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The EFF Horribly Misunderstands Patent Trolls

The purpose of a patent is to provide an income to those who produce public goods like knowledge. ~The argument being that without the invention of this form of property then public goods like knowledge will be underproduced.

Someone who insists upon being paid for a patent is not, therefore, a patent troll. They are, instead, someone using the patent system as it is meant to be used. Producing an income stream from having procued that public good, the knowledgte, that is being charged for.

At which point the EFF’s whining here rather falls down.

Imagine this: a limited liability company (LLC) is formed, for the sole purpose of acquiring patents, including what are likely to be low-quality patents of suspect validity. Patents in hand, the LLC starts approaching high-tech companies and demanding licensing fees. If they don’t get paid, the company will use contingency-fee lawyers and a litigation finance firm to make sure the licensing campaign doesn’t have much in the way of up-front costs. This helps give them leverage to extract settlements from companies that don’t want to pay to defend the matter in court, even if a court might ultimately invalidate the patent if it reached the issue.

That sounds an awful lot like a patent troll.

The reason this sounds like a patent troll is because this is the way that EFF defines a patrent troll. Someone who gathers up patents in order to enforce them is, in the eyes of the EFF, a patent troll. But this is not in fact true, as I’ve said before:

My apologies but this just isn’t correct. Patent trolls exist, yes, patent trolls are largely non-practising entities, yes, but it does not therefore follow that all NPEs are patent trolls. Let me take a hypothetical example. We have a university (we might call it “Harvard” for example) where professors and students create a new drug with interesting properties. They patent it. This is actually the sort of thing that happens quite a lot actually, small research organisations (whether universities or not) find something of interest. They’ve absolutely no intention whatsoever of trying to take that drug to market though. Not when it costs $1 billion to get a new drug through the FDA they’re not going to. So, they licence that drug to a pharmaceutical company that agrees to do all of the testing.

Harvard, or the little corporation Harvard sets up, are clearly an NPE here. But they’re in no manner a patent troll if they do end up suing someone for breaching their patent. And that’s where I spot the error in this paper. They’re simply not distinguishing, as they should be, between NPEs and patent trolls.

Sadly, the EFF continues to make this mistake. Even a kombinat – as here – of patents from different universities that really is an NPE still isn’t a patent troll. It’s a patent licencing organisation.

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TD
TD
1 month ago

Patent trolls do have upfront costs in that they often pay to acquire the patent. Not every deal would be “on the come”. If their issue is with “low-quality patents of suspect validity” then isn’t their concern really with the patent office? This really isn’t all that different from those who complain about investors buying up distressed debt from its holders (often the original lenders) and then trying to collect. Someone doesn’t have the resources or inclination to license or enforce a patent or even to collect a debt so they engage with a third part to take this on.… Read more »

Charles
Charles
1 month ago
Reply to  TD

There’s a difference between selling your rights to something and engaging an agent to exploit them. If you’re a landlord, for example, you can pay a letting agency to find, vet, and manage tenants – you don’t need to do the work yourself and you don’t need to sell the property to the agency. It would be entirely possible to have the law state that only the inventor (and their heirs after death) could hold the rights. Another big problem with patents is that a product might use many of them. It’s like needing to buy 100 houses to demolish… Read more »

TD
TD
1 month ago
Reply to  Charles

Perhaps, but ultimately isn’t this an issue to take up with the authority granting the patents – that they are granting patents they shouldn’t?

Charles
Charles
1 month ago
Reply to  TD

That’s part of the problem. But there’s also the problem of situations where acquiring rights to 100 patents is worth $1,000,000 while acquiring any 99 is worth nothing.

Boganboy
Boganboy
1 month ago
Reply to  Charles

Must admit I wouldn’t sell my home. All the endless flow of junk from estate agents goes straight in the bin.

That’s why governments have given themselves the right to confiscate your property and pay you whatever they see fit. Otherwise no roads would be built.

As for patents, I do feel that giving IP a value for a limited period to encourage people to develop it is a good one. This being the case, I can see no reason why such rights should not be saleable to anyone who feels they can profit from them.

Charles
Charles
1 month ago
Reply to  Boganboy

Governments such as those in the UK and USA have. China has done the opposite – leading to the newly named “nail house” which is where someone refuses to sell and ends up in the middle of a development site.

BlokeInTejas
BlokeInTejas
1 month ago
Reply to  TD

A patent troll is by definition someone who acts in bad faith. If they’re acting in good faith, here meaning they believe their patent is valid and valuable; and that they have seriously looked at your product and are honestly convinced that you’re practicing their patent; and that they have lost money as a result, then they’re not a troll. But the situation is complicated by the fact that there are way too many patents issued for anyone to keep track of, and the likelihood is that any given tech product or component infringes tens or hundreds. This strongly suggests… Read more »

TD
TD
1 month ago
Reply to  BlokeInTejas

Patent troll has come to be defined as any an entity that specifically purchases patents they did not develop themselves to exploit them in some manner, and exploit means to charge money for their use. Those who object to suddenly having to pay have come up with the pejorative “troll”. It’s analogous to a “vulture” fund. Someone thinks they’re off the hook and then finds that they’re not and they’re hopping mad about it. But fundamentally, a patent gives someone something they own and others don’t, and you can (and should be able to) sell or lease out your property.… Read more »

Spike
Spike
1 month ago

Compare transactions that, taken as a whole, appear to be a sham whose basic goal is to evade taxes. Compare the town’s serial gold-digger. Legal moves can sometimes be executed with the intent to pester. In other areas we identify frivolous litigation without calling for a “solution” to the system of property rights.

dodgy geezer
dodgy geezer
1 month ago

If a patent is worth money then it can be bought and traded like any future. The traders are speculators, true, but that is somewhat better than trolls. The ‘non-ethical’ aspect of speculation would be a circumstance where the owner of a possibly valuable item is induced to part with it considerably below its reasonable valuation by trickery, asymmetric access to pricing data, or because they need the liquidity. Victorian melodrama is full of such examples. We talk about ‘unfair bargains’ in this context, and there is some defense against these in contract law… A ‘troll’, on the other hand,… Read more »

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