Fighting patent trolls is the new slogan for the do-gooders waging war against the intellectual property pirates who are sapping innovation from the U.S. economy. You hear it from benevolent technology companies and Washington insiders alike, but there are more than a few in Silicon Valley who are walking a fine line between playing the virtuous corporate citizen and maintaining the bottom line.
It’s a paradox that leaves open the opportunity for so-called trolls and other ill-intentioned actors to continue to abuse the broken patent system far beyond the Bay Area and D.C., across the United States and internationally.
According to the Houston Chronicle more than half the patent infringement lawsuits filled in the second quarter of 2015 within the United States were filed in federal courts in East Texas. A record 1,656 new lawsuits alleging patent infringement were filed in the same period — and again, an astonishing 839 of them were in East Texas. Why are Silicon Valley’s nemesis patent trolls flocking to the Lone Star State? Judges there have experience in high-volume litigation and are able to move cases quickly to trial — meaning the lawyers as well as the litigants get more money, faster.
If this is the case the grand efforts of the do-gooders on both coasts have failed to put a dent in the patent system’s bad actors and have taken no real action to help the thousands of businesses affected by this frivolous litigation.
The trolling business model has inevitably been legitimized by the courts in suits involving private companies asserting patents. It has reached the point where it is disrupting competition and wreaking havoc on the marketplace by forcing real technology companies to litigate with entities whose primary purpose say some is extortion rather than innovation. This sort of shady action can take place outside of the courts as well, as is true with the evolving phenomena of third party “privateers.”
Patent privateering is the practice of operating firms transferring patents to non-practicing entities in order to bring patent litigation against their rivals. Often times this appears to be businesses purchasing patents from technology companies and then filing infringement lawsuits against those in competition with the companies making the sale. Companies like Nokia, Apple, Ericsson and Panasonic are often thought of as pioneers working to battle trolls in the technology industry but the regrettably also bear similar signatures to patent privateers, working with no-name “innovation” firms to play both sides of the market.
For example, Nokia once was the leading global manufacturer of mobile phones. The company maintained almost its entire patent portfolio when it sold its manufacturing arm to Microsoft back in 2013. With this transaction, Nokia became a non-practicing entity itself — but also sold a good deal of its patents to other small players in what is called the patent assertion space. It was an elegant piece of corporate sleight of hand that allowed Nokia to use the guise of other companies to make money dually on patents for products they no longer produce. Nokia does not limit themselves to this sort of scam in just their native Finland; they’ve have repeatedly done this to U.S. companies as well.
While Silicon Valley is supposedly banding together to fight patent trolls there must be a continued effort across the entire system to reduce the negative effects of assertion entities of all shapes and sizes. It’s important these efforts be weeded out rather than given comfort and a warm welcome in places like the federal courts in East Texas where they have become bread and butter for too many. One of the first major challenges will be for lawmakers to incorporate all types of patent abusers, including privateers, into legislation to reform the patent system, if we hope to preserve the integrity and competition of private companies and intellectual property in the future.
Peter Roff is a former political analyst for United Press International who now provides commentary on public policy issues for One America News.