Patent trolls: an (un)ethical way of making money?
Patent trolls are individuals or companies who make money with patents, but not in the same way as the average patent owner.
A patent troll buys patents from inventors and often small, possibly ailing businesses. The purchased patents are placed on the shelf and are not used to invent, produce and/or innovate.
The patent troll then seeks a company that violates one of her patents. She addresses the company and starts a lawsuit to put the company under pressure. Most large companies do not want to end up in such a case for it results in high litigation costs, adverse publicity and nervous shareholders. To prevent this, the company is often willing to settle: they pay a considerable amount to the patent troll in exchange for withdrawing the trial. This explains why the patent troll focuses on multinationals.
The origin
In 2001 Intel was prosecuted by TechSearch LLC for infringing on its patents.
R.P. Niro, a famous lawyer, represented TechSearch and demanded that Intel would pay a substantial amount of compensation. P. Detkin, director of Intel, called him a patent extortionist. Detkin was immediately sued for libel and had to refrain from further use of the term. Instead, he called Niro a patent troll. A term that is now widely spread.
Recent patent trolls
Erich Spangenberg earns a lot of money with being a patent troll. He buys patents and then sues large companies for infringement: Xerox, Hewlett-Packard, General Motors, Microsoft, Hyundai. Most companies readily pay to get rid of the trial. Hyundai opposed the patent troll and did not pay but it appeared that Spangenberg was not just bluffing. Hyundai had to pay $ 34 million for infringement.
Another example shows why more and more patent trolls arise. During its eighteen years of existence Acacia Research (California) has already filed 337 lawsuits for infringement. 95 percent of those cases ended in a settlement and from the 5 percent that were not settled, half was gained by Acacia. In 2006 the company earned $ 34.8 million, in 2010 this amount was already doubled.
Although patent trolls have been around for a while, multinationals have not yet found an answer to stop them. It is a business where a lot of money is involved.
The patents
It seems that there are not many criteria for the patents in which the patent troll is interested: patents must lie in a field of interest to multinationals. Popular targets are technology firms. The precise, technical subject matter of the patent is not relevant to the patent troll.
The pros and cons
The example of Spangenberg shows that it is not just empty actions. Apparently, some big companies actually infringe patents of small companies or private patent owners. Where the multinational patent holder may outflank a small firm, or bring a small enterprise to bankruptcy, the wealthy patent troll (Acacia has a $ 250 million budget for conducting proceedings) is firmer. Some say that patent trolls contribute to the protection of intellectual property (IP) in a positive way because they are forcing multinationals to respect the IP rights of others.
On the other hand, there is a lot of criticism on patent trolls. IPR legislation is aimed at innovation. Patent law ensures that all new knowledge is public, so further development can take place. The patent troll is not engaged in innovation. He buys a patent to put others under pressure and to make money out of it, notwithstanding the purpose of the IP regulations. Therefore for many, a patent troll does not live in conflict with the law, but lives in conflict in comparison with ethics.
Source: NL Patent Office, Clea Witteman, 9 September 2011
