Modern Day Patent Trolls and Scandinavian Folklore

Trolls1

From the earliest days of Scandinavian folklore, Trolls have been used to explain diverse everyday experiences such as earthquakes and avalanches (Fjell-Trollet, the Mountain Trolls, stomping their feet), or to provide explanations for bad behavior (i.e. Lange-Nesen, or Long Nose, causes people to gossip), or to excuse fussy babies (the mortal baby was stolen and replaced with a Troll child).

The Trolls in these stories come in many shapes and sizes, from huge and ugly to beautiful and human-like (but with a tail!).  We’ve heard the story of the Bro-Trollet, or Bridge Troll, threatening to “gobble up” the Billy Goats Gruff wanting to cross his bridge.  Not so familiar outside of Scandinavia are stories about the tiny Tusselader who come out at night with a hammer and chisel to make holes in the teeth of those too lazy to brush.  Or the Vesle-tomten who whisper in horses ears telling them to be disobedient and telling the hens not to lay eggs so they would end up in the stew pot.  

Consider that perhaps there is a folklore story that we haven’t heard before, about a heretofore-unknown Troll, and maybe it goes like this:

There was once a type of troll called Lazy, and they did nothing but think and plan for ways to benefit themselves while avoiding any kind of work.  On a particular day one of the Lazy Trolls came into an inheritance of some skinny Billy Goats and some chickens. “I don’t like Billy Goats!” said the Lazy Troll.  “And I don’t like chickens.  But I do like eggs, a lot.  And chickens lay eggs.  It is my good fortune to inherit the chickens because I can collect their eggs.”Trolls2

However, Lazy Trolls don’t live in houses because they require housework.  So Lazy Troll didn’t know what to do with the creatures he inherited.

“Think, think, think,” Lazy Troll said to himself.  “How can I turn this to my advantage?”  And then, “Aha!  I know of a certain Bridge Troll that was never seen again after trying to gobble up the third and largest of the Billy Goats Gruff.  No one is using the place under the bridge, so I will put my chickens there and I will collect the eggs.  And my skinny Billy Goats will cross the unguarded bridge to eat from the grassy hillside and get fat.  It is my good fortune that the Bridge Troll was never seen again.”   And he made it so.

After a time other Billy Goats crossed the unguarded bridge to eat with Lazy Troll’s goats and the grassy hillside was soon covered with fat Billy Goats.

Trolls3Lazy Troll said to himself, “Think, think, think.  How can I turn this to my advantage?”  And then, “Aha!  Bridge Trolls like to gobble up fat Billy Goats.  I will send the fat Billy Goats to other Bridge Trolls and they will send me chickens so I can collect more eggs!  I can never have too many eggs!  It is my good fortune that so many Billy Goats have crossed the unguarded bridge.”  And he made it so.

But one day, Mountain Troll started stomping, because that’s what Mountain Trolls do.  And his stomping caused an avalanche that blocked one of the roads leading to Lazy Troll’s bridge.  Lazy Troll noticed that the Billy Goat and chicken traffic was slowed and he wasn’t gathering so many eggs.  

“Think, think, think,” said Lazy Troll to himself.  “How can I turn this to my advantage?”  And then, “Aha!  It is Mountain Troll’s fault that I’m not able to gather as many eggs.  I will ask the Eastern District Council of Troll Country for justice.” And he made it so.

As egg lovers themselves, the members of the Eastern District Council of Troll Country decided that Mountain Troll’s avalanche infringed on Lazy Troll’s right to gather eggs.  They ordered Mountain Troll to deliver a dozen eggs to Lazy Troll every day that the road was blocked.

“This is good news,” said Lazy Troll to himself.  “Now I can collect eggs without doing any work at all!  It was my good fortune to inherit the chickens and skinny Billy Goats.  It was my good fortune to find the unguarded bridge.  And it was my good fortune that the members of the Eastern District Council of Troll Country are egg lovers!”

“Think, think, think,” said Lazy Troll to himself.  “How can I turn this good fortune to my advantage?”  And then, “Aha!  I will find more blocked roads leading to the unguarded bridge and the Eastern District Council will order other Mountain Trolls to deliver more eggs.  I can never have too many eggs.”  And he made it so.  

Eventually, Lazy Troll thought, “This is too much work to find blocked roads.”  And then, “Think, think, think,” he said to himself.  “How can I turn this to my advantage?”  And then, “Aha!  If I give some of my eggs to other Trolls, they will find the blocked roads for me and ask the Eastern District Council to order the Mountain Trolls to give me more eggs.  I can never have too many eggs.”  And he made it so.

Silly story, right?  Maybe, but there are parallels between this made-up folklore story and the rise of modern day Patent Trolls.

Granted, modern day Patent Trolls are much more sophisticated than their folklore counterparts, but they work in much the same way.  Today’s Trolls buy patents for things they didn’t invent, many times from companies going out of business.  Then they file broad lawsuits claiming infringement.  

The behavior has become so prevalent that in 2012, the most recent year with statistics available, more than half of all patent suits filed in the U.S. were by Trolls.

One of the most frightening examples of patent trolling is the success of Intellectual Ventures, a company that has been called “a troll on steroids.”  Since it was founded in 2000, Intellectual Ventures claims it has generated more than $2 billion in revenue.  That claim is difficult to verify, however, because many of their dealings are channeled through shell companies, making it somewhere between difficult and impossible to sort through the transactions.

In June of 2011, National Public Radio (NPR) featured a story about Intellectual Ventures entitled When Patents Attack.  The story describes, in part, the convoluted web of the estimated 1300 shell companies associated with Intellectual Ventures.  

The reporters followed the story to 104 East Houston Street, a building just two doors down from the Federal Courthouse in Marshall, a small Texas town with a population of around 24,000.  They were looking for Suite 104, the reported office of Oasis Research, LLC, trying to determine the connection between Oasis Research and Intellectual Ventures.  Suite 104 was dark and no one answered a knock on the locked door.  It was one of many dark and empty offices in a long corridor of this building.

Trolls4A local attorney interviewed in the story claimed that, as far as he could tell, none of the offices had employees.  They appeared to be nothing but addresses for companies existing solely for the purpose of filing lawsuits for patent infringement.  The Eastern District of Texas, where Marshall is located, has consistently been first, second or third in the nation in numbers of patent cases filed each year, presumably because the juries of Marshall consistently grant large verdicts to patent-owners.  At the time of the story, the list of patent cases at the Marshall courthouse was about 2,000 cases long.

On it’s website, Intellectual Ventures claims they are in business, in part, to “assist small inventors against corporations.”  But are they, and others like them, actually exploiting weaknesses in the patent system?  
In November of 2011, the Boston University School of Law published a paper in entitled “The Private and Social Costs of Patent Trolls.”  Following is the abstract of the paper:

In the past, non-practicing entities (NPEs) — firms that license patents without producing goods — have facilitated technology markets and increased rents for small inventors. Is this also true for today’s NPEs? Or are they “patent trolls” who opportunistically litigate over software patents with unpredictable boundaries? Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives and a net loss of social welfare.

The authors make convincing arguments of the following three points:  

1) The costs to technology developers from patent troll lawsuits reduces their profits and substantially reduces their incentives to innovate.

2) Less than 2% of the defendants’ losses from the infringement cases brought by patent trolls are transferred to the patent inventors.  

3) The court cases brought by patent trolls exploit weaknesses in the patent system, focusing on patents for software and business methods that have “fuzzy boundaries” in which vague language causes the scope of the patents to be unclear.

In their conclusion, the authors state:  

We conclude that the loss of billions of dollars of wealth associated with these lawsuits harms society. While the lawsuits increase incentives to acquire vague, over-reaching patents, they decrease incentives for real innovation overall.

Just as disturbing as the conclusion of the Boston University paper is an example of the Patent Troll behavior reported in this January 14, 2014 story about MPHJ Technology.  MPHJ claims to have patents covering all networked “scan-to-email” functions.  The story reports that they sent a total of 16,465 letters to small businesses threatening a lawsuit for patent infringement if the businesses refused to pay a licensing fee of $1,000 or more per employee.  Trolls5

MPHJ is the first patent troll to be investigated by the Federal Trade Commission (FTC).  In return, MPHJ recently filed a suit claiming the FTC has overstepped its bounds by trampling on MPHJ’s first amendment right to send the letters.  It will be interesting to learn the outcome of that particular lawsuit.   

Members of Congress are also concerned about the overall effect of the patent troll lawsuits.  As of March 2014, there are twelve bills that have been introduced this Congress to deal with various aspects of the patent troll issue. The areas addressed in these bills include:

  • Expanding a review program that allows industries to deal with the bad patents often asserted by Patent Trolls
  • Curbing abusive litigation tactics used by Patent Trolls
  • Protecting end-users
  • Adding transparency to reveal who is actually providing Patent Trolls with patents and funding

The White House is also fed up with some of the Patent Troll tactics, announcing on February 20, 2014 the following Executive Actions:

  • A new initiative is expanding ways to help patent examiners, holders, and applicants find relevant “prior art” to determine if an invention is truly novel.
  • The United States Patent and Trademark Office (USPTO) is inviting volunteers to help ensure that its training programs are current to help patent examiners keep up with fast-changing technological fields.
  • The USPTO will dedicate resources to assist inventors who lack legal representation, appoint a full-time Pro Bono Coordinator, and help expand the existing America Invents Act pro bono program to cover all 50 states. The Administration is also calling on members of the patent bar to participate in the program.

Obviously, the story of Patent Trolls is still being written.  In late February 2014, Claire McCaskill introduced a bill in the House entitled the Transparency in Assertion of Patents Act, attempting to reduce consumer scams.  This bill would assist the Federal Trade Commission in fighting companies like MPHJ by requiring “demand letters” to include minimum disclosures when alleging patent violations and making demands.

If you are one of many who are currently fighting a claim by a Patent Troll, there are options besides paying up:

  • Review pending legislation, and contact your member of Congress in support of the bills that you believe are worthwhile.  
  • Join with others to fight a particular troll, like here, or as in this story.  

Lazy Troll would say to himself, “Think, think, think.”  If you do, you might just have your own “Aha!” moment and find a way to turn the situation to your advantage.

About the author
Marsha A. Harmon is Vice President and Chief Operating Officer of Q.E.D. Systems, an organization
providing standards development, as well as educational, advisory, and systems design services; focusing
primarily on logistics technology, including the disciplines of bar code technology, two-dimensional symbols, radio-frequency identification, wireless communications, sensors, and location based services.

Copyright (c) 2014 Barcode Media Group, Inc.  Sarasota FL.  All rights reserved. May not be reprinted without express written permission.

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