As you can tell by the name we’ve given them, patent trolls aren’t popular critters. The game these operators play is shady and sleazy, bordering on extortion — though it’s completely legal. What they do is to purchase patents, with no intention of using or selling them, but rather to shake down as many people as possible by accusing them of violating the patent, even if the patent troll has no reason to believe that.
President Obama has said that patent trolls are “just trying to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them.” And in a letter it sent last week to U.S. congressional leaders, the National Retail Federation, which rarely agrees with Obama, said that patent trolls often target smaller companies because “patent trolls know it is often cheaper and easier for their victims to settle than to become educated about the inner-workings of technology made by someone else.”
The NRF has now created the Patent Reform Coalition, which includes as members Amazon, Adobe, Cisco, Oracle, Facebook, Google, Macy’s, JCPenney’s and Williams-Sonoma. But the goal of the group is not to stop patent trolls. It’s merely to slow them down, to whittle away their profit potential by increasing the paperwork and disclosure burdens. The problem is that this approach could easily backfire, giving the trolls more legitimacy and legal backing and therefore increasing their efforts and boldness.
The most direct way to address these putrid patent pariahs is to directly make their activities illegal, by passing a federal law making the most heinous aspects of trolling — such as accusing a company of violating patent when you have no meaningful reason to believe that it has done so — illegal. That would allow victims to much more easily pursue federal criminal and civil charges. But the NRF chose not to go that route, for the pragmatic reason that it feared it would be too difficult to phrase legislation that would halt patent trolls but wouldn’t also infringe on legitimate patent protection efforts.
The compromise was to make trolling more onerous. The NRF is now lobbying for more transparency, in the form of demand letters that would have to “explain in detail the basis for the alleged infringement. Current law does not require that a patent holder explain how a patent is infringed, or even identify the product involved, which makes it nearly impossible for someone who has been sued to evaluate the case and decide how to proceed,” the NRF said in its Jan. 15 letter to four House and Senate leaders.
This change would enable letter recipients to say, “We don’t even use that technology,” said Beth Provenzano, an NRF VP of government relations and a co-chair of the Patent Reform Coalition. “It will take them [trolls] more research to send the letters in the first place and it will deter them from casting such wide nets.”
The group is also pushing for a rule that trolls must complete litigation against manufacturers of products that allegedly use the patented technology before going after the manufacturer’s customers. This is a good idea, given that the manufacturer is much more directly involved — and therefore in the best position to argue whether or not a patent has been infringed. Put another way, if the troll can’t make a case against the manufacturer, end users are off the hook, which makes sense.
The group wants trolls who lose to have to pay the victor’s legal fees — giving them an incentive to not pursue weak cases — and a requirement that judicial hearings to evaluate the claims be held much earlier, before clients have to pay for discovery. In short, these efforts are designed to weed out trumped-up claims before companies have to spend money and time to go through the legal process. This will give companies — in theory — much less reason to just pay the license fee to make the hassle go away.
All of this comes with a huge risk, though. Many trolls hate to actually go to court, because many jurors and judges feel tremendous animus toward patent trolls. The preferred approach is to send threatening letters, knowing that a percentage of recipients will simply pay the license fee even if they have not done anything wrong. It’s the ultimate nuisance lawsuit.
A troll that complies with these new requirements — assuming the NRF can push its ideas through Congress and get them signed into law — will actually be on stronger legal ground. Instead of banning this practice, it codifies and legitimizes it.
Provenzano argued that “it’s very hard to define a patent troll. It’s gets pretty tricky.” The problem with that is that, in the NRF’s own statement trumpeting the coalition’s creation, it crafted a pretty decent definition: “Patent trolls are firms that buy overly-obscure, general or vague patents with the sole purpose of extracting licensing arrangements and settlement payments by threatening businesses and companies with claims of patent infringement. The threats often involve opaque claims regarding common practices, services or technology. The trolls’ hope is that businesses would rather settle or pay a licensing fee instead of hiring attorneys to review infringement claims or fight back in court.”
The real problem for the NRF is probably that defining patent trolls that way within legislation could be seen as diluting patent protections — reality notwithstanding — and that Congress simply wouldn’t do it. “I don’t know if it would actually be productive,” Provenzano said. “It’s my understanding that there isn’t a desire from the members of Congress to define a patent troll. We are pursuing what is politically feasible. We are very hopeful that we’ll see meaningful legislation this year.”
As a rule, lobbyists don’t pursue ideal legislation — laws that directly address whatever the issue is — but rather craft compromises that move the law a few millimeters closer to where the lobbying group wants it to be. After all, a bill that won’t be passed isn’t going to help anyone.
One advantage of the NRF proposal is that it does push the trolls into the light, which is not a comfortable place for them. The trolls’ preference is to send their threatening letters and to then slither back into the darkness to write more. “We see when you actually challenge patent trolls, they don’t have the fortitude to stand,” Provenzano said.
My fear is that, though the proposed legislation might discourage some trolls, it will embolden others. And as long as trolls comply with the new rules, they will be in a stronger position to attack new victims, with added legal protections. I fear that, as with cockroaches, whatever doesn’t kill them will make them stronger.
Evan Schuman has covered IT issues for a lot longer than he'll ever admit. The founding editor of retail technology site StorefrontBacktalk, he's been a columnist for CBSNews.com, RetailWeek and eWeek. Evan can be reached at email@example.com and he can be followed at twitter.com/eschuman. Look for his column every other Tuesday.