity you cannot defend your company pro se, you must retain a licensed attorney.

Right... good point.

I don't know about the different kinds of patents, but shouldn't the printer manufacturers be paying up licensing fees?

The letter from the patent trolls actually explains why they don't do that (the real reason is probably because it's easier to get a 30 person small business to pay up instead of a giant corporation with a retainer of lawyers).

The clock is ticking for these patent trolls, scanners will soon become completely useless (posted on HN yesterday) http://techcrunch.com/2013/01/02/google-expensify-paperless-...

Couldn't someone end this by gettingt a business process patent on patent trolling?

Doesn't help if you can't find the correct shell company to serve with the lawsuit.

Prior art.

I'm on the edge of my seat waiting for them to send one of these extortion notices to the wrong guy who will get enraged enough to shoot up their office.

I wonder if a chain of such shootings would set a precedent for change.

That would be way too expensive, I'm sure they hold a patent on a method on expressing customer dissatisfaction via chemical reactions to convert chemical energy into kinetic motion.

How would that one individual even find them? PO boxes and a "legal department call center" are all that seem to be given and it would seem difficult to track them down.

Crazy people... they get crazy. Camp out at the PO box and wait for someone to pick up the mail. Get a job at that UPS store location. Pay off one of the kid employees that work there to give you the name and address on file. Follow the person that picks up the mail home. Look up his information based on his home address. Collect all his trash, find out where he works. follow him to work. then wreak havoc on all his coworkers!

you are really not all that creative are you... :)

Well...it looks like I'm not going to be sending you any patent infringement paperwork (whether it is legit or not)! Although, for somebody who has just snapped and is going to wreak physical vengeance, I wouldn't put a normal thought process behind it. Which means you may not be able to count on logically thinking and finding these people.

Mentally ill or "crazy" people may still be able to think logically. Having experienced psychotic episodes that included planning "bad" things, I can assure you it did not interfere with logical planning. Recounting it later, the clarity of thought was quite clear, disturbingly. The Unabomber is a well-known example.

Someone's goals, utility functions, and even certainty values for some beliefs may be very different than "normal", but it doesn't mean they aren't able to reason logically within those constraints.

or just pay a private investigator to do all that for you.

Is it legal?

Certainly. It's what you do after that's problematic.

It is amazing how much rage a story like this can produce in people who work in non-legal professions. The law-firms involved, of course, don't see it that way. This is just work for them-- although I can't fathom how they can sleep at night making a living by being what amounts to a parasite.

I've worked in a situation where I believed that what I was doing was fairly unethical. I wasn't sending out bogus legal threats, but I was doing development work for a company I consider flat-out evil.

I dealt with it by donating all the money I made during those hours to a relevant charity. It helped.

Might need to donate more - for every $1 you got paid, the evil company received more than $1 of benefit. ;)

Well, I guess that's why nobody likes lawyers.

Right, let's call for violence. Violence will solve the problem. There's nothing wrong with shooting people who's legal business practices you disagree with.

Maybe it can be done in a Stand Your Ground state. I'm sure that the patent trolls won't mind, as long as it's "completely within the bounds of the law," just as their business is.

I think you misunderstand what "stand your ground" laws are actually about.

It was a joke, mod me down accordingly if you like.

Your sentiment has been logged and cross-referenced in our classified database for the betterment of current and future society.

Yet another patent troll nonsense. Who needs scanners anyway... maybe people will come to their senses and stop printing signing & scanning... a waste of paper, energy and precision!

It would be interesting to see if you could pursue a case of legal malpractice against the firm which took this case to the patent office in the first place.

The present-day patent office is a joke. They basically just rubber stamp whatever you send them, and do so in priority order of who knows how to play their elaborate and bizarre game of approval queue gaming.

On what grounds? That law firm successfully obtained a patent which (even if later invalidated) resulted in revenues for their client (the extortion money). That is not malpractice, it is SUCCESSFUL practice -- and more so if the patent is highly questionable, as it may have been the legal firm's skill that resulted in the patent being issued.

On the same grounds that lawyers are sanctioned for bringing frivolous or extortionate lawsuits.

I think you bring a poor strawman to the debate, its not a question of whether or not the lawyer was successful, its a question of whether they were working toward the betterment of the system. For example. doctors may be sued for malpractice for performing surgeries that are unneeded even though the surgery is completely successful. They violate the terms of their licensing in the state where they practice by doing so.

My point is that there are many ways to mitigate the perils of the patent system without destroying it. One is to make abuse of it to have some cost.

So a proposal might be like this [1]:

To prosecute a patent (represent an inventor as their attorney in the application process) requires licensing by the patent licensing bar. That license states that willfully bringing a patent before the commission that is found later to be invalidated, and such invalidation shows negligence on the part of the prosecuting attorney, that attorney or their firm, is co-liable for any charges or court costs incurred by the folks who invalidated the patent.

It would also be interesting in public shaming of people who claim to have 'invented' such preposterous things. That is a much more social thing though.

[1] I'm not a lawyer, and I know it doesn't work like this today, its a proposal to make it 'painful' to try to game the system as a lawyer.

Ob. SMBC

http://www.smbc-comics.com/index.php?db=comics&id=2761#c...

Politicians aren't going to do anything about patent trolls until politicians start getting threatened and/or sued by patent trolls.

honest question - does the united states not have barratry laws? why do they not cover cases like this?

So who has the patent on patent trolling?

IBM: http://appft1.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Se...

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