Stop the trolls

Tuesday June 25, 2013

There aren’t many things more American than working hard and succeeding, but perhaps one of those things is doing as little as possible and getting rich.

Setting aside the cult of celebrity that enriches the famous for just being famous, the most recent example of succeeding while doing as little original work as possible is something called a "patent troll."

Patience Wait, writing for Information Week, described patent trolls as companies that buy small or struggling firms in order to obtain the patents they hold, and then embark on a string of lawsuits against other companies that may use aspects of the patents in their own products. Trolls typically do not produce any products that use the patents they own.

For many in the information technology industry, patent trolling is nothing more than intellectual piracy, noted Wait.

The official name of a patent troll is "Patent Assertion Entity," which is nothing more than a company whose business it is to take people to court and, Wait noted, while a PAE’s claims may not be true, many companies would rather settle out of court than spend years in litigation.

In the past, patent trolls targeted tech startups, but in recent years they have been expanding their scope to include mobile device application designers, retailers, hotels and even coffee shops, said Edith Ramirez, chairwoman of the Federal Trade Commission, at the National Press Club on June 23,

Mike Wheatley. writing for siliconANGLE, noted when something as mundane as using Wi-Fi in a coffee shop or making an online purchase with your smartphone provokes a lawsuit, "It’s clear that the legal system is seriously flawed. Unfortunately, that’s the way things have been in the U.S. for a number of years now ..."

According to a recent White House report, PAEs are responsible for 62 percent of all patent-infringement lawsuits, up from 29 percent two years ago. It’s no wonder the intellectual property industries are being targeted by unsavory firms out to make a buck off of other people’s work -- they were responsible for 35 percent of the U.S. GDP in 2010, or more than $5 trillion.

"They also represent 60 percent of all American exports and more than 40 million jobs, directly and indirectly," noted Wait.

Earlier this month, the Obama Administration issued several executive orders mandating government agencies educate and protect small businesses from PAE attacks. The goal of the White House Task Force on High-Tech Patent Issues is to crack down on frivolous and predatory litigation.

The administration’s recommendations and executive actions followed in the wake of the Leahy-Smith America Invents Act. Sponsored by Vermont Sen. Patrick Leahy and Texas Rep. Lamar Smith, the act is the first in a long, long time to attempt to overhaul the United States’ antiquated patent law.

And recently, Oregon Rep. Peter DeFazio introduced the "Saving High-tech Innovators from Egregious Legal Disputes (yes, SHIELD) Act," which would create a "loser-pays" system to help stem frivolous lawsuits intended to be settled out of court.

But there’s evidence the PAEs might have bitten off more than they can chew, because by attacking application designers, they are stepping on the toes of tech giants.

"When, for instance, Lodsys sued seven small firms, claiming the apps they design for Apple iOS and Google Android infringe Lodsys patents, that troll was picking a fight with Apple and Google themselves simply because those giants rely on small developers to build smartphone apps," wrote Richard Levick for Forbes. "The trolls have managed time and again to tick off just about everybody."

It’s not just the giants they have provoked, noted Levick.

"The trolls have also aroused the ire of powers like the National Retail Federation."

"Small and medium-sized retailers are .... being threatened and sued, and they are seen as easy prey because they don’t have the legal expertise or money to easily fight back," Mallory Duncan, the NRF’s Senior Vice President and General Counsel, told Levick.

And if you listen to podcasts, some of your favorites could also be under the gun.

A Texas company, Personal Audio, holds a 2012 patent for a system for disseminating media content representing episodes in a serialized sequence and a related 1996 patent for an audio program player including a dynamic program selection controller, wrote Grant Gross for IDG News Service. In April, Personal Audio filed lawsuits asserting its podcasting patent against NBC and CBS, and in January, it filed lawsuits against ACE Broadcasting Network, and TogiEntertainment.

"A podcaster working out of a garage is unlikely to have the financial resources to fight a lawsuit," Daniel Nazer, an EFF staff attorney, told Gross. "Patent trolls like Personal Audio know this and use the threat of ruinous litigation costs as a weapon."

The Electronic Frontier Foundation and the Cyberlaw Clinic at Harvard University’s Berkman Center for Internet and Society are taking the fight to the public by asking people to identify examples of ideas similar to podcasting that were published before Oct. 2, 1996, noted Gross.

EFF and the Cyberlaw Clinic are using components of the America Invents Act to fight back.

Of course, the patent trolls are quick to defend their actions.

Robert Berman, CEO of CopyTele, told Wheatley his company helps to protect the "little guy" from larger corporations that often try to take advantage of individuals and smaller companies.

"In today’s economy, it is nearly impossible for a small company to bring products to market on its own," Berman said. "Instead, it is often necessary for the company to ‘partner’ with a much larger company that has manufacturing and distribution capabilities. Because of the difference in size and power between the two companies, these ‘partnerships’ are often one sided, with the larger company attempting to take unfair advantage of the small company."

Berman told Wheatley that companies like CopyTele buy up patents from small inventors, giving them an opportunity to make cash that they’d probably never have by going it alone.

However, wrote Wheatley, various studies have concluded that companies such as CopyTele harm innovation.

"One study in 2011 went as far as to claim that patent troll suits cost US corporations around $29 billion a year in legal fees."

It’s too bad there are lots of less-than-ethical people out there looking to make a quick buck off of someone else’s work, but truth be told, that’s as American as, well, apple pie.

The Reformer urges its readers to support the Electronic Freedom Foundation and the Cyberlaw Clinic in its battle to protect podcasters. We also urge our readers to encourage Congress and the Obama Administration to do more to protect America’s IT industry against spurious attacks designed to do nothing more than cow an innovator into handing over a check to someone who doesn’t deserve it.


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