The Daily Caller

The Daily Caller
              Harold McIlhenny, center, an attorney representing Apple Computer in the Apple Samsung trial, exits a federal courthouse Wednesday, Nov. 13, 2013, in San Jose, Calif. How much does Samsung Electronics owe Apple for copying vital features of the iPhone and iPad, such as scrolling and the "bounce-back" function at the end of documents? Apple says $380 million. Samsung counters with $52 million. The companies made their demands Wednesday during opening statements of a patent trial. At issue are 13 older products a previous jury found infringed several Apple patents. That previous jury awarded Apple $1.05 billion after determining 26 Samsung products had infringed six Apple patents. (AP Photo/Ben Margot)
              Harold McIlhenny, center, an attorney representing Apple Computer in the Apple Samsung trial, exits a federal courthouse Wednesday, Nov. 13, 2013, in San Jose, Calif. How much does Samsung Electronics owe Apple for copying vital features of the iPhone and iPad, such as scrolling and the "bounce-back" function at the end of documents? Apple says $380 million. Samsung counters with $52 million. The companies made their demands Wednesday during opening statements of a patent trial. At issue are 13 older products a previous jury found infringed several Apple patents. That previous jury awarded Apple $1.05 billion after determining 26 Samsung products had infringed six Apple patents. (AP Photo/Ben Margot)   

Congress’s Patent Reform Efforts Don’t Go Far Enough

Photo of Steve Pociask
Steve Pociask
President, American Consumer Institute

Wireless technology, services and applications are revolutionizing how consumers communicate, shop, work and get information. In the last year, mobile traffic grew by 81 percent, downloading speeds doubled to 1.4 megabits per second and mobile apps grew by 115 percent – 92 percent of which was downloaded at no cost to consumers.

In the U.S., the number of wireless telephone subscriptions currently exceeds the population, and 40 percent of households rely only on wireless services for telephony. Despite the rosy picture, however, the success of wireless broadband and apps is being slowed by abusive litigation practices employed by patent trolls that never intend to deliver a single product to consumers. These actions are extortionist-like attempts to garner excess royalties and payments, and potentially remove entire product lines from the shelves.

Trolling is profitable because it presents potential defendants, such as wireless device manufacturers, with two choices – settle up and pay or withstand a long and expensive legal battle. For consumers, this adds real dollars to the wireless products that they demand.

Some patent trolls are obvious. In less than 10 years, the number of defendants sued by trolls has increased 4-fold at an annual cost approaching $100 billion, and estimates are that one-third of startups have been threatened by trolls. While Congress is working on much needed patent reforms that it hopes will prevent this abuse, their actions may not go quite far enough.

Some patent abuse occurs when expired patents remain “active” because they are bundled into patent pools. This trick, in effect, makes consumers pay several dollars more for every television, DVD player, computer and smart phone – even though the majority of patents in the pool have expired. Congress is not looking at this form of abuse.

Other patent abuses are less obvious, but are nonetheless costly to consumers. For example, InterDigital has, according to many, pursued patent troll-like activities with its International Trade Commission lawsuit against Nokia, Samsung, and ZTE. InterDigital acts much like non-practicing entities (NPE), which develop technologies but do not make anything with them. It often claims its patents are Standard Essential Patents (SEPs), which means the patent is commonly accepted as the industry standard and is essential to the functionality of a wireless device. Once a technology is deemed an SEP, licensing fees must be negotiated under fair, reasonable and non-discriminatory (FRAND) terms to every licensee. However, the only way to dispute SEPs is in court, where patent trolls are taking their licensing disputes rather than negotiating fairly with licensees outside the legal system.

InterDigital, as some have observed, opts to subject manufacturers to costly litigation in an effort to force an unfair settlement rather than negotiate with licensees in good faith. In some cases, it pursues general exclusion orders in the ITC in order to prevent an alleged infringing company from selling consumers the products they want. This type of exclusions can be detrimental to both the defending company as well as the competitive marketplace, and ultimately consumers pay the price.