Is the underlying reason for this strategy the low costs of settlement, or the extremely high costs of lawsuits? What if the value of a patent really is only a few thousand dollars?
Note that this very tactic is used by big companies to avoid licensing valid and useful patents owned by smaller entities. Licensing discussions often begin with the potential licensor saying "sue me", or these days, outright suing you first with a Declaratory Judgement. Can an individual afford to take on a large company? Trolls appear to simply be a symptom of this disparity in the market.
What about the situation with east Texas where they side with the patent holder the majority of the time?
Under this I might almost be more likely to just settle. Do I pay nothing, a paltry sum to settle, or 2-4x the cost without "loser pays" to lose? If I have even a 10% chance of losing it sounds like settling might be a good deal.
Not to mention that the costs to the losers the few times they win would really scare anyone who isn't able to eat the massive costs anyways. Would you sue someone from stealing thousands from you if there was a small chance at you owing them millions?
(I'm not an expert on the subject, but it's been discussed before on HN, and this is my recollection.)
It occurs to me that an interesting variation would be for the loser to pay an amount equal to the lesser of the two parties' legal bills. That would limit the risk, and remove the incentive for the deeper-pocketed party to spend money just to inflate the bill.
I am small troll A suing company B. I lose, judge orders that troll A pay all the legal fees. I don't have the money, I file bankruptcy, I flee the country.
Lawyers still want to get paid. I doubt any legal team will just chase some random around into collections because "loser pays"
I remember a comment a while back on HN or somewhere which suggested an approximate solution to this : the loser must pay the costs equal to its or the winners fees- whichever is lower.
Are there caps? Is one side prohibited from charging substantially more than the other?
I think it would somewhat depend on the judge's assessment of the situation, but I would think so long as you're acting in good faith they'd likely rule for you to pay whatever costs you can afford, and the rest would be covered by public finances.
It wouldn't surprise me to hear of judges deciding that the defence's legal team is grossly excessive and telling them they're not claiming for everything either, at least in the UK judges have quite a lot of leeway in what they can do in their own court room.
If the max cost of predatory practices isn't much higher than the gain from using them in the rare cases when caught, it creates an incentive to use such practices.
This isn't a complete economic argument in favor of companies behaving poorly. Punitive damages pale in comparison to a threat of loss of future business dealings as a result of poor behavior.
Japan, for instance, prohibits punitive damages. Is there any suggestion on your part that companies there are somehow more "predatory" than ones here in the US?
That fully depends upon how you simulate humans in one's argument. For a generally rational generally well informed human this is likely true (note I'm not even going with the 'fully rational fully informed'). But for the majority of consumers, there is less cost and there are ways to reduce the cost further. There will be some impact when the news breaks (if it breaks, the story being publicly available is a world of difference from the story being CNN/Fox New's headline of the day), but people will quickly lose interest or otherwise stop caring. While punitive damages may not be enough to fix the issue, I think there is an issue and I think the issue would be worse without them.
That is one of the problems, he who fronts the money expects to get the reward. Hence class actions where the lawyer who works on contingency gets millions and those wronged get a nickle.
1. You'll still get a significant sum if the total is significant (and if the case is open-and-shut, the risk wouldn't be too high for an investor, so you could get a favorable deal)
2. The infringing company would have to pay in full, which discourages them from doing it in the first place.
I guess I really want to know is if this actually happens in practice, or if there are reasons I'm not thinking of that stop it from happening.
What about paying into an troll insurance policy every month so that if a troll wanted to sue you they would see that you were protected and would fight the lawsuit with a giant pile of money. This might deter the troll from suing in the first place.
The biggest factor for that is not the validity of the patents, but the breadth and ability of the patents to be filed against "juicy" targets with a lot of cash. The cost of filing a suit is literally in the hundreds of dollars (I think ~$750) and most of these cases get settled out fairly early because of the immense cost of the defendants to complete the discovery process.
The selling out to a bigger player does happen, although since it's a distress sale it's often for a low value.
I'm paraphrasing, but 'Just assign your patent to [some group of investor/trolls] and they'll let you know if they can make anything of it.'
Patents do virtually nothing useful for small businesses/solo inventors. There are exceptions, but they are exceptional.
However to me this signals the possibility of an inefficiency in the market, and something that trolls leverage. Intellectual Ventures was reputedly originally formed to fix this gap.
This isn't common. See Jarg corp which was basically out of cash, then hired lawyers on contingency (with patents licensed from Northeastern University) then sued google. I think google paid northeastern in a settlement.
Though seriously, I think the term landmine is loaded toward using patents exclusively as a troll. A wider analogy could be like a toll bridge, where the builder should be compensated by travelers. Some tolls could be usurious, but that wouldn't invalidate the whole principle.
You run into a lot more useful ones at the intersection with the physical world where some protection lets a company get a chance to be the first one to market and reap some benefit.
In some industries (Pharma) it's really the only practical approach due to the extreme development costs (easily over 1B$) and often cheap production costs.
Your impression is likely based on what you hear in a) tech media, which is largely supported by ads and hence welcome rage-views, and b) tech forums like this where open source is the dominant religion. But count how many times you've heard of a merit-less lawsuit, and compare that to the dark matter of millions of active patents out there. Forming opinions based on cherry picked examples is not a good idea. Better to look at empirical evidence.
I'll give you some numbers less than 1% of patents are ever asserted, and only a fraction of them make it to a trial. The vast majority of patents lie fallow because there is no demand for their technology in the market. Now does that look like a serious problem anymore?
The RSA patent held back crypto progress for decades. I don't know if there were any lawsuits.
Likewise for the GIF patent.
Still today patents on JPEG2000 are preventing its adoption.
H.264 patents slowed progress on web technology. https://en.wikipedia.org/wiki/H.264/MPEG-4_AVC#Controversies
The "dark matter of millions of active patents out there" is an apt description of failure. The constitutional purpose of patents was to disclose inventions that others could build on. If that purpose were being fulfilled we'd be browsing the patent database instead of all the places we actually go when we want to pick up a new technique.
Give concrete examples instead of vague generalizations. I just have an example of how the GIF patent actually provoked progress as it was used to sure people who were using it without remuneration to the creators.
Image compression experts say JPEG2000 is simply not used because it's just not enough of an improvement to make it worth the hassle. Patent issues are secondary. And note that patents did not prevent it from bruin developed in the first place.
H.264 patents did not slow down development of new technology, it just slowed adoption of existing technology (h.264) in a different existing environment (browsers) Would you really qualify using the same technology in a browser as a significant technical innovation?
So coming back to my challenge: Now that the RSA patent has expired in 2000, 15 years ago, what novel developments can you point to that you can say was blocked by the patent?
For one concrete example, anyone who worked on data compression outside of purely academic areas has been harmed, and by extension their customers have been harmed, by early software patents in that area. The LZW patent (infamously associated with the .GIF file format) and IBM's patents on arithmetic coding both rendered entire fields of computer science radioactive for years.
It's perhaps even more enlightening to spend some thinking about what life would be like if everything that could be patented under the incredibly loose standards of the USPTO was patented. It's safe to say you wouldn't be able to afford the computer or tablet you're typing on, nor the Internet service necessary to convey your thoughts. But this argument is also moot because neither of those technologies would be available in their present form, at any price.
Your impression is likely based on what you hear in a) tech media, which is largely supported by ads and hence welcome rage-views, and b) tech forums like this where open source is the dominant religion.
My impression is based on decades of work in the industry.
I'll give you some numbers less than 1% of patents are ever asserted
How many land mines ever explode? Does that make land mines a good thing? Patents are intellectual land mines, nothing more, nothing less.
http://eml.berkeley.edu//~bhhall/papers/HallHarhoff12_NBER_w...
Your example is not concrete. What you think of as "radioactive" could simply be researchers concluding that specific area was not worth exploring anymore. Here's how you can give a concrete example: Those patents have expired. Can you point to any new fundamentally significant compression technology that has since emerged that could have been thought of as being previously held back by those patents?
Now I can give a concrete example of how those very same patents caused innovation: When they sued people over lzw in gifs, that prompted people to develop alternate methods like PNG. Sounds like progress to me. Was it forced innovation? Sure! But that's always been one of the rationalizations of patents. People often don't innovate unless forced to.
>My impression is based on decades of work in the industry.
So let's get even more anecdotal: how often have you been unable to "advance the arts" due to a patent?
> How many land mines ever explode?
How many good ideas get ripped off with their creator getting nothing in return? If we want to be hyperbolic, I could just say "anti-patent people are just intellectual thieves, nothing more, nothing less"?
You're asking to assume patents are useful until proven otherwise, and waving your hands about cherry-picking, when in fact you'd have to cherry-pick pretty severely to find an example of a software patent which would stand up to an honest evaluation of its novelty. This is because software is not created by lone inventors having eureka moments behind closed doors—the state of the art is pushed forward primarily through massive collaboration. The vast majority of software patents only exist because software and mathematics are arcane topics that the patent office doesn't have the expertise to understand or the incentive to evaluate honestly.
Software patents and IP are not natural laws with inherent value. It is not for us to empirically prove their harm, rather they are specific legal constructs designed for the public good, and thus their good must be justified, not the other way around.
It sounds like you are arguing to abolish patents. The rest of the world is held hostage for under 1% of the patents issued? It doesn't sound like a serious problem to just do away with then all according to your stats.
Note that this very tactic is used by big companies to avoid licensing valid and useful patents owned by smaller NON PRACTICING entities.
Yes, big companies have a better track record against trolls. And yes, this unfair. But that doesn't mean trolls are OK.
Lawyers are expensive. Good lawyers are extremely expensive. There are also experts, investigators and consultants to hire. Everything about the process is expensive. It's very good that newegg is doing this because it helps everyone.
Their bias got so bad that even their typically anti-patent commenters called it out on one of their recent articles.
This is not true. Giants like Apple, Google and Microsoft get sued all the time. They face hundreds of troll lawsuits at any given time.
http://arstechnica.com/tech-policy/2014/02/apple-top-target-...
Mentions Google, Apple and Samsung (respectively 192, 191, 151 lawsuits over last 5 years). Microsoft has mentioned similar numbers, but I can't find a reference off hand. Google for "patent trolls target Microsoft"
That's great for Newegg, but it means that future trolls will skip them, and just go after the startups and small businesses that don't have the resources to fight a lawsuit on principal.
I'm not saying that what Newegg is doing is bad, or even that it doesn't help. I'm just saying that the publicity that they are seeking for it might end up working out well for them by getting people to stop suing THEM, but won't work well to get people to stop suing other, smaller businesses.
If a patent troll were to sue you for something you've implemented, and you knew that Newegg implemented it too, you'd have a difficult time getting Newegg to fund your defense I think. Unless the troll sues Newegg, nobody's going to help you out. If the trolls just avoid Newegg, they can still get their payout.
How about some sort of patent troll insurance that takes over your defense and sues to invalidate the patent? The insurance should cost a smaller amount of money than settlement would cost. The more companies have that insurance, the bigger the defense you can mount, and the lower the costs for everybody are.
The first person sued by the troll immediately takes it to court and wins, invalidating the patent, and ensuring that only one lawsuit will have to be fought and everybody else is safe.
Of course this could mean that a lot of people feel they don't need the insurance because someone else will invalidate the patent for them, but if the list of people and companies protected by this insurance is public, those without it will be the first to be sued. So eventually, everybody will want this insurance, and the trolls will be forced to take it to court every time.
There's got to be a business model in this.