Strategies to Combat Patent Trolls and Protect Innovation

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Strategies to Combat Patent Trolls and Protect Innovation

By The Fatty Fish Editorial Team - June 7, 2023

A patent troll refers to a person or entity that acquires patents solely for the purpose of enforcing them against alleged infringers, often using aggressive legal tactics. Their main strategy is to extract licensing fees or settlements from companies by threatening or filing patent infringement lawsuits. Patent trolls do not produce or market any products or services based on their patents. Instead, they exploit the legal system and the complexity of patent laws to their advantage. They often target small and medium-sized businesses that may lack the resources to engage in lengthy and costly legal battles, forcing them to settle.

Many companies have filed for bankruptcy while fighting a patent infringement lawsuit in court. Others have had financial problems while paying costly licensing fees to patent trolls, and sadly each time a patent troll gets paid, whether through court judgments or licensing fees, more trolls seem to copy their success. In July 2016, Apple paid Network-1 Technologies $25 million to settle a patent infringement lawsuit. The same patent was the topic of a $625 million lawsuit only a few years earlier before Network-1 Technologies bought the patent.

Patent trolls have a negative impact on innovation and the economy because they divert resources and attention away from actual research and development, and instead create a climate of uncertainty and fear for companies, hindering their ability to innovate freely. There have been some efforts to address the issue of patent trolls. These include proposed legislative reforms to strengthen patent law and discourage abusive practices. Additionally, the US Patent and Trademark Office (USPTO) has implemented various initiatives to improve patent quality and streamline the patent litigation process. Here is a series of opinion pieces we found of interest regarding the impact of patent trolls and recommendations to fix the patent system.

Protect the Supply Chain From Patent Trolls Before It’s Too Late

In an opinion piece, “Protect the Supply Chain From Patent Trolls Before It’s Too Late” for Bloomberg Law, Michael Carrier, Rutgers Law School professor and Alex Moss, executive director of the Public Interest Patent Law Institute, argue that a Department of Justice (DOJ) decision on wireless technology patents is hurting consumers. The authors believe the DOJ should reconsider its findings in the case of Avanci, which was open about its intention to offer licenses exclusively to car manufacturers, and refuse all other industry participants, including manufacturers of the components that enable wireless connectivity. They claim this scheme overtly violates the pool members’ obligations to license standard essential patents (SEPs) on fair, reasonable, and nondiscriminatory terms, also known as FRAND.

The authors stress that the urgency for action by the DOJ is clear with the current supply chain crisis. The Covid-19 pandemic caused a severe shortage of semiconductor chips, which was further exacerbated by Russia’s invasion of Ukraine. The challenges faced by the semiconductor industry are substantial, and its output is crucial. To support domestic manufacturing of chips and related technology, Congress has authorized over $50 billion. The last thing manufacturers, employees, and consumers need is for Avanci to add more risks, costs, and uncertainty to the situation. Read the full article on Bloomberg Law.

It’s Time for the U.S. to Tackle Patent Trolls

Writing an opinion piece “It’s Time for the U.S. to Tackle Patent Trolls” for Harvard Business Review, Max Baucus, founder at Baucus Group, argues that patent trolls pose a significant economic challenge in the United States, impeding progress and innovation while imposing burdensome costs on companies in terms of both time and money. He feels that the current Director of the USPTO, Kathi Vidal, has the chance to promptly address this issue and bring about significant enhancements to the functionality of our patent system, thereby promoting innovation in the U.S. This opportunity involves the reversal of a rule implemented by the previous administration, which created obstacles for companies targeted by patent trolls to utilize the services of specialized expert judges.

According to Baucus, Director Vidal’s initial action should involve the complete annulment of the NHK-Fintiv rule, which was wrongfully enforced by her predecessor. This rule imposes additional challenges for inventors who are targeted by patent trolls to access the expertise of judges at the USPTO in determining the validity of the patent being asserted against them. These specialized judges play a vital role in providing businesses and innovators with a more cost-effective and dependable alternative to litigation when facing patent trolls, so restricting their utilization represents a regressive move. Read the full article on Harvard Business Review.

The Fatty Fish Editorial Team

The Fatty Fish Editorial Team includes a diverse group of industry analysts, researchers, and advisors who spend most of their days diving into the most important topics impacting the future of the technology sector. Our team focuses on the potential impact of tech-related IP policy, legislation, regulation, and litigation, along with critical global and geostrategic trends — and delivers content that makes it easier for journalists, lobbyists, and policy makers to understand these issues.