In order to understand our “Patent Troll Smackdown” series this month, you ought to know who the trolls are, and who’s trying to fight back against them. The term “patent troll” has been around for a while, referring to organizations that file – or occasionally license or acquire – vague, ill-defined patents, and then use them to sue (or extort licensing fees from) other companies impeding on these patents. Their official title is patent assertion entities (PAE), and they rarely develop the patents they hold which also makes them non-practicing entities (NPE).
As PandoDaily has reported in the first few stories of the series, organizations are fighting back against patent trolls and the debate is heating up in the US Congress. Six acts were recently introduced to fix the patent system.
A study out of Stanford says the term “patent troll” may have come from the Norwegian folk tale, “Three Billy Goats Gruff.” Researchers claimed it was coined, ironically, by a co-founder of the country’s biggest PAE — Intellectual Ventures. A troll makes three billy goats pay a price to cross a bridge. Adorable. But less adorable, and more exciting, is the version of trolls in “The Lord of the Rings,” where trolls try to eat their nemeses, so let’s go with that.
We need a name for the increasingly more vocal patent-troll fighters, and PandoDaily hereby dubs them “elves.” This is a rundown on all the major troll vs. elf players in the fight for patent Middle-earth.
1. Intellectual Ventures – Intellectual Ventures is considered by some to be the biggest player in the patent troll world. Founded by Microsoft’s former CTO Nathan Myhrvold, it was the subject of scrutiny in a 47-page article published in the Stanford Technology Law Review in 2011, and investigated in an hour-long “This American Life” episode a few months ago. Stanford researchers explained that the numbers behind Intellectual Ventures are hard to track, because they can hide behind shell companies and non-disclosure agreements with the companies they license patents to. But said researchers combed through thousands of documents from US Patent office records, IRS filings, and SEC data, and they came up with some approximations.
They estimate Intellectual Ventures has more than 1,200 shell companies that it hides behind. Intellectual Ventures has faced suspicions in the past that it was “double-dipping” by suing one company multiple times from different shell companies. Those shell companies have filed an estimated 11,000 patents as of May 2011, according to Stanford researchers.
2. Lodsys – Lodsys rose to infamy in 2011 when it began going after mobile app developers, marking what some said was the first wave of patent trolls targeting app developers (as opposed to device makers and operating system sellers).
Lodsys — which has a very troll-like name itself incidentally — has gotten money from 150 developers for using an in-app purchasing button provided by Apple and Google. Apple has been fighting the charges, saying that because it pays licensing fees on the idea its developers shouldn’t have to. But the courts have been slow to process Apple’s case, and in the meantime, smaller developers are getting hit with legal fees to fight Lodsys’ lawsuits. That results in many skipping litigation altogether and just paying Lodsys a licensing fee. Lodsys proclaims proudly on its own blog that four out of five of 150 companies have skipped litigation and paid up.
4. IPNav — Law firm IPNav also isn’t a troll in the traditional sense of the word, because the firm doesn’t own patents itself. It just prosecutes on behalf of its clients. IPNav is more like a troll’s henchman, but it’s worth a mention, because it’s a very famous troll henchman. Its CEO, Erich Spangenberg, was recently the subject of a New York Times profile, and is notorious for bullying companies into paying licensing fees to avoid lawsuits. He’s led IPNav in suing 1,638 companies in the last five years (page 30 of the company report).
In a recent (possibly publicity motivated) stunt, he took up the side of someone going bankrupt fighting a patent troll and decided to fight their case in exchange for $500,000 in equity in that person’s fledgling company. Spangenberg has learned how to play both sides of the profitable patent field, and he has the Ferrari to prove it.
There are many others – too many to count. Acatia, Interdigital, Rambus, and others are doing variations of the work of the trolls above.
1. EFF – The Electronic Frontier Foundation is a non-profit that has been around since the 1990s and defends free speech and privacy issues related to the web. It’s recently been making headlines for its lawsuit against the NSA, but it’s been playing a vocal role fighting trolls, too. This week, it sent a letter to Congress alongside 50 other organizations asking for patent reform, pointing out that “trolls no longer only sue large tech corporations. Small and medium-sized businesses of all types, including start-ups, are now the most frequent targets.” It also releases regular news on patent trolls latest lawsuits. (‘Mo trolls, ‘mo problems.)
2. Application Developers Alliance – The Application Developers Alliance is the sponsors of this series. The organization is an association of developers, including 100 companies and 20,000 individuals. It aims to help out those in the developer industry, whether that means lobbying for patent reform or providing coding resources.
The Alliance argues that, “Patents provide almost no protection to developers because short life cycles make products obsolete before a patent can issue.” As a result, the group wants a faster, cheaper way to challenge “invalid” patents (like the broadly defined ones filed by trolls). It also believes trolls should pay legal fees when they lose patent lawsuits.
3. Consumer Electronics Association (CEA) – The CEA’s self-defined mission is to “grow the consumer electronics industry.” Its grassroots organization the Innovation Movement is all about fixing legal policies that stymie innovation — from immigration to patent reform. It invites people to contact Congress and ask their representatives to prioritize fighting patent trolls.
4. Mark Cuban – Billionaire Dallas Mavericks owner Mark Cuban decided last year to help the EFF fight patent reform. He now funds “The Mark Cuban Chair to Eliminate Stupid Patents,” a position currently held by lawyer Julie Samuels. Why? “I have had multiple small companies I am an investor in that have to fight or pay trolls for patents that were patently ridiculous,” Cuban told TechCrunch. “There is no place for software patents and most tech patents are not original in the first place.”
To sum up, the elves in this battle are mostly associations and non-profits representing developers, electronics builders, and consumers. The trolls are law firms and companies that either buy up patents and then pursue litigation, or represent “idea” inventors in lawsuits and take a cut of the profits.
Let the battle begin, for the rest of the month in PandoDaily’s Patent Troll Smackdown series.
* The PandoDaily series “Patent Troll Smackdown” is brought to you by the Application Developers Alliance. To join the fight against patent trolls and tell Congress that innovators need patent reform please visit devsbuild.it/fightpatenttrolls. (Sponsored message.)
[Illustration by Hallie Bateman]