Not two weeks ago some of today’s tech big boys asked the FTC to take action against patent trolls. Blackberry, Earthlink, Google and Red Hat made this demand in the immediate wake of the latest clash between well-known patent troll IP Nav and Rackspace, an open cloud hosting company. The two had entered into an agreement that provided they would each give notice before suing over a series of contested patents, but according to Rackspace, IP Nav failed to give notice as it filed suits.
Of course filing lawsuits to contest patents is what IP Nav does as a patent troll. The kinder appellation for companies like IP Nav is patent assertion entities (PAEs), or non-practicing entities (NPEs). Patent trolls are able to build sizable patent collections by shopping firms that are going out of business, too poor to develop technology they invent, or simply not pursuing their technological innovations. Then they simply find their patents in action; technology covered by their patents is easily found in successful products already on the market. The trolls demand a licensing fee, and because patent suits are costly to defend, settling the case without going to court is often the only viable option for targeted companies.
In December 2012 the FTC and the Department of Justice convened a workshop on these kinds of companies. The comment period which followed ended toward the beginning of this month, and Google’s comments in the form of its FTC petition were in the context of the workshop.
Since 2005, patent trolls like IP Nav have filed enough lawsuits to quadruple the number of patent cases in the U.S. The battle over rights to intellectual property has sucked companies like Google and other Goliaths into court numerous times. In fact, according to Boston University this battle cost companies almost $30 billion in legal and related costs in 2011 alone.
While many are crying out for patent system reform—better standards for issuance of patents, making the loser of patent suits liable for legal fees, compulsory licensing which would prevent trolls from sitting on patent claims until they become profitable, to name a few—don’t hold your breath in anticipation of reform coming anytime soon. Congress addressed patent reform in 2011, and few of the concerns that anyone involved actually has were addressed. And while the SHIELD bill is being reintroduced, it doesn’t address the problem on the front end in the patent office which is where most of the issues are.
The patent system was originally designed to protect ingenuity and promote innovation. Unfortunately the excessive litigation now springing forth from the system is having the opposite effect. True reform will involve not only changes to the patent issuing process, but to the practice of intellectual property law.