You all should know by now how I feel about the state of our patent system as it applies to the tech world. Given the patents awarded that absolutely shouldn't exist and the ridiculously broad and over-reaching scope of others, it's only a matter of time before they're weaponized to make a sleaze-dripping buck or push someone's competition back on their heels. Outside of these cracks that exist in the system in general though, patent trolls specifically hold a special place on my jackass list. I've railed against PacketVideo trying to hit Spotify with a lawsuit when US users were finally able to use the service, and outright CRINGED when I read and wrote about Paul Allen suing pretty much the entire internet. So for those of you that are new to this little song and dance I do or are reading up on this subject matter for the first time, let me explain what a patent troll is:
Patent trolls, the best way I can put it, are the ill-intentioned champions of "just in case," and dark masters of playing the long odds. They're folks that can hold patents on ideas, even if they have no intention of executing or manufacturing what's detailed in the patent. Instead, they wait. They wait for other engineers and inventors to develop something and then hit them with a lawsuit yelling “hey that was my idea!” In a lot of cases the patent holders don't even have the means to manufacture or create the idea they supposedly now own. Seriously, check the link at the top of the post on PacketVideo suing Spotify. You'll cringe just like I did.
Twitter, it seems, agrees with me. They have a track record of trying to be proactive with innovation and patents, as they are a company of engineers after all. Back in April their VP of Engineering Adam Messinger proposed the Innovator's Patent Agreement on the Twitter Engineering blog. And yesterday Ben Lee, Twitter's lead for litigation and IP wrote a little something for GigaOm sharing a patent troll case they just finished fighting off, what the costs are, and a possible method to fix the problem. The case involved Dinesh Agarwal, who came up with and now owns the patent named "Method and System for Creating an Interactive Virtual Community of Famous People" (U.S. Patent No. 6,408,309 for those who want to see). As Agarwal himself testified, he is himself a patent lawyer, has no experience in computer science or programming, and came up with the idea while he was at the grocery store. And that was enough to sue Twitter. So let's examine this for a second - (a) a self-admitted non-technologist that (b) has absolutely no means to design or create this virtual community that (c) was still awarded the patent. The case was eventually thrown out before a jury trial, but that's really beside the point. The USPTO issued 247,000 patents last year, a number of them being ridiculous. This means the means and opportunity for firing off patent salvos is at a crazy potential high.
The financial advantage fully resides with the party holding the patent here. Patents can be filed for relatively nothing, and as Mr. Lee notes, if you find a law firm that will work on contingency you get to file the lawsuit for free too. If you lose, no harm, and if you win, well then it's party time isn't it? And what about whoever's on the defensive? According to the American Intellectual Property Law Association (AIPLA)’s 2011 survey, their cost is anywhere between $900,000 to $6,000,000 to defend themselves, very little of which can be recuperated.
Now that's Twitter. They have the financial position to weather this sort of thing to a point. But what about patent trolls that target small companies and entrepreneurs? If I hold the patent on an idea with no means to create it myself, or I buy a portfolio of patents from another entity, then all I have to do is lay in wait and drill someone with a lawsuit when it finally happens. I can get a payout by doing no work and kill an entrepreneur at the same time. And that's totally legit by today's rules – not exactly the application of “two birds with one stone” that I like to see. What this kind of practice does is create an environment that handcuffs inventors and innovators. Not only does this environment hinder the entrepreneurial spirit, but also racked up costs of $29 billion in the US for 2011. That’s BILLION with a “B.” And for what? Ill-conceived hailmary exercises in frivolity. How willing can small tech startups to try and come up with something new with the fear of litigation hanging over their head? My guess is that it would negatively impact the process. The costs of having to defend against a patent troll can have a serious impact on cash flow - I mean let's face it, not everyone's a Twitter. If you were running a small startup, flushing all the cash you’ve received over a couple rounds of funding defending yourself from this kind of lawsuit could be a dream killer.
It looks like Congress is finally ready to step up and stem the flow of ridiculous lawsuits with the SHIELD Act proposed a few weeks ago. Now I know, given the content of my scribblings you’re picturing Nick Fury and any of the Avengers. While it does represent the same kind of heroics, the players here are a bit different. SHIELD, which stands for “Saving High-Tech Innovators from Egregious Legal Disputes,” is sponsored by Rep. Peter DeFazio (D-OR) and Rep. Jason Chaffetz (R-UT), and aims primarily to make filing useless lawsuits less attractive to patent trolls with a “loser pays” mentality by making a shift in the plaintiff’s risk/reward estimates. They propose that should a patent troll lose, that they be on the hook for the defendant's legal feels in full, nullifying the incentive to file suit for kicks, cranking up the risk and toning down any potential reward. This kind of law would definitely make a troll think twice before coming out from under their metaphorical bridge, knowing that they could be on the hook for another $900k to $6MM should they lose.
Given the legislative fiascos we’ve seen in the past two years involving tech, SHIELD is a welcome change of pace. The bill has the support of the Electronic Frontier Foundation, who call the bill a "moment of sanity" and something that can legitimately help. This is one bill I can wholeheartedly support, and a good step in shoving those trolls back under the bridge.